CLP HOLDINGS LIMITED 
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CLP Holdings Limited(incorporated in Hong Kong with limited liability)
(stock code no.: 00002)
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
Quarterly Statement 2013 (January - September) To Shareholders:
The operations of CLP Holdings Limited (the Company) for the nine months ended 30
September 2013 are summarised in this Quarterly Statement.
In the first nine months of 2013, local sales of electricity were 24,540 gigawatt hours (GWh), a decrease of 1.2% over the same period last year. The reduction was attributable to lower humidity in the first quarter and cooler weather in the summer compared with the corresponding period of 2012, which included an extra day due to that being a leap year. The moderate drop of 4.5% in sales to the Residential sector offset the slight sales growth in the Commercial and Infrastructure & Public Services sectors. Sales to the Manufacturing sector also decreased by 3.6%. A breakdown of the changes in local sales during the period by sector is as follows:
Increase / (Decrease) % of Total Local Sales
Residential | (325GWh) | (4.5%) | 28% |
Commercial | 23GWh | 0.2% | 40% |
Infrastructure & Public Services | 66GWh | 1.0% | 26% |
Manufacturing | (52GWh) | (3.6%) | 6% |
Sales to the Chinese mainland amounted to 1,382GWh, a 4.1% decrease over the same period last year, mainly due to lower committed sales to Guangdong Power Grid Corporation.
Total unit sales in the period, including both local sales and sales to the Chinese mainland, decreased by 1.3% over the same period last year to 25,922GWh.
We are working closely with the HKSAR Government on both the Interim Review of the Scheme of Control Agreement and the 2014-18 Development Plan, which outlines the capital projects required for meeting Hong Kong's socio-economic development over the next few years. We expect both discussions to be concluded before the year end.
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Subsequent to the commissioning of "The Hong Kong Branch Line" (HKBL) facilities, conversion of the eighth and final gas-fired generation unit at Black Point Power Station was completed in August to support operations using the new natural gas supplies through PetroChina's Second West-East Gas Pipeline. Good progress is also being made to finalise the approval of the new joint venture (JV) between PetroChina (60%) and CLP (40%) to own and operate the HKBL facilities. We anticipate that the JV will be formed around the fourth quarter of 2013.
Regional Energy BusinessesAustralia
Difficult conditions remain in the Australian energy markets. The wholesale market is continuing to see suppressed prices resulting from an over-supply of generation and falling demand. This will increase the financial pressure on costly or inflexible power plants across the industry. While door knocking activity has slowed, intense retail competition continues, driven by potentially unsustainable price discounting.
In September 2013, the Coalition opposition won Australia's Federal election. The Coalition remains committed to repealing the carbon tax and its associated measures, such as industry compensation, and replacing it with its Direct Action Plan. The centrepiece of the Plan is a government fund to buy abatement from industry to meet Australia's 2020 emissions target, with a focus on incentives, not penalties. The Coalition Government will also review the Renewable Energy Target in 2014. EnergyAustralia will work closely with the new Federal Government to support efficient implementation of its policies.
Internally, EnergyAustralia has been making progress on a number of fronts. In late September
2013 EnergyAustralia reached an in-principle agreement with the Construction, Forestry, Mining and Energy Union for a new four-year enterprise bargaining agreement (EBA) at Yallourn Power Station. The new EBA balances recognition for the work of our employees, cost control and flexibility to optimise the operation of Yallourn to respond to wholesale market conditions. The Morwell River Diversion re-construction has entered the final commissioning phase. The Diversion is anticipated to be fully functional by the end of 2013.
On 2 September 2013, EnergyAustralia completed the acquisition of the Mount Piper (1,400MW) and Wallerawang (1,000MW) power stations and associated infrastructure from the New South Wales (NSW) Government. The acquisition has reinforced EnergyAustralia's position as one of Australia's largest integrated energy businesses and enabled EnergyAustralia to operate the plants more flexibly. It will also remove high fixed costs associated with the original Delta Western GenTrader arrangement.
In the retail business, a stabilisation programme for C1 (Customer First, EnergyAustralia's new billing system) achieved significant improvements, including the implementation of a number of technical fixes to address issues that have led to some customers not being billed on time. The programme is on track to have three key areas - registrations, billing, and credit and collections - operating at target performance levels by the end of 2013. Stability of the C1 system is a prerequisite for the integration of the customer accounts acquired from the NSW Government in 2012 onto the C1 platform during the course of 2014.
In July 2013, new laws took effect in Victoria that allow retailers to introduce more flexible pricing arrangements to smart meters users based on the time they consume electricity. As part of this change, EnergyAustralia released a suite of new flexible pricing products.
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Against the backdrop of the current difficult external trading environment in Australia and the internal challenges EnergyAustralia is addressing, Standard & Poor's announced that it had revised EnergyAustralia's rating from BBB to BBB- on 18 October 2013. The revision is likely to affect the margin on our bank loans but there is no threat to the immediate or medium-term liquidity of the business.
Chinese Mainland
The downward trend of coal prices has continued in both international and domestic coal markets and the National Development and Reform Commission (NDRC) has decided to reduce on-grid tariffs for coal-fired power stations from 25 September 2013 onwards. At the same time, the NDRC has raised the environmental emission control tariffs that the power plants are entitled to receive.
With the State Ministry of Environmental Protection's endorsement of the Environmental Impact Assessment Report for Fangchenggang Phase II project (2 x 660MW ultra-supercritical units), we have submitted the final project verification application to the NDRC and approval is expected before end of the year.
Wind speeds have improved in Jilin and in some areas of Shandong Province. However, severe grid restrictions are expected to remain in Jilin until new transmission lines, construction of which is anticipated to commence in 2014, are commissioned to export power to other provinces. Construction of our third wholly-owned wind farm, Laiwu Phase I (49.5MW) in Shandong, is progressing well with target commissioning in early 2014. Meanwhile, our hydro projects benefited from heavy rain in the summer.
CLP's first solar project in China at Jinchang in Gansu Province (85MW) was commissioned in July 2013 and has been performing satisfactorily with maximum output meeting the design rating.
The Company had made known its intention to acquire from China General Nuclear Power
Corporation (CGNPC) a 17% equity share in the Yangjiang Nuclear Power Station (6 x
1,080MW) in Guangdong Province (Yangjiang) in July 2010. In September 2013, CGNPC advised CLP that due to continuing delays in regulatory approvals and their own review of their funding needs and capital raising options, the Company would not be able to take up its
17% equity share in Yangjiang for the time being. As a consequence, CLP has announced that discussions on Yangjiang have been discontinued. The cessation of discussions on Yangjiang does not give rise to any financial impact on CLP, as detailed in our announcement to shareholders dated 3 September 2013.
India
In May, Jhajjar Power Limited (JPL) obtained formal approval from Haryana Chief Minister to procure 1.7 million tonnes of imported coal through May 2014. As a result, both generating units have been able to generate consistently and average availability of our plant was at about
85% in the third quarter of 2013. Over the past nine months, the Indian rupee has been volatile and has depreciated significantly. To protect our business against such risks, we follow a prudent risk-management policy, under which we hedge most of our exchange and interest rate exposures. Consequently, we have very minimal cash exposure to the recent exchange rate volatility. However, mark-to-market gains/losses will continue to be reflected in our statement of profit or loss, as determined by the respective accounting standards. Therefore, notwithstanding good operational performance, JPL's financial performance continues to be impacted by the depreciation of the Indian rupee.
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In the first nine months of 2013, output from our wind portfolio has been marginally lower than estimates, with grid congestion at the Theni wind farm being a major factor. Notwithstanding that, the majority of our operating wind farms (568.4MW out of 595MW) will benefit from a decision by the Government of India to extend the Generation-Based Incentive scheme. Under the scheme, wind power projects commissioned during the 12th Five-Year Plan will be entitled to receive an additional revenue of Rs.0.5 per unit, subject to a cap of Rs.10 million per MW. In September, we signed a "pooled financing" agreement for our wind assets with three financial institutions to boost the growth of our wind portfolio. This innovative financial structure helps mitigate the inherent risk arising out of the unpredictable nature of wind assets' output.
Output from our Paguthan gas-fired plant continues to be constrained due to an acute shortage of domestic gas supplies. The plant continues to declare availability through spot contracts and fixed charges have been recovered. The plant's off-taker, Gujarat Urja Vikas Nigam Limited (GUVNL), has sought concessions on the fixed capacity charges in light of low off-take and the Company is in discussion with GUVNL over the matter.
Southeast Asia and Taiwan
After years of negotiations, Ho-Ping Power Company in Taiwan, in which CLP has a 20% shareholding, finally agreed to a tariff reduction under the power purchase agreement (PPA) signed with Taiwan Power Company (Taipower). Ho-Ping had previously appealed a penalty imposed by the Taiwan Fair Trade Commission (FTC) for opposing Taipower's earlier requests to reduce tariffs. In September 2013, the Executive Yuan, the executive branch of Taiwan's Government, upheld the penalty decision, but asked the FTC to reconsider the penalty amount. Ho-Ping is reviewing the Executive Yuan's decision with legal advisors to determine the next steps, which may include administrative litigation.
In Vietnam, the Vung Ang II project is awaiting the Government's final decision on the acceptance of the key project documents including the PPA, build-operate-transfer contract (BOTC) and government guarantees and undertakings, which had been extensively negotiated over the last couple of years. Meanwhile, the Vinh Tan III project is finalising its engineering, procurement and construction contract, and negotiating its PPA and BOTC.
Directors today declared the third interim dividend for 2013 of HK$0.53 per share payable on
13 December 2013 to Shareholders registered as at 4 December 2013. The dividend of HK$0.53 per share (2012: HK$0.53 per share) is payable on the existing 2,526,450,570 shares of HK$5.00 each in issue.
The Register of Shareholders will be closed on 4 December 2013. To rank for this dividend, all transfers should be lodged with the Company's Registrars, Computershare Hong Kong Investor Services Limited, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration not later than 4:30 p.m. on Tuesday, 3 December 2013.
Chairman of the Board of Directors
Hong Kong, 28 October 2013
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The Directors of the Company as at the date of this quarterly statement are:
(Mr. David Moore as Mr. Theys' alternate)
Independent Non-executive Directors: Mr. V. F. Moore, Professor Judy Tsui, Sir Rod Eddington, Mr. Nicholas C. Allen, Mr. Vincent Cheng,Mrs. Fanny Law, Ms. Irene Lee and Dr. Rajiv Lall
Executive Directors: Mr. Richard Lancaster and Mr. Andrew BrandlerThis Statement will be despatched to Shareholders on 6 November 2013 and is also available
at the Corporate Governance or Investors sections on the Company's website at www.clpgroup.com.
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