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CLP HOLDINGS LIMITED

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CLP : Demonstrates Operational Resilience and Progress in Decarbonisation in 2021 First Half

08/03/2021 | 11:04am EDT

CLP Holdings Limited (CLP) announced today the Group's operating earnings for the first half of 2021 were HK$5,698 million, a decrease of 7.0% from the same period of 2020.

Total earnings decreased 23.2% to HK$4,615 million after one-off charges were booked in its Australian business to settle a longstanding litigation and to provision for the cost of ensuring safe operations in the Yallourn mine following the impact of the recent extreme rainfall.

The Board is confident in the Group's ability to remain resilient through the pandemic and continue with its strategy of decarbonisation and digitalisation moving forward. With this in mind the first and second interim dividends have been maintained at HK$0.63 per share, unchanged from the same periods in 2020. 'As we emerge from one of the most challenging periods of our time, I am pleased to report significant progress in decarbonisation, and operational resilience was achieved during the first half of this year. We have maintained COVID-19 support for communities, customers and staff and we are grateful to our colleagues for their ongoing efforts in difficult circumstances.

Across our business we have seen exciting developments that underscore CLP's commitment in delivering the energy transition. With our pathway towards a zero-carbon future solidifying further, we are well placed for the next phase of transformation that requires greater agility and effort than anything that has come before,' said Richard Lancaster, Chief Executive Officer of CLP.

Hong Kong

CLP continued to provide a highly reliable electricity supply in Hong Kong. Electricity sales rose 4.4% in the first half of the year from the same period in 2020. Residential consumption saw growth with a cold spell early in the year and warmer weather in the second quarter pushing up demand. The rollout of the Government's vaccination programme and the gradual easing of social distancing measures allowed workers and students to return to offices and schools.

Economic activity therefore increased, triggering higher electricity sales across other sectors compared with the same period last year. CLP is engaged in discussions with the Hong Kong Government to contribute to a preliminary decarbonisation roadmap in support of the city's target of becoming carbon neutral by 2050. The commissioning of a new combined-cycle gas turbine (CCGT) unit at Black Point Power Station in 2020 has enabled the increased use of cleaner natural gas in the fuel mix andresulted in a significant reduction in the carbon intensity of CLP's electricity supply. Construction of a second CCGT unit at Black Point continued to make good progress despite ongoing challenges posed by the pandemic, with the unit expected to go into service in 2023.

Elsewhere, the Hong Kong offshore LNG terminal project is under construction with marine installation and laying of the subsea gas pipelines in progress and completion is expected in 2022. CLP is conducting pre-development studies - including preliminary site investigations and technical evaluations - into the feasibility of an offshore wind farm in Hong Kong as the latest lower cost and larger capacity wind turbine technologies have made the project more viable. The Renewable Energy Feed-in Tariff scheme continued to receive positive customer response, with more than 15,900 applications received by the end of June. Of those, around 90% - representing a combined capacity of around 217MW - were approved or connected to the grid. Demand for Renewable Energy Certificates benefitted from large, multi-year purchases by various companies with total committed sales increasing to around 35GWh during the period. CLP recognises the importance of enabling customers to manage their electricity consumption and increase their energy efficiency as part of a holistic approach to decarbonisation.

By the end of June, over one million smart meters were connected, giving more customers access to detailed consumption data and allowing them to participate in demand response programmes. To support people in need and encourage consumer spending amid the pandemic, CLP introduced a HK$160 million package of initiatives for 2021 from the CLP Community Energy Saving Fund. CLP remains focused on decarbonising its electricity business and using digital technologies to deliver smarter, greener services to customers. In the longer term, CLP is exploring opportunities in the development of zero-carbon hydrogen technologies and supply chains, as part of its continued efforts to support Hong Kong's 2050 carbon neutrality target.

Mainland China

CLP's non-carbon energy portfolio in Mainland China delivered a stable performance during the first half of the year as the economy continued to recover from the impact of COVID-19. However, high coal prices affected the earnings of thermal power assets. Daya Bay Nuclear Power Station and Yangjiang Nuclear Power Station continued to perform reliably. Generation at Yangjiang was higher than the same period a year ago, while a planned refuelling outage programme in March and April impacted output from Daya Bay. Wind energy generation increased moderately with better resources and the addition of the Laiwu III Wind Farm, commissioned in 2020. Construction began on the Qian'an III wind farm, which will be CLP's first grid-parity project in Mainland China. A 5MW battery storage system is being installed as part of the project.

Solar energy generation was higher than last year, thanks to extended periods of good solar irradiance. Meanwhile, decreased water flow at projects in Sichuan and Guangdong provinces diminished the output from CLP's hydro portfolio. As of 30 June 2021, delayed national subsidy payments for renewable energy projects amounted to HK$2,189 million for CLP's wind and solar energy subsidiaries in Mainland China, compared to HK$1,774 million at the end of 2020. Partial payment of the subsidies is expected in the second half of the year. Fangchenggang Power Station increased generation in response to stronger electricity demand and reduced competition from hydro plants. However, profitability of the plant was under pressure because of higher coal prices and softer electricity sale prices. Coal prices may soften slightly in the second half of the year but are expected to remain high, which will continue to impact the profitability of CLP's coal-fired assets.

The Chinese Government set out in its 14th Five-Year Plan new targets for reducing carbon intensity and increasing energy efficiency. With the cost of renewable energy projects falling, CLP will continue to explore further investment opportunities for grid-parity projects in line with the Government's target to reach peak carbon emissions by 2030 and carbon neutrality by 2060. The continuing decarbonisation of China's economy is opening up opportunities in new energy infrastructure and smart energy services. CLP is focused on meeting growing demand for diversified energy solutions, including centralised cooling systems, energy solutions for data centres, and energy management systems for buildings, particularly in the Greater Bay Area.

Australia

EnergyAustralia took significant steps to decarbonise its business and support the country's transition to clean, reliable, and affordable energy. In March, EnergyAustralia entered into an agreement with the State Government of Victoria in relation to the advanced retirement of Yallourn Power Station in mid-2028, four years before the end of its technical life. The retirement of Yallourn will reduce EnergyAustralia's carbon dioxide emissions by more than 60%. To ensure the plant's orderly closure, EnergyAustralia is providing a comprehensive package to support the workforce. EnergyAustralia also announced the construction of a 350MW utility-scale battery adjacent to the Jeeralang power station in Victoria by the end of 2026. The new facility will be larger than any battery operating in the world today, enabling more renewable energy to enter the market.

An agreement was reached with the Government of New South Wales in May for EnergyAustralia to build a new power plant of around 300MW on its Tallawarra site, in time to begin operations for the 2023-24 Australian summer. Tallawarra B will be the country's first net-zero-emissions power station using a blend of green hydrogen and natural gas, with direct carbon emissions from the plant offset over the course of its operational life. Earnings in EnergyAustralia's Energy business were affected by lower wholesale electricity prices during most of the first half. In addition, earnings were adversely affected by accelerated depreciation costs resulting from the advanced retirement plans for Yallourn, and the re-contracting of gas purchasing arrangements at higher prices reflecting international

India

CLP India has focused on efforts to protect the health and safety of employees and maintain a reliable service for customers as COVID-19 cases rose sharply amid a second wave of the pandemic. CLP and CLP India also lent their support to relief efforts to local communities, helping provide oxygen machines and critical medical supplies to areas badly hit by the pandemic.

In January and February, new records were set for national peak electricity demand as a broad-based recovery in electricity demand occurred across the country. CLP India increased its solar energy output with a portfolio expanded by the 2020 acquisition of two plants, and continued to ensure the strong operational performance of its assets.

Southeast Asia and Taiwan

In the first half, Ho-Ping Power Station continued its reliable operations, which were unaffected by supply outages that impacted large parts of Taiwan in May. In Thailand, operations of the Lopburi Solar Farm remained stable. CLP will continue to explore potential investment opportunities in the renewable energy sector in Southeast Asia and Taiwan.

Conclusion

The 26th United Nations Climate Change Conference, COP26, being held later in 2021, will highlight the critical importance of accelerating global decarbonisation efforts and aligning national policies towards that objective. CLP is in the process of reviewing the pace of its transition and plans to significantly strengthen its climate targets ahead of COP26.

To realise a carbon-neutral society by 2050, the entire system needs to be upgraded or replaced by clean energy in less than 30 years. As new digital technologies and business models transform the energy market, CLP will also need to strengthen its capability to manage an increasingly complex system and become more resilient against such risks as growing cyber security threats.

Contact:

Tel: (852) 2678 8189

Email: ir@clp.com.hk

(C) 2021 Electronic News Publishing, source ENP Newswire

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Financials
Sales 2021 83 800 M 10 774 M 10 774 M
Net income 2021 11 386 M 1 464 M 1 464 M
Net Debt 2021 45 268 M 5 820 M 5 820 M
P/E ratio 2021 16,7x
Yield 2021 4,22%
Capitalization 189 B 24 295 M 24 297 M
EV / Sales 2021 2,80x
EV / Sales 2022 2,71x
Nbr of Employees 8 074
Free-Float 71,6%
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Number of Analysts 13
Last Close Price 74,80 HKD
Average target price 86,57 HKD
Spread / Average Target 15,7%
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Managers and Directors
Richard Kendall Lancaster Chief Executive Officer & Executive Director
Nicolas Alain Marie Tissot Chief Financial Officer
Michael David Kadoorie Chairman
David Christopher Smales Chief Operating Officer
David John Simmonds Secretary & Chief Administrative Officer
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