HONG KONG: Hong Kong’s largest power firm insisted it needs a guarantee of healthy earnings to keep investing in the sector after the government sought to lower the utilities’ profit margins.
The statement came as the authorities are soliciting public views on an upcoming 2018 renewal to the Scheme of Control Agreement which spells out how much profit a power generating firm can pocket in a three-month consultation that will end in June.
Supplying electricity to 80 percent of the local population, CLP Holdings could see its permitted rate of return decline from the current 9.99 percent to 6-8 percent from 2018 on.
“We need to have a reasonable level of return to support ongoing investment in the industry,” said chief executive Richard Lancaster after the annual general meeting here the other day.
“We are a capital-intensive industry with assets that have a very long life,” he said, adding its British peers had scaled back investment as returns dwindled.
The government aims to double the share of natural gas in local power generation to 50 percent in a bid to reduce carbon intensity by 2020 to 50-60 percent of a 2005 level, while mindful to keep tariffs from jumping. Responding to calls for a more open market now dominated by CLP and HK Electric CLP Power chairman Michael Kadoorie said competition is not the answer to more affordable electricity supply as reliability also needs to be considered.
In countries with more competitive markets such as the UK and Australia, electricity prices are much higher than in Hong Kong, and the local regulatory framework over the past 50 years has proved satisfactory, Kadoorie said. The firm said last month it is considering building two new natural-gas fired generation units to keep up with the government’s cleaner- energy ambition.
CLP vice chairman Betty Yuen So Siu-mai gave no estimated budget for the project, saying the firm is doing environmental and technological feasibility studies, and will submit a report to the government for review in a year.
