CLP Holdings Ltd., Hong Kong’s biggest electricity supplier, fell on the city’s stock exchange, paring earlier gains, after posting a first-half profit that missed analysts’ estimates.
The shares declined 1.5 percent, to HK$52.75 at 2:37 p.m., after rising 0.8 percent earlier. CLP reported at the market’s midday break net income dropped 42 percent to HK$3.24 billion ($418 million), missing the median estimate of five analysts in a Bloomberg survey of HK$4.25 billion, on lower earnings in Hong Kong and a provision for its Australian solar power investment.
“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 are generally disappointing, with lower earnings in mainland China too.”
Under a government agreement introduced in October that links power companies’ profits in Hong Kong to efforts to cut pollution, the rate of return on fixed-asset spending by CLP was reduced to 9.99 percent from between 13.5 percent and 15 percent. CLP wrote down its investment in Solar Systems, a solar- technology development company in Australia, after it couldn’t find a partner to help fund the venture, the utility said.
CLP has a 20 percent stake in Solar Systems, according to today’s statement. “Solar Systems’ fund raising efforts have taken place in a very challenging financial market,” the Hong Kong utility said. CLP will take a cautious approach toward future technology investment opportunities, it said.
The company made a loss of HK$97 million on its mainland electricity business on reduced demand during the economic slowdown and government caps on power tariffs, compared with a HK$34 million profit in the same period last year, CLP said.
Power business earnings in India declined to HK$159 million from HK$263 million because of the depreciation of the rupee against the Hong Kong dollar, it said.
Overall revenue dropped 15 percent to HK$23.5 billion in the first half.
CLP rose 5 percent this year in Hong Kong trading, while the benchmark Hang Seng index gained 40 percent. The stock climbed 0.8 percent to HK$53.95 before the result announcement. The shares are rated a “buy” by four out of 16 analysts surveyed by Bloomberg. Four analysts rate the stock as a “sell.”
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.
“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 fall 20 percent this year to HK$8.3 billion, according to a median estimate of seven analysts in data compiled by Bloomberg.
New projects in the first half of this year included the 435-megawatt Tallawarra power station in New South Wales in Australia run by CLP unit TRUenergy, inaugurated on March 18.
Nuclear and wind power offer growth potential as CLP expands operations overseas, particularly in mainland China, Chief Executive Andrew Brandler said on April 28.