CLP First-Half Profit Falls After Paying Acquisition Charge

CLP Holdings Ltd. (2), Hong Kong’s biggest electricity supplier, reported a 2 percent decline in first-half profit after booking an acquisition-related charge.

Net income fell to HK$5.8 billion ($745 million) in the six months ended June 30 from HK$5.9 billion a year earlier, CLP said in a statement to the Hong Kong stock exchange today. That beat the HK$4.7 billion estimate by Michael Parker, a Hong Kong- based analyst at Sanford C. Bernstein & Co. Operating profit, which excludes the one-off charge, gained 13 percent to HK$5 billion as earnings in Australia rose.

The utility expanded overseas to counter curbs by the Hong Kong government on returns from its power business. In December, CLP and Origin Energy Ltd. agreed to buy New South Wales electricity assets for a total of A$5.3 billion ($5.6 billion) to gain customers in Australia’s most populous state.

CLP took a charge on the A$78 million stamp duty paid on its purchase of the assets for A$2.2 billion in March, according to its earnings statement.

Earnings from CLP’s businesses outside Hong Kong grew 41 percent to HK$1.7 billion in the first half. Profit from its Australian energy business more than doubled to HK$1.2 billion, while income from India climbed 59 percent to HK$183 million.

Profit from the utility’s electricity business in Hong Kong increased 3.3 percent to HK$3.1 billion.

CLP has gained 17 percent in the past year in Hong Kong trading compared with the 4.3 percent drop in the benchmark Hang Seng Index. The stock rose 1.8 percent to close at HK$68.10, following the earnings announcement.

Overseas Expansion

Under Hong Kong government rules introduced in October 2008 to curb electricity charges, the rate of return on fixed-asset spending by CLP was cut to 9.99 percent from between 13.5 percent and 15 percent. To offset the reduced returns, the utility has acquired power assets in China, Taiwan, Australia, India, Thailand and the Philippines.

Unit TRUenergy Holdings Pty agreed to acquire a stake in coal-seam gas reserves in New South Wales from Santos Ltd. for A$284 million to help support CLP’s generation and gas retail operations, the Hong Kong utility said on July 18.

CLP is unlikely to pursue any acquisitions in the near future on the scale of the New South Wales power-asset purchase, Chief Executive Officer Andrew Brandler said at a media briefing in Hong Kong after the earnings announcement.

The utility prefers “organic” growth in Australia and India, Brandler told reporters.

To contact the reporter on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

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