CLP to Pay $1.8 Billion for Stakes in Exxon Units in Hong Kong

CLP Holdings Ltd. (2), Hong Kong’s biggest electricity provider, recorded its largest acquisition after agreeing to pay HK$14 billion ($1.8 billion) for stakes in two Exxon Mobil Corp. (XOM) units.

CLP will pay HK$12 billion for a 30 percent stake in Castle Peak Power Co., which owns three plants in Hong Kong, the company said today in a statement. It will also pay HK$2 billion for a 51 percent stake in Exxon’s Hong Kong Pumped Storage Development Co. Exxon will also sell a 30 percent stake in Castle Peak to China Southern Power Grid Co., owner of China’s second largest power distribution network.

The deal tops CLP’s $1.69 billion purchase of Australian natural gas and electricity assets in 2005 from Singapore Power Ltd., according to data compiled by Bloomberg. CLP doesn’t expect the transaction to affect customer bills in the near term, CLP Vice Chairman Betty Yuen said.

“The purchase will improve the operation of our generation business and the integration with power distribution,” Yuen said today at a media conference in Hong Kong. “It’ll also increase our cooperation with China Southern and could create opportunities for partnerships in the future.”

CLP gained 0.7 percent to HK$62.15 at the close in Hong Kong, while the benchmark Hang Seng Index was little changed.

Photographer: Paul Hilton/Bloomberg

The Castle Peak power plant stands in Hong Kong in this 2008 file photo. Close

The Castle Peak power plant stands in Hong Kong in this 2008 file photo.

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Photographer: Paul Hilton/Bloomberg

The Castle Peak power plant stands in Hong Kong in this 2008 file photo.

Rival Sale

Power Assets Holdings Ltd. (6), owner of Hong Kong’s other major electric utility, plans to sell as much as 70 percent of its Hong Kong business in a deal that could be valued at $5 billion. The company is owned by Asia’s richest man, Li Ka-shing, who has been looking to sell assets in the city where growth is slowing.

“We have confidence in our Hong Kong business and it will continue to grow,” CLP Chief Executive Officer Richard Lancaster said today at the conference. “Hong Kong’s population is growing and those people are moving to the New Territories and Kowloon.”

The two areas represent the bulk of CLP’s customers and Hong Kong’s land.

CLP’s acquisition increases its stake in Castle Peak’s 6,908 megawatt generating capacity to 70 percent. CLP’s maximum generation capacity for use in Hong Kong is 8,888 megawatts, including Castle Peak’s contribution.

CLP has yet to decide how to finance the deal, according to Chief Financial Officer Mark Takahashi. The company first said in March 2012 that it and China Southern were in talks with Exxon to buy Castle Peak. In its preliminary 2012 annual report, CLP said negotiations with Exxon had been “protracted,” citing a “considerable gap” in valuation between the parties.

Higher Tariff

CLP’s power unit has applied to raise electricity tariffs in the city next year, having increased prices by 5.9 percent in January. Under an agreement with the government, CLP and Power Assets earn an annual return of 9.99 percent on fixed assets until 2018.

Evercore Partners Inc. and HSBC Holdings Plc acted as financial advisers on the transactions, according to CLP’s statement. Morgan Stanley and China International Capital Corp. advised China Southern, according to a statement on the company’s website, which didn’t disclose the price.

CLP also has assets in Australia, India, Thailand, Taiwan and mainland China, according to its website.

To contact the reporters on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net; Benjamin Haas in Hong Kong at bhaas7@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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