Clp Holdings Ltd S/Adr

Good afternoon and welcome to Selby Holdings' 2023 Annual Results Briefing. My name is Marisa Wong, Director of Investor Relations, and I'm joined by Chief Executive Officer, Mr TK Chiang, and Chief Financial Officer, Mr Nicola Tissot. We launched our 2023 Annual Results announcement today with the Hong Kong Exchange at about midday, and the announcement in addition to this briefing is available on our website. This briefing is also being recorded and will be on our website later. Before we begin, please read the disclaimer on slide two. And for today's agenda, we'll follow the same practice, which is TK providing us with an overview, as well as the strategic outlook, and Nicola with the financial results. This will be followed by Q&A. With that, I will pass over to TK to commence the briefing. Thanks, TK.

Good afternoon, ladies and gentlemen. It is a privilege and an honour for me to share with you CLB Group's performance for the first time as Chief Executive Officer. I'm pleased to say it's been a year of very solid performance against a backdrop of global economic uncertainty and challenging external environment. The ability to deliver in this environment is a testament to our strong foundations and the robustness of our diversified energy businesses in Asia Pacific. Our financial results were strong, driven by dependable core Hong Kong and mainland China businesses, and improved contributions from our overseas businesses, including a progressive recovery at Energy Australia. 2023 saw the achievement of an important milestone in Hong Kong, the approval of 2024 to 2028 development plan, a five-year program worth 52.9 billion capital expenditure to propel Hong Kong's next development and decarbonization phase, a mark of regulatory stability and economic certainty, which is particularly relevant in the current environment. Operationally, we ended 2023 with our fleet delivering excellent performance. Yangjiang had record high generation. Diabase Unit 2 successfully completed its 30-year outage, the first large-scale commercial nuclear plant in mainland China to do so. Hong Kong endured a super typhoon and one of the heaviest rainstorms on record within a week. and availability at DeLong and Mount Piper improved. All thanks to the hard work of our people across the organization. For future growth, we made progress on nationally significant projects. The decolonization of Hong Kong took a major step forward with the launch of a new offshore LNG terminal. In mainland China, we accelerated the expansion of our renewable energy portfolio, underscoring our commitment to meet demand for sustainable energy. Energy Australia's advanced its flexible capacity projects to support reliability in Australia's energy transition with Talarara B gas power station coming online and a number of battery and pump hydro projects making progress. Aprava Energy in India has entered the advanced metering infrastructure markets, winning contracts to install more than 3 million smart meters, which will enable the development of more energy efficiency services. Across all our markets, we are building strong growth momentum, seizing the opportunities in energy infrastructure and rising demand for energy solutions. We have a healthy pipeline of projects and the long-term fundamentals of the markets where we operate remains compelling. Finally, energy transition remains a fundamental priority and at the core of CLP's strategy. That's why we have again strengthened our greenhouse gas emission intensity targets to bring us closer to 1.5 degrees Celsius. Now turning to the highlights for 2023. Financially, the Group's operating earnings before fair value movements increased by 33% year-on-year to over HK$10 billion. As we have already announced, we took an impairment of goodwill of Energy Australia's customer business to reflect the changes in the Australian retail market. After taking this into account, another one of our items, total earnings were 6.7 billion, a strong rebound from 924 million. Our Hong Kong team did a great job working with the government to conclude the 2024 to 2028 development plan. This plan keeps up a high level of investment in the next five years to support Hong Kong's growth. In line with our longstanding practice and policy on dividends, the board struck a balance between the improvement of financial performance and the group's ongoing investments in energy transition. They've approved a fourth interim dividend of $1.21 per share, making total dividends the same as 2022 at $3.10 per share. Looking ahead, we remain committed to build on the positive momentum to remunerate shareholders in line with the evolution of earnings while maintaining a solid financial position to back our business growth. On the operational front, our injury rates went down by 28%, which is especially pleasing in a year of heavy development and construction activities. Despite super typhoon solar, reliability in Hong Kong remains exceptional compared to most major urban centres. On the customer front, we saw growth in our customer accounts in Hong Kong, while intense competition in Australia resulted in a slight reduction in accounts there. Energy output declined 9%, mainly due to exiting Fangchenggang coal-fired power station and the deconsolidation of approval energy. Excluding these changes, output from our portfolio matched last year's level. We increased our generation capacity, continuing our investments in the transition to cleaner energy, while greenhouse gas emission intensity of our operation was stable. I will now hand over to Nicola to take you through the financial results.

Thank you, TK, and good afternoon. In a context of rapidly changing energy markets and macroeconomic as well as financial pressure, CLP performed strongly. We recorded EBITDAF growth of 12% to 23.6 billion. This reflected stable generation and sustained capital expenditure in Hong Kong. Energy Australia recovered from a loss in 2022 to turn significantly positive at EBITDAF level in 2023. Groups operating earnings before fair value movements were strong, above 10 billion, 33% higher as compared with 2022. Coupled with the favorable fair value movements of 2.1 billion versus an unfavorable fair value movement of 3 billion in 2022, operating earnings soared above the 12 billion mark. Despite the significant negative impact of items affecting comparability, predominantly the impairment of Energy Australia's customer goodwill of 5.9 billion, as well as a small impairment in China and a positive one-off in India, total earnings for the year were 6.7 billion, a significant rebound from less than a billion in 2022. After the consolidation of APRAVA Energy, capital investment continued at a healthy pace of $12.8 billion in 2023. And as mentioned by TK, total dividends per share declared in 2023 were maintained at $3.10, same as last year. EBITDAF evolution reflects solid delivery across the group, with significant improvement at Energy Australia, which turned 2.3 billion positive compared to a loss position in 2022. I will double-click each of the regions in the following slides. On the left-hand side, you'll see the scope impact of around a billion from the deconsolidation of APRAVA Energy, now equity-accounted as a 50-50 joint venture, as well as the divestment of Fan Chenggang events that occurred in late 2022. Removing the impact of Scope and a stronger Hong Kong dollar against Australian dollar and Renminbi, consolidated EBITDAF of the group grew 17% organically. This slide shows the solid 30% organic evolution of our operating earnings before fair value movements. This organic growth results from an increase of almost 3.7 billion in EBITDAF as we have reviewed in the previous slide. Higher net financing costs due to higher interest rates environment in Hong Kong and Australia, although we were able to mitigate part of this pressure. Higher tax expenses, many due to the impact of reduced tax credits in Energy Australia, in line with lower losses. Higher depreciation and amortization were driven by new projects commissioned in Hong Kong and mainland China. At the operating earnings before fair value movements level, we saw higher contribution from almost all regions. Hong Kong continued to deliver steady earnings from higher average net fixed assets. However, higher interest costs borne by shareholders on higher interest rates limited the growth of earnings. Mainland China saw dependable performance from our non-carbon fleet, and in particular from nuclear, where we had a record high output from Yangjiang. However, loss from legacy minority-owned coal assets resulted in a 7% decrease, but still above the 2 billion mark. Energy Australia recovered from heavy losses in 2022 to close to break even, driven by improvement from its energy segment in a more stable market environment. This was partially offset by retail market headwinds and a period of cost of living pressures. In India, the APRAVA Energy joint venture delivered a strong performance with higher contributions across its diversified portfolio. hoping to perform well operationally, and the earnings increased from the favorable full-year impact of the accelerated electricity tariff cold indexation mechanism. I've spoken about the 2.1 billion favourable fair value movements and items affecting comparability earlier. After these one-off elements, the Group's total earnings improved significantly from 924 million in 2022 to nearly 6.7 billion in 2023. I'll now review each business unit's performance and outlook. All variances will be analyzed at operating earnings before fair value movements level and will exclude the impact of forex and scope to reflect the actual organic underlying performance of the business. Starting with Hong Kong. The slight increase in earnings to 8.8 billion reflected continued investments in electricity, infrastructure, and decarbonization, driving higher average net fixed assets, as well as meeting our five-year performance incentive targets. This was offset by higher interest costs borne by shareholders due to higher interest rates. 2023 was a very busy year marked by major achievements. We came to the end of the 2018-2023 development plan. In the last year of that plan, we delivered 11.7 billion of capital expenditure, including 4.9 billion in generation, most recently the completion of the offshore LNG terminal, and 6.8 billion mainly in transmission and distribution networks, substations and smart meters. We concluded the interim review of the scheme of control and the 2024-2028 development plan was approved by government at a level of 52.9 billion over the next five years. TK will talk about this later. Looking ahead, we will focus on delivering this new development plan to support government's economic infrastructure and decarbonisation agenda. In addition to providing support funding for customers and communities in need, we remain committed to prudent cost controls and a diversified fuel strategy to alleviate the tariff pressure on customers. Mainland China continued to deliver over 2 billion operating earnings. Nuclear continued to perform well, contributing more than 1.8 billion, taking into account the impact of the planned Daya Bay Unit 2 large-scale outage. We saw smooth operations and slightly higher earnings from our renewables portfolio, mainly due to the additional contributions from new wind and solar projects, while partially offset by lower water resources. Lower tariff and output turned our remaining coal-fired assets' profits in 2022 into losses in 2023. Financing costs were lower because of favorable interest rates after several important refinancings, while corporate costs were higher, mainly due to the development expenses to support the acceleration of our renewable growth in mainland China. Looking ahead, nuclear performance is expected to remain dependable despite another major planned outage at Dyer Bay. We have also started to explore other nuclear opportunities. We will continue to build out and execute our development pipeline to deliver upon our ambition to add new renewable generation and flexible assets. As we invest to develop our decarbonisation pathway, options such as green contracts for corporate clients and EV charging stations for local governments are targeted. Turning to Australia, Energy Australia has recovered from heavy losses in 2022, too close to breakeven in 2023. After a particularly extreme 2022 that resulted in the energy segment being in a short position amid very high spot prices, 2023 saw softened and less volatile wholesale electricity prices. The much stronger energy segment performance was driven by Yallon and Monpiper's higher realized prices from forward contracts, non-repeat of high costs to settle short position, and higher gas portfolio margins. Together with higher contributions from the renewable power purchase agreements, the energy segment recorded a big swing from a loss to a substantial 2.9 billion EBITDA. Decrease in EBITDAF in the customer segment was due to unfavorable retail customer book with increased costs of purchasing energy and cap payouts no longer received in 2023. As noted in our customer goodwill impairment announcement, we have seen more demanding economic and operating conditions in the Australian retail market, which has put pressure on margins and resulted in higher churn. Higher finance costs were driven by higher interest rates. In line with improvement in financial performance, tax credits decreased. Looking ahead, our focus remains to continue to strengthen the operational and financial performance of Yallour and Lone Piper after the improvements that we started in 2023. As per its Climate Transition Action Plan, Energy Australia will contract or invest in renewable energy and flexible capacity needed to support Australia's clean energy transformation. And there are a list of initiatives underway covering batteries, picking capacity and pumped hydro. Energy Australia is also working to support its 1.6 million households and businesses who rely on them for their energy needs. This customer base is a key component of the GenTailor integrated model to underpin investments required for the transition of our generation portfolio and to drive future growth and value streams. Finally, to India, where strong momentum behind our joint venture, Aprava Energy, has delivered profitable growth across its diversified portfolio. After adjusting for the deconsolidation resulting from the lower shareholding from 60% to 50%, operating earnings were up 43% to $301 million. Renewables performed well with higher generation from wind and solar and higher interest received due to high efficiency and performance at Jadjar. Transmission continued with a very solid performance, availability from our two transmission assets standing at 100%. Looking ahead, the momentum to expand and diversify its energy portfolio is clear. Sidpore Wind Farm will be in its full 251 MW capacity operation in the first half of 2024, and we have won an additional equivalent capacity of around 1.2 GW of non-carbon projects. These include 300 megawatts of wind projects, 250 megawatts of solar, three interstate transmission projects, and two advanced metering infrastructure projects. Moving now to the group's cash flows. Cash inflows were 23.5 billion, more than double the prior year. This increase was principally from increased funds from operations driven by our improved EBITDAF, but also from large, favourable, exceptional working capital movements and receipt of 1.6 billion, the consideration for the divestment of Feng Shui Gang at the end of 2022. Working capital movements reversed from negative to positive this year as a result of lower fuel costs paid and recovery of fuel costs from customers in Hong Kong, and cash released from Energy Australia's future margin account upon softening forward prices. Cash outflow in the period amounted to 19.1 billion, made up of 11.3 billion of capital investments and 7.8 billion of dividend payments. Most of the capex was for our Hong Kong SOC business at a similar level to 2022 for the final year of our 2018-2023 development plan. As mentioned at the start of the presentation, our consolidated gross capex were lower because of the deconsolidation of APRAVA Energy and the timing of our new projects in 2023. Gross capex spend was mainly on renewable projects in mainland China and Talaura B open cycle gas-fired power plant in Australia. Group financial situation remains healthy. Net debt at 52.3 billion is lower than 54.9 billion a year ago on the back of stronger cash generation. Net debt to total capital ratio also improved, standing at 31.6% compared to 32% a year ago. It's important to highlight that we were able to actively manage funding costs, mitigating the impact of the high interest rates environment by going more fixed and raising floating rate bank loans at attractive conditions as interest rates were rising. We maintain a strong liquidity as at 31st of December 2023 we had above 36 billion of available liquidity made up of 30.9 billion undrawn bank facilities and 5.2 billion of bank balances. Credit ratings and rating outlooks for CLP companies remain unchanged in 2023. Following the yearly credit review by S&P, the credit ratings and stable outlooks for CLP Holdings, CLP Power and Capco were reaffirmed at A, A+, and AA- respectively, and the same goes for Moody's. Overall, we are in a good position to address our commitments to shareholders and bondholders, have ample liquidity for any event, and continue to fund our energy transition growth plans. Finally, on a more personal note, I wanted to share that these annual results will be my last ones with CLP. As announced on January 30, I will leave the company for personal reasons. With these solid results, I'm happy that I live on a high note, and I'm proud of the steps we've delivered during these four intense years to put CLP in a stronger position. I will be leaving the CFO role at the end of March, and I look forward to continue helping a smooth handover with my successor, Alex Kayser, until the end of June, including during the upcoming roadshow. With that, I will pass it over to TK.