Clp Holdings Ltd S/Adr

Good afternoon and welcome to CLP Holdings' 2024 Interim Results Briefing. My name is Marisa Wong, Director of Investor Relations, and today I'm joined by Chief Executive Officer Mr Tihei Chang and Chief Financial Officer Mr Alex Kaiser. We lodged our 2024 results with the Hong Kong Exchange today at around midday. Those results as well as this presentation is available on our website now. This briefing is also being recorded and will be available on our website later. Before we begin, please remember to read the disclaimer on slide one. And for today's agenda, we'll follow the usual practice, which is TK to deliver the overview as well as the strategic outlook, Alex to take you through our financial results, and this will end with a Q&A session. With that, I will now hand over to TK to commence the briefing. Thank you, TK.

Thank you, Marisa. So thank you for joining us for our 2024 interim results briefing. I'm pleased to report a strong start to the year with solid growth in the Group's earnings and improved results from Energy Australia. These results illustrate that the fundamentals of CLP remain strong despite volatile global conditions and growing complexity of new energy systems. Operational delivery remains at the core in our pursuit of energy transition. This half, we continued our track record of delivering significant projects. In our home market, the last piece of gas infrastructure, our 600 MW D2 unit, went into operation, enabling the gradual retirement of coal-fired units. In Australia, amidst increasing price volatility, we achieved first fire at Talarara B, the only peaking plant added to the New South Wales grid in the past decade. And across all our markets, we've worked tirelessly to improve the availability and reliability of our 23GW fleet as we responsibly transition to a low-carbon portfolio. Our growth momentum is matching the energy transition opportunities in our markets. In Hong Kong, we continue to make progress executing the new development plan. In China and India, we accomplished one of our strongest zero carbon growth performances due to increases in power demand and the push towards electrification and decarbonisation in these markets. At Energy Australia, we advanced with approvals for the development of the 350-megawatt Vuren battery in Victoria and a 50-megawatt battery system at Hallett Power Station in South Australia. Our financial position remains strong, as evidenced by the S&P maintaining our investment-grade credit rating and a stable outlook for CLP Holdings, CLP Power and Capco, and MODIS doing the same for EA. With stable earnings, sound capital structure and a healthy development pipeline, the foundations for future earnings and a lower carbon future are set and well underway. Now, turning to the highlights. Financially, the Group's operating earnings before fair value movements increased by 22% year-on-year to nearly HK$5.7 billion. This reflected solid contributions with delivery from across the group along with improved earnings contributions from Energy Australia. Operating earnings after fair value per share increased to $2.32 and the Board has recommended a second interim dividend of $0.63 per share, equal to the first dividend. Total earnings were also up 18% to nearly $6 billion, representing $2.36 per share. Based on our share price at the end of June, this provides a yield to investors of 4.9%. Operationally, our injury rates remain stable, and we continue to prioritise safety as we enter into high level of fuel activities. Our reliability, measured by unplanned customer minute loss, was impacted by extreme weather and power supply incidents in Hong Kong. Nevertheless, Hong Kong's network reliability remains exceptional by world standards and we will continue our effort to uphold this. On the customer front, we saw growth in our customer accounts in Hong Kong, while intense competition in Australia resulted in a slight reduction. Electricity output from our generation facilities was stable. The slight decrease in generation capacity reflects the retirement of three coal units in Hong Kong. I'll now welcome Alex for the first time as Group CFO to take you through the financial results.

Thank you, TK, and good afternoon. It's my pleasure to report a strong set of results this half. The snapshot of key financial results metrics shows that we achieved growth in earnings while investing for the future and returning to our shareholders. Earnings before interest, tax, depreciation and fair value increased by 17% to close to HK$13 billion. This reflected sustained capital expenditure in Hong Kong and a turnaround at Energy Australia. Increase in EBITDAF supporting operating earning growth of 22% to close to 5.7 billion. This was slightly impacted by higher interest costs in Hong Kong and higher tax expenses. Adjusted for fair value movements and items affecting comparability, total earning for the period was slightly higher than operating earnings before fair value. Capital investment of over 10 billion was higher than last year, reflecting our focus on decarbonisation and supporting infrastructure growth. Total interim dividends per share declared in the first half were maintained in $1.26, same as last year. Overall, the EBITDAF evolution reflects solid growth in earnings. there was a small impact of currency movements against Hong Kong dollar. Otherwise, the EBITDAF waterfall shows energy Australia as the major driver for the period-on-period increase, followed by dependable performance from Hong Kong and profitable growth in India. The reduced contribution from mainland China coincided with the major scheduled maintenance work at Daya Bay and Yangjiang nuclear plants. I will go into detail on each of the regions in the following slides. At the operating earnings level, we saw higher contribution from all regions, except for mainland China, Taiwan region, and Thailand. Hong Kong delivered very robust underlying performance, with earnings of almost $4.3 billion. Earnings from mainland China reached almost $1 billion, impacted by scheduled 30 years and 10 years outages at Daya Bay and Yangjiang, respectively, both of which were completed on time. Energy Australia delivered its turnaround from a lost position to positive earnings, reflecting improved performance in the energy and customer segments in a market that continues to evolve. India's APRAVA Energy continued to grow, with increased contributions from a diversified portfolio of renewable, transmission, smart meters, and thermal. Our asset in Taiwan was impacted by more planned outages and an earthquake, while OpBury Solar in Thailand had reduced contribution due to lower tariffs. Ongoing digitalization and corporate center optimization led to a 7% improvement in cost. as we focus on driving further efficiency in our business. We therefore reported operating earnings before fair value at nearly 5.7 billion, 22% higher than the first six months of 2023. Fair value was positive, reflecting on accounting gain on Energy Australia's forward energy contracts against prevailing prices as of end June 2024. After one-off elements, the group's total earnings for the period increased by 18% to nearly $6 billion. I'll now take you through the performance and outlook for each business unit. All variances will exclude the impact of foreign exchange and scope to reflect the organic actual underlying performance of the business. Starting with Hong Kong, we deliver another financially dependable half-year performance in an environment of higher global interest rates. Operating earnings were up by 3%, reflecting higher average net fixed assets from continued capital investment, which was around 4.1 billion this half on an actual basis. earnings were slightly offset by higher interest costs. Operational performance was sound, with local electricity sales up by 2.6%, driven by higher temperature and economic recovery. Average net tariff was at a lower level compared to this time last year. as fuel cost adjustment reduced by over 5% since the start of the year, reflecting softening of international fuel prices. As TK mentioned, the D2CCGT generation unit went into service in April. Looking ahead, the focus will be on delivering the new development plan, investing in low-carbon energy systems and bringing in more zero-carbon energy, and continue to provide support to communities in need, and being the energy partner to customers to deliver reliable electricity at a reasonable tariff. Moving to mainland China, underlying performance of our mainland China business remains solid. These half results reflected low output from our nuclear portfolio due to scheduled maintenance required on their anniversary years of operation. Earning from renewable remains solid with slightly higher output from the portfolio and contribution from new grid parity projects. Earnings from our minority-owned coal plants decreased due to lower tariffs, although this was partially offset by stabilizing fuel prices. In aggregate, our earnings for mainland China decreased by $384 million to just shy of $1 billion. Looking ahead, nuclear is expected to be back to normal operations in the second half. On renewable development, we are poised to capture the structural power demand growth in mainland China with a healthy pipeline and new capacity additions expected to contribute to earnings. And we will continue to leverage our international presence to foster green contracts and energy solutions for corporate clients and local governments. In Australia, the business turned around from a lost position to positive 611 million operating earnings, the net results of much stronger performance from the energy and customer segments. In the energy segment, the combination of measures that we undertook to improve thermal plants' reliability and availability, as well as the rolling off of lower-priced forward contracts, led to higher realized prices for both Yaloon and Mount Piper. Increase in the customer segment was due to improved recovery of energy procurement costs compared to last year. However, this was against a backdrop of more intense retail competition, lower customer demand, and cost of living pressures. The uplift in depreciation is based on the increased investment for Yalloon toward 23 outages and capitalization of additional decommissioning costs. Lower finance costs were driven by lower average loan debt. and in line with improved financial performance, tax expenses increased. Looking ahead, our focus remains on strengthening the operational and financial performance of Yaloon and Monpiper against viable wholesale prices and higher fuel costs for Monpiper as coal price caps expire. Competition remains high, leading to pressure on earnings contribution from the customer segment. We continue to focus on serving our customers and advocacy on energy affordability. Energy Australia is set to develop flexible capacity projects under the Climate Transition Action Plan, including the Rouen Utility Scale Battery in Victoria and the Hallett Battery located next to Hallett Power Station. Finally, to India, where our joint venture platform, Aprava Energy, continued its strong momentum and delivered 61% increase in operating earnings to over $200 million. Underlying earnings contributions were positive across a balanced and diversified portfolio. Growth in earnings came from strong operational performance in transmission and Jar Jar coal-fired power station. Operating expenses improved mainly due to the recognition of deferred tax assets related to prior tax losses. APRAVA Energy has an equivalent of around two gigawatts of non-carbon projects currently in execution, including two renewable, one transmission, and two advanced metering projects won in the first half of this year. Looking ahead, the John Venture will continue to build out its pipeline of zero-carbon projects to meet rising energy demands and support the country's decarbonization. We are working with the government authorities to renew the necessary approvals for participating in government greenfield auctions. Moving on to the group cash flow. Our free cash flow generation was strong at 8 billion, driven by underlying EBITDAF performance. Cash outflow were higher, totaling 14 billion, made up of 9.3 billion of capital investment. Most of the capex was for our Hong Kong SOC business, standing at 6.1 billion. The rest was made up of renewable projects in mainland China and part payment for our new headquarters in Kai Tak. Dividends payment represent 4.6 billion. Note that our cash flow is seasonal, with cash inflow usually lower in the first half, combined with higher dividend payment due to the practice of a higher final dividends. Financial structure of the group was maintained at a strong position with modest growth in debt and a sound liquidity position. Confirming this strength, S&P reaffirmed the credit rating and stable outlook in May for CLP Holding, CLP Power and Capco at A, A+, and AA- respectively. Similarly, Moody's escaped EA's rating. This is also reflected in our ability for the group to raise competitive financing to maintain a balance sheet debt maturity profile and fixed floating composition. This half, the scheme of control business arrange a total of 11.4 billion bank facilities and bonds with low spread from a diversified base of international and local lenders and investors. Our mainland China and Australia business also executed respectively 3.3 billion and 3.9 billion Hong Kong dollars bank facilities to support energy transition. With a solid investment grade balance sheet and healthy liquidity, we are very well positioned to back our business growth and stay true to our long history of dividend payment. I'll pass it over to TK, to take you through the group's strategic priorities.