Clp Holdings Ltd S/Adr

Good afternoon, everyone, and welcome to CLP's 2025 Interim Results Briefing. I'm Marisa Wong, Director of Investor Relations. Joining me today is Chief Executive Officer, Mr. TK Chung, and Chief Financial Officer, Mr. Alex Kaiser. We lodged our 2025 interim results announcement with the Hong Kong Exchange at New Day Today. That announcement, in addition to this presentation, is available on our IR website now. This briefing is also being recorded, which you can also access on our website later. Before we begin, Kasturi, for me to remind you to read the disclaimer on slide two. And for today's briefing, TK will open with a business overview, followed by Alex with the financial results, and then TK will provide his strategic outlook, finished with a Q&A session. So with that, I'll pass it over to TK to begin the briefing. Thanks, TK.

Yeah, thank you, Marisa. So good afternoon, everyone. Thanks for joining us. Now as we navigate an accelerating energy transition, shifting market dynamics and heightened geopolitics in the first half of 2025, the group has demonstrated resilience, anchored by the strength of our core Hong Kong business. However, our performance was moderated by specific market headwinds, including downward market tariff evolution in the mainland and strong retail competition in Australia, both of which impacted this half's results. The fundamentals of the business, however, remain strong. Our commitment to operational excellence continues to deliver results. We maintained our track record of excellent reliability in Hong Kong, achieved commercial operation of new energy transition projects in the mainland, and successfully completed the major maintenance overhaul at Mount Piper in Australia, enhancing its flexibility and reliability. We are continuing to build the energy infrastructure needed to drive decarbonisation and the foundation for future recurring earnings. We are funding this growth from a position of strength underpinned by our strong balance sheet and a recently affirmed A-stable rating by S&P. This foundation enables our disciplined capital allocation framework, which prioritizes high-value investments and efficient use of capital, including strategic partnerships, in order to drive sustainable long-term returns. We approach the remainder of 2025 with a robust financial structure and clear pathways to continue to create value for our shareholders. Now turning to the highlights. As mentioned, our results this half was shaped by the market challenges in the mainland and Australia. With that context, our group operating earnings before fair value movements decreased by 8% year-on-year to HK$5.2 billion. This performance flowed through to our bottom line with total earnings decreasing by 5% to HK$5.6 billion. The Board has recommended a second interim dividend of $0.63 per share, bringing total interim dividends to $1.26 per share, equating to a yield of 4.8%. Operationally, we maintained good performance on our safety and reliability matrix, with higher reliability in Hong Kong at 99.999% and less injuries in Australia. On the customer front, we saw growth in accounts in Hong Kong, while competitive market conditions in Australia resulted in a reduction in customer numbers. Generation performance reflected cold output reduction, and we added more non-carbon capacity to our group portfolio. I'll now hand over to Alex to take you through the financial results.

Thank you, TK, and good afternoon. A snapshot of our financial results. Earning before interest, tax depreciation and fair value, or EBITDAF, was down by 5% to HK$12.4 billion compared with the same period last year. Operating earning before fair value movement decreased by 8% and landed at HK$5.2 billion. Adjusted for the fair value movement and items affecting comparability, total earnings was 5.6 billion, a decrease of 5%. Capital investments of over 8 billion was lower than last year, as despite a higher gross capex in 2025, our headquarter acquisition was finalized in 2024. Total dividends per share declared for first half 2025 was $1.26, same as last year. Now let's go into the details. Our core Hong Kong business anchored the group's performance with higher contributions. As highlighted by TK, industry-wide challenges in the mainland and Australia, plus one-offs in India, resulted in lower operating earnings. There were small fair value movements reflecting accounting losses on Energy Australia's forward energy contracts as of end of June 2025. This half results including also a one-off item related to the realization of Energy Australia's Wuring battery post-introduction of our 50-person joint venture partner, Bamboo. All in all, the group total earnings were moderately down by 5% to over 5.6 billion. I'll now take you through the detailed performance and outlook for each business unit. All variances will exclude foreign exchange to reflect the organic underlying performance of the business. Starting with Hong Kong, Hong Kong delivered yet another round of solid and dependable core earnings through our continued investment and reliable operations. We've made good progress on CAPEX, standing at 4.5 billion, primarily for key initiatives to support Hong Kong's growth for the northern metropolis, new housing development, data centres and decarbonisation agenda. While there was slightly lower overall electricity sales, largely because of last year's warmer weather and an extra day which set a high base for comparison, data centres continue to show steady growth. Lower interest costs and positive refinancing outcomes for the US$500 million perpetual capital securities added to Hong Kong's strong reserves. Hong Kong continues to charge ahead, enabling a low-carbon economy across all major sectors, such as road transportation, shipping and building. Demonstrating our leadership in decarbonisation, we partnered with SYNOC to deliver a Hong Kong First, simultaneous liquefied natural gas fueling and handling of a cargo. Looking ahead, our focus is threefold. To continue providing reliable electricity at a reasonable tariff, to deliver the 52.9 billion program of work in the development program, and to advance our decarbonization efforts toward governance 2035 climate target. Moving now to the mainland, where financial performance was affected by market challenges. The combination of soft demand, accelerated growth in new generation capacity and wind resources variability contributed to earning reduction of 15% to 870 million. Operationally, our nuclear joint venture plans delivered strong performance, highlighted by another outstanding performance from Yangjiang. However, lower tariffs for Yangjiang ultimately impacted operating earnings from the nuclear portfolio. Renewable earnings were also lower, driven by lower wind resources, higher curtailment in the northern and eastern regions, as well as lower tariffs. Successful commissioning of three new renewable projects in the first half, as well as higher output from hydro, provided a positive offset, demonstrating tangible value to our disciplined growth strategy. While our minority coal JVs were impacted by reduced dispatch from lower demand. Our reputation as a reliable foreign investor enables us again to secure a GEC of stake agreement with one of the largest green power purchasers in the world, enabling earnings visibility and positioning CLP as a provider of choice for green solutions. Our development pipeline is solid, with over 1 GW of renewable and battery projects in various stages of development. including our largest wind and our first independent battery energy storage system. Looking ahead and in response to Policy Document 136 and the move towards market-based pricing, we will evaluate the renewable portfolio to maximize value. Capital allocation will be based on our value-over-volume principle and focused on risk-return as we track policy implementation and supply and demand trends. Nuclear performance is expected to remain dependable. Also for Yangjiang, we expect increasing market tariff exposure and evolving taxation issues that are being reviewed. turning to Energy Australia results, which overall reflected solid energy market performance, but challenging retail conditions. The first half saw another period of intense retail competition, coupled with cost-of-living pressure, leading to margin compression and reduction in customer accounts. Importantly, despite the weaker performance in the customer segment, our increasingly flexible generation feed performed solidly. The combination of favorable wholesale prices and the ability to capture value in volatility, plus the recoupment of development expense for Lake Lyle, more than offset higher loan depreciation, plus the absence of one-off benefits from last year, namely Montpiper's call compensation and strategy value book outcome. The net impact was a decrease to 167 million operating earnings. We continue to actively shape our energy transition with our growing portfolio of flexible capacity assets, which include six battery storage and one pump hydro into operation or construction. With the objective to have Energy Australia self-funded and with a solid credit rating, a key component of our business model is to fund flexible capacity portfolio through a mix of contracted capacity and partnerships. This first half, we signed two partnerships. One with Bamboo Energy to develop one 350 MW 4 hours battery. It is the single largest investment to date. Another one with EDF Power Solutions to co-develop the potential 330 MW 8 hours pump hydro energy system. Looking ahead, Our focus will be to underpin a foundation for stability and earning growth with three key actions. Ensure performance of our generation to respond to demand and price volatility in favorable wholesale price environments. Improve our customer margin through pricing, re-contracting activities and cost-saving initiatives, including expected longer-term benefits from the multi-year platform replacement. And lastly, advance our strong pipeline of flexible capacity projects with new partnerships alongside Energy Australia's strong customer base. Aprava Energy operating earnings reached almost 80 million thanks to solid renewable performance and Jar Jar's continued reliability. Renewables performance was driven by higher wind resources and full commissioning of Aprava's largest renewable asset, the 250 MW Sipu wind farm, while Jar Jar continued to uphold its reputation as one of India's best-run thermal plants. Earnings performance was however offset by a one-off item for the KMTL asset, which included a non-cash impairment charge of $83 million, following a reassessment of more conservative assumptions in the discount rate. Furthermore, in 2024, we had a retrospective tariff gain from prior years that was not repeated. APRAVA made solid advancement in smart meter rollout, with around 7 million meters under installation. So, near-term cost weighted on contribution. Finally, corporate expenses rose due to mark-to-market losses for aluminum hedges taken for transmission projects. Growth momentum remains robust, 15 projects won within 2 years for an equivalent of 2 GW capacity. As India, the world's third largest electricity producer, strives to reach 500 GW of non-carbon capacity by 2030, our strategic joint venture will deliver its growth potential, funded by its own balance sheet. Finally, to Taiwan region and Thailand. Lower earnings contributed from hopping in Taiwan was attributable to lower recovery of coal cost. Lobb Brewery Solar's performance in Thailand remained stable. In line with the group's strategy to explore new opportunities in the region, higher corporate and development expenses were recorded in the first half for development in the Taiwan region and Vietnam. Together, earnings decreased to 19 million. Looking ahead, OPENG will focus on managing fuel costs and more broadly, we are evaluating renewable energy opportunities backed by long-term contractual agreements as part of our Taiwan region and Southeast Asia growth strategy. Turning finally to cash flow. Free cash flow generation was 7.1 billion, down 0.9 billion versus 2024 first half, unexplained by the underlying EBITDA performance reduction of 0.6 billion and unfavorable working capital movement of 1.3 billion, which was mainly due to a one-off advance receipt for Energy Australia in the first half of 2024 that was subsequently rebated to customers in the second half. On the investment side, with our new headquarter now complete, overall capital spending was lower. The group invested 7 billion in the first half, made up of 5.1 billion for Hong Kong SOC business and nearly 2 billion for renewable energy projects in the mainland and marine battery at Energy Australia. Cash payment for dividends was higher, as a result of the higher final dividends for financial year 2024. Now, our financial structure remains strong, despite an increase in net debt to 62 billion and with a sound liquidity position of close to 30 billion. Our prudent financial management has been recognized by S&P, which reaffirmed our strong investment grade rating for CLP Holding, CLP Power and Capco, all with stable outlooks. The team successfully raised over 10 billion in competitive financing for Hong Kong SOC business, in addition to the refinancing of the 500 million USD perpetual capital securities, all with favorable credit spread. I'll now pass this over to TK for the update on the group's strategic priorities.