CLP gets green light to build US$708m gas-fired unit in Hong Kong

The approved 550MW facility will be built in 2-3 years.

CLP receiving government approval to build a new gas-fired unit in HK is positive while its HK tariff freeze in HK in 2017 is in line according to Citi, with the offer of one-off HK$0.023/kWh rebate in 1Q17 from tariff stabilisation fund with no profit impact. 

"CLP FY16E net profit is -1% on less profit from India, but FY17-18E net profits are up 2-6% on buying 17% stake of Yangjiang nuclear plant in 1H17E and
extra profit from the new gas-fired plant," Citi said in a report.

CLP’s fuel mix in HK from NG would be lifted from 25% in 2015 to 50% in 2020E; by adding the newly approved 550MW gas-fired unit to be built in 2-3 years at HK$5.5bn (US$708m) at its Black Point power plant, of which HK$3.6bn will be incurred in the current Scheme of Control period until 30 Sep 2018. This will add to its tariff by HK$0.02/kWh (1.8%) in 2017E and HK$0.04/kWh (3.5%) in 2018E.

To recall, CLP bought a 17% stake of Yangjiang nuclear plant from CGN Power (1816.HK; HK$2.23; 3) at Rmb5bn, or 11.9x pro-rata 2016E PER based on annualized net profit of Rmb1,654m in 8M16. 

The deal will be completed in 1H17E & CLP will book it as an associate, as one of the 7 directors of the board & a deputy general manager of the plant will be from CLP. Yangjiang has 6X1,080MW, of which 3 are in operation and 3 are being built.