Disposal of coal assets bites CR Power's 2018 profits

Its profits were down 14.6% to $503.26m in 2018.

The disposal of China Resources Power’s coal assets and impairment provisions for its power assets weighed on its profits which fell 14.6% YoY to $503.26m (HK$3.95b) in 2018. On a recurrent basis, its profit rose 27% YoY to $885.48m (HK$6.95b) last year.

However, Pierre Lau, Citi’s head of Asian utilities and clean energy research, commented that its dividend cut was unjustified. CR Power was supposed to have a distribution per share of at least 11 cents (HK$0.875).

CR Power gave three reasons for the cuts: (i) it had material business change disposal of five coal mines in 2018 at a total of $270.36m (HK$2.12b) loss; (ii) it wants to retain more cash for wind farm development; & (iii) PRC central government requests de-gearing of state-owned enterprises.

As a result, it saved $331.27m (HK$2.6b) in 2018. “We think these reasons are unconvincing & regard the broken promise as damaging to its creditability,” Lau said.