Oopps. Shares in Hong Kong’s CLP Holdings had their biggest fall in over a decade on Friday after the power company warned it would book a first-half loss due to a massive write-down on the value of its Australian business.
As well the company’s main operation in Australia – Energy Australia has suffered a sharp slump in earnings in the first five months of 2019, with more pressures to come over the rest of the year, but at a reduced level.
Shares in the company fell as much as 5.5% on Friday after it said in a statement to the Hong Kong stock exchange after the market closed on Thursday, that it would take an impairment charge of between $HK6 billion and $HK7 billion ($A1.1 billion and $A1.3 billion) on its EnergyAustralia retail business.
The write-down reflects the impact of new retail power price caps that will be imposed by the Australian government from next Monday, July 1, CLP said.
The shares closed down 4.4% on Friday in Hong Kong – a fall that pushed them into negative territory for the year to date with a loss of 3%.
That was the biggest fall the shares have suffered since the GFC in late 2008.
It’s the second bit of bad news from an Australian energy utility – 10 days ago AGL quietly revealed that a short in a generator unit at its Loy Yang station in Victoria would take at least six months to repair and could cost $A100 million more off its expected earnings in 2019-20.
CLP said the new “safety net” tariffs and efforts by Energy Australia to lure new customers with cheaper deals would cut its second-half earnings before tax from the Australian retail business by between $HK240 million and $HK300 million.
“This reduction will likely sustain into the future, but may vary as market participants and customers adjust to these new market conditions,” CLP said.
CLP also revealed the impact of poorer trading conditions in Australia. It said in the statement that operating earnings at EnergyAustralia for the first five months of 2019 had dropped to HK$731 million ($94 million).
That was down sharply from the HK$2.25 billion it reported for the six months to June 30 last year and was due to weaker generation from the Australian unit’s two biggest power plants: Yallourn in Victoria and Mount Piper West of Sydney where coal quality problems had reduced energy production.
“We do not expect these issues to be repeated during the second half of the year at Yallourn and we are also undertaking efforts at Mt. Piper to improve the coal quality,” CLP Chief Executive Richard Lancaster told investors on a conference call on Thursday.
CLP said the announcement the new “safety net” tariffs and efforts by Energy Australia to lure new customers with cheaper deals would cut its second-half earnings before tax from the Australian retail business by between HK$240 million and HK$300 million.
CLP’s Australian assets (Mostly Energy Australia) contributed 22% of the company’s operating earnings before unallocated expenses in 2018.
CLP said it expects a reduction of HK$6 billion ($US766 million) to HK$7 billion in goodwill attributed to the retail business of Energy Australia.
In addition to Hong Kong and Australia, CLP also has operations in mainland China, India, Taiwan, and Southeast Asia, spanning power generation, transmission and distribution.
