Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong start to the year with solid growth in the group's earnings and improved results from EnergyAustralia.
- Successful operational delivery with significant projects, including the 600 MW D2 unit in Hong Kong and the first fire at Tyler RFP in Australia.
- Financial position remains strong with S&P maintaining investment grade credit rating and a stable outlook.
- Operating earnings before fair value movements increased by 22% year on year to nearly HKD5.7 billion.
- Continued progress in zero-carbon growth in China and India, with strong performances in power demand and electrification.
Negative Points
- Intense competition in Australia resulted in a slight reduction in customer accounts.
- Higher interest costs in Hong Kong and higher tax expenses slightly impacted operating earnings growth.
- Reduced contribution from Mainland China due to major scheduled maintenance work at Daya Bay and Yangjiang nuclear plants.
- Unplanned customer minutes lost in Hong Kong impacted by extreme weather and power supply incidents.
- Ongoing intense retail competition and cost of living pressures in Australia may continue to affect margins.
Q & A Highlights
Q: Management, congratulations on your good first half results. For your Australian business, do you expect further margin expansions in the second half, and what will be the driver? Also, any updates on the potential disposal of your Australian business? Lastly, how much rental expense savings can we expect from your new headquarters in Kai Tak?
A: (Tung Keung Chiang, CEO) In the first half, we recovered high procurement energy costs, but intense competition offset some margin gains. We expect this competition to continue in the second half. Regarding the potential disposal, we are open to partnerships to fund required investments, similar to our joint venture in India. For the new headquarters, we plan to move in by December, and the current office will be used temporarily for renovations. Long-term usage is still under review.
Q: With the maintenance program finishing by the end of this year, is Yallourn still expected to retire by 2028? Also, can you explain the seasonality of your cash flows and any potential upside to the current development plan in Hong Kong?
A: (Tung Keung Chiang, CEO) Yallourn is still set to retire by 2028, and we are preparing the rehabilitation plan. For cash flows, our strong inflow this semester was due to high EBITDA and some timing reasons, like advance payments and deferred taxes. Regarding the Hong Kong development plan, we are executing the approved HKD52.9 billion plan. Any additional CapEx would depend on future requirements and discussions with the government.
Q: What's the outlook on long-term power prices in Australia's wholesale market, and how much of the improvement in the Australian business was contributed by gas-fired plants? Also, should we expect similar CapEx levels in Australia and Mainland China going forward?
A: (Tung Keung Chiang, CEO) Long-term power prices depend on supply and demand, and recent slow progress in renewable energy projects might keep prices elevated. (Alexandre Keisser, CFO) CapEx in China is expected to increase due to our development strategy, funded by project finance and equity. In Australia, development will be self-funded. Gas plants are crucial for our flexible capacity portfolio, and their contribution is expected to increase with more renewables coming in.
Q: Given the turnaround in the Australian business, can we expect dividends to grow in line with this improvement?
A: (Tung Keung Chiang, CEO) Our policy is to maintain a reliable and consistent dividend, targeting growth supported by business performance and financial sustainability. The Board will decide based on the company's financial condition.
Q: How did EnergyAustralia perform during the volatile New South Wales pool price event in May, and what impact will the HKD1,000 per household subsidy in Southeast Queensland have on your business?
A: (Tung Keung Chiang, CEO) Our generation plants performed well during the event, benefiting from it. The Queensland subsidy will be passed through to our customers, easing cost-of-living pressures and positively impacting our business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
