Financial Capital

Our contribution to society is far beyond the profit we generate for our shareholders. We also create value for other stakeholders – about 84% of our revenue was redistributed back to our stakeholders through our expenses and payment in 2017.

Interview with Geert Peeters, Chief Financial Officer of CLP Group

“As we move towards a lower carbon future, it is important that we explore new and innovative ways of financing energy transition in the markets where we operate.”

What were the highlights for you in 2017?

Despite turbulence in the financial markets, shortage in the Australian energy market and oversupply of power in China, we had a strong year achieving on business performance and earnings, while maintaining a robust financial structure and strong investment grade credit ratings. In 2017, our Standard & Poor’s (S&P) credit ratings were upgraded across the board, with CLP Holdings moving from A- to A, CLP Power Hong Kong from A to A+ and EnergyAustralia from BBB to BBB+. In addition, for the first time, S&P assigned a credit rating of AA- to CAPCO., We see these upgrades as an endorsement to CLP’s business strategy, fundamentals and financial philosophy, which emphasizes discipline, proactiveness and diversification.

As we move towards a lower carbon future, it is important that we explore new and innovative ways of financing energy transition in the markets where we operate. In 2017, we developed the Climate Action Finance Framework (CAFF) to set a foundation for providing more low carbon financing options for investors to meet their increasing ESG investment requirements, while contributing to the development of CLP’s new low carbon energy infrastructure. The first bond issued under the CAFF was an Energy Transition Bond to finance the construction of a new 550MW combined cycle gas turbine generation unit (CCGT) at Black Point Power Station in Hong Kong, supporting our transition away from coal. As the first benchmark USD Energy Transition Bond issued globally, this bond was the first of its kind in the world.

As CLP invests more into the future, how do you explain to shareholders who may have concerns?

First, it is important to note that while we have increased our investments, we have maintained a strong balance sheet and even strengthened our credit ratings. The company generates strong cash flows, approximately two thirds of which are re-invested. Our disciplined financial strategy is aimed at keeping a sustainable balance between growth, energy and technological transition, financial strength and dependable investor return. CLP has a very long track record of delivering on this and it is key in our integrated decision-making.

What trends are pushing sustainability into the realm of finance?

Post the climate conference in Paris, we are definitely seeing more proactive engagement from many stakeholders and in particular from the financing community. There is a consensus that climate change has far reaching impacts for human kind and that businesses in general and utilities in particular, have to relentlessly seek solutions to move us towards a lower carbon pathway. I see the emergence of a combination of: i) enablers from technology and aspiration, such as CLP’s updated Climate Vision; with ii) the ‘carrot’ from the rapidly increasing green financing market; and iii) the ‘stick’ from increased shareholder positioning and activism on the topic of climate change and ESG-related matters.

At CLP, we proactively respond to this both through action and communication, as a pioneer in aspirational Climate Vision setting, investment in renewable assets in Asia-Pacific and finally as an early adopter and promoter of integrated reporting. This early adoption of sound voluntary ESG principles has prepared us very well for what is increasingly becoming required ESG practices, in particular in the equity and public debt markets.

We see integrated reporting playing an important role in helping to communicate a more holistic view on how a company is being managed. A sustainable company is one that does not just focus on financial delivery, but it must also be able to sustainably and ethically manage its human, social, intellectual, manufactured and natural capitals, as they are all critical to the company’s long-term existence. At the end of the day, sustainability is about being able to anticipate emerging risks and opportunities and making appropriately balanced decisions at the right time and place. This means we must have an integrated approach not only in our reporting, but also in our thinking and our decision-making.

Topics covered in this chapter