Material Topic : Indirect Economic Impacts
Most Material Topic : Economic Performance

Sharing the economic value generated

We create value not only for our shareholders, but also for our other stakeholders. The indirect economic value that we create is an important part of what makes our business sustainable.

A prudent approach

 

Our Value Framework specifies our commitment to the responsible management of our investment and business risks and investing to build on and preserve the value of our assets, capabilities and relationships.

The power industry is recognised for its high investment costs, capital intensity and long payback periods with compounding risk factors. The ability to arrange timely, cost-effective, diversified, multiple-tenured and sustainable funding is critical in managing and growing our business. Our shareholders and business partners place high value on our consistent commitment to prudent and vigilant financial management. We are highly committed to preserving our robust capital structure, maintaining strong investment grade credit ratings, keeping and cultivating good, long-term business relationships with lenders and investors, and reserving financial strength and flexibility to meet business objectives and contingencies.

With our growing, cross-border business portfolio, we are exposed to multiple risks in liquidity, financing and refinancing, foreign exchange, interest rates, counterparties and compliance. CLP Group requires all business units to clearly identify, carefully monitor and effectively manage their financial-related exposure, both in policy formulation and implementation.

Identifying potential financial market risks is only the first step of our financial strategy. A holistic risk management framework with effective implementation helps CLP protect profit and improve the reliability of cash flows to contribute to the financial strength of our business and create value for our shareholders. Equally important is the swift and rigorous implementation of policies and procedures put in place to mitigate the potential risks to the business in areas such as funding, foreign currency, interest rates, credit rating and counterparty risks.


Economic value generated and distributed

Our contribution to society is beyond the profit we generate for our shareholders. Revenue can be viewed as part of the economic value CLP has created in the provision of electricity and gas suppled to our customers. The payment of expenses can be considered as the distribution of economic value to our various stakeholders – suppliers and contractors, employees, capital providers, governments and the wider community. Economic value retained in CLP represents the reinvestment made to preserve operating capacity and to fund new investments. Please see how the economic value we generate is redistributed on the Financial Capital landing page.

Financial performance in 2017

We worked hard to deliver a highly reliable, environmentally responsible and safe electricity supply to customers in 2017. In 2017, operating earnings from our energy business increased 7.9% from a year ago to HK$13,307 million.

In 2017, we paid interim dividends to our shareholders of of HK$1.77 (2016: HK$1.71) per share for the first to third quarters, totaling HK$4,472 million (2016: HK$4,320 million). The fourth interim dividend of HK$1.14 (2016: HK$1.09) per share totalling HK$2,880 million (2016:HK$2,754 million), to be paid on 22 March 2018. This represents a dividend payout ratio for the year of 55% of operating earnings.

Despite uncertainties arising from new global political and economic order, financial markets continued to advance through much of 2017. The interest rate increase and market movements presented corporates with challenges and opportunities depending on their financial discipline, competency, and readiness to deal with market fluctuations. At CLP, we remained focused on our well-proven financial philosophy and deployed our financial flexibility and capability to diversify so that we could navigate through the volatile market in support of our business strategy.

In 2017, the average closing price of CLP’s shares was HK$80.47, an increase of 8.7% when compared with the average of 2016. The share price appreciated strongly during the first half of the year. The lowest closing price for the year of HK$72.55 was recorded on 3 January and the highest closing price of the year of HK$85.30 occurred on 1 June. The share price stabilised over the middle of the year and then declined towards year-end. This was largely driven by growing concerns that the U.S. Federal Reserve would increase interest rates and that Hong Kong utilities have in the past demonstrated an inverse correlation with rising interest rates. The share price ended the year at HK$79.95.

Compared with the starting position on 1 January 2017, CLP’s share price gained 12.2%. The HSI and the Bloomberg World Electric Index (BWEI) were up by 36.0% and 11.4% respectively, recovering strongly after making minimal growth or lost in 2016.

This comparison is shown in the chart on the right.

Find out more in the Financial Review section of our Annual Report

Credit ratings

CLP always strives to maintain strong investment grade credit ratings. In 2017, our commitment and initiatives to support a strong financial position were recognised by positive rating actions from S&P. In 2017, S&P upgraded the ratings of CLPH, CLP Power Hong Kong and Energy Australia to A (from A-), A+ (from A) and BBB+ (from BBB) respectively. CAPCO received AA- and A1 from S&P and Moody’s respectively for the first time.

The credit ratings of major companies within the Group as at 31 December 2017 are summarised in the table below.


Our Credit Ratings