CLP Holdings Limited

Good afternoon, everyone, and thank you for joining us for CLP's 2024 Annual Results Briefing. My name is Marissa Wong.

I'm Director of Investor Relations. And today, joining me is Chief Executive Officer, Mr.

T.K. Chiang; and Chief Financial Officer, Mr.

Alex Keisser. We lodged our announcement with the Hong Kong Exchange at midday today.

That announcement, in addition to this presentation, is now available on our website. This briefing is also being recorded.

So, if you want to find that on our website later on, you can. And just a few formalities before we begin, a reminder to read Slide 2 there.

And for today's briefing, we have Teekay delivering the highlights in 2024 as well as his strategic priorities, and Alex to deliver the financial performance for 2024. This will be followed by a Q&A session.

And so, with that, I will now hand over to T.K. to begin the briefing.

Thank you, T.K...

Thank you, Marissa. So good afternoon, ladies and gentlemen.

We are now broadcasting from our brand-new headquarters in Kai Tak today. And as we begin this pivotal chapter in our organization, it is with great excitement and pressure that I present a strong set of results and also share with you the outcome of our strategic review.

So, let's begin with our results. Financially, we delivered growth across key financial indicators from our diversified portfolio with notable material improvements from EnergyAustralia.

Our operational excellence remains at our core as we maintained our track record of execution, positioning us to lead to build-out of energy infrastructure in the coming years. In Hong Kong, we completed major gas infrastructure, paving the way for phasing down of coal.

In China, Yangjiang nuclear achieved record generation. While in India, Jhajjar upheld its position as one of the best-run thermal plants achieving record level efficiency.

In Australia, amidst increasing price volatility, Tallawarra B went into commercial operations, the only picking plant added to the New South Wales grid in the past decade. Turning to our growth momentum.

The new D plan cycle in Hong Kong is progressing well with HKD11 billion in CapEx in 2024. Hong Kong was close to 4.5 gigawatts of noncarbon projects in execution.

We are in a solid position to secure future recurring earnings and cash flows. A few highlights include construction of CLP China's largest wind and solar projects to date both 300 megawatts in Shandong and Guangxi, adding the largest solar project in India to date, 300 megawatts in Rajasthan, and expanding EnergyAustralia's flexible portfolio with the largest battery to date, the 350-megawatt 4-hour wind battery.

The strength of our results, together with growth momentum and already robust financial structure, has led to the Board's decision to increase the dividend. This reflects our policy of paying reliable and consistent ordinary dividends with steady increases when supported by earnings and the ability to fund growth.

Finally, I'm pleased to confirm that we have completed our strategic review. The strategic review will underpin our ambition of delivering cleaner and more reliable energy, stable earnings and dividend growth.

I'll share more towards the end of the presentation. Now turning to the highlights.

A strong financial performance in 2024, headlined by strong operating earnings before fair value movements and the announcement of increasing our dividends. Alex will cover the details next.

But in summary, group's operating earnings before fair value movements increased by 8% year-on-year to nearly HKD11 billion. Total earnings also up significantly by 76% to HKD11.7 billion.

The Board today recommended a fourth interim dividend of HKD1.26 per share, which, together with the 3 dividends already paid, brings 2024's total dividend to HKD3.15 per share, an increase of 1.6% from HKD3.10 in the prior year. The based on our share price at the end of December, this provides a yield to investors of 4.8%.

Operationally, we maintained good performance on our safety and reliability metrics. There was a slight increase in low-impact injuries, largely attributed to more planned outages and construction activities.

Reliability, measured by unplanned customer minute loss, was impacted by extreme weather and power supply incidents in Hong Kong. Nevertheless, Hong Kong's network reliability to 99.999%, which remains exceptional by the world's standards.

On the customer front, we saw growth in accounts in Hong Kong, while competitive market conditions in Australia resulted in a reduction in customer numbers. Electricity output from our generation facilities increased marginally and generation capacity decreased as a result of retirement of 3 coal units in Hong Kong, and exits of our minority share in Shandong Zhonghuan coal portfolio.

These actions led to a decrease in the overall greenhouse gas emission intensity. I'll now hand over to Alex to take you through the financial results.

Thank you, T.K., and good afternoon. The results today reflect the positive signals in first half consolidated growth trend across the financial indicators.

Earnings before interest, tax, depreciation, fair value, or EBITDAF, increased 9% to over HKD25 billion which reflected sustained capital expenditure in Hong Kong and strong performance from EnergyAustralia. In EBITDAF supported operating earnings before fair value movement growth of 8% to close to HKD11 billion.

This was slightly impacted by higher interest costs, depreciation and tax expense. Adjusted for fair value movements and items affecting comparability, total earnings was HKD11.7 million, an increase of 76%.

Capital investments of over HKD18 million were higher than last year, which I'll cover in more detail in the cash flow section. As a result of this momentum and as mentioned by T.K., we increased our dividends to our shareholders.

Total dividend for financial year 2024 were HKD3.50 per share. representing an increase of 1.6%.

In summary, we achieved growth in earnings while investing for the future and returning to our shareholders. The EBITDAF waterfall in EnergyAustralia was the major driver for the increase, follow dependable performance from Hong Kong, profitable growth from our Apraava Energy in India, and improvement in other earnings and unallocated items.

Reduced contribution from Mainland China was mainly due to lower contribution from nuclear fleet. Details of the region will be covered in the following slides.

In line with EBITDAF performance, we saw higher contribution at the operating earning level, with a significant uplift from EnergyAustralia and more modest uplift from Hong Kong and an Apraava Energy, offset by lower contribution from Mainland China, Taiwan region and Thailand. Together with the contribution from the region, share gains from digitalization and network cost optimization, we reported operating earnings before fair value of close to HKD11 million.

We didn't have the significant fair value gains that we saw in 2023, but it was still positive. Reflecting accounting gains on EnergyAustralia, forward energy contracts as of end of December 2024.

After one-off elements, the group's total earnings increased by 76% to HKD11.7 million. I'll now take you through the performance and outlook for each business unit.

All variances will include the impact of foreign exchange to reflect the organic underlying parts of the business. First, Hong Kong.

With the start of the new D plan cycle, our continued investment and reliable performance growth stable and dependable earnings. On an accrual basis, the Scheme of Control business invested HKD10.8 billion, the majority going towards transmission and distribution to support infrastructure growth, new development areas and decarbonization.

Earnings was slightly impacted by the nonrepeat of the one-off 5-year performance incentive we received in 2023 as well as higher interest costs. The last piece of gas infrastructure, our 600-megawatt CCGT D2 unit, went into operation in April.

With this milestone and the operation offshore LNG terminal, we now have successfully completed our major gas infrastructure, enabling the retirement of 3 coal units of peak. This is a significant step towards lower emissions.

Local electricity sales were up 2.1%, notably low demand from data centers and EV charging increased by 8.6% and 55.1%, respectively, outpacing overall electricity sales growth. It was a busy year for energy as a service activities across all major areas, such as cooling for buildings with energy efficiency solutions, transportation with e-mobility and replacing diesel engine with batteries on construction site, just to name a few examples, as we continue to change the way industries and customers utilize energy.

Looking ahead, the focus will be the program for work in the new development plan, working towards government's 2035 climate target, supporting industries' transition to a lower carbon economy, and continue to deliver reliable electricity at a reasonable tariff. Moving to Mainland China.

Overall, earnings by 10% to HKD1.9 billion. Main driver of low earning was nuclear, namely low tariff and higher cost and Yangjiang, and lower generation at Daya Bay due to a planned 30-year outage.

Earnings from renewables were slightly lower, mainly due to 2 legacy projects which were exposed to curtailment and tariff pressure. This was partially offset by contribution from new grid parity projects and better hydro resources.

Stabilized fuel prices and lower O&M costs on lower energy sold contributed to increase in earnings from thermal. In line with our Climate Vision 2050, we executed an early exit of our minority interest in Shandong coal assets in 2023.

Turning to our growth momentum. We've now made significant progress with close to 2 gigawatts of renewable and battery projects in various stages of construction, and notably a few achievements including our largest wind, our largest solar and our first stand-alone battery energy storage system.

Continuing with the theme of achievement, we also signed 2 large-scale and long-term energy offtake agreements with internationally known customers to supply green power, adding stability and long-term value to our portfolio. Looking ahead, nuclear performance is expected to remain dependable.

Although for Yangjiang, we expect higher market tariff exposure. Renewable tariffs are expected to be stable with our disciplined province selection and requirements.

We are on the right pathway to deliver renewable growth progressing business models and partnership options which T.K. will talk about later.

Turning EnergyAustralia now, where a record number of high-priced events occurred in New South Wales in 2024. [indiscernible] with average spot prices above AUD10,000 compared to zero in 2023.

Energy Australia's actions on investments in the reliability of Yallourn and coal supply and flexibility for Mount Piper, combined with higher and more volatile wholesale prices and hedge book outcomes, contributed to strong performance in the Energy segment. The customer segment saw higher churn and reduced customer accounts, driven by intense market competition coupled with higher cost of living pressure.

Depreciation cost increased as a result of the refurbishment CapEx in Yallourn. The net impact will be a turnaround from a loss position in 2023 to more than HKD590 million operating earnings before fair value movement in 2024.

We also accelerated our energy transition portfolio with more flexible capacity projects and renewable energy additions. Tallawarra B, a critical peaking plant in New South Wales went into operation, winning the capacity incentive scheme for Wooreen in Victoria and Hallett in South Australia will enable the construction of these battery projects.

Contracted capacity for Orana battery in New South Wales and Wooreen wind PPA in Victoria and to the growing renewable and flexible portfolio. Looking ahead, focus remains on maintaining the performance of our general fleet.

The outlook for wholesale prices is stable, albeit higher fuel cost from Mount Piper as well as higher depreciation costs for Yallourn. Market conditions in the customer segment is expected to remain competitive as we focus on efficiency improvements and Replatforming technology to strengthen business.

EnergyAustralia will expand its renewable portfolio in line with its climate transition plan through contracting of long-term PPAs. And flexible capacity development will continue leveraging business models and partnership to capture the increasing value in energy transition.

As a final note, we made a change to reporting segment to move the retail hedge book from customer segment to energy segment. This change -- for better reflection of the underlying customer segment results and enhances comparability with others in the industry.

A detailed reconciliation of the restatement is in the appendix of our IR materials. Now Apraava Energy.

Apraava Energy recorded another year of profitable growth with earnings increasing by 11% to nearly HKD330 million, and solid cash flow position enabling return of capital. While renewables contribution was down in line with lower wind resources and less delay payment income from the significant reduction of overdue receivables, we recorded steady earnings growth from transmission in Jhajjar coal plants.

The meter business is developing well as we work towards the installation of more than 6.8 million meters in 6 states. Turning to our growth momentum, again, progressing solidly with equivalent of around 2 gigawatt of noncarbon project in execution with [indiscernible] including the construction of our Apraava Energy's largest solar project today for transmission and 6 metering projects 2023 and 2024.

Corporate expenses improved mainly due to again recognize successful exit of our Dedasari solar project. In the year ahead, our Apraava Energy will continue to execute its growth strategy and build out its diversified portfolio of renewable batteries, transmission and smart meters.

Finally, to Taiwan region and Thailand. Generation at Ho-Ping coal power station in Taiwan region was impacted by an earthquake in April, as well as lower recovery of coal cost.

Operation was stable Lopburi solar in Thailand, but its contribution was lowered by a step-down in PPA tariffs. Together, earnings were down by 12% landing at HKD260 million.

Looking ahead, Ho-Ping will focus on managing fuel costs and, more broadly for this region, we will explore development opportunities in line with our strategy, which T.K. will cover later in this presentation.

Moving to the group cash flow. Free cash flow generation was healthy at HKD21 billion, driven by underlying EBITDAF performance, which increased by 2.1 billion This was offset by Hong Kong's Scheme of Control working capital movements returning back to a more normal profile, as fuel prices stabilize and recovery of fuel cost largely absorbed in 2023.

Cash outflow were higher, totaling almost HKD25 billion, made up of HKD11.2 billion of SoC CapEx, HKD2.7 billion growth CapEx mostly attributable to Mainland China energy projects, HKD3 billion for new Kai Tak headquarters, as well as a payment of HKD7.8 billion. Finally, our funding position remains strong with ample headroom to credit metrics.

There was a modest increase in debt, mainly driven by capital investment. Liquidity position remains healthy with HKD36 billion in available liquidity.

The team has been disciplined in maintaining a diversified and cost-effective debt portfolio, successfully raising competitive financing of over HKD15 million debt for Hong Kong SoC business, HKD5.2 billion nonrecourse project loan facilities for Mainland China renewable energy projects. Early in 2025, we also successfully refinanced USD500 million perpetual capital security for Hong Kong SoC business.

Our strong investment-grade credit ratings were confirmed by S&P in May for CLP Holdings, CLP Power and CAPCO, A and A+, respectively. Similarly, Moody's has kept rating of the three same companies together with A, all with stable outlooks.

With strong cash flows and funding metrics, we're in a position to invest prudently in our strategic priorities while remaining committed to keeping strong ratings and returning to our shareholders. I'll now pass this over to T.K.

for the group's strategic priorities.

Thanks, Alex. CLP has been a leading utility in Asia Pacific, with relations we built in Hong Kong and Mainland China.

For that case, CLP has powered this region with reliable and affordable energy, anchored in operational excellence, thoughtful approach to risk and financial strength. We have expanded into important key markets: India, Australia and Southeast Asia, delivering 22 gigawatt of generation capacity.

Our operations span the full value chain, from generation to network and services while consistently creating shareholder value. Now but energy self is undergoing significant transformation as catalytic force electrification and decarbonization take hold.

Our recent strategic review [indiscernible] our plan forward, taking advantage of growth opportunities while advancing long-term resilience. We are poised to lead this transition combining our regional expertise, infrastructure drive, to meet rising demand for clean, sustainable energy.

This is how we secure our legacy of powering brighter tomorrows. When I started with CLP Holdings back in 1988, electric vehicles were not commercially available.

Today, 7 out of 10 newly registered vehicles in Hong Kong are electric. In 1988, renewable energy contributed less than 1% of the global energy.

Today, they supply more than 1/4 of total electricity in this region. And Bloomberg predicts that Asia Pacific must triple energy investments by 2050 to hit the net zero.

Electrification, decarbonatization are irreversible trends, and our strategy aligns with these megatrends. To that end, delivering on Climate Vision 2050 is our true north, out of coal by 2040 and net zero by 2050 there is no change here.

Our strengths, including our people, operational expertise, regional knowledge, project pipelines, brand and access to capital, position us well to execute for growth and more dependable earnings and capture the opportunities at our doorstep. We are scaling investments in clean power generation, grid capacity, storage and customer solutions in this region, while advancing workforce capabilities and technology.

So now let me go through CLP's strategies and financial targets. First, our home markets, Hong Kong and Mainland China, remain a priority.

Our integrated utility business is Hong Kong is central to our continuous investments and dependable earnings, supported by predictable returns under its asset-based regulatory framework. We are committed to delivering HKD52.9 billion 5-year capital program to support government's economic and infrastructure agenda and decolonization targets.

We'll continue to maximize performance of the business, maximize synergies and improve operational efficiency. To our other home markets, Mainland China, where the need for clean energy is driving addition of some 300 megawatts -- 300 of renewable capacity.

This gives us good opportunities to find good projects. Our targets of double RE portfolio to about 6 gigawatts by the end of this decade is modest in comparison.

But it does reinforce our value over volume discipline, investing only in projects that meet our return criteria over the long term. We are already seeing tangible results on multiple fronts.

We have added almost 2 gigawatts in various stages of construction since we announced the targets. We are seeing good returns from [indiscernible] tariff.

Lower cost of capital and the emergence of long term PPAs as further stability and long-term value to our portfolio. And finally, the potential for partnership models, like a clean energy fund, to optimize capital efficiency and enhance returns.

As regional cooperation strengthens, our unique plan of energy, infrastructure and commercial expertise position us to enable energy transition in key industries like transportation. We are committed to becoming an important partner in achieving to new net zero economy across the whole supply chain.

The market has that we operate in have some of the opportunities with strong market fundamentals and [indiscernible] energy security and lower carbon. We have built up a sizable platform in this region a key component of our geographical and technological diversification.

This, combined with active asset management and operational approach underpin our confidence to invest, but only if those opportunities meet our tighter parameter of value creation and dependable earnings. Now in India, matching the opportunities in one of the fastest-growing economies, the joint venture will continue to channel efforts to triple its non-carbon portfolio, which now includes renewables, transmission and smart meters on a self-funded basis.

The advancements achieved so far have been excellent, with a growing portfolio of winning bids and projects under construction. For other key Asia Pacific markets, we'll focus on markets with stable market design and where we have core competencies and competitive advantage.

Ultimately, looking for assets that meet our criteria of profitable growth, accompanied by dependable earnings and with the availability of financing in front of us. This will initially be Taiwan and, in long term, Vietnam and Laos.

In Australia, where the energy transition is occurring at pace, the investment case will be on building key parts of a decarbonizing system, critical low-carbon dispatchable generation like gas, palm hydro renewables. And with ready access to transmission infrastructure, with partnership and business model of science.

Security of supply and firming capacity will remain high valuable in highly -- valuable in Australia to meet market needs and capture value in increasing volatility, and we will optimize the portfolio accordingly. Anchoring our efforts will be our continuous work to uplift and enhance capability.

The focus is on three critical elements. First, investing in our future-ready workforce.

We are closing talent gaps through targeted programs that equip teams with skills to lead the net zero transition at scale. Second, embedding digital into our DNA.

From AI-driven grid resilience, to our proprietary e-mobility platform for Hong Kong's EV expansion, we are unlocking efficiencies, elevating customer experiences and pioneering new revenue streams. Third, sustained operational excellence.

This is the backbone of our success. It ensures we continue to deliver safe, reliable and affordable energy, while enabling disciplined growth.

Finally, to our financing strategy to get capital flowing towards our priority areas. The strong cash recovery profile allows us to continue to pay dividend, while funding future growth.

Maintaining our investment-grade credit rating provides financial flexibility to support operations and growth. We also run businesses with the objective of financial independence, with stand-alone credit profiles for different funding sources.

Sustained and committed asset growth in Hong Kong underpin stable and predictable cash flow to continue our track record of delivering value to shareholders. We have a disciplined and selective investment criteria based on differentiated risk-adjusted returns, which we'll share today.

Our investment committee prioritizes high-return opportunities focusing on the most strategically large and financially compelling projects. There will be options around partnerships, capital recycling and business model optimization like the Clean Energy Fund in Mainland China for efficient use of capital.

At the core of our strategy lies disciplined capital allocation and a resilient, diversified portfolio designed to drive consistent earnings growth as we close three forces align to power our success: clean trajectory of electrification and decarbonization, attractive growth markets, our regional leadership and proven expertise. Together, they position us to deliver on this strategy and continue to generate savings value for shareholders.

We are excited about this new phase, and we are committed to execution with discipline and focus to continue our legacy in the energy sector in Asia Pacific. With that, I'll hand it over to Marissa for Q&A.

Thank you, T.K. Thank you, Alex.

We will now open the lines for a Q&A session. [Operator Instructions].

So on to our questions. We have one from Pierre Lau with Citi.

Pierre, if you can go ahead and unmute and ask your question.

Good afternoon, everyone. Thanks for this time let me ask a questions and congratulations to your strong set of results for 2024.

Thanks T.K. and Alex.

Three question on your company. The first one is that your Australian business performance in second half last year, clearly, exceeded previous management expectations.

So, what was the key reason for the outperformance in the second half last year? And do you expect your Australian business to further year-on-year in 2025?

Second question is, I recall your previous plan is to [indiscernible] your Australian business, but it seems that nothing happened last year. Is this remain your goal?

And is there any strategic change on this regard? And the third question is China.

Your presentation material shows you that you aim to double your overall capacity in China from, right now 3 gigawatts to 6 gigawatt in 2029 by expanding HKD4 billion per annum. How do you assess your investment risk and return for your China renewable project, given that new renewable project where it's been sort of project compete from 1st of June 2025, we will no longer be able to buy any object volume and pricing, so how would you control the risk there?

And also, we see that some provinces at Shandong, Jiyang, right now have some negative electricity service business on grid level, so how would you control your investment risk there? Thank you.

Great question.

Thank you, Pierre. Now for Australia, so actually starting, because of the bad performance in 2022, which basically is attributable to two reasons.

One is the outage in the Yallourn power station. During that price volatility period -- volatile price period that we cannot generate.

And secondly, the coal supply to Mount Piper. So, over the past 2 years, actually, we have taken significant measures to uplift the capability of the plant condition in Yallourn, and at the same time, we also secure a multi-mine coal supply contract for Mount Piper.

So, in terms of the reliable operation of power station, they are in a better positioned now. So, in 2024, because of that reliable performance, our generation business basically have very good financial results.

Now going forward, actually, the whole EnergyAustralia business would very much depend on wholesale price level. And in 2024, we do see quite high wholesale price.

Now going forward, we believe that the wholesale price will remain stable despite maybe, in the shorter term, there could be some -- it could soften a bit. Now -- but there are also some other factors that may affect our operation.

First, actually in the second half of last year as compared with the first half, we do see more intense competition in the retail sector. So, in the second half, actually, the retail business performed worse than in the first half.

And we see this more intense competition will continue, at least in 2025. And at the same time, there are also some one-off benefit in the EnergyAustralia business.

For example, the coal compensation payments, which already ended in June last year. So, there are different factors affecting the business in Australia.

Now regarding your second question about the -- I would call it a potential partnership in Australia, maybe just to give you a bit of a background. The reason why we look for partnership is mainly because of the fact that for -- as a whole CLP Group perspective, we have the Climate Vision 2050 that we want to achieve net zero by 2050.

So, the capital requirement for this energy transition, which net zero is very significant, and we want to basically put the capital more in core markets. And for EnergyAustralia, as well as, for example, even in India, Apraava Energy, we will adopt a kind of like self-funded approach.

So, for EnergyAustralia, we hope that we can, in order to also fulfill the reorganization targets, we will find partners. And the form of local partnership, very -- we are open minded about different suggestions.

It could be at the project level. For example, if we have a project investment in, particularly ongoing flexible capacity in Australia, we may look for partners.

Or it could be an enterprise level. So, we are open-minded about difference, and we do not see any pressure, so we will look for opportunity when it arises.

I think, T.K., we can touch on what we're doing around marine batteries. Alex, do you want to maybe say quite a few words on that.

If you wish, on Wooreen battery, we had put project finance objective with basically contracting the offtake of Wooleen battery with EA, and this gives the potential if we wish so, to find an equity partner in the future in order to reduce the cash needed for EA's corporate. I think the main message is that EA strategy and its goal to do its turnaround is fully funding on its balance sheet, without needs from CLP in order to reach carbon objectives.

Thank you, Alex. Now turning to the question on China.

So, Pierre, you are right, there was a new policy, actually just the week before. And for the renewable energy investments connected to the grid after 1st of June this year will be subject to this new policy.

So that means all the generation will be under the market sale mechanism. But at the same time, there is also a so-called kind of similar to the contract for different kind of mechanism on top of 100% market sale.

Now of course, now we have only high-level information about the scheme. But our understanding is that under this mechanism, there will be what we call the mechanism tariff, which is determined by a bidding process.

But that mechanism tariff actually will give protection to Audi developers over several years in order to kind of protect the payback period. And I think the mechanism volume will also be determined by the Audi consumption targets of individual provinces.

So, more details are yet to be released, but we do see this mechanism actually will reduce uncertainty and give some protection to competitive Audi developers. And also, at the same time, it applies to new projects and our existing projects basically would not be affected.

And actually, when we look at our existing renewable energy assets, for those subsidized projects, basically we can achieve the return that we target for despite there are some receivable of the subsidies are still ongoing. But overall speaking, the return is on par with our original investment case.

And for the grid parity projects that we have invested, actually, the performance is better than our investment case. So, we are still confident in the investment in renewal energy as well as battery storage projects in Mainland China.

Thanks, T.K. We have a question from Stephen Tsui, JPMorgan.

Stephen, please unmute yourself and go ahead.

It's Stephen from JPMorgan. Can you hear me?

Yes, very well.

Congrats on the great results. I just have three questions.

The first is about the CapEx plan. So, if we look at the presentation, it seems that we target to increase the China renewable capacity by -- around 3 gigawatts from 2 to 4 to 2 to 9, and we plan to spend around HKD4 billion a year.

And at the same time in Australia, we also increased energy storage and renewable capacity by a similar amount, but the CapEx is only HKD0.5 billion the year. And what do we mean by self-fund?

And how should we reconcile the difference? That's the first question.

The second question is about the dividend policy. And then we increased dividends by 1.6%, which is encouraging.

At the same time, it seems that net debt is also up HKD4 billion. So how should we think about the dividend growth in the next few years, while the net gearing seems high and we see the limited decline in finance this year?

And the last question is, would you please break down BESS path by key regions, for example, Hong Kong, Mainland China, Australia, and also maintain CapEx?

Yes. Thank you, Stephen.

Maybe I will ask Alex to help answer actually, the first question and third question are similar we can give an overview about our CapEx plan. Now regarding the second question on the dividend.

So, we -- our dividend policy basically is to maintain a consistent and growing dividend as long as it's supported by the underlying business growth. So, this year, because of the solid results, the Board consider the outlook of the business, so we decided to increase the dividend.

Now going forward, actually, when Alex talk about the CapEx plan, Alex will also talk about a funding strategy. So after, of course, the fund dividend will be determined by the Board at the end of this year.

But if the underlying business growth is sustainable, we would target to increase the tariff on a -- kind of on a steady base. So, this is our target.

So maybe I'll hand it over to Alex to talk about our CapEx spend and also funding strategy.

So, I'll start with our capital allocation. As presented by T.K.

earlier, we have a capital allocation of going around a little bit more than HKD10 billion for CLP Power for its activity linked to our SoC development plan. Then in China, we are focusing all our CapEx into renewable, with the objective to basically double our existing capacity.

So, this is equivalent to around HKD4 billion per year of CapEx. We may decide in the future, as mentioned also, to create a clean energy fund or to have partnership in order not to fund fully this activity pending decision on this.

In India, which is self-funded and not consolidated, we want to triple our noncarbon activities in order to reach 8 gigawatt the end of 2029. This is equivalent around to HKD6 billion.

In Australia, which is also self-funded, the difference is that we not necessarily develop assets. We may also contract.

So up to today, our gigawatt renewal capacity that we want to develop is through PPAs, hence not developing it. While the battery is following a different strategy, on our side where we have transmission, land, water and people and where we are very competitive, we develop here a CapEx plan where we tender on the project quite successfully as we could see on Wooreen and on Hallett because we can get the right return.

On other location where we don't consider that we have a repetitive advantage, we are happy to contract and make use of the flexible capacity without investing. So, this explains our CapEx allocation.

When it comes to funding, our strategy is quite clear. First, we rely on the strength of the cash flow generation in order to be able to fund the project in the future based on what we can live on.

Second, it's absolutely crucial to keep very strong investment lead in order to be able to have low cost of funding, but also flexibility for future growth. Third, we want our dependable dividend to all stay at the same level or grow over time.

Fourth, we have a very strict capital allocation between our different region by putting in competition, the different projects, and making sure that we have the right risk return for each that we invest in and decide, hence, where we put our CapEx. This enable us to continue our growth in order to focus on decarbonization target.

Regarding your exact question on dividend policy, we always had the dividend policy to keep consistent and reliable dividends over time, growing that dividend pending our earnings growth as long as we can, of course, continue our future needs, the Board decided to increase the dividend by 1.6% in 2024 versus 2023. The Board will take a decision in due time regarding the 2025 dividend policy.

Thank you, Alex. A question from HSBC, Yonghui Park, around AI and data centers and its impact on fleet demand in Hong Kong, and then maybe your comment on China there as well.

T.K., would you like to take that one?

Yes. Thank you.

For AI, I'm sure with the emergence of DeepSeek, the attention is even higher now on AI. Now for data center demand in Hong Kong, if you look back, the previous development plan from 2018 to 2023, we had about four data center -- new data center kind of commissioned.

But just in last year, we already commissioned three data centers in Hong Kong. So, you can see there is significant growth in data center demand.

If you look at the electricity demand, overall speaking, in Hong Kong last year is 2.1%. But if we just look at data center, the increase is 8.6%.

And data center now amounts to about 5.7% of the total demand of the CLP business in Hong Kong. So, you can see the, I would say, huge potential and also a significant growth.

Now definitely, our Hong Kong business has already carried out comprehensive planning in order to cater for future scenarios and requirements, in particular, in the Northern Metropolis. So, CLP Power Hong Kong fully support own government's development in Northern Metropolis and will make the required investment in infrastructure expansion in that region in order to support the development when it come into play.

Now regarding the data center development in Mainland China and Australia, I think AI will become more and more important, and we do see the increase in demand. Now -- but in these two regions, mainly, we are in the gen business.

So, our objective is to help decarbonize the generation sector and the energy transition. But I think one point I want to highlight is that for data center operators or even AI operators, they are all looking for green power.

We see this in Mainland China -- actually, in Hong Kong, in Mainland China, also in other parts of the world. So, we expect with the increasing demand in AI, there will be more and more demand in green power and that basically fits our strategy.

So definitely, in Hong Kong, in Mainland China, in Australia, we'll continue to develop green energy in order to fulfill the increasing demand of green energy.

Thank you, T.K. Question from Eva Hou from Morgan Stanley around nuclear in China, with some comments on tariffs for renewables.

But this question is around business outlook for China nuclear business in 2025.

Yes. Now we will not give any guidance on the return or profit, et cetera.

But I think in terms of the nuclear sector in China, because of the -- again, the carbon reduction target, so it will continue to grow. And now in particular, I think for our nuclear business, for 2024, we see a reduction in earnings, mainly because for Yangjiang nuclear power station, the tariff has reduced because of the reduction in the market tariff in Guangdong.

So now going forward, the proportion of output from Yangjiang falling under this market sale will increase. And we do see similar kind of type level in 2025.

So that's the outlook for the nuclear business of CLP China next year. But for Taipei, obviously, because we have the PPA, so the tariff actually will be quite stable.

Okay. Stephen from JPMorgan has put his hands up again for another question.

Stephen, go ahead.

I just have two quick follow-up questions. The first is that you also mentioned the Northern Metropolis development plan.

I just wonder if Hong Kong government's like ramp up, the progress, do we see upside to the SoC CapEx during this 5-year period or the next one? And the second question is about like the strategic review.

We mentioned in the presentation that we aim to optimize value in Australia and also establish a clean energy fund in Mainland China, can you please elaborate more on this?

Okay. Thank you.

Now maybe I will ask Alex to talk about the clean energy fund for China. Now for the Northern Metropolis, actually, in the current development plan, there are already projects proposed and approved to provide the infrastructure to support the Northern Metropolis development.

Regarding the strategic review, now in EnergyAustralia, as I just mentioned, the first or the kind of important factor is to make sure that the generation fleet is reliable. So, we have already completed the refurbishment for Yallourn.

We have secured a multi-mine coal supply contract for Mount Piper. So, the coal portfolio in EnergyAustralia now has been, I would say, in a good clip and performing [indiscernible].

So that resulted in good financial performance in Yangjiang 4. Now that's one factor.

Now going forward, we do see, I would say, increasing volatility in the electricity market because of the increasing proportion of renewable energy. Actually, if you look at the wholesale price, intraday volatility increased quite significantly over the past years.

So, our strategy in EnergyAustralia is to have balanced capacity and short energy. So, we'll continue to invest in flexible capacity in which we can then take advantage of the volatility of the wholesale market.

And for example, you can charge up the battery during low-price period or even negative price periods, and then discharge during high price periods. That not only give value for our investment, but the battery investment actually would also help modify the shape of the customer demand, which will also help our existing generation fleet.

So that will basically help us derisk our generation even in EnergyAustralia. At the same time, we will also -- over the longer term, we will try to optimize the cost of our cost to serve to our customer to as to improve our retail business competitiveness.

At the same time, of course, we will also introduce value-adding service to our customer. So basically, like a two-pronged approach, managing our energy business using more flexible capacity in a more volatile environment, and then optimizing our [indiscernible] for the retail business, and have more product and new product and services to serve our customer.

Over to Alex.

Regarding our development in China, I'll make two observations. The first one, if we do our development as planned and we do HKD4 billion per year over 5 years, that will be a total of HKD20 billion is quite material.

Second observation is that the project that we developed in China would be a good project in the right region. We're an FDI in China.

The -- we are able to sign corporate PPA and sell green energy certificate. So, we -- our brand in China is good.

And we were contacted by multiple investors about potentially partnering with us in China. So looked at different alternatives, partnership, and deliver the project with some customers or at the level of cooperation, or potentially doing clean energy fund that had been done by other funds, which would consist of basically selling the project while it's been derisked to a fund with limited partners, still keeping a matter ownership into it to align interest, but basically providing our skills in order to able this development, limiting the funding from the group and enabling us to have a superior.

So, we are currently looking at these different alternatives in order to grow profitably our portfolio.

Thanks, Alex. Take one last question from Evan Li, who's on the Zoom line, HSBC.

Evan, go ahead, please.

Can you hear me? Hello?

Yes, we can.

Great. One is to further understand, for your investment in Mainland China for renewables, how those will be funded?

Would those be funded by onshore financing in renminbi? Or the be term capital offshore into the Mainland?

And then second question will be is there any update about development of any facilities to import power from the Mainland over the long term? I remember that it's been mentioned by the power utilities in Hong Kong that in order to get the net zero, we need further green energy, mainly nuclear to be imported from Guangdong.

I. I just want to see, has there been any development in that?

Yes. Thank you, Evan.

So maybe I'll take the second question, and I'll ask Alex to will take the first one on the funding for investment in China. Now for power import from the Mainland to Hong Kong.

If you look at the Climate Action Plan 2050 published by the Hong Kong government, by 2035, that would be 6% to 7% of our generation mix being zero energy. So, if you look at that, given Hong Kong's small place, we don't have any or much renewable energy or zero carbon energy resources.

So, we expect we have to import new zero carbon energy from Mainland China in order to fulfill this 2035 targets. And by zero carbon energy, it could be nuclear or renewable energy.

Now we are now in discussion with the relevant parties, including Hong Kong government, the Guangdong government and also the Mainland government in order to move forward about this initiative. But these kind of cross-border kind of infrastructure and also commercial arrangement is complex and it will take some time.

Now -- but we do not expect -- because we have not carried out any detailed study yet, so we do not have any numbers in terms of, for example, investment required. And we do expect in the coming years, we will carry out this more detailed design.

And -- but we do not expect significant CapEx will be within this D plan. Once the design is finalized, I expect the majority of the CapEx requirement will be in the next development plan, okay?

Maybe I give it to Alex.

Regarding our funding strategy for our development. First, our priority is to seek a project finance on these projects.

We were able to obtain up to 80% project finance who is off course onshore debt. Regarding the remaining 20% equity, here, we have two alternative, CLP funding or partners as I discussed before.

Regarding CLP funding, today, it's mostly coming from money offshore from Hong Kong. But we believe with Yangjiang and with the growth of our renewable portfolio, we'll be able to have much more competitive funding onshore by being investment grade and potentially bond funding that we are working on, which shall enable us to have a lower cost of capital and be even more competitive.

And as mentioned also just before, we're also looking for third party for partnership, which is more structured, clean energy fund of partnership.

Thank you, Alex. Thank you, everybody, for your questions.

I will thank Alex and T.K. for their time and comprehensive briefing.

Before I close the briefing, I wanted to announce the winners of our closest estimate’s competition. The winner of the operating earnings goes to Yue Kang from Huatai Securities.

She just started her coverage of getting within 0.1%, I think it is, of operating earnings. That's really well done.

And then on dividend, congratulations to Stephen Tsui, you've won the money at HKD3.15, reflective of all the good questions that you've asked today. So, congratulations to the both of you.

We'll reach out with your prices soon. So, with that, thank you, everybody, for joining us and for your comments.

My team and I will be available after this call for any further questions you have. But other than that, thank you, and goodbye.