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Castle Peak Power

Exxon turns to auction for Hong Kong power stake: sources

By Denny Thomas

HONG KONG (Reuters) – Exxon Mobil Corp (XOM.N: Quote, Profile, Research, Stock Buzz) has launched an auction to sell up to $2 billion worth of shares in a Hong Kong power venture after a year-long effort to offload its holding to its partner yielded no result, sources familiar with the matter said.

The world’s biggest oil company by market value has hired Barclays Plc (BARC.L: Quote, Profile, Research, Stock Buzz) as an advisor for the sale of nearly half of its 60 percent stake in Castle Peak Power Co Ltd as part of its plan to divest non-core assets.

Talks to sell the entire stake to CLP Holdings (0002.HK: Quote, Profile, Research, Stock Buzz) and state-owned China Southern Power Grid had stalled due to disagreements over valuations, the sources said. CLP owns 40 percent of Castle Peak.

The auction may attract interest from infrastructure funds, Japanese trading houses and sovereign wealth funds, they added without specifying names.

The process is in its early stages and potential suitors are assessing whether to bid for the stake. First-round bids are due in early April.

China’s cash-rich state power groups have also been scooping up assets worldwide, with dominant power distributor State Grid Corp establishing a presence in the Philippines, Spain, Brazil and Portugal.


CLP, controlled by Hong Kong’s wealthy Kadoorie family, remains attracted to the stake because Castle Peak offers guaranteed returns, one source familiar with CLP’s strategy said.

But “the ball is in Exxon’s court now,” the source added.

Castle Peak operates three coal-fired power stations and has a generation capacity of 6,908 megawatts.

CLP and Power Assets Holdings Ltd (0006.HK: Quote, Profile, Research, Stock Buzz), Hong Kong’s other power supplier that is controlled by tycoon Li Ka-Shing, garner an annual return of 9.99 percent on net fixed assets until 2018 under a program known as Scheme of Control.

The sources, who declined to be identified as the sale process is confidential, said the 60 percent stake was valued at around $3 billion last March. Around half of that plus a premium would bring the deal value closer to $2 billion, they said.

Exxon Mobil said in an emailed statement that it does not comment on rumors or speculation and that it routinely assesses its global portfolio of businesses.

A CLP spokeswoman and a Hong Kong-based spokesman for Barclays declined to comment.

CLP posted a 10.5 percent drop in its earnings last year because of weak performances at its operations in Australia and India. Hong Kong accounts for the bulk of CLP’s earnings.

(Additional reporting by Anna Driver and Charlie Zhu; Editing by Michael Flaherty and Edwina Gibbs)

Emissions rise, but CLP vows to meet targets

emissionsLast updated: March 11, 2010

Source: South China Morning Post

CLP Power emitted more air pollutants and greenhouse gases last year as a result of more coal burning, but was confident of meeting the more stringent emission targets this year.

The city’s largest electricity supplier still complies with the 2009 emission caps set by the Environmental Protection Department, though the emission of three main air pollutants – nitrogen oxides, sulphur dioxide, and particulate mattergrew by 6 per cent, 20 per cent and 30 per cent respectively last year.

The carbon dioxide released by local power generation also rose by 6 per cent, to 19 million tonnes.


CLP To Fire Up Cleaner Generator By Year’s End

Joyce Ng, SCMP – Mar 17, 2009

CLP Power (SEHK: 0002) will fire up its first upgraded lower-emission generating unit at its Castle Peak coal-fired power plant by the end of the year.

The upgrade is part of a programme aimed at meeting the company’s 2010 emission-reductions target. But the whole project, which requires upgrading of four such units, would not be completed until 2011, and the company would have to rely on other measures to meet its 2010 target, CLP Power commercial director Lo Pak-cheong said yesterday.

“We will also have to rely on the use of ultra low-sulphur coal and more natural gas consumption,” he said.

The project started in 2007 and was expected to “considerably” cut nitrogen oxides, sulphur dioxide and respirable suspended particulates emissions, a CLP Power spokeswoman said. She declined to give specific figures until the installations had been tested. Equipment is being installed in the boilers of Castle Peak’s four generating units to reduce nitrogen dioxides emissions during the coal-burning process.

Two limestone absorbers are being built near the coalfield to neutralise sulphur dioxide emissions.

CLP Power said the Castle Peak project would provide jobs for 500 construction workers by the middle of the year.

Under targets set by Hong Kong and Guangdong to improve regional air quality, Hong Kong’s two power companies are required by next year to reduce sulphur dioxide emissions by 54 per cent from 1997 levels, and nitrogen dioxide by 24 per cent.

The government has imposed emission caps on power plants and tightened them over the years to ensure targets are met. Castle Peak Power Plant’s licence renewal in 2007 required it to emit not more than 41,400 tonnes of sulphur dioxide and 27,650 tonnes of nitrogen dioxide in 2008. The caps this year are 39,400 tonnes and 27,300 tonnes.

Government Gave Power Plant Right To Pollute More

SCMP – Friday October 8 2004

China Light and Power omits certain details in the letter from Daisy Chan (‘CLP has made significant cuts in emissions’, October 6).

Compare the CLP-ExxonMobil coal power plant at Castle Peak to Hong Kong Electric’s most recent Lamma Island coal plant (built in 1997). You will see that CLP has been given the right by Secretary for Labour and Economic Development Stephen Ip Shu-kwan to generate twice the amount of one pollutant (particulates), three times another (nitrogen oxides) and 10 times a third (sulphur dioxide) as the Hong Kong Electric plant.

Moreover, the actual emissions from the Castle Peak plant are kept secret by the government at the request of CLP. At any time since 1997, CLP could have spent a fraction of its profits to clean up this plant, but it has instead waited for seven years – and now it has sent a letter to Mr Ip asking that it be allowed to earn 15 per cent profit on its investment to clean up the sulphur dioxide. This is unconscionable. The Star Ferry only asks seven per cent profit for its shareholders.

And the real question is why Mr Ip has allowed CLP to force us to suffer for seven years when the technology has existed for more than 10 years to reduce the sulphur dioxide by more than 90 per cent.

The public is not allowed to see or have an opinion on CLP’s letter. We believe that we are entitled to know what profits Mr Ip thinks are acceptable to CLP and that he will be hard-pressed to justify more than a seven per cent return for the shareholders of CLP-ExxonMobil, the single biggest polluter in Hong Kong.


Officials Must Kick Out CLP’s Plans For Extra Spending

Updated on Apr 05, 2008 – SCMP

I see it is business as usual for CLP Power under the revised scheme of control agreement for electricity companies (“CLP places LNG plant on shopping list”, March 31).

Under the previous arrangement, CLP Power was able to generate extra income for shareholders (mainly Exxon) of HK$3.2 billion to HK3.6 billion per annum from capital spending of HK$23.8 billion over the past five years, at the permitted rate of return of 13.5 per cent to 15 per cent per annum. Barely is the ink dry on the new agreement and CLP Power wants to bump that spending up to HK$38 billion, to generate HK$3.7 billion per annum extra income under the next “five-year plan”.

This extra spending is needed to “compensate” for the miserly rate of return of 9.99 per cent now imposed upon it by a heartless administration.

If allowed, this money would come straight out of hard-pressed Hong Kong consumers’ pockets. But what is it all for? In addition to the deeply unpopular and unnecessary liquefied natural gas plant on South Soko Island, we can no doubt look forward to endless roadworks up and down the length of Lantau and the New Territories, upgrading the transmission lines to “super class”.

Only a passing mention was given to the long overdue installation of 1980s technology, finally, to reduce emissions from the notorious coal-fired generating plant at Castle Peak (Hong Kong’s single largest polluter), and none at all to energy conservation measures. At the moment, the more you burn, the less you pay.

Profligate corporate users have no need to economise, and all the incentives are to keep CLP Power generating more electricity, further increasing our carbon footprint, along with its executive remuneration packages.

Padding of budget submissions is an old bureaucratic trick, of course, and, by now, our energy officials at the Environmental Protection Department will be well used to these ruses.

It is to be hoped that the department will take an axe to CLP Power’s more extravagant capital expenditure proposals. The LNG plant is top of the list for the chop, in my view.

John Schofield, Lantau

CLP Carbon Output Hits 15-Year High

Cheung Chi-fai – Updated on Mar 13, 2008 – SCMPCLP Power’s carbon dioxide emissions rose 8.5 per cent last year, hitting a 15-year high as it generated power for the city using more coal and less natural gas.

The city’s biggest power supplier also emitted a quarter more nitrogen oxide – a smog-inducing air pollutant – after reductions were achieved in the previous two years.

The company blamed depleted gas reserves in Hainan for the greater reliance on coal.

CLP Power did not rule out using less gas this year unless its liquefied natural gas terminal project – which the government is still studying for feasibility – was approved soon.

Natural gases accounted for just 23 per cent of the company’s fuel mix last year, down from the 31 per cent in 2006. Coal use increased from 40 per cent to 48 per cent, while the share of nuclear power remained at 29 per cent.

Greenhouses gas emissions from the Castle Peak and Black Point power stations hit 19.5 million tonnes, the highest since 1993, and 8.5 per cent more than 2006. The increased reliance on coal saw nitrogen oxides in the air surging to 30,500 tonnes, although this was still within emission caps imposed by the Environmental Protection Department, CLP Power said. Sulfur dioxide emissions fell by 3 per cent to 35,100 tonnes last year, but the level of particulates rose by 5 per cent to 1,500 tonnes.

Lo Pak-cheong, station manager of the Castle Peak Power Station, said the LNG terminal project was needed if the company was to deliver on its pledge to increase gas use to 50 per cent of the fuel mix.

He said they could not import more energy from the nuclear plant in Daya Bay as the supply was capped.

A department spokesman said it had urged CLP Power to find alternative gas supplies.

Frances Yeung Hoi-shan, a Greenpeace energy campaigner, said the emission caps for power plants were either too lenient or tailor-made for the power operator.

Black Point Power Station Gets New License

Hong Kong’s Black Point Power Station Gets New License

January 3, 2008 – China CSR

Hong Kong’s Environmental Protection Department issued a renewed license for the Black Point Power Station at the end of December 2007.

“The renewed licence under the Air Pollution Control Ordinance will come into effect tomorrow (January 1) and remain valid until the end of 2009,” said an EPD spokesman in an issued press release. “Having regard to the need to keep the emissions to the minimum and the current level of natural gas supply, the emission caps of the Black Point Power Station will be maintained at the current levels. As natural gas for power generation emits significantly less air pollutants than coal-fired units, it is the Government’s policy to encourage the use of natural gas in place of coal to reduce emissions. For this purpose, we have provided in the licensing conditions for an increase in the use of natural gas at the Black Point Power Station whenever this is become feasible.”

The spokesman also said when there is an increase in electricity generation due to increase in the use of natural gas at the Black Point Power Station, the increase in emissions at the station has to be offset by a corresponding reduction at the Castle Peak Power Station by a ratio ranged between 5.6 to 58 times, depending on the particular different pollutants.

Hong Kong’s also tightened the emissions cap for the Castle Peak Power Station ein early 2007, effectively bringing down the emission of air pollutants from the power plants. To improve air quality, Hong Kong reached a consensus with the Guangdong Provincial Government in April 2002, to reduce, on a best endeavor basis, the emission of four major air pollutants — sulphur dioxide, nitrogen oxides, respirable suspended particulates and volatile organic compounds — by 40%, 20%, 55% and 55% respectively in the region by 2010, using 1997 as the base year.

To achieve the reduction targets, Hong Kong says it has implemented a series of measures to improve air quality, including the tightening of fuel and vehicle emission standards, requiring the retrofitting of emission control device to trap the particulate emission from diesel vehicles, strengthening vehicle emission inspections and enforcement against smoky vehicles, incentivizing early replacement of old diesel commercial vehicles with vehicles that comply with Euro IV standard, encouraging the use of environment-friendly vehicles through tax concession, limiting the emissions of volatile organic compounds from paints, printing inks and consumer products, requiring the installation of vapour recovery systems in petrol filling station and tightening the emission control on power stations.

CLP Set To Clear The Air Significantly By 2050

Regina Leung – SCMP
5:00pm, Dec 07, 2007

The CLP group (SEHK: 0002) set a voluntary target to cut its carbon emissions per unit of power output by 75 per cent by 2050, says Andrew Brandler, Chief Executive Officer of CLP on Friday.

“The plan is part of our pledge to fight global warming and reduce the effect of climate change. It is going to save millions of tonnes of carbon emissions between now and 2050,” Mr Brandler said.

As an interim measure, there will be a 5 per cent cut over the coming three years.

“We would achieve our target by increasing non-carbon emitting power generation capacity to 20 per cent of the total by 2020, through greater use of nuclear, hydro-power and renewable energy,” Mr Brandler explained.

He also revealed CLP would not build any more conventional coal-fired power stations in Hong Kong and other developed countries, to reduce the worse effect to the environment.

At the moment, CLP runs two major power stations in the New Territories – one in Castle Peak and the other one is in Black Point, both are in Tuen Mun.

Some Greenpeace activists hang a banner that reads “Climate change starts here” from a silo at CLP Power’s Castle Peak plant in Tuen Mun on Thursday while the UN Climate Change Conference was holding on the Indonesian island of Bali, urging the government to regulate its carbon dioxide emissions.

Castle Peak Power Objection

PRESS RELEASE – January 25, 2007

Clear The Air objects to Exxon/Mobil attempt to take over Soko Island

Yesterday, Clear The Air submitted its objection to the Castle Peak Power Environmental Impact Assessment for the building of a facility to store methane gas.

Methane is a major greenhouse gas. It is called liquefied natural gas or LNG when chilled.

Exxon/Mobil is the majority shareholder of Castle Peak Power.

Our submission shows that we can meet our energy needs and reduce pollution significantly without this facility. (graph shown on our submission). Exxon/Mobil has the following options:

a. Stop burning coal to create electricity to sell to China
b. Eliminate the 50% discount for large users to encourage energy savings
c. Start practicing proper demand management to reduce energy use by 30% using techniques that have been successful in Thailand, South Korea and the US.

The following options are also available for LNG supply

1. Extend the existing contract with the Chinese company CNOOC so they can drill new gas wells to provide methane beyond the current contract period. CNOOC has indicated in the press that they are willing to do so.
2. Use ships that warm up the methane on-board instead of on land.
3. Invest in proven “clean coal” technology
4. Use the Chinese company SINOPEC as a methane supplier as they have shown interest in supplying Hong Kong from an LNG facility they are planning to build on Huangmao Island. (map included in submission).

LNG Receiving Terminal by Castle Peak Power Company

Date: 22 January 2007

To : Environmental Protection Department

Re: Environmental Impact Assessment under Study Brief No. ESB-126/2005 for Liquefied Natural Gas (LNG) Receiving Terminal by Castle Peak Power Company

Clear The Air Response to EIA based on objectives of the study brief

1. Proposed capacity

“The objectives of the EIA study are as follows:

(ii) to provide information on the intended uses of the LNG and justify the proposed capacity of the facilities;”

Clear The Air

Clear The Air submit that there is no justification for the proposed capacity. Below is a graph of the “fuel mix” as used by CLP in 2004 and a proposed “fuel mix” by Clear The Air for 2013. The need for proposed LNG capacity can be eliminated because the existing gas supply can be extended by the fuel mix below which will also significantly reduce air pollution.

CLP Power can:

a. Eliminate electricity sales to China
b. Eliminate the 50% discount for large users to encourage less energy use
c. Start practicing proper demand management to reduce energy use by 30% using techniques that have been successful in Thailand, South Korea and the US.
c. Invest in renewable energy through
– large scale renewable energy projects
– small scale electricity generation reducing the total annual need for natural gas

Fuel Mix Used by CLP in 2004 and proposed fuel mix by Clear The Air for 2013

2. LNG carrier route

(iv) “to identify and describe the elements of the community and environment to be affected by the Project, including any loss of natural coastline, rocky or sandy shore, the population close to the LNG carrier route, and/or to cause adverse impacts to the Project, including both the natural and man-made environment and the associated environmental constraints;”

Clear The Air:

CLP Power provided an incorrect carrier route. LNG ships going to and from the Black Point site can use existing shipping lanes and the Tong Gu Channel (under construction) If this Channel is extended into Hong Kong waters, as was originally proposed, the route would not be close to any population centres.

3. Alternatives

(v) “to consider alternatives including, but not limited to, location, size of reclamation, scale of development, design layout, with a view to avoiding and minimizing the potential environmental impacts on marine waters and the ecological sensitivity areas and other sensitive uses; to compare the environmental benefits and dis-benefits of each of the different options; to provide reasons for selecting the preferred option(s) and to describe the part of environmental factors played in the selection;

Clear The Air

Clear The Air submit the following alternatives that are not included in the EIA:

  • Extend the existing contract with the Chinese company CNOOC so they can drill new gas wells to provide methane beyond the current contract period. CNOOC has indicated in the press that they are willing to do so.
  • Pursue the energy demand reduction plan shown above.
  • On-board Re-Gasification of LNG instead of terminals – a more flexible and significantly less destructive technology than building terminals.
  • Invest in proven “clean coal” technology
  • Use the Chinese company SINOPEC as a methane supplier as they have shown interest in supplying Hong Kong from an LNG facility they are planning to build on Huangmao Island.

4. Options
(xiv) to compare the environmental merits and demerits of the Soko and/or Black Point Option with other options;

Clear The Air

The merits and demerits of the Black Point Option should have included extending the dredging of the Tong Gu channel in Hong Kong waters so that LNG ships can get to and from Black Point

Clear The Air note that In May 2003, the EPD issued a study brief for the Shenzhen Port Tonggu Channel Developing Office so that they could write an EIA. In March 2005, The Director of the EPD ruled that the EIA submitted for the Tong Gu Channel section in Hong Kong waters did not meet the study brief requirements. In June 2005, just three months later, the study brief for the LNG terminal was released.

With the full knowledge, therefore, of the issues regarding dredging near Black Point, we believe that the EPD is aware that extending the dredging of the Tong Gu channel is an alternative and therefore, we are surprised that this EIA has not been rejected by the EPD as also not meeting its study brief requirements.

5. Methane (LNG) global environmental damage

(vi) to identify and quantify emission sources and determine the significance of impacts on sensitive receivers and potential affected uses;
(xi) to identify the risk due to the transportation and storage of LNG and to propose measures to mitigate the impact;
(xii) to identify the risk to environmental sensitive receivers, including the marine and terrestrial habitats, due to LNG leakage and the consequential fire hazard and to propose measures to minimize the potential risk;

Clear The Air

As a signatory to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, China (and therefore Hong Kong) is responsible for measuring the entire global impact of shipping and using methane (LNG) one of the six greenhouse gases addressed by the treaty. Methane that is lost through the original liquefaction process, evaporation during transhipment from the host country and transfer to the LNG facility, and loss during re-gasification should be included in the EIA. Since the origin of the LNG is unknown, a range of figures need to be supplied given the best and worst scenarios available today.

Furthermore, since many countries shipping methane are in or near areas of civil unrest, the impact to the environment if the LNG supplies should not arrive because of political reasons – compared to sourcing methane from China, should be included.

End of submission