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Cheung Kong Infrastructure leads consortium in HK$9.7billion acquisition of largest waste-to-energy company in the Netherlands

Oct 9th, 2013
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[Press Release]

(June 17, 2013 – Hong Kong) A consortium led by Cheung Kong Infrastructure Holdings Limited (“CKI”) has entered into an agreement to acquire AVR Afvalverwerking B.V. (“AVR”) in the Netherlands. The enterprise value of the transaction is approximately HK$9.7 billion (EUR940 million).

Members of the consortium include Cheung Kong (Holdings) Limited and CKI, each taking a 35% stake; Power Assets Holdings Limited (“Power Assets”) a 20% stake; and the Li Ka Shing Foundation Limited holding 10%.

AVR is the largest energy from waste (“EfW”) player in the Netherlands. It is the country’s market leader, commanding a 23% market share of the waste processing industry.
AVR’s revenue streams are very stable with long term contracts in place for both gate fees for processing waste as well as off-take for energy generated.

AVR Represents an Attractive Proposition

Leading this acquisition move is Mr. Andy Hunter, Deputy Managing Director of CKI. Mr. Hunter said, “since the acquisition of EnviroWaste in New Zealand in January, we have been presented a number of waste treatment business opportunities around the world.”

“With its secured and stable income as well as good profitability, AVR represents an attractive proposition,” continued Mr. Hunter.

“The experienced management team, market leadership position and potential growth opportunities are other key factors which add appeal to AVR,” commented Mr. Hunter.

“The prospects of AVR are also enticing. Further growth opportunities include the treatment of import waste of which AVR has already started,” Mr. Hunter expressed.

CKI Making Good Inroads in Waste Management

“We are very happy with the acquisition of AVR. It fits in well with CKI’s stringent investment requirements, generating immediate recurring cash flow with profitable and stable returns,” said Mr. H L Kam, Group Managing Director of CKI.

“CKI is making good inroads in the area of waste management. In the United Kingdom, Northumbrian Water is one of the leading companies treating waste water and sludge in the country. While, in New Zealand, EnviroWaste is one of the leading waste management companies in the country and operates the largest landfill there. The acquisition of AVR will see us investing in a leading waste management company in Europe, possessing the largest EfW plant capacity in the continent. With waste treatment being an imminent issue in most places around the world, we see good growth potential in this business,” expressed Mr. Kam.

This HK$9.7 billion AVR acquisition is the second waste treatment investment that CKI has participated in this year, following the HK$3.2 billion EnviroWaste acquisition which took place in January.

New Milestone for Power Assets

“The acquisition poses a new milestone for Power Assets. AVR represents an attractive diversification of our investment portfolio into the energy from waste industry,” commented Mr. CT Wan, Group Managing Director of Power Assets.

“Power Assets now has a strong portfolio of electricity generation and distribution, gas distribution as well as renewable energy business in six markets outside of Hong Kong. Furthering our strategy of expanding our portfolio outside of Hong Kong, the investment in AVR extends our geographic reach into the European Continent,” Mr. Wan continued.

The AVR acquisition transaction is subject to customary approvals, including a Central Works Council consultation process as well as approval pursuant to European Union Merger Regulation (EUMR). Completion of the transaction is expected to take place in the third quarter of the year.

Upon completion, AVR will become the newest investment in Cheung Kong Group’s portfolio in the Netherlands, which currently encompasses retail business and container port.
Together with AVR’s 430 employees, the Group will have about 20,000 staff in the Netherlands.

SCMP: Sky Rabbit/Typhoon Usagi’s sends clear warning for ill-conceived wind farm proposals in Hong Kong

Oct 7th, 2013
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From SCMP’s Howard Winn (1 Oct 2013):

One of the effects of Typhoon Usagi, which received little attention, was its impact on the Honghaiwan wind farm in Shanwei, eastern Guangdong, about 130 kilometres northeast of Hong Kong. The onshore wind farm comprises 25 imported Vestas V47 600KW turbines. The website Windpower Intelligence reports that eight of the turbines were blown down by the typhoon, while the blades of another eight turbines were blown off, and the blades of the remaining turbines are being examined to see if they can operate normally.

Typhoon Usagi's damage to turbines in Shanwei's wind farm (CCTV, SCMP)

CCTV2 reported that 70 per cent of the wind farm had been knocked out. Windpower Intelligence reports that one of the managers says the typhoon has led to 100 million yuan in losses for the wind farm. This is the second time the wind farm has suffered typhoon damage. The farm was hit in 2003 with damage to 13 out of 25 turbines, causing losses of 10 million yuan.

The recent damage may have caused some unease within the government and possibly within Hongkong Electric and CLP, the two companies planning wind farms in Hong Kong waters. CLP, Hong Kong’s largest power company, plans to build what will be one of the biggest offshore wind farms in the world off Sai Kung – generating 200 megawatts a year – at a cost of almost HK$7 billion. Hongkong Electric is to build a HK$3 billion wind farm between Lamma Island and Cheung Chau that would generate 100MW of power – enough for 50,000 households.

Since Shanwei is fairly close to Hong Kong, it is frequently used as a reference for winds in Hong Kong. “This is another indication of how ill-advised these Hong Kong wind projects are,” Ng Young, the chairman of Hong Kong’s Association for Geoconservation, told Lai See.

The companies are still involved in testing work, and construction has yet to begin. At best the two wind farms might produce about 1.5 per cent of Hong Kong’s total electricity production, and reduce its output of carbon dioxide by about 2 per cent. This miniscule contribution comes at a cost of HK$10 billion. Regardless of how useless these wind farms are, the government can point to them as its contribution to reducing Hong Kong’s carbon footprint and take its place in the world’s effort to limit the production of carbon dioxide, and thereby global warming, or so they would have us believe. As for the power companies, the farms are a wonderful opportunity for them to increase their net assets at a time when returns from the scheme of control, which governs them, have been reduced from 13.5 per cent to 15 per cent under the previous scheme, which ended in 2009, to 9.99 per cent under the current scheme. But they will get 11 per cent on their wind farm assets since they are a form of renewable energy. Meanwhile, the public picks up the bill in the form of higher electricity prices. Higher fuel costs are inevitable, but better to spend this on efficient clean energy like gas.

Ng says the wind farms are unsightly and kill birds, and are an unreliable source of energy. He makes the point that the Shanwei wind farm operates at an average of 17 per cent to 18 per cent efficiency: “The government is silly to support this project – building this white elephant just for the sake of appearing to do something green, when in fact it is damaging the environment, and costing the community a lot of money in terms of higher fuel bills and higher costs to business. The only beneficiaries are the power companies.”

Hong Kong should review the profit scheme of its two electricity companies

Dec 13th, 2012
by Editor.
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Submitted by admin on Dec 13th 2012, 12:00am

Comment›Insight & Opinion

SCMP Editorial

No one likes a tariff increase. In the case of electricity bills, public sentiment is even stronger. For decades, an archaic business agreement with the government guaranteed the two power companies a maximum return on their investment. Despite efforts to reduce the profit, CLP Power and Hongkong Electric are still allowed profits of up to nearly 10 per cent until 2018. Consumers have little choice but to live with higher tariffs every year. The only comfort is that the adjustments this year are not as steep as expected.

On January 1, CLP will raise prices an average of 5.9 per cent, while Hongkong Electric will charge 2.9 per cent more. The rises are moderate compared with the 9.2 and 8 per cent sought by the two power giants last year. The increases were eventually reduced to 4.9 and 6.3 per cent respectively after a public outcry. But CLP warned that hefty increases were in store.

Households and businesses are already weighed down by high inflation. The increases, however moderate, will add to their burden. It is, therefore, important for the power companies to reduce the impact. The rebate of the rents and rates overcharged by the government to all CLP customers in the coming year is a welcome step to take.

Rewarding low-use customers is also a commendable strategy to promote energy efficiency. Under the CLP rebate scheme, those who can keep usage below 400 kilowatt hours during the two-month billing period can get a rebate of 7 to 9 cents a kilowatt hour. About 700,000 households and 130,000 general businesses may end up paying the same tariff as before or HK$3 to HK$6 less per month. But for heavy users, their bills will be even higher than previously.

Clean energy comes with a price. The increasing use of natural gas to meet more stringent emission targets is likely to push up tariffs in the future. Like it or not, there will be steeper adjustments ahead. That is the price to pay for a greener environment, and the community should be prepared for it.

But that does not mean excessive charges can be tolerated. The profit scheme for the power giants has put customers in a helpless situation. With the agreement due for a mid-term review next year, the government should explore options to protect consumers’ interests. Sadly, the environment chief has already said there is little room to manoeuvre. The remarks are not reassuring to people who count on the government to play a better role in monitoring public utilities.

Topics:

Electricity

CLP Power

HK Electric

profit scheme

Source URL (retrieved on Dec 13th 2012, 6:15am): http://www.scmp.com/comment/insight-opinion/article/1103936/hong-kong-should-review-profit-scheme-its-two-electricity

Legco votes down tariff motion

Feb 9th, 2012
by Editor.
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08-02-2012
The Legislative Council has voted down a motion to force the disclosure of details of the two power companies’ tariff increase proposals, by invoking the Powers and Privileges Ordinance.

CLP Power and Hong Kong Electric have provided a Legco panel with part of the information, but asked for some data to be kept confidential.

The Environment Secretary, Edward Yau, said some sensitive information should not be divulged, as it could affect the firms’ bargaining power, leading to potentially higher costs, and higher tariffs.

No easy escape from the powers that be

Dec 23rd, 2011
by Editor.
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South China Morning Post – 23 Dec. 2011

Everyone is so upset at the greed of the power companies that even chief executive candidate Henry Tang Ying-yen has jumped on the bandwagon.

The former chief secretary yesterday denounced the power supply market as uncompetitive and called for it to be opened up. That’s all very well, but how? We have created a duopoly monster that would be difficult, if not impossible, to slay without incurring serious costs to ourselves.

After a public outcry over the new tariff rises, Hongkong Electric (SEHK: 0006) and CLP Power (SEHK: 0002) made token concessions. Subsidised electricity, it seems, is an entitlement in Hong Kong. In reality, it would be better if the companies had raised them to earn the full profit of 9.99 per cent of net fixed assets, as capped by the so-called scheme of control.

That way, the bills would become so expensive that people would be forced to cut back. That in turn would help enhance energy efficiency and cause less pollution. Alas, everyone is fixated on affordable tariffs so that we can waste as much as ever.

We get the electricity market we deserve. Decades ago, we made a Faustian bargain in the form of the present scheme to get steady and reliable supply, continuous investment and facility upgrades. The result was that the companies were guaranteed double-digit profits tied to their investment in fixed assets.

In the most recent negotiations over the scheme in 2008, officials managed to cut the profit cap to single digits – well, sort of – 9.99 per cent. Because of the scheme, the companies have become so vertically integrated – owning everything from generation and distribution to supply and services – it would be tough to break them up.

Even if we managed to, we would have to compensate them again for their investments, which we have paid for already. Tang may well be right. But let’s see the devilish details before we get too excited by his headline-grabbing sound bites.

alex.lo@scmp.com

Pull plug on power duopoly, Tang says

Dec 23rd, 2011
by Editor.
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South China Morning Post –

Clear the Air says:

Tang was extremely silent (without a speech writer) whilst being number 2 in the Administration in his last day job.

Now he wants the number one job he is more vocal which suggests he was incompetent in his former job or basically had no say, so why would the public now believe his intentions ?

The Government negotiated and agreed  binding contracts with the power companies under the Scheme of Control. The Government of which Tang was number 2, was at fault.

The contract was excessive and flawed and too beneficial to the power companies under its ‘build more, get more return’ policy.

The contracts were, however and remain, legal binding documents between the Government and the two suppliers.

It is puerile of Government  to whine when the suppliers seek to obtain what they are entitled to.

In the private business world, the person or team approving and signing such a lopsided contract would have been long since fired.

Demands for opening up of market supported by chief executive candidate, who points to success of telecom break-up as outcry over price rises grows
Peter So and Cheung Chi-fai 
Dec 23, 2011

Chief executive candidate Henry Tang Ying-yen added his voice yesterday to the public clamour against electricity price rises, calling for the power duopoly to be opened to competition.

“In the long run, Hong Kong should introduce competition [into the market],” Tang said during a radio interview.

“We could consider breaking the power supply into two different markets, for generation and distribution. On this, we have the example of the opening up of the telecom market.”

Asked again about the electricity tariff rises at a public forum organised by the Liberal Party, Tang said: “It is the responsibility of the next administration to come up with a better agreement [with power companies] so that the tariff can be more reasonable.”

The government opened up the telecommunications market in 1995 and paid Hong Kong Telecom HK$6.7 billion to terminate its exclusive licence in 1998, eight years earlier than scheduled. That change allowed more operators to enter the market through the third-party access rights to the telecom giant’s exchanges, causing the cost of international calls to plummet.

But whether breaking up the power monopoly, controlled by Hongkong Electric (SEHK: 0006) and CLP Power (SEHK: 0002), would go as smoothly seems unlikely, as studies have concluded.

The two utilities control the supply, distribution and services, leaving no niches for newcomers to the business. If they are paid compensation, the Hong Kong taxpayer would have to pick up the tab. Questions have been raised about how to regulate a power supplier operating from the mainland and whether, and how much, the power grid owner should be paid in compensation.

There was a failed attempt in 2008 when China Power International (SEHK: 2380) vowed to break the duopoly and to supply power to border areas; it dropped its plan because the government did not want to duplicate the supply network.

Officials will have to confront the issue as they have pledged to notify the power firms by the end of 2015 if they decide the market is ready for opening up after 2018, when the existing regulatory regime expires.

Then both sides must discuss the financial arrangements relating to assets and investment left redundant by opening up the market. Issues related to the future regulatory framework must also be decided.

Tang’s rival Leung Chung-ying said further study was needed.

“The most important [thing] is that the operator will have a reasonable return, and offer quality services at prices affordable to the public and businesses,” he said yesterday after the same forum.

A spokesman for the Environment Bureau yesterday said it was studying issues involved in reforming the market. The government has reportedly already appointed a consultant to study a range of issues, including how to introduce competition in the local market.

Dr William Yu Yuen-ping, the head of WWF Hong Kong’s climate programme, said the city could start tackling the issue by strengthening the interconnections between the two firms to minimise their reserve generating capacity, which was excessive.

Dr Billy Mak Shui-choi, of Baptist University’s department of finance, said any opening up should be cost-effective and not sacrifice the reliability of supply. He urged officials to learn the lessons of the power markets on the mainland and California, where either excessive regulation or fully liberalised markets have been cited as a cause of blackouts.

Letters to the Editor: Expensive, unsightly wind farms will have tiny impact on carbon footprint

Apr 2nd, 2010
by AdminCTA.
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windfarm4

Last updated: March 21, 2010

Source: South China Morning Post

I refer to the article concerning the plans by power firms’ CL Power and Hongkong Electric (SEHK: 0006) to pump HK$10 billion into offshore wind farms (“Clearly inadequate”, March 14).

I have to question the wisdom of these proposals.

Not content with defacing Lamma with the Hongkong Electric power plant which was constructed in the 1980s, these companies now want to despoil great tracts of sea near some of Hong Kong’s beautiful outlying islands with gigantic wind farms – one between Lamma and Cheung Chau and the other off Sai Kung.

As the article effectively confirmed, the economics concerning these options just do not make sense: “So, for about HK$10 billion, the two wind farms would produce at best about 1.5 per cent of Hong Kong’s electricity and reduce its carbon dioxide emissions by less than 2 per cent.” Therefore, they will do little to make the city greener or its skies cleaner and they will have a negligible effect on the city’s carbon footprint and air quality.

If it really is necessary to satisfy the political desire to meet the 2005 report produced by the Council for Sustainable Development for 1 to 2 per cent of Hong Kong’s electricity to be generated by renewable energy by 2012 by focusing on the wind farm method, then a more appropriate location for locating the wind farms should be chosen.

Somewhere such as, for example, the southwestern coast of the New Territories where the existing power stations of Black Point and Castle Peak are located may work.

Even wind turbines around Castle Peak itself may be more of an acceptable eyesore than ruining the view near Lamma, Cheung Chau and Sai Kung.

A far better solution is to ditch the idea of wind farms altogether.

With the cleanest power from an air pollution perspective being nuclear, we should instead source what Hong Kong needs from the mainland’s future nuclear power stations that the central government plans to build.

What is required is a leap of imagination.

Unfortunately it is not to be found with the wind farm proposals that have been put forward.

Nick Seymour, Kennedy Town

Environment questions for Undersecretary of the ENB remain uinanswered

Mar 24th, 2010
by AdminCTA.
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3d human with a red question markClear the Air says:

This week we had the dust cloud from China sending our already high pollution levels off the scale.

An EPD spokesman on 22nd March stated that they had instructed the power companies to burn gas to try and alleviate the air quality. The statement was made by Mr Mok Wai Chuen, Assistant Director of Environmental Protection.

On 23rd March 2010 Mr James Middleton from Clear the Air’s Energy Committee called the Backchat program and asked why, if the EPD can direct CLP and HKEH to use gas this week, could the EPD not dictate to the power companies to use gas all the time instead of polluting coal. ‘Well, we do not have enough gas’ was Mr Mok’s reply.

Listen to the program here:

http://programme.rthk.org.hk/channel/radio/programme.php?name=/backchat&d=2010-03-23&p=514&e=105932&m=episode

Look at our (unanswered) query to EPD below in October 2008.

From: James Middleton [mailto:dynamco@netvigator.com]
Sent: Tuesday, October 21, 2008 10:08 AM
To: ‘enquiry@enb.gov.hk'; ‘katharinechoi@enb.gov.hk’
Cc: ‘hrmrajh@hkucc.hku.hk'; ‘chair@cleartheair.org.hk'; ‘Mark Hunter'; ‘communications@cleartheair.org.hk’
Subject: Environment questions for Undersecretary of the ENB

Dr. POON Kit, Kitty, JP

Under Secy for the Env

2594 6703

enquiry@enb.gov.hk

Dear Ms Poon

It seems your predecessors did little for HKG’s environment.

We agree we need to burn more gas. The numbers below showing CLP’s decline in gas use from 1999 are horrendous as is the massive increase in coal use.

So Ms Poon, where will the gas come from ? We need 6 billion m3 to produce 50% of what is now generated. More would be better so the additional product could be sold to Guangdong power net to reduce the use of high sulphur backup generators used over the border. Having an MOU is great ; we believe CLP is currently negotiating to take 80% of Daya Bay output instead of 70% but the gas supply will leave a void until the proposed pipeline supply and LNG terminal appear. That means more coal.

Please see our queries below that unfortunately were not read out today on Backchat.

We totally agree with Professor Hedley’s letter below. To use the recommended WHO non developed entry levels adopted in the Democratic Republic of Congo are hardly appropriate for Hong Kong and a sham. It should not even be considered as a starting level.

If this morning’s program had run for 3 hours we would have still been out of time as the emotive statements showed clearly that the people have had enough and Government should act now, not have a consultation as to whether another consultation on the proposed consultation is required.

People want action not words and a non N-A-T-O administration – No Action Talk Only.

Our major environment problem is summed up simply –

– locally burning coal with the ESP in the stacks incapable of catching the PM2.5 emissions unless they fit agglomerators – for the price of 17 days’ coal CLP could add a further 15 agglomerators at Castle Peak and catch the PM2.5. HK Electric is even dirtier than CLP.  Simply – enact a new PM2.5 AQO to at least USA standard if WHO standard is deemed currently beyond reach for whatever reason.  Once you make the AQO standard the power companies will comply. The technology is there. Only now are our local  power companies fitting FGD and NOx burners to meet the 2010 standards.

– local inefficient old diesels – well taxation should get the message across that they need to scrap these vehicle and replace them with at least Euro 4 machines.

Yes we can say we get pollution blown in from PRD for half the year but a vast amount of pollution is created locally and the cure is available.

regards

James Middleton

Greens laud Lamma wind farm plan as breath of fresh air

Feb 5th, 2010
by AdminCTA.
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The single turbine wind plant on the Lamma Island since 2006.

The single turbine wind plant on the Lamma Island since 2006.

Hongkong Electric will today announce plans to develop an offshore wind farm close to Lamma Island and will forward an environmental impact assessment for public inspection.

The site chosen for the project is southwest of the island.

Last year, the government gave CLP Power the go-ahead for an offshore wind farm, which may become the largest in Asia. The CLP project, off the Ninepin Islands near Sai Kung, may produce about 1 percent of the territory’s electricity.

Greenpeace senior campaigner Gloria Chang Wan-ki said she is looking forward to receiving details of the Hongkong Electric project. “Greenpeace thinks renewable energy is definitely one way for us to reduce our dependence on fossil fuel and to reduce our carbon footprint. It is a good way to go in combating climate change,” Chang said.

She said it is “a good initiative” for both power companies to plan for wind farms.

However, the government still has not gone far enough to support renewable energy.

“On one hand we have a 1-2 percent renewable target by 2012, a voluntary target which is not legally binding to power companies,” she said.

On the other, electricity pricing also puts fossil fuel costs “unreasonably low,” making the market unfavorable to renewable energy.

She does not think Lamma residents will oppose the wind farm because Hongkong Electric has had a single turbine wind plant on the island since 2006.

“Based on the feedback from the single wind turbine on Lamma, residents there, I think, will welcome another project in their own backyard.”

But Chang said although her group supports wind energy in principle, “we need to take a careful look at the details and the environmental impact assessment.”

She added: “This project is much bigger than a single turbine, so we need to look at other environmental impacts, for example, that on the seabed, scenery and noise.”

Source: HK Standard

CLP Power can take lead in pollution fight

Dec 28th, 2009
by AdminCTA.
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Can CLP help us by setting up new green traget?

Can CLP help us by setting up new green traget?

The failure of the Copenhagen climate summit to cut a deal to tackle rising temperatures effectively is a sad indictment of leaders’ claims to be taking the matter seriously. In the absence of a unified effort, governments have to implement their own targets and rules to reduce the carbon emissions that are causing global warming.

The chief of Hong Kong’s biggest electricity producer and single largest polluter is right to say the lack of a legally binding treaty is a “real shame” and big disappointment. He should be going a step further by pairing his rhetoric with policies that make his company a shining example for others to follow.

CLP Holdings has a target of a 75 per cent cut in carbon intensity by 2050. It aims to have 20 per cent of its power generated from renewable and nuclear sources by 2020. Goals need to be set and met to fight climate change. They could be considerably more ambitious than those put in place by CLP.

Emissions from the power plants operated by CLP and Hong Kong’s other electricity supplier, Hongkong Electric Holdings, account for the majority of our city’s carbon emissions. Both firms are public companies with shareholders’ interests to protect. But the pollution that comes from the smokestacks of their plants affects the well-being of all citizens.

They have to make every possible effort to keep pollution levels as low as possible. Generating electricity by burning the most polluting fossil fuel of all, coal – as happens at present – is not in Hong Kong’s interests. Power bills are kept low, but the grey pall that hangs overhead threatens and harms our health. Our city’s image is lessened in the eyes of tourists and businesses wanting to locate here or expand.

Alternatives should be used as soon as possible, even at a higher cost. Both electricity providers are making an effort. In CLP’s case, sights are set on new nuclear reactors in Guangdong to complement cleaner energy being produced at its jointly owned plant at Daya Bay. More than 10 per cent of the power coming from its stations across the region is generated from renewable sources other than nuclear – up from 1 per cent five years ago. More gas and oil are being used instead of coal. As the unambitious targets indicate, though, greater effort is needed. The government drives Hong Kong’s policies to cut carbon emissions. It has not set targets, which are of debatable value in the context of a city that has a small area and is prone to the effects of regional pollution.

Officials have a poor track record in environmental protection. Their lack of a popular mandate to govern has made them reluctant to implement laws that affect the companies that contribute to bulging coffers. Authorities need to be pushed into tougher pollution-cutting policies. CLP is perfectly placed to take the lead. By setting an example through taking bigger strides to clean up its operations, it will send a loud and clear message to the government and community.

Electricity charges will most likely be raised, but the cost is worth bearing for the sake of the improvements that will follow.

Source: SCMP

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