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SCMP: CLP Power and China Southern Power buy Exxon Mobil’s power plant stakes

Nov 28th, 2013
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from Anita Lam and Denise Tsang of the SCMP:

City supplier teams up with mainland giant to grab Exxon Mobil’s stake in three electricity plants Hong Kong’s biggest electricity provider, CLP Power, and state-owned China Southern Power Grid (CSG), will each pay HK$12 billion to acquire Exxon Mobil’s 60 per cent stake in Castle Peak Power Company (Capco).

The deal strengthens CLP’s presence in Hong Kong and brings a mainland player into the city’s closed electricity market for the first time. It is not expected to affect tariffs as it involves only shares, without adding fixed assets. But analysts said a strengthened partnership between the largest power suppliers in Hong Kong and southern China could help CLP meet a new 2020 emissions target that may require more clean energy to be imported from the mainland.

After the transaction, CLP’s stake in Capco – which owns three power plants in Hong Kong – will jump from 40 per cent to 70 per cent. CSG will hold the remaining 30 per cent.

CLP vice-chairwoman Betty Yuen So Siu-mai said it was a natural commercial decision to bring CSG into talks that started more than a year ago when Exxon Mobil, the world’s biggest independent oil company, expressed a desire to exit the market.”All electricity imported into Hong Kong must pass through the CSG network,” Yuen said. “Our partnership with CSG will make any transmission of cleaner energy from the mainland easier.” Pierre Lau, managing director and head of Asian utilities research at Citigroup, said the closer ties might also cushion CLP from competition if regulators open up the city’s electricity market.

“Any power supplier who wants to enter Hong Kong must first get past CSG. Of course, it would give CLP an edge if it has a good relationship with CSG,” he said. CLP will also buy out Exxon Mobil’s 51 per cent stake in Hong Kong Pumped Storage Development for HK$2 billion in cash. The whole deal will remove Exxon Mobil from the city’s commercial power generation market – its only such investment worldwide. An Exxon Mobil spokeswoman said it planned to explore other opportunities. Citigroup expects the deals will raise CLP’s net profit by up to 3 per cent next year and 5 per cent in 2015 if the deals are finalised by the middle of next year. CLP said it had secured a HK$10 billion loan facility from HSBC to fund the deal, but in the long run it may have to refinance the loans through corporate bonds or perpetual securities.

Credit rating agency Standard & Poor’s said it had placed it’s A- long-term and A-2 short-term corporate credit ratings on parent company CLP Holdings on credit watch with negative implications. “We placed the ratings on credit watch because we believe the leverage of CLP Holdings could increase substantially if it mainly uses debt to fund its proposed significant acquisition,” S&P credit analyst Gloria Lu said.

20 Nov 2013

Standard: Return stays at 9.9pc for power firms

Nov 23rd, 2013
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from Kelly Ip for the Standard:

Power suppliers CLP and Hongkong Electric will continue to enjoy the 9.99 percent permitted return on capital investment.

The decision – following a just- completed mid-term review of the Scheme of Control Agreements between the government and power companies – was expected, said an Energy Advisory Committee member.

During the review, the two firms agreed to set up an energy efficiency fund from shareholders’ earnings to provide subsidies on a matching basis to owners of non- commercial buildings so they can make their structures more energy efficient.

The scheme is expected to be launched in the first half of next year.

According to previous records, the two companies are expected to invest HK$100 million into the fund, with HK$70 million coming from CLP and spread over four years.

CLP and Hongkong Electric also agreed to raise performance thresholds for both incentive payments and penalties with regard to supply reliability, operational efficiency and customer services.

They also reached a consensus on lowering the cap on the Tariff Stabilisation Fund balance, from 8 percent to 5 percent of annual total revenues from sales of electricity to local consumers, to ensure the balance of the fund can be used to alleviate the impact of tariff increases on customers.

To promote transparency, both firms will set up dedicated websites to show information relating to financial and operating data. The current Scheme of Control Agreements run for a term of 10 years and will expire in 2018.

Energy Advisory Committee member William Yu Yuen-ping said the energy efficiency fund is a breakthrough to help buildings save power.

“Since the fund is from shareholders’ earnings, it will not be included in operational costs and should not affect tariffs,” he said.

An Environment Bureau spokesman said electricity consumers can expect some benefits from the modifications.

Conservation group World Green Organization predicted CLP will increase electricity charges by 4 to 5 percent and Hongkong Electric by up to 1 percent.

22 Nov 2013

Difficulties of establishing biofuels exposes poor thinking of HK policymakers

Nov 6th, 2013
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In 2011, Eric Ng of the SCMP wrote an article about a biofuels plant in Tseung Kwan O Industrial Estate that had to suspend construction, likely due to a lack of funding. At the same time, the article shed light on the difficulties faced by current biofuels producers in Hong Kong: stiff competition on the waste oil market, import levies for feedstocks, lack of mandatory legislation to promote biofuels use, and so on.

One of the main advantages of using biofuels is that it achieves more than some 85% reduction in greenhouse gas emissions. The European Union has already mandated a policy of fuel blending: at least 5.75 per cent of all fuel sold has to be biofuel, with the percentage to increase further in the future, and other countries in Asia also have policies encouraging biofuel consumption. Hong Kong lags behind in such initiatives, and it is not difficulty to see why: Eric Ng, in a recent update on the issue, reports official Mok Wai-chuen of the Environmental Protection Department as saying in 2007 that “biodiesel did little to improve roadside air quality”, backed up by 2002 reports from the US National Biodiesel Board and the US Environmental Protection Agency that “suggested the use of biodiesel would result in a relatively modest reduction in roadside emissions”. The irrelevance of such an analysis – blending 5% biofuel into Euro V standard diesel containing 0.001% sulphur could never have meant reducing roadside pollutants – escapes officials; much of the roadside pollutants are carried by prevailing winds from shipping lanes and industries across the border.

If public policy on biofuels is to be decided on this factor alone, then the real benefits of biofuel would be ignored: once the biofuel industry is established, it can process the city’s waste and convert it to fuel; as mentioned before, biofuels hugely reduce greenhouse gas emissions; more importantly, by helping biofuel operations purchase waste cooking oil, the practice of smuggling waste cooking oil across the border to be converted into ‘gutter oil’ and re-used as cooking oil can be stemmed – which would happen to be quite the moral thing to do, given that such usage of recycled oil is carcinogenic and harmful to human health when ingested.

Click here to read the coverage from SCMP:

SCMP: CLP Power pushes back construction of Sai Kung wind farm for study

Oct 31st, 2013
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CLP Power delays energy project to spend more time on feasibility research

by Cheung Chi-fai

A proposed offshore wind farm off Sai Kung might not see its blades rotating for at least another two years after the city’s largest power producer decided to extend a feasibility study into its economic viability and technical design.

The wind farm, proposed by CLP Power for construction near the Ninepin islands, was once said to be the city’s most ambitious renewable energy project and was targeted for completion by 2016. But the firm now appears to be taking a more cautious approach to the project.

Offshore wind farms in Hong Kong can hardly be described as feasible (HK Magazine)

Richard Lancaster, chief executive of CLP Holdings, the firm’s parent company, said the group had already spent 10 years looking into how to build a wind farm in Hong Kong, but it did not want to make a hasty decision.

“The decision has to be taken quite carefully as it is a big investment. We need to make sure the costs are fully understood,” he said at the World Energy Congress in South Korea last week.

Lancaster said more solid wind data would be required to confirm the project’s economic feasibility, and that a couple more years of study were needed.

The lengthening of the study means the multibillion-dollar project is unlikely to be part of the five-year development plan the company submitted to the government earlier this year.

Construction of the infrastructure for the wind farm would boost the value of the firm’s fixed assets, which is the basis on which its maximum permitted profits by the government are calculated. The greater the asset value, the higher the return allowed.

The firm is facing uncertainty ahead of the expiration of the current regulatory regime for the power industry, also known as the Scheme of Control Agreement, in 2018. A decision will likely be made before 2016 on whether the electricity market will be liberalised.

CLP estimated in 2011 that a 200 megawatt wind farm with up to 67 turbines would cost up to HK$7 billion and would lead to a 2 per cent rise in customer tariffs.

Lancaster said he would prefer the wind farm, if it were accepted, be paid for by all the company’s electricity users.

21 Oct 2013

Transport firms seek funding to upgrade bus fleets, switch to cleaner fuel in ferries

Oct 7th, 2009
by AdminCTA.
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Cheung Chi-fai, SCMP

Franchised bus and ferry operators have publicly sought government financial assistance to help them upgrade their fleets and switch to cleaner fuels if they are required to do so. The operators say they are seeking the unspecified help on the assumption that they will not be able to pass on the cost of improvements to the public through higher fares.

New World First Ferry – now testing ultra-low-sulphur diesel on three boats – said it could not keep using the fuel because it was too expensive.

“We will be unable to carry on after the end of the trial unless the government helps,” assistant general manger David Wong Yui-cheong told the Legislative Council’s environmental affairs panel yesterday.

The ferry operator’s sister company, New World First Bus, also said a subsidy would be needed if it was told to upgrade its diesel bus fleet ahead of schedule.

“The assumption is that we would not pass on the additional cost to the passengers by raising fares, and therefore a financial subsidy is necessary,” deputy head of corporate communications Elaine Chan Yin-ling said. It would be wasteful to phase out older buses before the end of their supposed life cycle, usually up to 18 years, she said.

In its recent air-quality review, the Environment Bureau estimated a 15 per cent fare rise would be needed to replace by 2014 about 4,500 franchised buses that went into service before Euro II emission standards were introduced in 1996 and 1998.

Fume-belching diesel buses are blamed for much of the roadside air pollution that persists despite efforts to clean up the environment.
Kowloon Motor Bus operations director Tim Ip Chung-tim said the bus-replacement programme was a complicated one that was also governed by manufacturers’ ability to supply vehicles. He also warned of the affect on finances and operations.

Secretary for the Environment Edward Yau Tang-wah said all parties in the community – individuals, government and businesses – would have to pay for better air quality. But he did not say whether the government had any plans to help bus companies upgrade their fleets.
The review proposed 19 measures to meet recommended new air-quality objectives, which have not been updated since 1987.
Representatives of more than 30 organisations attended yesterday’s panel meeting to offer their views on the review.

The prevalent view among non-business delegates was that tighter targets should be adopted and the proposed measures implemented as quickly as possible. A public forum will be held on Saturday to gauge public views on the review.

Meanwhile, WWF Hong Kong published its “Climate Policy Address” for Chief Executive Donald Tsang Yam-kuen’s reference. It also urged Hong Kong to set a carbon emissions target of 25 per cent below 1990 levels by 2020.

Plant’s waste management plan would cost less than incinerator

Oct 5th, 2009
by AdminCTA.
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SCMP

I refer to the report (“Sewage could be energy source, scientist says”, September 28).

While the studies of Herbert Fang, chairman of environmental engineering at the University of Hong Kong, should be encouraged, I wish to point out that the use of sewage sludge as a refuse derived fuel is not an entirely new concept. There are many operations all over the world that treat sewage sludge and use it as an environmentally-friendly and cost-effective refuse derived fuel.

At Green Island Cement, we have been working on our waste management technology, the eco-co-combustion system, for the past nine years.

We have already presented the government with our environmentally-friendly and cost-effective solution for sludge treatment. However, it has rejected our proposal and decided to construct a conventional sludge treatment incinerator in Tsang Tsui to manage Hong Kong’s growing waste management problem.

Through our eco-co-combustion system, sludge would be used as a refuse derived fuel at our cement plant in Tap Shek Kok. Sludge would be taken from Stonecutter’s Island (using existing transport containers) and further dewatering would be carried out at our site to create sludge pellets. These refuse derived fuel pellets would then be fed into the cement plant’s burner system to replace imported coal.
Together with this technology, the refuse derived fuel could replace about 40 per cent of coal currently burnt at the cement plant.

Our eco-co-combustion system pilot plant tests have demonstrated excellent emissions results, far better than the government’s best practical means.

In sum, our system offers a waste management solution that will result in an overall net improvement in air quality. All residual ash is recycled and used in the manufacturing of cement clinker, thereby further reducing the burden on landfills.

We estimate that the quantity of dewatered sludge which can be treated by our proposed facility would be up to about 2,000 tonnes of sludge per day, the same as the government’s proposed incinerator.

The capital required to install such a sludge processing facility at Tap Shek Kok is around HK$950 million.

This is a substantial saving on the government’s proposal to spend HK$5.2 billion.

It is a significant saving for the public purse.

Despite these numerous benefits, the administration has pressed ahead with its own conventional sludge incinerator proposal, without giving due consideration to our technology.

So while Professor Fang should be encouraged with his studies, we hope officials can provide a forum in which new technologies can be assessed and brought into fruition. If the government will only consider conventional technologies, any new scientific studies or advancements will prove pointless.

Don Johnston, executive director, Green Island Cement (Holdings) Limited

Electricity Consumption in Hong Kong in 2006

Sep 29th, 2009
by AdminCTA.
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image005

image006

So in 2006 we imported 10,256 GWh nuclear from Daya Bay and exported 4,528 GWh back to China produced locally by burning dirty coal and the trend continues

Daya Bay power contract extended

Sep 22nd, 2009
by AdminCTA.
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Govt Press Release

Cheaper electricity is projected after the Executive Council today approved CLP Power’s contract extension for the supply of electricity from Daya Bay Nuclear Power Station for another 20 years from May 7, 2014.

The projected average unit price of nuclear electricity from Daya Bay is expected to fall up to 12% under the deal.

The Memorandum of Understanding on Energy Co-operation signed between the Government and the National Energy Administration last August saw the backing of the 20-year extension. The supply quantity will be no less than the current level in principle while pricing will be agreed on commercial principles.

Secretary for the Environment Edward Yau said the extension will benefit both consumers and the environment.

“[It] provides an assurance of electricity supply at reasonable and affordable prices for Hong Kong consumers, and also a continued supply of cleaner electricity to Hong Kong, which will help alleviate air pollution and greenhouse gas emission locally,” he said. “This is in line with our policy intention to use cleaner fuel for electricity generation under the current consultation on the review of the Air Quality Objectives.”

Electricity Consumption

Terajoule
Year Month

Domestic

Commercial

Industrial

Street lighting

Exports to the mainland of China

All groups
2006

35 428

95 370

14 015

391

16 300

161 504
2007

36 422

97 155

13 104

391

14 527

161 598
2008

37 100

97 672

12 182

391

12 789

160 134
2008 Jun

3 460

8 932

1 010

30

556

13 987
Jul

4 434

9 566

1 149

31

963

16 143
Aug

4 639

9 338

1 070

31

978

16 057
Sep

4 805

9 336

1 079

34

1 058

16 313
Oct

3 391

8 837

1 023

35

822

14 108
Nov

2 307

7 650

916

32

1 074

11 979
Dec

1 907

7 238

957

36

1 122

11 260
2009 Jan

2 187

6 800

807

35

615

10 445
Feb

2 375

6 490

693

32

1 015

10 605
Mar

2 312

7 429

888

33

1 086

11 749
Apr

2 155

7 445

953

31

1 040

11 624
May

3 035

8 538

943

29

1 125

Ferry operators get assurance on the cost of cleaner diesel

Aug 26th, 2009
by AdminCTA.
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Cheung Chi-fai and Anita Lam – SCMP

The extra cost of using cleaner diesel in Hong Kong’s ferries is likely to be much less than ferry operators have claimed, the environment watchdog says.

Ultra-low-sulphur marine diesel, which went on trial in five ferries yesterday, would cost about 60 HK cents a litre more than conventional diesel, not up to HK$3 as the companies had estimated, the Environmental Protection Department said.

But one of the operators said the cleaner fuel would still push up its operating costs by 10 per cent, increasing pressure for a fare rise.

A department spokesman said clean diesel now cost HK$4.50 a litre, compared with HK$3.90 for conventional marine diesel, subject to oil-price fluctuations.

Hong Kong & Kowloon Ferry said that price difference would lead to a 10 per cent rise in operating costs if all its vessels used the fuel.

“The additional cost would erode our meagre profit and increase pressure for a fare rise,” general manager Nelson Ng Siu-yuen said.

Launching the nine-month trial of the cleaner fuel yesterday, the Environmental Protection Department said it would pay up to HK$10 million in incentives for ferry operators to take part. The money was for fuel subsidies and technical monitoring. The trial would provide data on operating costs, and the impact on maintenance and technical performance to help officials decide whether all ferries should use cleaner fuel.

The fuel, 100 times lower in sulphur, will be supplied to five selected ferries by an oil barge operated by Sinopec (SEHK: 0386) in Cheung Sha Wan.

These are New World First Ferry’s Xin Hui III and VIII between Central and Cheung Chau and Xin Ying running from Central to Mui Wo; Hong Kong & Kowloon Ferry’s Hoi Ming connecting Central and Peng Chau; and a Hong Kong and Yaumati Ferry car-carrier between Kwun Tong and North Point.

The Star Ferry did not join the trial, saying its own trial of cleaner diesel in 2006 resulted in loss of power, higher fuel consumption, and engine corrosion. “We will still keep track of the trial results of other ferry operators,” general manager Johnny Leung Tak-hing said.

The department spokesman said there had been no mechanical problems for government vessels since they started using the cleaner fuel in 2000. He said there were other solutions to resolve the operators’ worries about the lubricating effect of sulphur in the engines.

The spokesman said that if all local passenger ferries switched to the cleaner fuel, the total sulphur emissions from the marine sector could be cut by about 12.5 per cent. Other sulphur emissions come from domestic vessels such as barges and fishing boats, as well as ocean-going vessels and cross-border ferries.

The Marine Department said four local vessel operators were convicted for black-smoke emissions last year, compared with none in 2007

Ferry firms must play part in clearing the air

Aug 26th, 2009
by AdminCTA.
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SCMP

The unsightly black smoke that pours from ferries as they churn across the harbour tells much about the Hong Kong government’s approach to air pollution. It is a clear sign of the need for greater urgency. Such emissions are from another era, an age when the world had little concern for the environment. Visitors look at the pall and in an instant think our city is out of step with global concerns about climate change, sustainability and public health.

This is not the case, of course. Lawmakers are only too aware of what they should be doing to clean our air. The Environmental Protection Department is staffed with highly skilled officers who are not short of facts, figures and solutions. What is holding up action is an unelected government under pressure from interest groups: in this instance, ferry companies.

A government with a popular mandate could quickly fix the problem by making it law that ferry operators use clean diesel to fuel their craft. There is no reason why our leaders could not also do the same in the name of the common good. We must remember, though, that the companies have been hit hard by the economic crisis and unstable fuel prices. Any move to get them to switch has to involve cajoling, convincing, incentives and help with infrastructure.

The nine-month trial of ultra-low-sulphur diesel involving three ferry companies announced yesterday fits with such a strategy. Passing it off as a technical and economic feasibility study lays the groundwork. The best locations for refuelling depots can be determined during the trial. From the initial five ferries, the programme can be broadened. During the nine months, the benefits that are already so obvious will be made plain to the ferry industry.

Ferry companies have to use cleaner fuel; on this there can be no argument. Higher fares may be necessary to help offset increased fuel costs. The trial will help determine the details. Unlike other schemes, though, this one must not be left high and dry after it ends or is implemented on a voluntary basis. Getting rid of such pollution is an integral part of cleaning Hong Kong’s air

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