CLP Holdings Limited (2) Earnings Call Transcript & Summary

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 T.K. delivering the highlights for 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.

Yes. 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 pleasure 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 the 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 a record generation while in India, Jhajjar upheld its position as one of the best-run thermal plants, achieving record level of efficiency. In Australia, amidst increasing price volatility, Tallawarra B went into commercial operations, the only peaking 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 HKD 11 billion in CapEx in 2024. Outside of 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 key highlights include construction of CLP China's largest wind and solar projects today, 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 Wooreen 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 outcomes of this 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 HKD 11 billion. Total earnings were also up significantly by 76% to $11.7 billion. The Board today recommended a fourth interim dividend of $1.26 per share, which, together with the 3 dividends already paid, brings 2024's total dividend to $3.15 per share, an increase of 1.6% from $3.10 in the prior year. Now 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 Zhonghua coal portfolio. These actions led to a 2% 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 the first half, consolidating the growth trend across the key financial indicators. Earnings before interest, tax, depreciation and fair value, or EBITDAF, increased by 9% to over HKD 25 billion. This reflected sustained capital expenditure in Hong Kong and strong performance from EnergyAustralia. Increase in EBITDAF supported operating earnings before fair value movement growth of 8% to close to $11 billion. This was slightly impacted by higher interest costs, depreciation and tax expenses. Adjusted for fair value movements and items affecting comparability, total earnings was $11.7 million, an increase of 76%. Capital investments of over $18 billion were higher than last year, which I'll cover in more detail in the cash flow section. As a result of this positive momentum and as mentioned by T.K., we increased our dividends to our shareholders. Total dividend for financial year 2024 was $3.15 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 shows EnergyAustralia as the major driver for the increase, following dependable performance from Hong Kong, profitable growth from Apraava Energy in India and improvement in the 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 earnings level, with a significant uplift from EnergyAustralia and more modest uplift from Hong Kong and Apraava Energy, offset by lower contribution from Mainland China, Taiwan Region and Thailand. Together with the contribution from the region and efficiency gains from digitalization and network cost optimization, we reported operating earnings before fair value of close to $11 billion. 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 $11.7 billion. 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 performance of the business. First, Hong Kong. With the start of the new D plan cycle, our continued investment and reliable performance drove stable and dependable earnings. On an accrual basis, the Scheme of Control business invested $10.8 billion, the majority going towards transmission and distribution to support infrastructure growth and new development areas and decarbonization. Earnings were 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 of our offshore LNG terminal, we now have successfully completed our major gas infrastructure, enabling the retirement of 3 coal units of Castle Peak. This is a significant step towards lower emissions. Local electricity sales were up 2.1%. Notably load 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 on 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 decreased 10% to $1.9 billion. Main driver of low earnings was nuclear, namely lower market tariffs and higher cost in 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 2024. 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 renowned 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 return requirements. We are on the right pathway to deliver renewable growth and progressing business models and partnership options, which T.K. will talk about later. Turning to Australia now, where a record number of high price events occurred in New South Wales in 2024, 12 hours with average spot prices above AUD 10,000 compared to 0 in 2023. EnergyAustralia's actions on investments in the reliability of Yallourn and coal supply and flexibility from 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 costs of living pressure. Depreciation cost increased as a result of the refurbishment CapEx in Yallourn. The net impact enabled a turnaround from a loss position in 2023 to more than $590 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 Golden Plains' wind PPA in Victoria add to the growing renewable and flexible portfolio. Looking ahead, focus remains on maintaining the performance of our generation fleet. The outlook for wholesale prices is stable, albeit higher fuel cost from Mount Piper as well as higher depreciation cost 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 action 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 allows 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 $330 million, and solid cash flow position enabling return of capital. While renewables contribution was down in line with lower wind resources and less delayed payment income from the significant reduction of overdue receivables, we recorded steady earnings growth from transmission and Jhajjar coal plants. Smart 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 4 renewable including the construction of Apraava Energy's largest solar project today; 4 transmission; and 6 metering projects won in 2023 and 2024. Corporate expenses improved mainly due to a gain recognized upon the successful exit of our Dedasari solar project. In the year ahead, 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 at Lopburi Solar in Thailand, but its contribution was lowered by a step-down in PPA tariffs. Together, earnings were down by 12%, landing at $260 million. Looking ahead, Ho-Ping will focus on managing fuel costs. And more broadly for this region, we will begin to explore development opportunities in line with our strategy, which T.K. will cover later in this presentation. Moving to the group's cash flow. Free cash flow generation was healthy at $21 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 $25 billion, made up of $11.2 billion of SoC CapEx, $2.7 billion growth CapEx mostly attributable to Mainland China renewable projects, $3 billion for our new Kai Tak office headquarters as well as dividends payment of $7.8 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 $36 billion in available liquidity. The team has been disciplined in maintaining a diversified and cost-effective debt portfolio, successfully raising competitive financing of over $15 billion debt for Hong Kong SoC business and $5.2 billion nonrecourse project loan facilities for Mainland China renewable energy projects. Early in 2025, we also successfully refinanced USD 500 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 at A, A+ and AA- respectively. Similarly, Moody's has kept rating of the 3 same companies together with EA, 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 rating 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, based on the foundations 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 gigawatts of generation capacity. Our operations span the full value chain, from generation to network and services while consistently creating shareholder value. Now but energy itself is undergoing significant transformation as catalytic forces of electrification and decarbonization take hold. Our recent strategic review sharpens 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 and 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 as a graduate trainee 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 and decarbonization 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 strategic priorities and financial targets. First, our home markets, Hong Kong and Mainland China, remain a priority. Our integrated utility business in 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 $52.9 billion 5-year capital program to support government's economic and infrastructure agenda and decarbonization targets. We'll continue to drive performance of the business, maximize synergies and improve operational efficiency. To our other home market, Mainland China, where the need for clean energy is driving addition of some 300 megawatts -- [ 300 gigawatts ] of renewable capacity. This gives us good opportunities to find good projects. Our targets of double our 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 from multiple fronts. We have added almost 2 gigawatts in various stages of construction since we announced the targets. We are seeing good returns from grid-parity projects. Lower cost of capital and the emergence of long-term PPAs adds 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 blend 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 the new net-zero economy across the whole supply chain. The market that we operate in have some of the richest opportunities with strong market fundamentals and [ geo aims ] of 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 noncarbon 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, pumped hydro and renewables, and storage outlets with ready access to transmission infrastructure, with partnership and business model upsides. 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 3 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 eMobility platform for Hong Kong's EV expansion, we are unlocking efficiencies, elevating customer experiences and pioneering new revenue streams. Third, sustaining 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 dividends while funding future growth. Maintaining our investment-grade credit rating provides financial flexibility to support operations and growth. We also run our businesses with the objective of financial independence, with stand-alone credit profiles for different funding sources. Sustained and committed asset growth in Hong Kong underpins stable and predictable cash flow to continue our track record of delivering value to shareholders. We apply disciplined and selective investment criteria based on differentiated risk-adjusted returns, which we'll share today. Our investment committee prioritizes high-return opportunities, focusing capital on the most strategically aligned 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, 3 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 hear me, go ahead and unmute and ask your question.

Let me -- I have 3 questions, and congratulations to your strong set of results for 2024. I have 3 questions on your company. The first one is that your Australian business performance in second half last year, clearly, exceeded 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 improve further year-on-year in 2025? Second question is, I recall your previous plan is to scale down 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 about China. Your presentation material show you that you aim to double your renewable capacity in China from right now 3 gigawatt to 6 gigawatt by 2029 by spending HKD 4 billion per annum. How do you assess your investment risk and return for your China renewable project given that new renewable project, whether it's wind or solar project complete from 1st of June 2025, will no longer be protected by any offtake volume and/or pricing? So how would you control the risk there? And also, we see that some provinces like Shandong, Zhejiang, right now have some negative electricity [ sales ] prices on grid level. So how would you control your investment risk there?

Great question.

Yes. Thank you, Pierre. Now for Australia, so actually starting -- because of the bad performance in 2022, which basically is attributable to 2 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 both our power station, they are in a much better position now. So in 2024, because of their reliable performance, our generation business basically have delivered very good financial results. Now going forward, actually, the whole EnergyAustralia business would very much depend on the 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 kind of 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 potential partnership in Australia, maybe I can just give a bit of a background. The reason why we look for a 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 to reach net zero is very significant, and we want to basically put the capital more in the 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 decarbonization targets, we may need to find partners. And the form of so-called partnership varies. We are open-minded about different options. It could be at the project level. For example, if we have a project investment in, in particular, [ for farm wind ] flexible capacity in Australia, so we might look for partners, or it could be at enterprise level. So we are open-minded about different options, and we do not see any kind of pressure, so we will look for opportunity when it arises.

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

Yes, if you wish. On Wooreen battery, we had put a project finance objective with basically contracting the offtake of Wooreen 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 from EA as a 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 any needs from CLP in order to reach its carbon objectives.

Yes. Thank you, Alex. Now turning to the question about China. So Pierre, you are right, there was a new policy, actually just announced the week before. And for the new 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 so-called 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 that 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 RE over several years in order to kind of protect the payback period. And at the same time, the mechanism volume will also be determined by the RE 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 -- give protection to competitive RE 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 3 questions. The first is about the CapEx plan. So when we look at the presentation, it seems that we target to increase the China renewable capacity by around 3 gigawatt from 2024 to 2029, and we plan to spend around $4 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 $0.5 billion a 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% this year, which is encouraging. At the same time, it seems that net debt, also up $4 billion. So how should we think about the dividend growth in the next few years while the net gearing seems high and we see like limited decline in finance cost this year? And the last question is, would you please break down our CapEx by key regions, for example, Hong Kong, Mainland China, Australia, and also maintenance CapEx?

Yes. Thank you, Stephen. Maybe I will ask Alex to help answer -- actually, the first question and third question are similar, so maybe he can give an overview about our CapEx plan. Now regarding the second question on the dividends. 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 decided to increase the dividend. Now going forward, actually, when Alex talk about the CapEx plan, Alex will also talk about the funding strategy. So after all, of course, the 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 steady -- kind of on a steady base. So this is our target. So maybe I 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 HKD 10 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 $4 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 by the end of 2029. This is equivalent around to $6 billion. In Australia, which is also self-funded, the difference is that we don't necessarily develop assets. We may also contract. So up to today, our 3-gigawatt renewable capacity that we want to develop is through PPAs, hence not developing it. While the battery is following a different strategy, on our sites, 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 competitive 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 leave on. Second, it's absolutely crucial to keep very strong investment grade in order to be able to have low cost of funding but also flexibility for future growth. Third, we want our dependable dividends to -- or 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 project that we invest in and decide, hence, where do we put our available CapEx. This enable us to continue our growth in order to focus on our 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 earning growth as long as we can, of course, continue to fund our future needs. The Board decided to increase the dividend by 1.6% in 2024 versus 2023, and the Board will take a decision in due time regarding the 2025 dividend policy.

Thank you, Alex. A question from HSBC, Yonghua Park, around AI and data centers and its impact on electricity demand in Hong Kong, in particular, and then maybe your comment on China and Australia 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 utility demand in Hong Kong, if you look back, the previous development plan from 2018 to 2023, we had about 4 data center -- new data center kind of commissioned. But just in last year, we already commissioned 3 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 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 Hong Kong 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 2 regions, mainly, we are in the generation business. So our objective is to help decarbonize the generation sector undergoing 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 and -- actually, in Hong Kong, in Mainland China, also in other parts of the world. So I expect with the increasing demand in AI, there will be more and more demand in green power and that basically fits in 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. A question from Eva Hou from Morgan Stanley around nuclear in China, with like 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 dual carbon reduction targets, 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 tariff level in 2025. So that's the outlook for the nuclear business of CLP China next year. But for Daya Bay, obviously, because we have the PPA, so the tariff actually will be quite stable.

Thanks, T.K. Stephen from JPMorgan has put his hands up again for another question. Stephen, go ahead.

I just have 2 quick follow-up questions. The first is that you also mentioned the Northern Metropolis development plan. I just wonder if like the Hong Kong government like ramp up the progress, will 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 state and performing rapidly. So that resulted in good financial performance in 2024. 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, we can charge up the battery during low-price period or even negative-price periods and then discharge during high-price periods. That not only create 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 investment 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 so as to improve our retail business competitiveness. At the same time, of course, we will also introduce more value-adding service to our customer. So basically, like a 2-pronged approach, managing our energy business using more flexible capacity in a more volatile environment, and then optimizing our cost structure for the retail business and have more product and new product and services to serve our customer. Over to Alex.

Yes. Regarding our development in China, I'll make 2 observations. The first one, if we do our development as planned and we do $4 billion per year over 5 years, that will be a total of HKD 20 billion, which is quite material. Second observation is that the project that we develop in China are very 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 very good. And we were contacted by multiple investors about potentially partnering with us in China. So we have looked at different alternatives, partnership and delivered the project with some customers or at the level of corporate or potentially doing clean energy fund that had been done by other funds, which would consist of basically selling the project while it is being derisked to a fund with limited partners, still keeping a material ownership into it to align interest, but basically providing our skills in order to enable this development, limiting the funding from the group and enabling us to have a superior return. So we are currently looking at these different alternatives in order to grow profitably our portfolio.

Thanks, Alex. We'll 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. Two questions actually. One is I just want to further understand, for your investment in Mainland China for renewables, how those CapEx will be funded? Would those be funded by onshore financing in renminbi or [ we take ] from 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 to net zero, we need further green energy, mainly nuclear to be imported from Guangdong. I just want to see, has there been any development in that front?

Yes. Thank you, Evan. So maybe I'll take the second question, and I'll ask Alex to 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, there would be 6% to 7% of our generation mix being zero-carbon 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 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 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, where we're able to obtain up to 80% project finance with, of course, onshore debt. Regarding the remaining 20% equity, here, we have 2 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 that 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 model for partnership, which is more structured, clean energy fund or partnership.

Thank you, Alex. Thank you, everybody, for your questions. I will now 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 estimates competition. The winner of the operating earnings goes to Qi Kang from Huatai Securities. She just started her coverage of us, so 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 estimates and on the money at $3.15, reflective of all the good questions that you've asked today. So congratulations to the both of you. We'll reach out with your prizes soon. So with that, thank you, everybody, for joining us and for your questions. My team and I will be available after this call for any further questions you have. But other than that, thank you, and goodbye.