Investment In Power Assets

With a 38.87% interest in the company, CKI is HK Electric's major shareholder. Through an installed capacity of 3,736 MW in Hong Kong, HK Electric generates, transmits and distributes power to more than 560,000 customers on Hong Kong Island and Lamma Island. HK Electric's growing portfolio of international investments also delivers strong recurring income.

Supply reliability was maintained at over 99.999%, higher than HK Electric's pledged service standards.

For the year ended 31 December 2009, HK Electric's audited consolidated net profit after tax was HK$6,697 million, a decrease of 17% as compared with last year. The primary reason for this drop was the 34% reduction in Hong Kong earnings, which amounted to HK$4,646 million. During the year, HK Electric's international operations grew and earnings from this sector doubled to HK$2,051 million in 2009.

Hong Kong Operations

In 2009, earnings from Hong Kong operations were reduced due to the lower rate of permitted return allowed under the new Scheme of Control Agreement, which commenced on 1 January 2009, as well as the lower cash deposit balances and deposit interest rates.

Despite various energy saving initiatives, unit sales of electricity increased by 0.5% as a result of a warmer summer. A slight increase was recorded in the number of domestic and commercial customers, while the number of industrial customers declined.

Supply reliability was maintained at over 99.999%, in excess of HK Electric's pledged service standards. Gas- fired units generated approximately 20% of the electricity sent out from Lamma Power Station, with the remainder being generated by coal-fired units.

A reduction in emission levels was recorded during the year through the commissioning of an additional flue gas desulphurisation plant and the increased consumption of natural gas, as well as efficient operation and maintenance activities.

HK Electric's first battery charging station for electric vehicles opened at the end of 2009.

The 800 kW Lamma Winds wind turbine operated satisfactorily during the year, with an increased capacity factor. Earlier in 2010, HK Electric further proposed the development of a 100 MW offshore wind farm in the south west Lamma channel.

International Operations

Strong operating results were achieved by HK Electric's businesses outside of Hong Kong. Earnings from international investments doubled in 2009. Total earnings arising from activities outside of Hong Kong increased from approximately 13% in 2008 to over 30% in 2009. This reflects the success of HK Electric's diversification strategy.

In April 2009, HK Electric acquired interests in three power plants in Mainland China to add to its portfolio. These investments performed ahead of expectations during the year and generated satisfactory returns.

During the year, HK Electric also increased its stake in Northern Gas Networks. Overall, increased revenue was reported by this quality asset in 2009.

The 48 MW wind project in Dali, Yunnan province and the 49.5 MW wind project in Leting, Hebei province achieved commercial operations in January and October 2009 respectively and are operating satisfactorily. In Thailand, the 25% owned Ratchaburi Power Company provided its first full year of contribution to HK Electric.

The wind power project in Dali, Yunnan province commenced commercial operations in January 2009.

The Australian electricity distribution businesses in South Australia and Victoria recorded a strong year with increased revenue, while stable returns were generated by Stanley Power in Canada. In New Zealand, HK Electric benefited from the first full year of operations from the 50% owned Wellington Electricity distribution network.