CLP Holdings （"CLP" or the "Company"） released its 1Q2019 quarterly statement, interim dividenddeclared is HK$0.63/share, up 3.2% YoY. CLP’s Hong Kong local sales of electricity remained stable at6,857GWh, up 1.8% YoY. Non-carbon power generation in mainland China remained stable while coal-firedgeneration continued to face downward pressure due to high coal prices. CLP India’s wind generationincreased YoY while Paguthan Power Station was approved to sell short-term power on the Indian EnergyExchange. CLP’s Southeast Asia and Taiwan operations remained stable.
In Australia, coal quality issues, outages and maintenance have negatively impactedEnergyAustralia’s energy business while the Default Market Offer （"DMO"） will lower retail profits in2H2019. CLP announced that due to myriad of factors, performance in Australia has remained at levelsobserved during 2H2018 （HK$1,045 mn, -47.2% YoY）； which is despite high wholesale electricity pricesobserved during 1Q2019. CLP also expects the DMO, which will began July 1, 2019, to have a significantnegative impact on the retail segment of EnergyAustralia’s business. In addition, uncertainty surrounding acoherent long-term energy policy for Australia persists, which will negatively impact investment planning forindustry players.
Our TP for CLP is HK$95.00, investment rating is "Accumulate". The lower permitted returns of the newHong Kong Scheme of Control Agreement in addition to weakness in Australia will likely place downwardpressure on earnings in 2019. However, we believe CLP’s medium and long-term prospects remain solid as theCompany expands its renewable power generation portfolio and remains in good financial health. We maintainour investment rating as CLP remains an attractive defensive stock with stable operations in its main HongKong market.