Core Viewpoint - The company reported a decline in revenue and net profit for the first half of 2025, with a focus on maintaining growth in Hong Kong while facing challenges in other markets [1][2]. Financial Performance - In the first half of 2025, the company achieved a revenue of 42.854 billion HKD, a year-on-year decrease of 2.79%, and a net profit of 5.624 billion HKD, down 5.49% [1]. - The operating profit before fair value changes was 5.227 billion HKD, a decline of 8% year-on-year, with Hong Kong and related businesses contributing 4.568 billion HKD, an increase of 6% [1]. - The fair value change income shifted from 172 million HKD in the previous year to -35 million HKD, leading to an overall operating profit decrease of 11% to 5.192 billion HKD [1]. Capital Expenditure and Cash Flow - Cash inflow, excluding maintenance capital expenditure, was 7.1 billion HKD, a decrease of 9 billion HKD year-on-year, primarily due to a 6 million HKD decline in EBITDAF and adverse working capital changes [2]. - Non-maintenance capital expenditure totaled 7 billion HKD, mainly for Hong Kong SoC business (5.1 billion HKD) and renewable energy projects in mainland China [2]. Strategic Focus and Long-term Outlook - The company aims to provide stable cash flow through core businesses while seeking opportunities in the rapidly evolving energy transition market [2]. - A five-year development plan worth 52.9 billion HKD is underway in Hong Kong, with capital allocation principles based on risk-return, geographic selectivity, and project expansion in mainland China [2]. - The long-term outlook remains positive, with projected revenues of 90.2 billion HKD, 91.2 billion HKD, and 92.1 billion HKD for 2025-2027, and net profits of 11.2 billion HKD, 11.6 billion HKD, and 12 billion HKD respectively [3].

Investment Rating - The report initiates coverage with a "Buy" rating for the company [12]. Core Views - The company experienced a decline in revenue and net profit in the first half of 2025, with revenue at 42.854 billion HKD, down 2.79% year-on-year, and net profit at 5.624 billion HKD, down 5.49% year-on-year [1][2]. - Despite short-term performance pressures, the company maintains growth in Hong Kong, with related business profits increasing by 6% to 45.68 billion HKD [2]. - The company is focusing on long-term investment value through stable cash flow from core businesses and exploring opportunities in the rapidly evolving energy transition market [4]. Financial Summary - The company reported a cash inflow of 7.1 billion HKD in the first half of 2025, a decrease of 9 billion HKD year-on-year, primarily due to a decline in EBITDAF and unfavorable working capital changes [3]. - Non-maintenance capital expenditures reached 7 billion HKD, mainly for projects in Hong Kong and renewable energy initiatives in mainland China [3]. - The company plans to allocate capital based on risk-return principles and geographic selectivity, with a five-year development plan in Hong Kong valued at 52.9 billion HKD [4]. Earnings Forecast - Projected revenues for 2025-2027 are 90.202 billion HKD, 91.221 billion HKD, and 92.144 billion HKD, respectively, with corresponding net profits of 11.194 billion HKD, 11.610 billion HKD, and 11.985 billion HKD [4][5]. - The expected price-to-earnings ratios for 2025-2027 are 15.12, 14.58, and 14.12, respectively [4].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 78.40 [4][6]. Core Views - The company reported a revenue of HKD 42.854 billion for 1H25, a year-on-year decrease of 2.8%, and an operating profit of HKD 5.192 billion, down 11.3% year-on-year. However, the net profit attributable to shareholders was HKD 5.624 billion, a decline of 5.5%, which exceeded the forecast of HKD 5.381 billion due to gains from the sale of a 50% stake in the Wooreen energy storage project by its Australian subsidiary [1]. - The company is optimistic about future performance growth and dividend increases due to its stable and growth-oriented business model [1][4]. Summary by Sections Financial Performance - In 1H25, the company's operating profit in Hong Kong increased by 8% to HKD 4.447 billion despite a 1.7% decline in electricity sales. This was attributed to ongoing capital expenditures and improvements in fixed asset net value [2]. - The operating profit in mainland China decreased by 13%, primarily due to pressure on electricity prices at the Yangjiang Nuclear Power Station and weak wind resources in some renewable energy projects [2]. - The Australian operations saw an 86% decline in operating profit, impacted by intense retail competition and maintenance shutdowns at power plants [2]. - The company reported a free cash flow of HKD 0.1 billion in 1H25, a significant improvement from a negative HKD 1.3 billion in 1H24 [3]. Future Growth Potential - The company is expanding its zero-carbon project portfolio, with 336 MW of renewable energy capacity commissioned in mainland China and the full commissioning of the Sidhpur wind farm in India [3]. - By 2029, the company aims to achieve approximately 6 GW of renewable energy capacity in mainland China and 3 GW in Australia [3]. - The report emphasizes that the implementation of zero-carbon plans will inject growth potential into the company's performance [3]. Valuation and Estimates - The report adjusts revenue forecasts for Hong Kong, mainland China, and Australia, expecting net profits attributable to shareholders to be HKD 10.670 billion, HKD 11.396 billion, and HKD 12.128 billion for 2025-2027, respectively [4]. - The estimated EPS for 2025 is HKD 4.22, with a projected PB ratio of 1.86x, leading to a target price of HKD 78.40 [4][6].

Financial Data and Key Metrics Changes - Group operating earnings before fair value movements decreased by 8% year on year to HKD 5.2 billion [7] - Total earnings decreased by 5% to HKD 5.6 billion [7] - EBITDAF was down by 5% to HKD 12.4 billion compared to the same period last year [9] - Capital investments of over CHF 8 billion were lower than last year [10] - Total interim dividends declared for the first half of 2025 remained at $1.26 per share, same as last year [10] Business Line Data and Key Metrics Changes - Hong Kong business maintained solid core earnings with capital expenditures standing at HKD 4.5 billion, primarily for growth initiatives [12] - Mainland operations saw a 15% reduction in earnings due to market challenges [13] - Energy Australia faced intense retail competition leading to margin compression and a decrease in customer accounts [16] Market Data and Key Metrics Changes - Competitive market conditions in Australia resulted in a reduction in customer numbers [7] - Lower tariffs in the Mainland impacted operating earnings from the nuclear portfolio [14] - The energy transition in the Mainland is expected to add significant renewable capacity, with over 270 gigawatts added in the first half [26] Company Strategy and Development Direction - The company is focused on investing in foundational growth in its core Hong Kong regulated business while targeting opportunities in fast-growing energy transition markets [24] - The strategy includes a GBP 52.9 billion five-year development plan to deliver reliable power and advance decarbonization efforts [25] - The company aims to maintain discipline in investment decisions, ensuring projects meet return thresholds [47] Management's Comments on Operating Environment and Future Outlook - Management acknowledged specific market headwinds in the Mainland and Australia affecting performance but emphasized strong fundamentals [5] - The company is closely monitoring the introduction of Policy Document 136 and will evaluate its renewable portfolio to maximize value [15] - Management expects to continue improving margins in Australia through cost optimization and recontracting efforts [44] Other Important Information - Free cash flow generation was CHF 7.1 billion, down CHF 0.9 billion compared to the first half of 2024 [21] - The company has a strong liquidity position of close to CHF 30 billion despite an increase in net debt [22] - The company is actively exploring renewable energy opportunities in Taiwan and Vietnam while remaining disciplined in capital commitments [33] Q&A Session Summary Question: Outlook for Australian business margins - Management expects improved margins in the second half due to government price increases and recontracting opportunities [44] Question: Expected returns for new renewable projects in China - Management maintains a target of achieving 6 gigawatts by 2029 but will be selective in project identification due to market uncertainties [46] Question: Changes in overseas business strategy - Management noted weaker performance in overseas markets but emphasized ongoing investments in reliability and flexibility of generation assets [48] Question: Funding for renewable projects in Australia - Management confirmed that Energy Australia has strong cash flow generation and plans to fund small CapEx through its balance sheet while larger projects will be project financed [61] Question: Dividend policy and potential increases - Management reiterated a commitment to a reliable dividend policy, with any increases dependent on sustainable growth in underlying business performance [68]

Financial Data and Key Metrics Changes - Group operating earnings before fair value movements decreased by 8% year on year to HKD 5.2 billion [7] - Total earnings decreased by 5% to HKD 5.6 billion [7] - EBITDAF was down by 5% to HKD 12.4 billion compared to the same period last year [9] - Capital investments of over CHF 8 billion were lower than last year [10] - Total dividends per share declared for the first half of 2025 remained at $1.26, the same as last year [10] Business Line Data and Key Metrics Changes - Hong Kong business maintained solid core earnings with capital expenditures standing at HKD 4.5 billion, primarily for growth initiatives [13] - Mainland operations saw a 15% reduction in earnings due to market challenges [14] - Energy Australia faced intense retail competition leading to margin compression and a decrease in customer accounts, resulting in operating earnings of HKD 167 million [17] Market Data and Key Metrics Changes - Competitive market conditions in Australia resulted in a reduction in customer numbers [7] - Lower tariffs in the Mainland impacted operating earnings from the nuclear portfolio [15] - The Mainland's renewable earnings were lower due to reduced wind resources and higher curtailment [15] Company Strategy and Development Direction - The company is focused on investing in foundational growth in its core Hong Kong regulated business while targeting opportunities in fast-growing energy transition markets [26] - The five-year development plan of GBP 52.9 billion aims to deliver safe and reliable power while advancing decarbonization efforts [28] - The company is pursuing a disciplined capital allocation strategy based on risk-return principles [30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged specific market headwinds in the Mainland and Australia but emphasized the strength of the core business [5] - The company is committed to operational excellence and building energy infrastructure to drive decarbonization [6] - Management expressed confidence in improving margins in Australia through recontracting and cost optimization initiatives [46] Other Important Information - The company has a strong balance sheet and a recently affirmed A stable rating by S&P [6] - Free cash flow generation was CHF 7.1 billion, down CHF 0.9 billion compared to the first half of 2024 [23] - The company is actively evaluating renewable energy opportunities in Taiwan and Vietnam [35] Q&A Session All Questions and Answers Question: Regarding the Australian business and forward prices - Management indicated that while forward prices may trend downward, there are opportunities for improved margins in the second half due to government price increases and recontracting efforts [46] Question: About the China business and operational renewable capacity targets - Management maintained the target of raising operational renewable capacity in China to 6 gigawatts by 2029 but emphasized a selective approach due to market uncertainties [49] Question: Overall overseas business strategy and performance - Management acknowledged weaker performance in the first half due to headwinds in China and Australia but highlighted strong generation business performance [50] Question: On Energy Australia's funding and CapEx - Management confirmed that Energy Australia has strong cash flow generation and plans to fund small CapEx through its balance sheet while larger projects will be project financed [63] Question: About the clean energy transmission system and CapEx for imports - Management stated that the clean energy transmission system is nearing completion, but significant CapEx will be required for future imports to meet energy targets [94] Question: On dividend policy and potential increases - Management reiterated a commitment to a reliable and consistent dividend policy, with any increases dependent on sustainable growth in the underlying business [96]

Core Viewpoint - Morgan Stanley reports that CLP Holdings (00002) has a mid-year net profit of HKD 5.6 billion, a 6% decrease from HKD 6 billion in the same period last year [1] Financial Performance - Excluding a fair value loss of HKD 35 million from EnergyAustralia, the operating profit stands at HKD 5.2 billion, reflecting an 8% year-on-year decline [1] - The interim dividend per share for CLP remains unchanged at HKD 1.26 [1] Regional Performance - Operating profit from CLP's Hong Kong business increased by 6% to HKD 4.6 billion year-on-year [1] - Operating profit from mainland China decreased by 12% to HKD 870 million, attributed to low electricity prices in Yangjiang and weaker wind resources leading to reduced renewable energy generation [1] Australian Operations - Operating profit from the Australian business fell by 73% to HKD 167 million, due to intense retail competition impacting profit margins, the end of coal compensation in 2024 leading to increased coal costs, and reduced generation from the Mount Piper and Yallourn coal-fired power plants due to outages [1]

Core Viewpoint - Morgan Stanley reported that CLP Holdings (00002) experienced a mid-year net profit of HKD 5.6 billion, a 6% decrease from HKD 6 billion in the same period last year [1] Financial Performance - Operating profit, excluding a fair value loss of HKD 35 million from EnergyAustralia, was HKD 5.2 billion, down 8% year-on-year [1] - The interim dividend per share for CLP remained stable at HKD 1.26, unchanged from the previous year [1] Regional Performance - CLP's operating profit in Hong Kong increased by 6% year-on-year to HKD 4.6 billion, while operating profit in mainland China decreased by 12% to HKD 870 million [1] - The decline in mainland China was attributed to lower electricity prices in Yangjiang and weaker wind resources leading to reduced renewable energy generation [1] Australia Operations - Operating profit from the Australian business fell by 73% to HKD 167 million [1] - Contributing factors included intense retail competition affecting profit margins, the end of coal compensation in 2024 leading to increased coal costs, and reduced generation due to outages at Mount Piper and Yallourn coal-fired power plants in New South Wales [1]

Group 1: Company Performance and Strategy - The CEO of CLP Holdings stated that the data center sector in Hong Kong is experiencing strong growth, aligning with the city's goal to become a technology hub, with 18 data centers expected to be operational from 2024 to 2028, of which 6 are already in operation [1] - The electricity demand from data centers increased by 6.7% in the first half of the year, accounting for over 6% of CLP's total electricity sales, indicating robust demand growth [1] - In mainland China, while electricity demand continues to grow, the pace has slowed compared to expectations, with sales growth estimated at 5% to 6% for the year [1] Group 2: Regulatory and Market Environment - A new electricity pricing mechanism in mainland China requires renewable energy projects to participate in market trading, which may have a limited short-term impact on CLP's existing assets but introduces uncertainty for future investment decisions [2] - The company plans to be more selective in investment decisions, focusing on regions with higher growth demand and electricity prices, while considering the potential for lower power supply constraints [2] Group 3: Market Conditions and Future Outlook - Global geopolitical uncertainties are impacting commodity prices, particularly international fuel prices, which have decreased from 46.3 HK cents to 43 HK cents since the beginning of the year [3] - CLP will closely monitor fuel price trends and adjust pricing mechanisms accordingly [3]

Financial Performance - Operating earnings before fair value movements decreased by 8% to HK$5,227 million compared to HK$5,683 million in 1H2024[20, 85] - Total earnings decreased by 5% to HK$5,624 million compared to HK$5,951 million in 1H2024[20, 85] - Interim dividend remained stable at HK$0.63 per share, with a total 1H2025 dividend of HK$1.26 per share and a dividend yield of 48%[20] - Capital investment reached HK$8,213 million, a 21% increase from HK$6,809 million in 1H2024[25] Business Unit Performance - Hong Kong energy and related activities saw a 6% increase in operating earnings, reaching HK$4,568 million[27] - Chinese Mainland operating earnings decreased by 12% to HK$870 million due to lower market prices and curtailments[27] - EnergyAustralia experienced a significant 73% decrease in operating earnings to HK$167 million due to retail margin compression and the end of coal price caps[27] - Apraava Energy's operating earnings decreased by 61% to HK$79 million, impacted by one-offs from the KMTL transmission asset[27] Financial Structure and Liquidity - Net debt increased to HK$624 billion, resulting in a net debt to total capital ratio of 350%[53] - The company maintains a strong liquidity position with HK$266 billion in undrawn bank facilities and HK$30 billion in bank balances[53] Strategic Growth Plan - CLP aims to achieve approximately 6GW of renewable energy capacity in the Chinese Mainland by 2029[70] - Apraava Energy targets approximately 8GW of non-carbon investments by 2029[72] - EnergyAustralia aims for approximately 16GW of flexible capacity by 2030[75] Hong Kong Market - Local electricity sales decreased by 17% due to high base effect from temperature in 1H24[31] - The company is supporting customers and communities with over HK$200 million from the CLP Community Energy Saving Fund[31]

Core Insights - The company reported a slight decline in total revenue for the first half of 2025, amounting to HKD 42.854 billion, a decrease of 2.8% year-on-year, primarily due to a drop in customer business revenue from EnergyAustralia [2] - Total profit for the period was HKD 5.624 billion, reflecting a year-on-year decline of 5.5% [2] - Operating profit before fair value changes was HKD 5.227 billion, down 8.0% year-on-year, mainly attributed to reduced contributions from businesses outside Hong Kong, particularly from EnergyAustralia and nuclear and renewable energy assets in mainland China, although strong performance in Hong Kong partially offset the decline [2]