LCQ9: Equity interest in Castle Peak Power Company Limited

     Following is a question by the Hon Li Wah-ming and a written reply by the Secretary for the Environment, Mr Edward Yau, in the Legislative Council meeting today (April 18):


     It has been reported that ExxonMobil Energy Limited intends to sell the 60% equity interest in Castle Peak Power Company Limited (CAPCO) it holds, whilst CLP Power Holdings Limited (CLP) and China Southern Power Grid Company Limited (CSG), which is a state-owned enterprise, plan to jointly acquire the aforesaid equity interest.  Members of the public are concerned about the acquisition's impact on people's livelihood and politics, and they also consider that in anticipation of the tariff increase of CLP in the coming year, it is necessary for the Government to assess the impact of the outcome of the acquisition on the regulation and improvement of the electricity market by the Government.  In this connection, will the Government inform this Council:

(a) whether it has assessed the impact of the successful joint acquisition of CAPCO's equity interest by CLP and CSG on the current and future tariffs in Hong Kong and the possibility of opening up the electricity market; if it has, of the findings; if not, whether and when such assessment will be made;

(b) whether it has any control on the sale of assets and equity interest by power plants at present; and whether it has any control over power companies in expanding the assets in their accounts by means of acquisition of equity interest;

(c) whether it knows if CLP will revise the amount of its assets upon successful acquisition of CAPCO's equity interest in order to adjust tariff;

(d) whether the SAR Government is involved in the aforesaid proposed acquisition of CAPCO's equity interest; whether it has obtained any relevant information beforehand; and

(e) given that CSG is a state-owned enterprise, whether the Government has assessed, upon the successful acquisition of CAPCO's equity interest by CSG, the changes to the previous agreements and development principles laid down by the Government with power companies, if the Government will formulate afresh the direction for the development of the electricity market, and if Hong Kong's electricity market will be subject to control by the mainland counterparts?


(a) and (e) Castle Peak Power Company Limited (CAPCO) and its shareholders (i.e. CLP Power Hong Kong Limited and ExxonMobil Energy Limited) are parties to the Scheme of Control Agreement (SCA) signed with the Government for electricity supply to certain parts of Hong Kong.  The SCA has clearly set out the rights and obligations of all signing parties, which will remain intact irrespective of the change to the shareholding of any signing party.  The Government will ensure that any change to the shareholding of CAPCO will not affect the operation of the SCA (including the tariff review mechanism) and CAPCO's electricity supply service to the public.

     The Government will continue to perform its gate-keeping duties with a view to ensuring the supply of safe and reliable electricity at reasonable prices while minimising the environmental impact in the production and use of energy.  In considering the future development of electricity market and its regulatory framework, the Government will adhere to the above policy objectives and discuss with the power companies before 2016 in accordance with the SCA.

(b) and (c) As far as we understand, discussion on the change to the shareholding of CAPCO is underway, and there is yet any agreement.  When details of any deal are available, we will determine the necessary arrangements to be put in place under the SCA in the light of specific circumstances.

     In accordance with Schedule 1 to the SCA, "Fixed Assets" refers to the Electricity-Related investments by CLP Power Hong Kong Limited and CAPCO in land, building, plant, equipment, and capitalised refurbishment and improvement works.  In general, purchase of shares does not fall within the definition of "Fixed Asset" under the SCA.  Thus, any change to the shareholding of CAPCO will not affect the value of Fixed Assets in the Scheme of Control Accounts and should not carry any tariff implication.

(d) The Government, as regulator of the electricity market, has been keeping a close watch on the above discussion on change to shareholding.

Ends/Wednesday, April 18, 2012
Issued at HKT 17:26