中電控股有限公司 CLP HOLDINGS LIMITED...A letter from the Chairman of CLP Holdings Limited...

10 December 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in CLP Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or the transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

中電控股有限公司CLP HOLDINGS LIMITED

(incorporated in Hong Kong with limited liability)(Stock Code: 00002)

Major TransactionAcquisition of further 30% Interest inCastle Peak Power Company Limited

and remaining 51% Interest inHong Kong Pumped Storage Development Company, Limited

Financial advisers to the Company

A letter from the Chairman of CLP Holdings Limited (the “Company”) is set out on pages 4 to 15 of this circular.

A notice convening the Extraordinary General Meeting of Shareholders of the Company to be held at Lower Level I, Kowloon Shangri-La Hong Kong, 64 Mody Road, Kowloon, Hong Kong on Wednesday, 22 January 2014 at 2:30 p.m. (the “EGM”) is set out on pages 92 to 97 of this circular. A proxy form for use at the EGM is enclosed. Whether or not you propose to attend the EGM, you are requested to complete the enclosed proxy form in accordance with the instructions printed thereon and deposit the same at the Company’s Registrars, Computershare Hong Kong Investor Services Limited, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time for holding the EGM or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or any adjournment thereof, should you so wish.

CONTENTS

Page

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Letter from the Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

The CAPCO Acquisition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

The PSDC Acquisition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Source of funding for the Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Financial information on CAPCO and PSDC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Shareholding structure of CAPCO and PSDC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Reasons for, and benefits of, the Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Information on the CLP Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Financial and other effects of the Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Financial and trading prospects of the Enlarged CLP Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Listing Rules implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Business dealings between the CLP Group and the CSG Group . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Appendix I – Financial Information of the CLP Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Appendix II – Accountant’s Report on CAPCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Appendix III – Management Discussion and Analysis on CAPCO . . . . . . . . . . . . . . . . . . . . . . . . . 50

Appendix IV – Accountant’s Report on PSDC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Appendix V – Management Discussion and Analysis on PSDC . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Appendix VI – Unaudited Pro Forma Financial Information of the Enlarged CLP Group . . . . . . 78

Appendix VII – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

1

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the meanings

respectively set out below:–

“A$” Australian dollars, the lawful currency of Australia

“Acquisitions” collectively, the CAPCO Acquisition and the PSDC Acquisition

“Acquisition Agreements” collectively, the CAPCO Acquisition Agreement and the PSDC

Acquisition Agreement

“Board” the board of Directors

“CAPCO” Castle Peak Power Company Limited, a company incorporated in Hong

Kong with limited liability which is currently owned as to 40% and 60%

by CLP Power and EMEL, respectively

“CAPCO Acquisition” pursuant to the CAPCO Acquisition Agreement, the acquisition by each

of CLP Power and CSG HK of half of Exxon Mobil Corporation’s 60%

equity interest in, and associated shareholder’s advances to, CAPCO,

currently held by EMEL

“CAPCO Acquisition Agreement” the sale and purchase agreement dated 19 November 2013 entered into

between EMEL, EMIHI, CLP Power, CSG HK and CSG in respect of the

CAPCO Acquisition

“Chairman” the Chairman of the Board

“CLP Group” or “Group” CLP Holdings and its subsidiaries

“CLP Holdings” or “Company” CLP Holdings Limited, a company incorporated in Hong Kong with

limited liability and whose Shares are listed on the Main Board of the

Stock Exchange (stock code: 00002)

“CLP Power” CLP Power Hong Kong Limited, a company incorporated in Hong Kong

with limited liability which is a direct wholly-owned subsidiary of CLP

Holdings

“Completion” the simultaneous completion of the CAPCO Acquisition and the PSDC

Acquisition

“CSG” China Southern Power Grid Co., Limited, a company established in the

PRC with limited liability and a state-owned enterprise

“CSG Group” CSG and its subsidiaries

“CSG HK” China Southern Power Grid International (HK) Co., Limited, a company

incorporated in Hong Kong with limited liability and a wholly-owned

subsidiary of CSG

2

DEFINITIONS

“Directors” the directors of the Company

“EGM” the extraordinary general meeting of the Company to be convened

to consider and, if thought fit, approve, amongst other things, the

Acquisitions, the Acquisition Agreements and the transactions

contemplated thereunder

“EMEL” ExxonMobil Energy Limited, a company incorporated in Hong Kong

with limited liability and an indirect wholly-owned subsidiary of EMIHI

“EMIHI” ExxonMobil International Holdings Inc, a company incorporated in the

State of Delaware, United States of America with limited liability and a

direct wholly-owned subsidiary of Exxon Mobil Corporation

“EnergyAustralia” a group of companies wholly-owned by CLP Holdings engaging in

integrated energy business in Australia

“Enlarged Group” or the Group as enlarged by the Acquisitions

“Enlarged CLP Group”

“Exxon Mobil Corporation” Exxon Mobil Corporation, a company incorporated in the State of

New Jersey, United States of America with limited liability and whose

common stocks are traded on the New York Stock Exchange

“HKFRS” the Hong Kong Financial Reporting Standards issued by the Hong Kong

Institute of Certified Public Accountants

“HK$” Hong Kong dollars, the lawful currency of Hong Kong

“HK$M” Hong Kong dollars, in millions

“Hong Kong Government” the Government of Hong Kong, Special Administrative Region, PRC

“HSBC” The Hongkong and Shanghai Banking Corporation Limited

“Latest Practicable Date” 4 December 2013, being the latest practicable date prior to the printing

of this circular for ascertaining certain information herein

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

“MW” Megawatt (one million watts)

“PRC” People’s Republic of China

“PSDC” Hong Kong Pumped Storage Development Company, Limited, a

company incorporated in Hong Kong with limited liability and which

is currently owned as to 49% and 51% by CLP Power and EMEL,

respectively

3

DEFINITIONS

“PSDC Acquisition” pursuant to the PSDC Acquisition Agreement, the acquisition by CLP

Power of all of Exxon Mobil Corporation’s 51% equity interest in, and

associated shareholder’s advances to, PSDC, currently held by EMEL

“PSDC Acquisition Agreement” the sale and purchase agreement dated 19 November 2013 entered

into between EMEL, EMIHI and CLP Power in respect of the PSDC

Acquisition

“Rs” Indian rupee, the lawful currency of India

“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong

Kong)

“Shareholders” holders of Shares

“Shares” ordinary shares of HK$5.00 each in the capital of the Company

“SoC” the Scheme of Control Agreement executed on 7 January 2008 by the

Hong Kong Government, CLP Power, CAPCO and EMEL

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“%” per cent

“2013 Interim Report” the interim report of the Company for the six months ended 30 June 2013

4

LETTER FROM THE CHAIRMAN

中電控股有限公司CLP Holdings Limited(incorporated in Hong Kong with limited liability)(stock code: 00002)

Non-executive Directors: Registered Office:The Hon. Sir Michael Kadoorie 8 Laguna Verde Avenue

Mr. William Mocatta Hung Hom, Kowloon

Mr. R. J. McAulay Hong Kong

Mr. J. A. H. Leigh

Mr. I. D. Boyce

Dr. Y. B. Lee

Mr. Paul A. Theys (Mr. David Moore as Mr. Theys’ alternate)

Independent Non-executive Directors:Mr. V. F. Moore

Professor Judy Tsui

Sir Rod Eddington

Mr. Nicholas C. Allen

Mr. Vincent Cheng

Mrs. Fanny Law

Ms. Irene Lee

Dr. Rajiv Lall

Executive Directors:Mr. Richard Lancaster

Mr. Andrew Brandler 10 December 2013

To the Shareholders

Dear Sir or Madam,

Major TransactionAcquisition of further 30% Interest inCastle Peak Power Company Limited

and remaining 51% Interest inHong Kong Pumped Storage Development Company, Limited

1. INTRODUCTION

On 19 November 2013 (before trading hours in Hong Kong), CLP Power (a wholly-owned subsidiary

of CLP Holdings) entered into: (a) the CAPCO Acquisition Agreement with EMEL and EMIHI (being

indirect and direct wholly-owned subsidiaries of Exxon Mobil Corporation, respectively), CSG HK and

CSG, whereby each of CLP Power and CSG HK will acquire half of Exxon Mobil Corporation’s 60%

equity interest in, and associated shareholder’s advances to, CAPCO currently held by EMEL; and (b) the

5


PSDC Acquisition Agreement with EMEL and EMIHI, whereby CLP Power agreed to acquire all of Exxon

Mobil Corporation’s 51% equity interest in, and associated shareholder’s advances to, PSDC currently

held by EMEL. The Acquisitions were announced by the Company on 19 November 2013.

As certain of the applicable percentage ratios for the Acquisitions are more than 25% but less than 100%

as calculated in accordance with Rule 14.07 of the Listing Rules, the Acquisitions constitute a major

transaction for CLP Holdings under Chapter 14 of the Listing Rules, and are therefore subject to the

notification, announcement, circular and shareholders’ approval requirements under Chapter 14 of the

Listing Rules.

The purpose of this circular is to provide you with, among other things, (i) further details of the

Acquisitions; (ii) financial information on the CLP Group; (iii) the accountant’s reports on CAPCO

and PSDC; (iv) the unaudited pro forma financial information of the Enlarged CLP Group; (v) a

recommendation from the Board; (vi) a notice of the EGM; and (vii) other information on CAPCO and

PSDC as required to be disclosed under the Listing Rules.

2. THE CAPCO ACQUISITION AGREEMENT

Date

19 November 2013 (before trading hours in Hong Kong)

Parties

(1) CLP Power, as a purchaser

(2) CSG HK, as the other purchaser

(3) CSG, to be jointly and severally responsible with CSG HK to perform their obligations under the

CAPCO Acquisition Agreement

(4) EMEL, as vendor

(5) EMIHI, as EMEL’s warrantor

CSG is a company established in the PRC with limited liability and is a state-owned enterprise principally

engaged in the investment, construction and operation of power networks in Guangdong, Guangxi,

Yunnan, Guizhou and Hainan provinces and regions in the PRC.

CSG HK is a company incorporated in Hong Kong with limited liability and is a direct wholly-owned

subsidiary of CSG.

Exxon Mobil Corporation is the world’s largest publicly traded oil and gas company which explores for,

produces and distributes crude oil, natural gas and petroleum products. Common stocks in Exxon Mobil

Corporation are traded on the New York Stock Exchange. Exxon Mobil Corporation (through its indirect

wholly-owned subsidiary EMEL) currently owns 60% and 51% equity interests in CAPCO and PSDC

respectively.

6


EMIHI is a company incorporated in the State of Delaware, United States of America with limited liability

and a direct wholly-owned subsidiary of Exxon Mobil Corporation. EMEL is a company incorporated in

Hong Kong with limited liability and an indirect wholly-owned subsidiary of EMIHI.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, (a)

EMEL, EMIHI and their ultimate beneficial owner Exxon Mobil Corporation, and (b) CSG HK and its

ultimate beneficial owner CSG, are third parties independent of CLP Holdings and its connected persons

(as defined in the Listing Rules).

Assets to be acquired

CAPCO is incorporated in Hong Kong with limited liability and is currently owned as to 40% and 60% by

CLP Power and EMEL respectively. CAPCO owns three power stations in Hong Kong with a total power

generation capacity of 6,908MW, namely, (a) Castle Peak Power Station (coal-fired with gas and oil as

back-up fuel, with a total capacity of 4,108MW), (b) Black Point Power Station (natural gas-fired, with

a total capacity of 2,500MW) and (c) Penny’s Bay Power Station (diesel-fired, with a total capacity of

300MW).

Pursuant to the CAPCO Acquisition Agreement, CLP Power and CSG HK will each acquire half of

EMEL’s 60% equity interest in, and associated shareholder’s advances to, CAPCO. As at 30 June 2013,

the total shareholder’s advances made by EMEL to CAPCO were HK$13.6 billion and Shareholders can

find this figure in Note 17 to the Accountant’s Report on CAPCO set out in Appendix II to this circular.

After Completion, CAPCO will be 70% and 30% owned by CLP Power and CSG HK respectively and its

financial results and position will be consolidated into the financial statements of CLP Group with a non-

controlling interest of 30% held by CSG HK.

Consideration

Subject to the consideration adjustment mechanism set out in the CAPCO Acquisition Agreement, the

unadjusted consideration payable by CLP Power in respect of the CAPCO Acquisition is HK$12 billion,

which will be payable to EMEL fully in cash at Completion. The consideration adjustment mechanism is

principally a dollar-for-dollar adjustment for dividends or movements in shareholder’s advances between

EMEL and CAPCO from 1 July 2013 onwards up to Completion.

Basis of consideration

The consideration for the CAPCO Acquisition was arrived at after arm’s length negotiations between the

parties to the CAPCO Acquisition Agreement and was determined after taking into account CLP Holdings’

internal valuation of CAPCO using a range of valuation metrics and parameters that are customary for

transactions of this nature, and which reflect expectations of the future prospects of CAPCO’s business.

Conditions precedent

Completion of the CAPCO Acquisition is conditional upon:

(a) Shareholders approving the CAPCO Acquisition by way of an ordinary resolution at a general

meeting; and

7


(b) CSG obtaining approvals from regulatory bodies in the PRC including the National Development

and Reform Commission, the State-owned Assets Supervision and Administration Commission of

the State Council, the Ministry of Commerce, and Guangdong Branch of the State Administration of

Foreign Exchange.

Under the terms of the CAPCO Acquisition Agreement, CLP Power and CSG HK may jointly waive any or

all the conditions set out in paragraphs (a) and (b) above by written notice to EMEL. However, to ensure

compliance with the Listing Rules regarding the shareholders’ approval requirements for the CAPCO

Acquisition, CLP Power will not consent to the waiver of the condition in paragraph (a) above.

If any of the conditions above is not fulfilled within 7 months after the date of the CAPCO Acquisition

Agreement, then unless the relevant parties otherwise agree, the CAPCO Acquisition Agreement shall

lapse and become null and void and the parties to the CAPCO Acquisition Agreement shall be released

from all obligations thereunder, save for liabilities for any antecedent breaches of the CAPCO Acquisition

Agreement.

Completion

Completion of the CAPCO Acquisition shall take place 3 months after satisfaction of the conditions

precedent set out in the CAPCO Acquisition Agreement or such later date as the parties to the CAPCO

Acquisition Agreement may agree. The purchasers, jointly, have the right to accelerate Completion within

such 3 month period.

Completion of the CAPCO Acquisition is inter-conditional on the completion of the PSDC Acquisition,

such that completion of the CAPCO Acquisition can only take place simultaneously with completion of

the PSDC Acquisition.

EMIHI

EMIHI, as a party to the CAPCO Acquisition Agreement, will be responsible with EMEL for certain

obligations and responsibilities of EMEL under the CAPCO Acquisition Agreement.

CSG

CSG and CSG HK, as parties to the CAPCO Acquisition Agreement, will be jointly and severally

responsible to perform all their obligations under the CAPCO Acquisition Agreement.

3. THE PSDC ACQUISITION AGREEMENT

Date

19 November 2013 (before trading hours in Hong Kong)

Parties

(1) CLP Power, as purchaser

(2) EMEL, as vendor

(3) EMIHI, as EMEL’s warrantor

8


Assets to be acquired

PSDC is a company incorporated in Hong Kong with limited liability and is currently owned as to 49%

and 51% by CLP Power and EMEL respectively. PSDC has a contractual right to use, until 2034, 600MW,

being half of the 1,200MW pumped storage capacity of Phase 1 of the Guangzhou Pumped Storage Power

Station which is situated in Guangdong Province, the PRC.

Pursuant to the PSDC Acquisition Agreement, CLP Power will acquire all of EMEL’s 51% equity interest

in, and associated shareholder’s advances to, PSDC. As at 30 June 2013, the total shareholder’s advances

made by EMEL to PSDC were HK$67.4 million and Shareholders can find this figure in Note 16 to the

Accountant’s Report on PSDC set out in Appendix IV to this circular. After Completion, PSDC will

become a wholly-owned subsidiary of CLP Power and its financial results and position will be fully

consolidated into the financial statements of CLP Group.

Consideration

Subject to the consideration adjustment mechanism set out in the PSDC Acquisition Agreement, the

unadjusted consideration payable by CLP Power in respect of the PSDC Acquisition is HK$2 billion,

which will be payable to EMEL fully in cash at Completion. The consideration adjustment mechanism is

principally a dollar-for-dollar adjustment for dividends or movements in shareholder’s advances between

EMEL and PSDC from 1 July 2013 onwards up to Completion.

Basis of consideration

The consideration for the PSDC Acquisition was arrived at after arm’s length negotiations between the

parties to the PSDC Acquisition Agreement and was determined after taking into account CLP Holdings’

internal valuation of PSDC using a range of valuation metrics and parameters that are customary for

transactions of this nature, and which reflect expectations of the future prospects of PSDC’s business.

Condition precedent

Completion of the PSDC Acquisition is conditional upon the Shareholders approving the PSDC

Acquisition by way of an ordinary resolution at a general meeting.

Under the terms of the PSDC Acquisition Agreement, CLP Power is entitled to waive the condition set

out above by written notice to EMEL. However, to ensure compliance with the Listing Rules regarding

shareholders’ approval requirements for the PSDC Acquisition, CLP Power will not waive the condition

above.

If the condition above is not fulfilled within 7 months after the date of the PSDC Acquisition Agreement,

then unless the relevant parties otherwise agree, the PSDC Acquisition Agreement shall lapse and become

null and void and the parties to the PSDC Acquisition Agreement shall be released from all obligations

thereunder, save for liabilities for any antecedent breaches of the PSDC Acquisition Agreement.

Completion

Completion of the PSDC Acquisition shall take place 3 months after satisfaction of the condition

precedent set out in the PSDC Acquisition Agreement or such later date as the parties to the PSDC

Acquisition Agreement may agree. The purchaser has the right to accelerate Completion within such 3

month period.

9


Completion of the PSDC Acquisition is inter-conditional on the completion of the CAPCO Acquisition,

such that completion of the PSDC Acquisition can only take place simultaneously with completion of the

CAPCO Acquisition.

EMIHI

EMIHI, as a party to the PSDC Acquisition Agreement, will be responsible with EMEL for certain

obligations and responsibilities of EMEL under the PSDC Acquisition Agreement.

4. SOURCE OF FUNDING FOR THE ACQUISITIONS

The consideration for the Acquisitions is to be wholly satisfied by the CLP Group in cash. In addition

to internal available resources and existing available banking facilities, the CLP Group has secured

from HSBC an irrevocable written commitment to enter into loan facility agreements in agreed form for

HK$10 billion to fund the Acquisitions. The HK$10 billion facilities will be available for draw down at

Completion and comprise a HK$5 billion facility with a maturity of 1 year from Completion and a HK$5

billion facility with a maturity of 2 years from Completion.

The Company will continue to assess its long term financing needs generally, as it does from time to time.

These options may include, but are not limited to, loans, bonds, hybrid securities and equity. The timing

and nature of any re-financing will be driven by several factors including prevailing market conditions, the

maintenance of a strong balance sheet and the interests of shareholders.

5. FINANCIAL INFORMATION ON CAPCO AND PSDC

CAPCO

Set out below is a summary of the audited net profits (before and after tax) of CAPCO prepared in

accordance with HKFRS for the years ended 31 December 2011 and 2012, and the audited net assets of

CAPCO as at 31 December 2011 and 2012:

2012 2011 HK$M HK$M

Net profits before tax 3,786 3,688

Net profits after tax 3,132 3,049

Net assets 540 514

PSDC

Set out below is a summary of the audited net profits (before and after tax) of PSDC prepared in

accordance with HKFRS for the years ended 31 December 2011 and 2012, and the audited net assets of

PSDC as at 31 December 2011 and 2012:

2012 2011 HK$M HK$M

Net profits before tax 218 207

Net profits after tax 163 155

Net assets 26 26

10


6. SHAREHOLDING STRUCTURE OF CAPCO AND PSDC

The following charts show the shareholding structure of CAPCO and PSDC (i) as at the Latest Practicable

Date and (ii) immediately after Completion.

(i) Shareholding structure of CAPCO and PSDC as at the Latest Practicable Date:

CLP Holdings

CLP Power EMEL

CAPCO

PSDC

40%

100%

49%

60%

51%

(ii) Shareholding structure of CAPCO and PSDC immediately after Completion:

CLP Holdings

CLP Power CSG HK

CAPCO

PSDC

70%

100%

30%

100%

7. REASONS FOR, AND BENEFITS OF, THE ACQUISITIONS

This transaction presents an opportunity for CLP Holdings, through its wholly-owned subsidiary, CLP

Power, to become a majority shareholder in CAPCO and the sole shareholder in PSDC and thus be in a

position to manage better the coordination of its Hong Kong generation business with its transmission and

distribution business. In addition, CLP Holdings has developed a number of commercial arrangements

with CSG over the years and it welcomes the opportunity to partner with CSG HK in CAPCO and

develop further what will become a strategic relationship. Finally, CLP Power has been providing reliable

electricity to fuel Hong Kong’s growth for more than 100 years and the Acquisitions reaffirm CLP

Holdings’ commitment to Hong Kong.

11


The Directors consider that the terms of the Acquisitions are fair and reasonable and are in the interests of

the Company and the Shareholders as a whole.

8. INFORMATION ON THE CLP GROUP

CLP Holdings is the holding company of the CLP Group. The CLP Group owns and operates a vertically

integrated electricity generation, transmission and distribution business in Hong Kong (through CLP

Power), and invests in the power sector in Australia, the Chinese mainland, India, Southeast Asia and

Taiwan.

CLP Power is a direct wholly-owned subsidiary of CLP Holdings and is the largest electricity utility

in Hong Kong serving the business and domestic community in Kowloon, the New Territories, Lantau

and most of the outlying islands. CLP Power supplies electricity to approximately 2.4 million customer

accounts in its supply area.

9. FINANCIAL AND OTHER EFFECTS OF THE ACQUISITIONS

Upon Completion, CLP Power will appoint a majority of directors to the board of directors of CAPCO and

all of the directors to the board of directors of PSDC. In addition, CLP Power and CSG HK have agreed to

enter into a joint venture agreement to govern their shareholding relationship in CAPCO after Completion.

The joint venture agreement relating to CAPCO will not contain any provisions which oblige either CLP

Power or CSG HK to make any capital commitment (whether by way of equity, loan or otherwise) or to

provide any guarantee or indemnity in support of CAPCO.

Upon Completion, CLP Power and CAPCO will also enter into:

(a) a Power Purchase Agreement whereby CLP Power will agree to purchase all of CAPCO’s

commercially available generating capacity at a price sufficient to cover all of CAPCO’s operating

expenses under the SoC, including fuel cost, depreciation, interest and taxes, as well as CAPCO’s

share of the return permitted under the SoC; and

(b) an Operating and Maintenance Agreement whereby CLP Power will be responsible to CAPCO for

the efficient operation and maintenance of CAPCO’s facilities, in return for CAPCO reimbursing

CLP Power for all costs incurred by CLP Power in performing the agreement.

These arrangements are broadly similar to the economic arrangements currently in place between CLP

Power and CAPCO which are described in the Company’s Annual Report for the year ended 31 December

2012.

As EMEL and EMIHI will be exiting CAPCO’s and PSDC’s businesses after many years of participation

and ownership, EMEL and EMIHI requested certain indemnities in respect of claims or liabilities which

might be asserted against them after Completion by reason of EMEL’s ownership in CAPCO and PSDC

prior to Completion. CLP Power has agreed to provide such indemnities in the relevant Acquisition

Agreements on a limited basis as to time period and quantum and restricted to events arising from the

operation of CAPCO’s or PSDC’s (as the case may be) business or assets after Completion or in respect of

any acts or omissions of CAPCO or PSDC (as the case may be) which occur after Completion.

12


Effect on assets and liabilities

As disclosed in the Company’s 2013 Interim Report, the unaudited consolidated total assets and

total liabilities of the CLP Group were approximately HK$214,763 million and HK$127,917 million

respectively as at 30 June 2013. Assuming that Completion had taken place on 30 June 2013 and the

consideration was funded from available banking facilities as at 30 June 2013 and the HK$10 billion

loan facilities which HSBC has committed to enter into, the Enlarged CLP Group’s total assets and total

liabilities according to the unaudited pro forma financial information of the Enlarged CLP Group as

contained in Appendix VI to this circular would be approximately HK$227,443 million and HK$134,872

million respectively as at 30 June 2013.

Effect on earnings

In light of the past financial performance of CAPCO and PSDC, the Directors are of the view that the

Acquisitions are expected to have a positive impact on the future earnings of the Enlarged CLP Group.

Goodwill recognition

According to the unaudited pro forma financial information of the Enlarged CLP Group as contained

in Appendix VI to this circular and assuming that Completion had taken place as at 30 June 2013, the

Enlarged CLP Group would have recorded goodwill of approximately HK$7,904 million with respect to

the Acquisitions. This represents the future economic benefits arising from assets acquired that are not

currently individually identified and separately recognised.

10. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED CLP GROUP

For the year ended 31 December 2012, the CLP Group’s operating earnings were HK$9,406 million,

a decline of 8.8% compared to the previous year. The CLP Group’s total earnings attributable to

Shareholders, which include non-recurring items, amounted to HK$8,312 million, a 10.5% decline

compared to the previous year. The CLP Group’s turnover was HK$104,861 million, a 14.4% increase

over the previous year. Earnings per Share for the year ended 31 December 2012 were HK$3.45.

The CLP Group’s business in Hong Kong is through the 100% ownership of CLP Power, which owns and

operates the electricity transmission and distribution systems in Kowloon, the New Territories, Lantau

and most of the outlying islands, and, prior to Completion, 40% ownership of CAPCO, which provides

approximately 68% of the power requirements of CLP Power’s customer base, the remainder coming

largely under long term contracts from the Guangdong Daya Bay Nuclear Power Station. For the year

ended 31 December 2012, the business in Hong Kong remained the largest source of profit contribution for

the CLP Group, amounting to operating earnings of HK$6,654 million, an increase of 5.0% as compared

to the previous year. This increase was due to a higher permitted return on higher net fixed assets, partially

offset by higher interest costs on increased borrowings for the financing of fixed assets. More recently,

relatively cool weather has reduced local sales of electricity by 1.2% in the first nine months of 2013 as

compared to the corresponding period in the previous year.

The CLP Group’s Australia business, through EnergyAustralia, operates a balanced portfolio of self-

owned generation capacity and capacity purchases, which includes gas, coal and wind and energy retail

business serving approximately 2.7 million customer accounts. Operating earnings for the year ended 31

December 2012 were HK$1,685 million, a decrease of 42.1% from the previous year. This decrease was

largely due to difficult operating conditions in a market which is exhibiting weak wholesale prices due

13


to declining demand growth and consequent over-capacity in generation and a fiercely competitive retail

sector. These factors have continued into 2013 where the wholesale market is continuing to see suppressed

prices resulting from an over-supply of generation and falling demand. Intense retail competition

continues, driven by potentially unsustainable price discounting. On 18 October 2013, Standard & Poor’s

announced that it had revised EnergyAustralia’s rating from BBB to BBB-.

The CLP Group’s portfolio in the Chinese mainland is spread across a number of coal-fired, wind,

solar, hydro and nuclear generating stations in which the CLP Group has various equity interests. The

contribution to operating earnings from this portfolio for the year ended 31 December 2012 was HK$1,411

million, a 22.2% increase over the previous year. In 2013, a variety of factors, such as declining coal

prices which are partially offset by reductions in on-grid tariffs for coal-fired power stations, improved

wind speeds but counterbalanced by severe grid restrictions in some areas and positive outlook on

hydropower stations as a result of heavy rainfalls in summer, are all likely to impact overall portfolio

profitability.

In India, where the CLP Group has investments in coal and gas-fired generating plants and renewable

energy, the contribution to operating earnings for the year ended 31 December 2012 was a loss of HK$182

million, as compared to earnings of HK$154 million in the previous year. This was primarily due to an

operating loss at the Jhajjar coal-fired power station resulting from severe difficulties in coal supply.

During 2013, agreement was reached to enable imported coal to be made available to this station and

its availability has been about 85% in the third quarter. The output from the Group’s Paguthan gas-fired

plant continues to be constrained due to an acute shortage of domestic gas supplies. The power purchase

agreement protects Paguthan’s revenue as the plant continues to declare availability. However, the plant’s

offtaker, Gujarat Urja Vikas Nigam Limited, has sought concessions on the fixed capacity charges in light

of low off-take and withheld certain payments under the power purchase agreement. Discussions over this

are ongoing.

The CLP Group also operates in Southeast Asia and Taiwan, where its principal activity is an interest

in Ho-Ping Power Company in Taiwan. The contribution to operating earnings for the year ended 31

December 2012 was HK$243 million, an increase of 182.6% over the previous year. In 2013, Ho-Ping

Power Company agreed to a tariff reduction under the power purchase agreement with Taiwan Power

Company.

The Company considers that it has a sound and diversified portfolio across different parts of the electricity

value chain and is optimistic about its future prospects.

The Company announced the Acquisitions on 19 November 2013 and Completion is expected to take place

mid 2014, although this could be later or earlier as described in the sub-sections entitled “Completion”

in each of the sections entitled “CAPCO Acquisition Agreement” and “PSDC Acquisition Agreement”.

Financial information of CAPCO and PSDC for each of the years ended 31 December 2010, 2011 and

2012 and each of the six months ended 30 June 2012 and 2013 are set out in Appendix II and IV to this

circular. Following Completion of the Acquisitions, this will enable the financial results and position of

CAPCO and PSDC to be consolidated on a line-by-line basis in the financial statements of the CLP Group.

It is also expected that the Company will be able to consolidate its regulated businesses in Hong Kong and

allow it to exercise a greater degree of control over its generation activities.

14


11. LISTING RULES IMPLICATIONS

As certain of the applicable percentage ratios for the Acquisitions are more than 25% but less than 100%

as calculated in accordance with Rule 14.07 of the Listing Rules, the Acquisitions constitute a major

transaction for CLP Holdings under Chapter 14 of the Listing Rules and are therefore subject to the

notification, announcement, circular and shareholders’ approval requirements under Chapter 14 of the

Listing Rules.

As at the Latest Practicable Date, no Shareholder has a material interest in the Acquisitions that is

materially different from other Shareholders and no Shareholder is required to abstain from voting on the

relevant ordinary resolution at the EGM in respect of the Acquisitions, the Acquisition Agreements and the

transactions contemplated thereunder.

12. BUSINESS DEALINGS BETWEEN THE CLP GROUP AND THE CSG GROUP

CSG HK will become a substantial shareholder of CAPCO upon Completion and thus together with the

other companies within the CSG Group will each be regarded as a connected person of CLP Holdings for

the purposes of the Listing Rules.

As mentioned above, members of the CLP Group have, in the ordinary course of business, entered into

a number of commercial arrangements with members of the CSG Group over the years. Currently, the

following arrangements are in place:

(a) an electricity supply arrangement whereby CLP Power supplies power to a member of the CSG

Group with operations in the Chinese mainland;

(b) a number of power purchase arrangements whereby members of the CLP Group with operations in

the Chinese mainland sell power to the relevant local power grid companies (which are members of

the CSG Group); and

(c) the arrangement referred to above under the heading “Assets to be acquired” in the section “The

PSDC Acquisition Agreement” whereby PSDC has a contractual right to use, until 2034, 600MW,

being half of the 1,200MW pumped storage capacity of Phase 1 of the Guangzhou Pumped Storage

Power Station which is owned by a member of the CSG Group and PSDC makes payment to the

CSG Group for this usage right.

These arrangements will become continuing connected transactions (as referred to in the Listing Rules)

for CLP Holdings to the extent that they, and any further arrangements with the CSG Group, are in

place at Completion. Further particulars of any such arrangements with the CSG Group will be provided

in a separate announcement to be published by CLP Holdings shortly after Completion. Thereafter,

CLP Holdings will comply with the applicable reporting, disclosure and, if applicable, independent

shareholders’ approval requirements under Chapter 14A of the Listing Rules upon any variation or

renewal of any such arrangements.

13. GENERAL

Completion of the Acquisitions is subject to fulfilment of the conditions set out in the Acquisition Agreements, and therefore may or may not proceed. Shareholders and investors should exercise caution in dealing with Shares.

15


14. EGM

A notice convening the EGM to be held at Lower Level I, Kowloon Shangri-La Hong Kong, 64 Mody

Road, Kowloon, Hong Kong on Wednesday, 22 January 2014 at 2:30 p.m. is set out on pages 92 to 97 of

this circular.

In addition to the ordinary resolution proposed to approve the Acquisitions, ordinary resolutions to

approve the election of Mr. Richard Lancaster and Dr. Rajiv Lall will be proposed at the EGM. Mr.

Richard Lancaster and Dr. Rajiv Lall were appointed as Directors with effect from 3 June 2013 and 13

August 2013, respectively. As these appointments were made by the Board, Mr. Richard Lancaster and

Dr. Rajiv Lall will, as required under the CLP Code on Corporate Governance, retire at the EGM, being

the first general meeting after their appointment but will be eligible, and offer themselves, for election

by the Shareholders. These proposed appointments are unrelated to the Acquisitions and have arisen

coincidentally upon the convening of the EGM. Further details and biographical information regarding Mr.

Richard Lancaster and Dr. Rajiv Lall are set out in Explanatory Notes 7 to 10 to the notice of the EGM.

A proxy form for use by the Shareholders at the EGM is enclosed with this circular. Whether or not you

propose to attend the EGM, you are requested to complete the enclosed proxy form in accordance with the

instructions printed thereon and deposit the same at the Company’s Registrars, Computershare Hong Kong

Investor Services Limited, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as

soon as possible and in any event not less than 48 hours before the time appointed for the holding of the

EGM or any adjournment thereof. Completion and return of the proxy form will not preclude you from

attending and voting in person at the EGM or any adjournment thereof, should you so wish.

15. RECOMMENDATION

The Directors consider that the terms of the Acquisitions are fair and reasonable and are in the interests

of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders

to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Acquisitions, the

Acquisition Agreements and the transactions contemplated thereunder.

Each of The Hon. Sir Michael Kadoorie and Mr. R. J. McAulay has, in his own personal capacity,

indicated his support for the Acquisitions and will, in respect of any Shares held personally, vote in favour

of the Acquisitions, and in respect of his interest in Shares representing not less than 1,000,000 Shares that

are held through trusts, request the relevant trustees to procure to vote in favour of the Acquisitions.

16. ADDITIONAL INFORMATION

Your attention is drawn to the additional information as set out in the appendices to this circular.

Yours faithfully,

For and on behalf of the Board

The Hon. Sir Michael KadoorieChairman

16

APPENDIX I FINANCIAL INFORMATION OF THE CLP GROUP

1. FINANCIAL INFORMATION OF THE GROUP FOR THE LAST THREE FINANCIAL YEARS

The audited consolidated financial statements of the Group for the year ended 31 December 2012 (the

“2012 Financial Statements”) are included on pages 148 to 220 in the annual report for the year of 2012 of

the Company (the “2012 Annual Report”) published on 8 March 2013.







Each of the 2012 Financial Statements, the 2011 Financial Statements and the 2010 Financial Statements

(but not any other part of the 2012 Annual Report, the 2011 Annual Report and the 2010 Annual Report,

respectively) are incorporated by reference into this circular and form part of this circular.

The 2012 Annual Report, the 2011 Annual Report and the 2010 Annual Report have been released on the

website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.clpgroup.com).

Internet links to the relevant annual reports are set out below:

2012 Annual Report:

https://www.clpgroup.com/ourcompany/aboutus/resourcecorner/investmentresources/Documents/2012/

CLP_2012AR_English_Full.pdf

2011 Annual Report:


CLP_2011AR_English_Full.pdf

2010 Annual Report:


CLP_AR_2010_Eng_Full.pdf

Other acquisitions since last published audited financial statements

Since 31 December 2012, the date to which the latest published audited financial statements of the CLP

Group have been made up, EnergyAustralia Pty Ltd and EnergyAustralia NSW Pty Ltd, both being

wholly-owned subsidiaries of the Company, entered into an acquisition agreement on 25 July 2013

with Delta Electricity in respect of the acquisitions of the Mount Piper and Wallerawang power stations

and associated infrastructure. Mount Piper Power Station is in the Central West region of the State of

New South Wales, Australia. It is a 1,400MW power station comprising two 700MW black coal-fired

steam turbine generators, commissioned in two stages over 1992 and 1993. Wallerawang Power Station

is a 1,000MW power station comprising two 500MW black coal-fired generating units, which was

commissioned in 1976.

https://www.clpgroup.com/ourcompany/aboutus/resourcecorner/investmentresources/Documents/2012/CLP_2012AR_English_Full.pdf




https://www.clpgroup.com/ourcompany/aboutus/resourcecorner/investmentresources/Documents/2010/CLP_AR_2010_Eng_Full.pdf

https://www.clpgroup.com/ourcompany/aboutus/resourcecorner/investmentresources/Documents/2010/CLP_AR_2010_Eng_Full.pdf

http://www.hkexnews.hk/index.htm

https://www.clpgroup.com/Pages/home.aspx?lang=en

17


The net cash consideration for the acquisitions was A$160 million which was funded by the then existing

financing facilities of EnergyAustralia. The total purchase price for the acquisitions was approximately

A$475 million which included the balance of the deposits paid by EnergyAustralia under the GenTrader

Agreements and held by the New South Wales State Government of approximately A$315 million at

completion. Both acquisitions were completed on 2 September 2013. No remuneration payable to, or

benefits in kind receivable by, any Directors will be varied in consequence of these acquisitions.

2. INDEBTEDNESS

A. Borrowings

As at the close of business on 31 October 2013, being the latest practicable date for the purpose of

this indebtedness statement, the Enlarged Group had outstanding borrowings of HK$64,283 million,

which comprised unsecured bank loans and other borrowings of HK$52,435 million, bank loans of

HK$12,197 million secured over certain assets of the Enlarged CLP Group and obligations under

finance leases of HK$35 million net of derivative financial instruments assets with a fair value of

HK$384 million being used to hedge debt items.

B. Contingent Liabilities

(a) CLP India – Deemed Generation Incentive Payment and Interest on Deemed Loans

Under the original power purchase agreement between CLP India Private Limited (“CLP India”)

and its off-taker Gujarat Urja Vikas Nigam Limited (“GUVNL”), GUVNL was required to make a

“deemed generation incentive” payment to CLP India when the plant availability of the Paguthan

Plant (“Paguthan”) was above 68.5% (70% as revised subsequently). GUVNL has been making such

payments since December 1997.

In September 2005, GUVNL filed a petition before the Gujarat Electricity Regulatory Commission

(“GERC”) claiming that the “deemed generation incentive” payment should not be paid for the

periods when Paguthan is declared with availability to generate on “naphtha” as fuel rather than on

“gas”. GUVNL’s contention is based on a 1995 Government of India notification which disallowed

“deemed generation incentive” for naphtha-based power plants. The total amount of the claim plus

interest calculated up to June 2005 amounts to about Rs.7,260 million (HK$919 million). CLP

India’s position, amongst other arguments, is that Paguthan is not naphtha-based and therefore

the Government of India notification does not apply to disallow the payments of the “deemed

generation incentive”.

GUVNL also claimed that CLP India has wrongly received interest on “deemed loans” under the

existing power purchase agreement. GUVNL’s claim rests on two main grounds: (i) CLP India had

agreed that interest paid by GUVNL for the period from December 1997 to 1 July 2003 was to be

refunded; and (ii) interest was to be calculated on a reducing balance rather than on the basis of

a bullet repayment on expiry of the loan term. The total amount of the claim plus interest for the

“deemed loans” amounts to a further Rs.830 million (HK$105 million).

18


On 18 February 2009, the GERC made an adjudication on GUVNL’s claims. On the issue related to

the payment to CLP India of “deemed generation incentive”, the GERC decided that the “deemed

generation incentive” was not payable when Paguthan was declared with availability to generate

on naphtha. However, the GERC also decided that GUVNL’s claim against CLP India in respect of

deemed generation incentive up to 14 September 2002 was time-barred under the Limitations Act of

India. Hence, the total amount of the claim allowed by the GERC was reduced to Rs.2,896 million

(HK$367 million). The GERC also dismissed GUVNL’s claim to recover interest on the “deemed

loans”.

CLP India filed an appeal with the Appellate Tribunal for Electricity (“ATE”) against the decision

of the GERC. GUVNL also filed an appeal in the ATE against an order of the GERC rejecting

GUVNL’s claims on interest on deemed loans and the time barring of the deemed generation claim

to 14 September 2002. On 19 January 2010, the ATE dismissed both CLP India and GUVNL’s

appeals and upheld the decision of the GERC. CLP India has filed an appeal against the ATE order

in the Supreme Court of India. The appeal petition was admitted on 16 April 2010 but the next date

of hearing has not yet been fixed by the court. GUVNL has also filed a cross appeal challenging

those parts of the ATE judgment which held that GUVNL’s claims before September 2002 were

time barred and which disallowed its claims for interest on “deemed loans”.

Following the issue of the ATE’s judgment, GUVNL deducted Rs.3,731 million (HK$472 million)

from January to March 2010 invoices after adjustment for a previous deposit of Rs.500 million

(HK$63 million), which included tax on incentive relating to deemed generation on naphtha, and

delayed payment charges on associated incentive calculated up to March 2010.

Subsequent to the above deduction, CLP India represented to GUVNL that during April 2004 to

March 2006, gas was available for generation and therefore should not be considered as availability

(deemed generation) on naphtha. GUVNL accepted the representation and refunded the base

amount of Rs.292 million (HK$37 million) and interest of Rs.150 million (HK$19 million) in

March 2011. However, during the first and last quarter of 2011, with the spot gas availability being

constrained, Paguthan was forced to declare availability on naphtha for certain periods, which

resulted in deduction of incentive revenue by GUVNL under deemed generation of Rs.17 million

(HK$2 million). At 31 October 2013, the total amount of the claim plus interest and tax with

respect to the “deemed generation incentive” amounted to Rs.8,543 million (HK$1,082 million).

On the basis of legal advice obtained, the Directors are of the opinion that CLP India has a strong

case on appeal to the Supreme Court. In consequence, no provision has been made.

(b) Indian Wind Power Projects – WWIL’s Contracts

CLP Wind Farms (India) Private Limited, CLP India and its subsidiaries (“CLP India group”) have

invested (or are committed to invest) in around 680MW of wind power projects to be developed

with Wind World India Limited (“WWIL”). WWIL’s major shareholder, Enercon GmbH, has

commenced litigation against WWIL claiming infringement of intellectual property rights. CLP

India group, as a customer of WWIL, has been named as a defendant. Enercon GmbH is also

seeking an injunction restraining CLP India group’s use of certain rotor blades acquired from

WWIL. As at 31 October 2013, the Group considered that CLP India group has good prospects of

defending these claims and the legal proceedings are unlikely to result in any material outflow of

economic benefits from the Group.

19


(c) JPL – Disputed Charges with Off-takers

Jhajjar Power Limited (“JPL”) had disputes with its off-takers over the applicable tariff of capacity

charges, energy charges relating to transit loss, coal-handling agent charges and Unscheduled

Interchange charges payable as per the Central Electricity Regulatory Commission (Terms and

Conditions of Tariff) Regulations, 2009. Total disputed amounts were Rs.1,194 million (HK$151

million) at 31 October 2013. JPL has filed a petition against its off-takers since March 2013. The

Group considered that JPL has a strong case and hence, no provision has been made.

(d) Land Premium of a Property in Hong Kong

As at 31 October 2013, the Group had received a demand note from the relevant authorities in the

Hong Kong Government in an amount of HK$280 million as land premium relating to the Group’s

new office at Laguna Verde Avenue, Hung Hom, Kowloon, Hong Kong. The Group considers,

including on the basis of legal and other professional advice, that no payment is due. Exchanges are

continuing regarding both the principle and quantum of any such premium.

Save as aforesaid and apart from intra-group liabilities, the Enlarged Group did not have any material

mortgages, charges, debentures, loan capital, debt securities, loans, bank overdraft or other similar

indebtedness, finance lease or hire purchase commitments, liabilities under acceptances (other than normal

trade bills), acceptance credits or guarantees or other contingent liabilities at the close of business on 31

October 2013.

3. WORKING CAPITAL OF THE ENLARGED GROUP

The Directors are of the opinion that, after taking into account completion of the Acquisitions and the

present financial resources available to the Enlarged Group, including internally generated revenue and

funds, the HK$10 billion committed loan facilities to be provided to CLP Holdings and CLP Power by

HSBC, and other available banking facilities, the Enlarged Group will have sufficient working capital to

meet its present requirements for at least 12 months from the date of this circular.

4. NO MATERIAL ADVERSE CHANGE

In the section of this circular entitled “Financial and Trading Prospects of the Enlarged CLP Group” in the

“Letter from the Chairman”, reference is made to parts of the CLP Group’s business outside Hong Kong

which have continued to face operational challenges in 2013. The impact of these challenges on the CLP

Group’s results for 2013 cannot, as at the Latest Practicable Date, be assessed.

Save as aforesaid and as at the Latest Practicable Date, the Directors were not aware of any material

adverse change in the financial or trading position of the CLP Group since 31 December 2012, the date to

which the latest published audited financial statements of the Group were made up.

20

APPENDIX II ACCOUNTANT’S REPORT ON CAPCO

The fo l lowing i s t he t ex t o f a repor t rece i ved f rom the Company’s repor t ing accoun tan t ,

PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this

circular.

10 December 2013

The Directors

CLP Holdings Limited

Dear Sirs,

We report on the financial information of Castle Peak Power Company Limited (“CAPCO”) which comprises

the statements of financial position of CAPCO as at 31 December 2010, 2011 and 2012 and 30 June 2013, and

the statements of profit or loss, the statements of profit or loss and other comprehensive income, the statements

of changes in equity and the statements of cash flows of CAPCO for each of the years ended 31 December

2010, 2011, 2012 and the six months ended 30 June 2013 (the “Relevant Periods”) and a summary of significant

accounting policies and other explanatory information. This financial information has been prepared by the

directors of CLP Holdings Limited (the “Company”) and is set out in Sections I to III below for inclusion in

Appendix II to the circular of the Company dated 10 December 2013 (the “Circular”) in connection with the

proposed acquisition of CAPCO by the Company.

CAPCO was incorporated in Hong Kong on 10 July 1981 as a limited liability company.

The financial statements of CAPCO for each of the years ended 31 December 2010, 31 December 2011 and 31

December 2012 and the interim financial statements of CAPCO for the six months ended 30 June 2013 were

audited by PricewaterhouseCoopers pursuant to separate terms of engagement with CAPCO.

The directors of CAPCO during the Relevant Periods are responsible for the preparation of the financial

statements of CAPCO that give a true and fair view in accordance with Hong Kong Financial Reporting

Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), and

for such internal control as the directors determine is necessary to enable the preparation of financial statements

that are free from material misstatement, whether due to fraud or error.

The financial information has been prepared based on the audited financial statements of CAPCO with no

adjustment made thereon.

21


Directors’ Responsibility for the Financial Information

The directors of the Company are responsible for the preparation of the financial information that gives a true

and fair view in accordance with HKFRS and accounting policies adopted by the Company and its subsidiaries

(together, the “Group”) as set out in the interim report of the Company for the period ended 30 June 2013.

Reporting Accountant’s Responsibility

Our responsibility is to express an opinion on the financial information and to report our opinion to you. We

carried out our procedures in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting

Accountant” issued by the HKICPA.

Opinion

In our opinion, the financial information gives, for the purpose of this report, a true and fair view of the state of

affairs of CAPCO as at 31 December 2010, 2011 and 2012 and 30 June 2013 and of CAPCO’s results and cash

flows for the Relevant Periods then ended.

Review of stub period comparative financial information

We have reviewed the stub period comparative financial information set out in Sections I to II below included

in Appendix II to the Circular which comprises the statement of profit or loss, the statement of profit or loss

and other comprehensive income, the statement of changes in equity and the statement of cash flows of CAPCO

for the six months ended 30 June 2012 and a summary of significant accounting policies and other explanatory

information (the “Stub Period Comparative Financial Information”).

The directors of the Company are responsible for the preparation and presentation of the Stub Period

Comparative Financial Information in accordance with the accounting policies adopted by the Group as set out in

the interim report of the Company for the period ended 30 June 2013.

Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on

our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410,

“Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the

HKICPA. A review of Stub Period Comparative Financial Information consists of making inquiries, primarily of

persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on

Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant

matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the Stub Period

Comparative Financial Information, for the purpose of this report is not prepared, in all material respects, in

accordance with the accounting policies set out in Note 2 of Section II below.

22


I FINANCIAL INFORMATION OF CAPCO

The following is the financial information of CAPCO as at 31 December 2010, 2011 and 2012 and 30 June 2013

and for each of the years ended 31 December 2010, 2011 and 2012 and the six months ended 30 June 2012 and

2013 (“Financial Information”):

1. Statements of Profit or Loss

Six months Year ended 31 December ended 30 June Note 2010 2011 2012 2012 2013HK$’000 (unaudited)

Revenue 5 12,606,830 13,802,830 14,695,880 6,898,702 6,775,311

Expenses Fuel 7,921,663 8,919,194 9,716,623 4,446,728 4,347,895

Operating expenses 798,018 821,749 842,123 419,210 390,520

Amortisation 10(b) 63,453 70,869 94,824 35,457 41,518

Staff expenses 6 261,403 269,178 282,398 141,941 128,449

9,044,537 10,080,990 10,935,968 5,043,336 4,908,382

Operating profit 6 3,562,293 3,721,840 3,759,912 1,855,366 1,866,929

Finance costs/(income) 7 104,898 34,237 (26,348) (13,720) 26,326

Profit before income tax 3,457,395 3,687,603 3,786,260 1,869,086 1,840,603

Income tax expense 8 605,342 638,795 654,353 320,878 311,394

Profit for the year/period attributable to shareholders 2,852,053 3,048,808 3,131,907 1,548,208 1,529,209

Dividends 9

Interim dividends paid 2,572,200 2,660,300 2,721,900 907,300 912,300

Final dividend proposed 279,800 388,600 410,000 – –

2,852,000 3,048,900 3,131,900 907,300 912,300

23


I FINANCIAL INFORMATION OF CAPCO (continued)

2. Statements of Profit or Loss and Other Comprehensive Income

Six months Year ended 31 December ended 30 June 2010 2011 2012 2012 2013HK$’000 (unaudited)

Profit for the year/period 2,852,053 3,048,808 3,131,907 1,548,208 1,529,209

Other comprehensive income

Items that may be reclassified

to profit or loss in subsequent

period

Cash flow hedges

Net fair value (losses)/gains (4,473) 3,231 (70) 1,681 (7,479)

Reclassify to profit or loss

(Note 7) 36,301 19,757 5,433 3,332 –

Reclassify to initial carrying

amount of hedged items

(Note 12) 16,963 9,028 – – 1,293

Tax (expense)/credit on the

above items (8,050) (5,283) (885) (827) 1,021

Other comprehensive income/(loss) for the year/period, net of tax 40,741 26,733 4,478 4,186 (5,165)

Total comprehensive income attributable to shareholders 2,892,794 3,075,541 3,136,385 1,552,394 1,524,044

24



3. Statements of Financial Position

As at As at 31 December 30 JuneHK$’000 Note 2010 2011 2012 2013

Non-current assetsProperty, plant and equipment under construction 10(a) 911,294 1,193,039 1,995,148 2,010,556Leasehold land 10(b) 2,490,528 2,523,864 3,043,099 3,001,786Finance lease receivables 11 25,070,275 25,128,721 24,581,470 24,216,008Derivative financial instruments 12 9 11 – –

28,472,106 28,845,635 29,619,717 29,228,350

Current assetsInventory – stores and fuel 1,454,335 1,432,499 2,496,099 2,400,794Sundry debtors and prepayments 178,835 36,621 39,027 66,980Current account with CLP Power Hong Kong Limited 13 1,373,746 1,623,043 1,405,118 1,325,718Finance lease receivables 11 1,994,236 2,199,578 2,405,275 2,382,808Derivative financial instruments 12 477 84 11 –Bank balances and cash 46 144 103 135

5,001,675 5,291,969 6,345,633 6,176,435

Current liabilitiesBank loans and other borrowings 14 (3,101,869) (3,250,381) (6,177,931) (6,390,268)Trade and other payables 15 (1,672,964) (1,842,067) (2,301,406) (1,142,265)Advances from shareholders 17 (21,801,433) (22,171,402) (22,645,968) (22,673,157)Derivative financial instruments 12 (29,324) (5,433) (2,084) (8,831)Income tax payable (154,312) (340,365) (225,219) (447,926)

(26,759,902) (27,609,648) (31,352,608) (30,662,447)

Net current liabilities (21,758,227) (22,317,679) (25,006,975) (24,486,012)

Total assets less current liabilities 6,713,879 6,527,956 4,612,742 4,742,338

Financed by:EquityShare capital 16 50,000 50,000 50,000 50,000Reserves – Proposed dividend 279,800 388,600 410,000 – – Others 48,669 75,310 79,795 691,539

Shareholders’ funds 378,469 513,910 539,795 741,539

Non-current liabilitiesBank loans and other borrowings 2,560,752 2,063,000 – –Deferred tax liabilities 18 3,524,240 3,581,983 3,571,527 3,512,806Derivative financial instruments 12 11,427 2,764 750 178Asset decommissioning liabilities 19 238,991 366,299 500,670 487,815

6,335,410 6,014,046 4,072,947 4,000,799

Equity and non-current liabilities 6,713,879 6,527,956 4,612,742 4,742,338

25



4. Statements of Changes in Equity

Share Hedging RetainedHK$’000 capital reserve profits Total (Note)

Balance at 1 January 2010 50,000 (74,309) 554,284 529,975

Total comprehensive income for the year – 40,741 2,852,053 2,892,794Dividends 2009 final – – (472,100) (472,100) 2010 interim – – (2,572,200) (2,572,200)

Balance at 31 December 2010 50,000 (33,568) 362,037 378,469








Total comprehensive income for the period (unaudited) – 4,186 1,548,208 1,552,394Dividends 2011 final – – (388,600) (388,600) 2012 interim – – (907,300) (907,300)

Balance at 30 June 2012 (unaudited) 50,000 (2,649) 723,053 770,404

Balance at 1 January 2013 50,000 (2,357) 492,152 539,795Total comprehensive (loss)/income for the period – (5,165) 1,529,209 1,524,044Dividends 2012 final – – (410,000) (410,000) 2013 interim – – (912,300) (912,300)

Balance at 30 June 2013 50,000 (7,522) 699,061 741,539

Note: CAPCO’s retained profits as at 31 December 2010, 2011 and 2012, 30 June 2012 and 30 June 2013 include an amount of HK$82,089,000 being the difference between the deferred taxation provision on accelerated tax depreciation using enacted tax rate at the end of the reporting period under HKFRS, and that amount calculated using tax rate applicable to each respective year under the Scheme of Control. Such amount of profits shall be retained within CAPCO until it may be required to pay tax and is therefore not to be distributed.

26



5. Statements of Cash Flows


Operating activitiesNet cash inflow from operations 20 3,202,256 3,558,274 3,369,937 2,144,356 2,038,034Income tax paid (186,401) (400,282) (780,840) (81,286) (146,387)

Net cash inflow from operating activities 3,015,855 3,157,992 2,589,097 2,063,070 1,891,647

Investing activitiesCapitalisation of assets under construction (3,308,380) (2,362,995) (3,032,499) (1,616,299) (1,869,263)Capital repayment of finance lease receivables 1,764,655 2,219,727 2,274,095 1,108,427 1,134,694

Net cash outflow from investing activities (1,543,725) (143,268) (758,404) (507,872) (734,569)

Net cash inflow before financing activities 1,472,130 3,014,724 1,830,693 1,555,198 1,157,078

Financing activitiesRepayment of long-term borrowings (745,369) (497,703) (497,652) (248,825) –(Decrease)/increase in short-term borrowings (1,636,957) 148,525 1,362,289 833,371 212,337Increase/(decrease) in shareholders’ advances 4,110,963 384,268 524,171 (789,228) 9,332Interest paid (156,481) (109,616) (109,042) (54,703) (56,415)Dividends paid (3,044,300) (2,940,100) (3,110,500) (1,295,900) (1,322,300)

Net cash outflow from financing activities (1,472,144) (3,014,626) (1,830,734) (1,555,285) (1,157,046)

Net (decrease)/increase in cash and cash equivalents (14) 98 (41) (87) 32

Cash and cash equivalents at beginning of year/period 60 46 144 144 103

Cash and cash equivalents at end of year/period 46 144 103 57 135

Analysis of balances of cash and cash equivalents

Bank balances and cash 46 144 103 57 135

27


II NOTES TO THE FINANCIAL INFORMATION OF CAPCO

1 GENERAL INFORMATION

The financial operations of CAPCO and its 40% shareholder CLP Power Hong Kong Limited (“CLP Power”) are governed by a Scheme of Control (“SoC”) Agreement entered with the Government of the HKSAR.

The principal activity of CAPCO is the generation and sale of electricity exclusively to CLP Power under the Electricity Supply Contract at cost plus profit calculated in accordance with the SoC Agreement. Under HKFRS, this contract is accounted for as a lease.

CAPCO is a limited liability company incorporated in Hong Kong. The address of its registered office is 8 Laguna Verde Avenue, Hung Hom, Kowloon, Hong Kong.

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The principal accounting policies adopted in the preparation of the Financial Information are set out below. These policies have been consistently applied to all the periods presented except for HKFRS 13 “Fair Value Measurement” which has not been retrospectively applied to the periods beginning before 1 January 2013 as it is considered that the measurement impact and disclosure of this to be immaterial to the users of the Financial Information.

The Financial Information has been prepared in accordance with HKFRS issued by the HKICPA.

The preparation of the Financial Information in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying CAPCO’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Financial Information are disclosed in Note 4 below.

The Financial Information has been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities (including derivative financial instruments) which are stated at fair values.

CAPCO has assessed the net current liabilities position as at the end of each reporting period and believe that CAPCO can continue in operational existence for the foreseeable future based on a stable operating cash flow from the SoC and continued support from shareholders. Therefore, CAPCO continues to adopt the going concern basis in preparing the Financial Information.

The following new/revised HKFRS have been issued and are mandatory for adoption by CAPCO for accounting periods beginning on or after 1 January 2014, but CAPCO has not early adopted:

• AmendmentstoHKAS32“OffsettingFinancialAssetsandFinancialLiabilities”• AmendmentstoHKAS36“RecoverableAmountDisclosuresforNon-FinancialAssets”• HKFRS9“FinancialInstruments”

The adoption of these new/revised HKFRS will have no significant impact on the results and the financial position of CAPCO.

(b) Accounting under the non Scheme of Control activities

Commencing 1 October 1991, CAPCO is entitled to 60% of the profit allowed to CLP Power and CAPCO (“Companies”) that derive from the sale of electricity by CLP Power to customers located in the Chinese mainland, in accordance with the arrangement agreed between the Companies and the Government of the HKSAR.

(c) Revenue

Revenue primarily represents finance lease income, operating lease and lease service income from CLP Power, together with CAPCO’s income earned on the sale of electricity by CLP Power to customers located in the Chinese mainland. Finance lease income is recognised in accordance with Note 2(e). Revenue on operating lease and lease service income is recognised when it is paid or becomes payable by CLP Power to CAPCO when the related services are rendered. The income earned on sale of electricity by CLP Power to the Chinese mainland is recognised in accordance with the arrangement referred to in Note 2(b).

28


II NOTES TO THE FINANCIAL INFORMATION OF CAPCO (continued)

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) Property, plant and equipment under construction and leasehold land

Property, plant and equipment of CAPCO are constructed for deployment for the generation of electricity supplied to CLP Power under the Electricity Supply Contract. Following the completion of construction, these assets are derecognised from assets under construction as they become the leased assets of the lessee in accordance with HKFRS-Int 4 and HKAS 17. Assets under construction are not subject to depreciation, and hence CAPCO is subject to no depreciation charge on these assets.

Leasehold land is amortised uniformly over the unexpired term of the lease.

(e) Leases

An electricity supply contractual arrangement is to be treated as containing a lease if the fulfillment of the arrangement is dependent on the use of specific assets and the arrangement conveys the right to use these specific assets. Payments from service and the cost of inputs of the arrangement are excluded from the calculation of minimum lease payments and are recognised as lease service payments.

(i) Finance lease

Leases of assets where CAPCO has transferred substantially all the risks and rewards of ownership to the lessee are classified as finance leases. Assets held under a finance lease are presented in the statement of financial position as a receivable at an amount equal to the net investment in the lease. The difference between the gross receivable and the net investment is recognised as unearned finance income.

Lease payments relating to the period are applied against the gross investment in the lease to reduce both the principal and the unearned finance income. Finance lease income shall be recognised so as to produce a constant periodic rate of return on the net investment in the finance lease.

The Electricity Supply Contract between CAPCO and CLP Power was assessed to contain finance leases with effective interest rate being a variable rate which moves with reference to the return allowed under the SoC Agreement and accordingly, the finance charge has been treated as contingent rent. Contingent rent is recognised in profit or loss in the period in which it is incurred.

(ii) Operating lease

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating lease income is recognised in profit or loss on a systematic basis representative of the time pattern of benefit derived from the use of the asset.

(f) Derivative financial instruments and hedging activities

A derivative is initially recognised at fair value on the date a derivative contract is entered into and is subsequently remeasured at its fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. CAPCO designates certain derivatives as hedges of the cash flows of recognised financial assets or financial liabilities or highly probable forecast transactions (cash flow hedges).

CAPCO documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge transactions. CAPCO also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in the cash flows of hedged items.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged items affect profit and loss. However, when the highly probable forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are reclassified from equity and included in the measurement of the initial cost or carrying amount of the asset or liability.

29




(f) Derivative financial instruments and hedging activities (continued)

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is reclassified from equity to profit or loss in the same period when the hedged forecast cash flows ultimately affect profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is immediately reclassified to profit or loss.

(g) Inventory

Inventory comprises stores and fuel which are stated at the lower of cost and net realisable value. The cost of fuel oil is measured on the ‘first-in, first-out’ basis. Cost for coal and stores are measured using the weighted average basis. Net realisable value is determined on the basis of anticipated sales proceeds less estimated selling expenses.

(h) Cash and cash equivalents

Cash and cash equivalents comprise cash at banks and on hand, demand deposits with banks and other financial institutions, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

(i) Current and deferred tax

Income tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or equity respectively.

The current tax charge is calculated on the basis of the tax laws enacted or substantially enacted at the end of the reporting period in Hong Kong where CAPCO operates and generate taxable income.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax liability is settled.

(j) Borrowings and interest

Borrowings are recognised initially at fair value, net of transaction costs incurred. Transaction costs are incremental costs that are directly attributable to the acquisition or issue of a financial liability. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is amortised to profit or loss or capitalised as cost of the qualifying assets over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless CAPCO has an unconditional right to defer settlement of the liabilities for at least 12 months after the end of reporting period.

Interest on borrowings arranged to finance the acquisition, construction or production of fixed assets is:

(i) incorporated in capital expenditure during the period of time that is required to complete and prepare the assets for its intended use;

(ii) charged to finance costs when incurred after commissioning.

(k) Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

30




(l) Foreign currency

The Financial Information is presented in Hong Kong dollars which is CAPCO’s functional and presentation currency.

Foreign currency transactions are translated into Hong Kong dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when deferred in equity as qualifying cash flow hedges.

(m) Related parties

Related parties are individuals and companies, including key management personnel, where the individual or company has the ability, directly or indirectly, to control or joint control the other party or exercise significant influence over the other party in making financial and operating decisions. A close family member of any such individual is considered to be a related party. Parties are also considered to be related if they are joint ventures of the same third party, or one party is a joint venture and the other is an associate of the same third party.

3 FINANCIAL RISK MANAGEMENT

(a) Financial risk factors

CAPCO’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. CAPCO’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise the impact of exchange rate and interest rate fluctuations on CAPCO’s financial performance. CAPCO uses different derivative financial instruments to manage its exposure in these areas. All derivative financial instruments are employed solely for hedging purposes.

Risk management for CAPCO is carried out by CLP Group’s central treasury department (Group Treasury) under policies approved by the Board of Directors or the Finance Committee of CAPCO. CAPCO has written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and cash management.

(i) Foreign exchange risk

CAPCO’s major foreign exchange risk arises from U.S. dollar payment obligations with regard to shareholders’ advances repayment and non-Hong Kong dollar payment obligations for spare parts and capital projects. CAPCO uses forward contracts to manage its foreign exchange risk arising from major capital projects. Foreign exchange gains and losses, other than those arising from capital project payments which will be capitalised, are ultimately recoverable from CLP Power under the current Electricity Supply Contract and as a result CAPCO does not retain any foreign exchange risk on such exposures over the long term.

(ii) Interest rate risk

CAPCO’s interest rate risk arises from debt borrowings. Borrowings issued at variable rates expose CAPCO to cash flow interest rate risk, whilst borrowings issued at fixed rates expose CAPCO to fair value interest rate risk. CAPCO manages its interest rate risks with a mix between fixed and floating rate borrowings appropriate for its business profile, and the use of interest rate swaps. The percentage of CAPCO’s borrowings with interest rates fixed to maturity over the reporting periods is as follows:

As at 31 December As at 30 June 2010 2011 2012 2013

Percentage of total borrowings with interest fixed to maturity 54% 48% 33% 32%

31



3 FINANCIAL RISK MANAGEMENT (continued)

(a) Financial risk factors (continued)

(ii) Interest rate risk (continued)

The extent of the impact of the movements in interest rates, with all other variables held constant, on CAPCO’s post-tax profit for the year/period (as a result of change in interest expense on floating rate borrowings) is shown in the table below:

As at 31 December As at 30 JuneHK$’000 2010 2011 2012 2013

If interest rates were higher by: 0.25% 0.1% 0.1% 0.1%Post-tax profit for the year/period (952) (178) (852) (605)Equity – hedging reserve 1,294 93 – –

If interest rates were lower by: 0.1% 0.1% 0.1% 0.1%Post-tax profit for the year/period 381 178 852 605Equity – hedging reserve (868) (109) – –

(iii) Credit risk

All CAPCO’s revenue comes from CLP Power which has investment grade credit ratings of A and A1 from Standard & Poor’s and Moody’s respectively as at 31 December 2010, 2011 and 2012 and 30 June 2013. The receivables from CLP Power under the Electricity Supply Contract are the only trade receivables of CAPCO. The outstanding trade receivables from CLP Power for a given month will be settled in the following month. None of the balance outstanding at each of the reporting dates is past due and no provision for impairment is recorded.

CAPCO’s exposure to credit risk from treasury transactions arises from default of the counterparty, with a maximum exposure equal to the carrying amount of the respective financial instruments as reported on the statement of financial position. All finance-related hedging transactions and deposits of CAPCO are made with counterparties with investment grade credit rating to minimise credit risk. CAPCO further assigns mark-to-market limits to its financial counterparties to reduce credit risk concentration and monitors potential exposures to all counterparties.

(iv) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and making available an adequate amount of committed credit facilities with staggered maturities to reduce refinancing risk in any year and to fund working capital, debt servicing, dividend payments and capital investments. CAPCO maintains significant flexibility to respond to opportunities and events by ensuring that adequate committed credit lines are available and shareholders’ advances can be called upon to meet future funding requirements. Management monitors rolling forecasts of CAPCO’s undrawn borrowing facilities and cash and cash equivalents on the basis of expected cash flows.

32





(iv) Liquidity risk (continued)

The table below analyses the remaining contractual maturities at the end of the reporting period of CAPCO’s non-derivative financial liabilities and derivative financial liabilities (both net settled and gross settled), which are based on contractual undiscounted cash flows:

Between Between Within 1 to 2 2 to 5 OverHK$’000 1 Year years years 5 years Total

As at 31 December 2010Non-derivative financial liabilities Bank loans and other borrowings 3,188,477 559,000 2,121,641 – 5,869,118 Trade and other payables 1,672,964 – – – 1,672,964 Shareholders’ advances 21,801,433 – – – 21,801,433

26,662,874 559,000 2,121,641 – 29,343,515

Derivative financial liabilitiesNet settled:Forward foreign exchange contracts 7,494 – 799 – 8,293Interest rate swaps 27,532 9,055 – – 36,587

Gross settled:Forward foreign exchange contracts– Outflow 31,589 – 11,696 – 43,285– Inflow 29,487 – 10,006 – 39,493

As at 31 December 2011Non-derivative financial liabilities Bank loans and other borrowings 3,342,854 2,121,803 – – 5,464,657 Trade and other payables 1,842,067 – – – 1,842,067 Shareholders’ advances 22,171,402 – – – 22,171,402

27,356,323 2,121,803 – – 29,478,126

Derivative financial liabilitiesNet settled:Forward foreign exchange contracts – 1,105 – – 1,105Interest rate swaps 9,294 – – – 9,294

Gross settled:Forward foreign exchange contracts– Outflow – 11,696 – – 11,696– Inflow – 10,026 – – 10,026

33







As at 31 December 2012Non-derivative financial liabilities Bank loans and other borrowings 6,293,601 – – – 6,293,601 Trade and other payables 2,301,406 – – – 2,301,406 Shareholders’ advances 22,645,968 – – – 22,645,968

31,240,975 – – – 31,240,975

Derivative financial liabilitiesNet settled:Forward foreign exchange contracts 861 – – – 861

Gross settled:Forward foreign exchange contracts– Outflow 11,696 132,749 – – 144,445– Inflow 10,481 131,996 – – 142,477

As at 30 June 2013Non-derivative financial liabilities Bank loans and other borrowings 6,482,231 – – – 6,482,231 Trade and other payables 1,142,265 – – – 1,142,265 Shareholders’ advances 22,673,157 – – – 22,673,157

30,297,653 – – – 30,297,653

Derivative financial liabilitiesNet settled:Forward foreign exchange contracts 609 – – – 609

Gross settled:Forward foreign exchange contracts– Outflow 131,997 2,892 – – 134,889– Inflow 123,737 2,712 – – 126,449

(b) Accounting for derivative financial instruments and hedging activities

These are covered under the Significant Accounting Policies Note 2(f).

(c) Fair value estimation

The fair value of financial instruments that are not traded in an active market is determined by using appropriate valuation techniques and making assumptions that are based on market conditions existing at the end of each reporting period. A discounted cash flow method is used to determine the fair value of long-term borrowings. The fair value of forward foreign exchange contracts is calculated as the present value of expected future cash flows relating to the difference between the contract rates and the market forward rates at the end of the reporting period. The fair value of interest rate swaps is the net present value of the estimated future cash flows discounted at the market quoted swap rates.

The carrying amounts of the current account with CLP Power Hong Kong Limited and advances from shareholders and other current financial assets and liabilities approximate their fair values.

34




(d) Fair value hierarchy of financial instruments

The fair value of a financial instrument is determined using quoted prices for an identical instrument in active markets (Level 1). If quoted prices for an identical instrument in active markets are not available, the fair value is determined using valuation-techniques based on observable market data (Level 2). Otherwise valuation-techniques, for which any significant input is not based on observable market data, are used (Level 3).

The following table presents the fair value hierarchy for those financial instruments carried at fair value in the statement of financial position at end of each of the reporting date.

HK$’000 Level 1 Level 2 Level 3 Total

At 31 December 2010Assets Forward foreign exchange contracts – 486 – 486

Liabilities Forward foreign exchange contracts – 11,992 – 11,992 Interest rate swaps – 28,759 – 28,759

– 40,751 – 40,751


Liabilities Forward foreign exchange contracts – 2,764 – 2,764 Interest rate swaps – 5,433 – 5,433

– 8,197 – 8,197


Liabilities Forward foreign exchange contracts – 2,834 – 2,834

At 30 June 2013Assets Forward foreign exchange contracts – – – –

Liabilities Forward foreign exchange contracts – 9,009 – 9,009

The valuation technique and inputs used in the fair value measurements within Level 2 are as follows:

Valuation technique Significant inputs

Financial assets/liabilities: Forward foreign exchange contracts Discounted cash flow Observable exchange rates and interest rate curves Interest rate swaps Discounted cash flow Interest rate curves

CAPCO’s policy is to recognise transfers into/out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. During the respective reporting periods, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.

35




(e) Capital management

The primary objective of CAPCO’s capital management is to safeguard CAPCO’s ability to continue as a going concern and maintain a healthy capital ratio to support the business and enhance shareholder value.

CAPCO manages its capital structure and makes adjustments to it in light of changes in economic conditions and business strategies. To maintain or adjust the capital structure, CAPCO may adjust the dividend payments to shareholders or raise and repay debts and shareholders’ advances. CAPCO’s capital management objectives, policies or processes were unchanged during each of the reporting years/periods.

Pursuant to a deed of subordination, shareholders’ advances to CAPCO are subordinated to certain debt financing of CAPCO and may be repaid up to a defined ratio of CAPCO’s borrowed moneys to shareholders’ funds. CAPCO has complied with this requirement during each of the reporting years/periods.

CAPCO monitors capital using “total debt to total capital” ratio. Total debt comprises CAPCO’s bank loans and other borrowings. For the purpose of the calculation of total debt to total capital ratio, shareholders’ funds comprise shareholders’ advances and shareholders’ equity. The total debt to total capital ratios at end of each of the reporting years/periods were as follows:


Total debt 5,662,621 5,313,381 6,177,931 6,390,268

Shareholders’ funds 22,179,902 22,685,312 23,185,763 23,414,696

Total capital 27,842,523 27,998,693 29,363,694 29,804,964

Total debt to total capital ratio 20.3% 19.0% 21.0% 21.4%

(f) Master netting or similar arrangements

CAPCO enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master agreements in which there is a set-off provision. In certain circumstances, e.g. when a credit event such as a default occurs, all outstanding transactions under the agreement are terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.

The ISDA agreements do not meet the criteria for offsetting in the statement of financial position. This is because CAPCO does not have any currently legally enforceable right to offset recognised amounts, because the right to offset is enforceable only on the occurrence of future events such as a default on the bank loans or other credit events.

36




(f) Master netting or similar arrangements (continued)

The table below analyses financial assets subject to offsetting, enforceable master netting arrangements and similar agreements:

Gross amounts of financial assets recognised in the Related financial statement of liabilities thatHK$’000 financial position are not set off Net amount

At 31 December 2010Forward foreign exchange contracts 486 (241) 245

486 (241) 245

At 31 December 2011Forward foreign exchange contracts 95 (84) 11

95 (84) 11

At 31 December 2012Forward foreign exchange contracts 11 – 11

11 – 11

At 30 June 2013Forward foreign exchange contracts – – –

– – –

The table below analyses financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements:

Gross amounts of financial liabilities recognised in the Related financial statement of assets thatHK$’000 financial position are not set off Net amount

At 31 December 2010Forward foreign exchange contracts 11,992 (241) 11,751Interest rate swaps 28,759 – 28,759

40,751 (241) 40,510

At 31 December 2011Forward foreign exchange contracts 2,764 (84) 2,680Interest rate swaps 5,433 – 5,433

8,197 (84) 8,113

At 31 December 2012Forward foreign exchange contracts 2,834 – 2,834

2,834 – 2,834

At 30 June 2013Forward foreign exchange contracts 9,009 – 9,009

9,009 – 9,009

37



4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

(a) Lease accounting

The application of HKFRS-Interpretation 4 “Determining whether an Arrangement contains a Lease” has resulted in finance lease accounting being applied to CAPCO as lessor for its Electricity Supply Contract with CLP Power. To apply finance lease accounting, a number of assumptions in the lease models have been made, such as minimum lease payments, implicit interest rates and residual values of the power plants at the end of contract periods. In determining the minimum lease payments the assumption has been made that the return contained in the lease is a variable rate return which moves with reference to the return allowed under the SoC and accordingly the finance charge has been treated as contingent rent. Any future changes to these assumptions will affect the value of the lease receivables recognised and the corresponding lease income in CAPCO’s financial statements.

(b) Asset retirement obligation

CAPCO has been investing in power stations for generation of electricity to meet the demand of CLP Power’s customers in Hong Kong. As CAPCO expects its generation facilities will continue to be used to maintain the electricity supply in Hong Kong for the foreseeable future, it is our assessment that removal of the generation facilities is remote. As such, an asset retirement obligation has not been recognised upfront in the financial statements in accordance with the requirements of accounting standards.

5 REVENUE

Revenue comprises:

Year ended 31 December Six months ended 30 June 2010 2011 2012 2012 2013HK$’000 (unaudited)

Operating lease income from CLP Power 316,698 322,592 365,305 165,127 183,550Lease service charges to CLP Power 9,781,672 10,704,729 11,572,071 5,360,462 5,238,474Finance lease income from CLP Power (Note) 2,454,927 2,730,519 2,726,965 1,353,365 1,338,644Sale of electricity by CLP Power to customers in the Chinese Mainland 52,573 44,810 31,356 19,565 14,376Other revenue 960 180 183 183 267

12,606,830 13,802,830 14,695,880 6,898,702 6,775,311

Note: The finance lease income from CLP Power is all contingent rent.

6 OPERATING PROFIT


Operating profit is stated after charging the following:

Staff expenses (Note) 261,403 269,178 282,398 141,941 128,449

Auditors’ remuneration Audit 1,387 1,485 1,580 790 841 Permissible non-audit services 44 69 81 37 40

Net exchange loss/(gain) 657 803 240 903 (250)

Note: The staff expenses represented the amounts recharged from CLP Power under the Operating Service Agreement with CAPCO.

38



7 FINANCE COSTS/(INCOME)


Interest expenses on Bank loans and overdrafts 41,526 17,438 22,058 10,502 14,390 Other borrowings wholly repayable within five years 58,803 58,803 58,964 29,321 29,160Fair value loss on derivative financial instruments Interest rate swaps: cash flow hedges, reclassified from equity 36,301 19,757 5,433 3,332 –Finance charges 1,308 1,280 4,840 4,151 1,013Exchange loss/(gain) 38,576 (14,361) (49,692) (28,112) 17,857

176,514 82,917 41,603 19,194 62,420Less: Amount capitalised (71,616) (48,680) (67,951) (32,914) (36,094)

104,898 34,237 (26,348) (13,720) 26,326

8 INCOME TAx ExPENSE

Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profits of all the reporting periods.


Current income tax Hong Kong profits tax 324,182 585,373 665,530 323,002 369,094 (Over)/under-provision in prior year (8,831) 962 164 – –

315,351 586,335 665,694 323,002 369,094

Deferred tax Accelerated/(declining) temporary differences 281,160 53,422 (11,165) (2,124) (57,700) Under/(over)-provision in prior year 8,831 (962) (176) – –

289,991 52,460 (11,341) (2,124) (57,700)

Total income tax expense 605,342 638,795 654,353 320,878 311,394

39



8 INCOME TAx ExPENSE (continued)

The income tax on CAPCO’s profit before income tax differs from the theoretical amount that would arise using the Hong Kong profits tax rate as follows:


Profit before income tax 3,457,395 3,687,603 3,786,260 1,869,086 1,840,603

Calculated at an income tax rate at: 16.5% 16.5% 16.5% 16.5% 16.5%Calculated income tax amount 570,470 608,454 624,733 308,399 303,699Expenses not deductible for tax purposes 34,872 30,341 29,632 17,108 7,695Income not subject to tax – – – (4,629) –Over-provision for prior year – – (12) – –

Total income tax expense 605,342 638,795 654,353 320,878 311,394

9 DIVIDENDS

Year ended 31 December Six months ended 30 JuneHK$’000 2010 2011 2012 2012 2013

Interim dividends paid 2,572,200 2,660,300 2,721,900 907,300 912,300Final dividend proposed 279,800 388,600 410,000 – –

2,852,000 3,048,900 3,131,900 907,300 912,300

Year ended 31 December Six months ended 30 JuneHK$’000 per share 2010 2011 2012 2012 2013

Interim dividends paid 5,144.40 5,320.60 5,443.80 1,814.60 1,824.60Final dividend proposed 559.60 777.20 820.00 – –

5,704.00 6,097.80 6,263.80 1,814.60 1,824.60

The proposed final dividend is not reflected as dividend payable in the Financial Information, but as a separate component of the shareholders’ funds in the Statement of Financial Position. The final dividend proposed in each year end was paid in the first six-month periods of the following year.

Subsequent to 30 June 2013, an interim dividend in the amount of HK$912,400,000 (HK$1,824.80 per share) was paid on 16 September 2013, and another interim dividend of HK$912,300,000 (HK$1,824.60 per share) was declared on 25 November 2013 to be paid on 16 December 2013.

40



10 PROPERTY, PLANT AND EQUIPMENT UNDER CONSTRUCTION AND LEASEHOLD LAND

(a) Property, plant and equipment under construction

Plant, machineryHK$’000 Buildings and equipment Total

Cost 1,461,376 3,245,622 4,706,998Accumulated depreciation – – –

Net book value at 1 January 2010 1,461,376 3,245,622 4,706,998

Net book value at 1 January 2010 1,461,376 3,245,622 4,706,998Additions 304,300 2,893,229 3,197,529De-recognised as finance lease receivable (1,727,371) (5,265,862) (6,993,233)

Net book value at 31 December 2010 38,305 872,989 911,294

Cost 38,305 872,989 911,294Accumulated depreciation – – –

Net book value at 31 December 2010 38,305 872,989 911,294

Net book value at 1 January 2011 38,305 872,989 911,294Additions 120,563 2,648,126 2,768,689De-recognised as finance lease receivable (152,502) (2,334,442) (2,486,944)

Net book value at 31 December 2011 6,366 1,186,673 1,193,039

Cost 6,366 1,186,673 1,193,039Accumulated depreciation – – –


Net book value at 1 January 2012 6,366 1,186,673 1,193,039Additions 307,294 2,430,658 2,737,952De-recognised as finance lease receivable (246,033) (1,689,810) (1,935,843)




Net book value at 1 January 2013 67,627 1,927,521 1,995,148Additions 62,589 699,701 762,290De-recognised as finance lease receivable (62,920) (683,962) (746,882)

Net book value at 30 June 2013 67,296 1,943,260 2,010,556


Net book value at 30 June 2013 67,296 1,943,260 2,010,556

41



10 PROPERTY, PLANT AND EQUIPMENT UNDER CONSTRUCTION AND LEASEHOLD LAND (continued)

(a) Property, plant and equipment under construction (continued)

With the adoption of lease accounting for the Electricity Supply Contract with CLP Power, the operational generating plants and associated fixed assets of CAPCO used for the generation of electricity supply to CLP Power under the Electricity Supply Contract were recognised as leased assets of CLP Power. CAPCO’s assets under construction are de-recognised and accounted for as net finance lease receivable when they become part of the operational generating plants and associated fixed assets under finance lease.

(b) Leasehold land

CAPCO’s interest in leasehold land represents operating lease prepayments and their net book value is analysed as follows:

HK$’000

Cost 2,933,447Accumulated amortisation (379,255)

Net book value at 1 January 2010 2,554,192

Net book value at 1 January 2010 2,554,192Additions –Transfers (211)Amortisation (63,453)

Net book value at 31 December 2010 2,490,528



Net book value at 1 January 2011 2,490,528Additions 104,205Amortisation (70,869)




42



10 PROPERTY, PLANT AND EQUIPMENT UNDER CONSTRUCTION AND LEASEHOLD LAND (continued)

(b) Leasehold land (continued)

HK$’000

Net book value at 1 January 2012 2,523,864Additions 614,059Amortisation (94,824)




Net book value at 1 January 2013 3,043,099Additions 205Amortisation (41,518)

Net book value at 30 June 2013 3,001,786


Net book value at 30 June 2013 3,001,786

The tenure of the leasehold land is as follows:


Held in Hong Kong: On medium-term lease (10 - 50 years) 2,490,357 2,523,731 3,043,004 3,001,710 On short-term lease (below 10 years) 171 133 95 76

2,490,528 2,523,864 3,043,099 3,001,786

11 FINANCE LEASE RECEIVABLES


Amounts receivable from finance lease: Within one year 1,994,236 2,199,578 2,405,275 2,382,808 After one year but within five years 7,947,850 8,761,022 9,490,187 9,341,412 Over five years 17,122,425 16,367,699 15,091,283 14,874,596

27,064,511 27,328,299 26,986,745 26,598,816

The effective interest rate of the finance lease receivable is a floating rate which moves with reference to the return allowed under the SoC and accordingly the finance income has been treated as contingent rent. The interest rate was 9.99% for the years ended 31 December 2010, 2011 and 2012, and for six months ended 30 June 2013. The finance income associated with the finance leases was recognised to profit and loss in the reporting period in which the income was actually incurred.

43



12 DERIVATIVE FINANCIAL INSTRUMENTS


AssetsCash flow hedge Forward foreign exchange contracts 486 95 11 –

486 95 11 –Less: Current portion of derivative financial instruments (477) (84) (11) –

Non-current portion of derivative financial instruments 9 11 – –

LiabilitiesCash flow hedge Interest rate swaps 28,759 5,433 – – Forward foreign exchange contracts 11,992 2,764 2,834 9,009

40,751 8,197 2,834 9,009Less: Current portion of derivative financial instruments (29,324) (5,433) (2,084) (8,831)

Non-current portion of derivative financial instruments 11,427 2,764 750 178

As at 31 December 2010 and 2011, CAPCO had two interest rate swap contracts under which CAPCO pays fixed rate and receives floating rate interest. The notional amounts of the outstanding interest rate swaps were HK$953,171,000 as at 31 December 2010 and HK$476,585,000 as at 31 December 2011. As at 31 December 2010, 2011 and 2012 and 30 June 2013, CAPCO had forward foreign exchange contracts which are hedges of highly probable forecast transactions. The notional amounts of the outstanding forward foreign exchange contracts were HK$162,849,000 as at 31 December 2010, HK$48,452,000 as at 31 December 2011, HK$160,377,000 as at 31 December 2012 and HK$146,090,000 as at 30 June 2013.

The net fair value and remaining terms of the derivative financial instruments are set out below:


Interest rate swaps Within one year (19,757) (5,433) – – Between one and two years (9,002) – – –

(28,759) (5,433) – –

Forward foreign exchange contracts Within one year (9,091) 84 (2,073) (8,831) Between one and two years – (2,753) (750) (178) Between two and five years (2,415) – – –

(11,506) (2,669) (2,823) (9,009)

44



12 DERIVATIVE FINANCIAL INSTRUMENTS (continued)

The maturities of the derivative financial instruments used for hedging will correlate to the timing of the cash flows associated with the corresponding hedged items which are highly probable forecast transactions. Gains and losses recognised in the hedging reserve in equity on forward foreign exchange contracts as of 31 December 2010, 2011 and 2012, and 30 June 2013 are to be included in the initial cost of fixed assets in the period or periods during which the hedged transactions result in the recognition of the related fixed assets. Gain and losses recognised in the hedging reserve in equity on interest rate swaps as of 31 December 2010 and 2011 are continuously released to profit or loss until the repayment of bank loans and the expiry of the derivative contracts as set out in the above table.

13 CURRENT ACCOUNT WITH CLP POWER HONG KONG LIMITED

CAPCO’s only trade receivables are the amounts due from CLP Power under the Electricity Supply Contract. The amounts due from CLP Power as at 31 December 2010, 2011 and 2012 and 30 June 2013 mainly represent the trade receivables for the month of December 2010, 2011, 2012 and June 2013 respectively, to be settled in their following month and with aging of 30 days or below. The carrying amounts approximate their fair values.

14 BANK LOANS AND OTHER BORROWINGS


Current Short-term bank loans 2,604,117 2,752,642 4,114,931 4,327,268 Current portion of long-term bank loans 497,752 497,739 – – Current portion of other borrowings – – 2,063,000 2,063,000

3,101,869 3,250,381 6,177,931 6,390,268

Non-current Long-term bank loans 497,752 – – – Other Borrowings 2,063,000 2,063,000 – –

2,560,752 2,063,000 – –

Total bank loans and other borrowings 5,662,621 5,313,381 6,177,931 6,390,268

The other borrowings are from ExxonMobil Hong Kong Limited, a fellow subsidiary of CAPCO’s 60% shareholder ExxonMobil Energy Limited, and are unsecured, bear fixed interest rate of 2.85% per annum as at 31 December 2010, 2011 and 2012 and 30 June 2013. Such other borrowings are repayable in full on 31 December 2013 and will be subject to refinancing at such time.

The maturity of the bank loans and other borrowings is as follows:


Within one year 3,101,869 3,250,381 6,177,931 6,390,268Between one and two years 497,752 2,063,000 – –Between two and five years 2,063,000 – – –

5,662,621 5,313,381 6,177,931 6,390,268

For the total bank loans and other borrowings, 54% as at 31 December 2010, 48% as at 31 December 2011, 33% as at 31 December 2012, and 32% as at 30 June 2013 were with interest rates fixed to maturity.

45



14 BANK LOANS AND OTHER BORROWINGS (continued)

The denomination of the loans and borrowings was:


U.S. dollars 42,334 21,154 – –HK dollars 5,620,287 5,292,227 6,177,931 6,390,268

5,662,621 5,313,381 6,177,931 6,390,268

The effective interest rates at the end of the reporting period were as follows:


Fixed rate loans and loans swapped to fixed rates 2.9% – 7.2% 2.9% – 7.2% 2.9% 2.9%Variable rate loans 0.6% – 0.8% 0.7% – 2.8% 0.6% – 2.0% 0.9% – 1.5%

The carrying amounts of bank loans and other borrowings approximate their fair values. The fair value of long-term bank loans and other borrowings is determined using the expected future payments discounted at market interest rates prevailing at each of the reporting period end.

15 TRADE AND OTHER PAYABLES


Trade payables 424,202 498,260 1,095,058 218,595Accrued expenses 1,248,762 1,343,807 1,206,348 923,670

1,672,964 1,842,067 2,301,406 1,142,265

The aging analysis of CAPCO’s trade payables (based on invoice date) is as follows:


30 days or below 424,163 490,703 1,094,842 217,80131 – 90 days 3 723 – 757Over 90 days 36 6,834 216 37

424,202 498,260 1,095,058 218,595

16 SHARE CAPITAL


Authorised:1,000,000 shares of HK$100 each 100,000 100,000 100,000 100,000

Issued and fully paid:500,000 shares of HK$100 each 50,000 50,000 50,000 50,000

46



17 ADVANCES FROM SHAREHOLDERS

The advances shown in current liabilities are from shareholders as follows:


ExxonMobil Energy Limited 13,081,438 13,302,827 13,587,531 13,603,820CLP Power 8,719,995 8,868,575 9,058,437 9,069,337

21,801,433 22,171,402 22,645,968 22,673,157

The advances from shareholders are unsecured, interest free and have no fixed terms of repayment. The shareholder advances are mainly denominated in U.S. dollars and the carrying values approximate their fair values.

18 DEFERRED TAx LIABILITIES

Deferred tax is calculated in full on temporary differences under the liability method using the tax rate enacted at each of the end of the reporting periods of 16.5%. Most of the deferred tax balance is to be recovered or settled after more than twelve months.

The movement on the deferred tax liabilities account is as follows:

Derivative and Accelerated tax other Financial HK$’000 depreciation instruments Total

Balance as at 1 January 2010 3,241,268 (15,069) 3,226,199Charge/(credit) to profit or loss 290,022 (31) 289,991Charge to other comprehensive income – 8,050 8,050

Balance as at 31 December 2010 3,531,290 (7,050) 3,524,240

Balance as at 1 January 2011 3,531,290 (7,050) 3,524,240Charge to profit or loss 52,429 31 52,460Charge to other comprehensive income – 5,283 5,283

Balance as at 31 December 2011 3,583,719 (1,736) 3,581,983

Balance as at 1 January 2012 3,583,719 (1,736) 3,581,983Credit to profit or loss (11,329) (12) (11,341)Charge to other comprehensive income – 885 885

Balance as at 31 December 2012 3,572,390 (863) 3,571,527

Balance as at 1 January 2013 3,572,390 (863) 3,571,527Credit to profit or loss (57,700) – (57,700)Credit to other comprehensive income – (1,021) (1,021)

Balance as at 30 June 2013 3,514,690 (1,884) 3,512,806

47



19 ASSET DECOMMISSIONING LIABILITIES

Under the current SoC Agreement, CAPCO is to charge a periodic amount of the estimated expenditure for dismantling and removing fixed assets to an asset decommissioning liabilities account. The balance of the asset decommissioning liabilities account of HK$238,991,000 as at 31 December 2010, HK$366,299,000 as at 31 December 2011, HK$500,670,000 as at 31 December 2012, and HK$487,815,000 as at 30 June 2013 recognised under the SoC represents a liability to CAPCO. The carrying amounts of the asset decommissioning liabilities approximate their fair values.

20 RECONCILIATION OF PROFIT BEFORE INCOME TAx TO NET CASH INFLOW FROM OPERATIONS


Profit before income tax 3,457,395 3,687,603 3,786,260 1,869,086 1,840,603Adjustment for: Finance costs/(income) 104,898 34,237 (26,348) (13,720) 26,326

Operating profit 3,562,293 3,721,840 3,759,912 1,855,366 1,866,929Adjustments for: Amortisation 63,453 70,869 94,824 35,457 41,518 Other financing costs 8,021 9,191 15,351 4,750 11,199

Operating profit before working capital changes 3,633,767 3,801,900 3,870,087 1,895,573 1,919,646(Increase)/decrease in inventory – stores and fuel (335,001) 21,836 (1,063,600) (414,258) 95,305Decrease/(increase) in sundry debtors and prepayments 13,735 142,215 (2,406) (21,284) (27,953)(Increase)/decrease in current account with CLP Power (114,013) (249,297) 217,925 140,300 79,400Increase/(decrease) in asset decommissioning liabilities 108,916 127,308 134,371 68,228 (12,855)(Decrease)/increase in trade and other payables (105,148) (285,688) 213,560 475,797 (15,509)

Net cash inflow from operations 3,202,256 3,558,274 3,369,937 2,144,356 2,038,034

21 COMMITMENTS

(a) Capital expenditure on fixed assets and leasehold land authorised but not brought into the Financial Information is as follows:


Contracted but not provided for 647,411 1,036,259 664,525 838,124Authorised but not contracted for 2,635,491 2,672,877 1,896,915 1,408,703

3,282,902 3,709,136 2,561,440 2,246,827

(b) Natural gas for the Black Point Power Station is purchased by CAPCO on a take-or-pay basis pursuant to two contracts, with a 20-year one commencing in January 1996 and another one with a 5-year plateau supply commencing in May 2012 respectively. The prices for the gas under both contracts are determined by reference to certain market and economic indices.

48



22 FUTURE MINIMUM LEASE PAYMENTS RECEIVABLE UNDER OPERATING LEASES

The future aggregate minimum lease payments receivable in respect of the operating leases contained in the Electricity Supply Contract with CLP Power are as follows:


Within one year 291,862 318,542 364,953 360,805Later than one year and not later than five years 1,103,971 1,203,316 1,376,777 1,360,173Over five years 5,146,398 5,451,589 6,056,254 5,893,493

6,542,231 6,973,447 7,797,984 7,614,471

23 RELATED PARTY TRANSACTIONS

(a) The following is a summary of significant related party transactions in addition to those disclosed in Notes 13, 14 and 17, which were carried out in the normal course of business during the year ended 31 December 2010, 2011 and 2012, and the six months ended 30 June 2012 and 2013:


Payment from CLP Power under Electricity Supply Contract (i) Operating lease income 316,698 322,592 365,305 165,127 183,550 Lease service charges 9,781,672 10,704,729 11,572,071 5,360,462 5,238,474 Finance lease income 2,454,927 2,730,519 2,726,965 1,353,365 1,338,644

Total related party income (note 5) 12,553,297 13,757,840 14,664,341 6,878,954 6,760,668Payment for finance lease receivable and other charges 1,827,615 2,259,799 2,402,292 1,171,443 1,085,579

14,380,912 16,017,639 17,066,633 8,050,397 7,846,247

Costs reimbursed to CLP Power (ii) 1,273,484 1,311,957 1,358,149 667,035 489,111

(i) CAPCO sells electricity under the Electricity Supply Contract to CLP Power at cost plus profit calculated in accordance with the SoC. CLP Power owns a 40% share in CAPCO.

Pursuant to the requirements of HKFRS, the electricity supply arrangement was assessed to contain leases with service payments. The payment receivable from CLP Power pursuant to the contract has been allocated to the different leases and service elements according to the requirements of HKFRS.

(ii) In accordance with the Operating Service Agreement between CLP Power and CAPCO, CLP Power is responsible to CAPCO for the efficient and proper construction, commissioning, operation and maintenance of the electricity generating facilities of CAPCO. In return, CAPCO reimburses CLP Power for all costs incurred in performance of the agreement. The portion of the amount recharged by CLP Power which is accounted for as operating expenses by CAPCO is covered under the amount payable under the electricity supply arrangement in (i) above.

49



23 RELATED PARTY TRANSACTIONS (continued)

(b) Total remuneration of CAPCO’s directors, who are the key management personnel of CAPCO, is as follows:


Directors’ remuneration – fees: Mr. Muschalik, James Frederick – 29 250 124 124 Mr. Neo, Kim Teck 250 221 – – – Mr. Chu, Richard Yiu Wah 180 180 90 90 – Mr. Ho, David 180 180 180 89 90 Ms. Lee, Sharon Therese – – 90 – 89 Mr. Leung, Kin Chung Jonathan 180 180 180 90 89 Ms. Luk, Siu-Kuen Rebecca 180 180 180 89 90 Mr. Tsao, Kwai Wah Andrew 180 44 – – – Mr. Tho, Yow Yin – 136 180 89 89 Mr. Mocatta, William Elkin 180 180 180 90 89 Mr. Brandler, Andrew Clifford Winawer 180 180 180 90 89 Mr. Crighton, David John 180 22 – – – Mr. Lancaster, Richard Kendall 180 180 180 89 90 Mr. Truscott, James Richarde – 158 180 90 89 Mrs. Yuen So, Siu Mai Betty 180 180 180 89 89

2,050 2,050 2,050 1,019 1,017

(c) CAPCO has no employees and the staff costs are recharged from CLP Power under the Operating Service Agreement with CLP Power.

24 ULTIMATE AND IMMEDIATE HOLDING COMPANY

CAPCO is 60% owned by ExxonMobil Energy Limited (“EMEL”) and 40% owned by CLP Power which is responsible for CAPCO’s day to day operations. The ultimate holding company of ExxonMobil Energy Limited is Exxon Mobil Corporation, a company incorporated in the United States of America. The ultimate holding company of CLP Power is CLP Holdings Limited, a company incorporated in Hong Kong.

25 SUBSEQUENT EVENTS

On 19 November 2013, EMEL, CLP Power and China Southern Power Grid International (HK) Co., Limited (“CSG HK”) entered into a sale and purchase agreement, whereby CLP Power and CSG HK will each acquire half of EMEL’s 60% equity interest in, and the associated shareholder’s advances to, CAPCO, subject to certain conditions being satisfied.

III SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by CAPCO in respect of any period subsequent to 30

June 2013 up to the date of this report. Subsequent to 30 June 2013, an interim dividend in the amount of

HK$912,400,000 was paid on 16 September 2013, and another interim dividend in the amount of $912,300,000

was declared on 25 November 2013 to be paid on 16 December 2013.

Yours faithfully,

PricewaterhouseCoopersCertified Public Accountants

Hong Kong

50

APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS ON CAPCO

The following discussion and analysis is based on the Financial Information from the Accountant’s report on

CAPCO contained in Appendix II to this circular.

REVENUE

Revenue of CAPCO for each of the three years ended 31 December 2010, 2011 and 2012 was HK$12,607

million, HK$13,803 million and HK$14,696 million respectively. Revenue of CAPCO for each of the six-month

periods ended 30 June 2012 and 2013 was HK$6,899 million and HK$6,775 million respectively.

CAPCO sells electricity to CLP Power under an Electricity Supply Contract where CLP Power is obliged to

purchase the total electricity output of CAPCO. It provides that CLP Power is responsible for the payment of

all of CAPCO’s operating expenses as well as CAPCO’s share of the return permitted under the SoC. Under

HKFRS, this contract constitutes a lease arrangement which is accounted for as a finance lease. Revenue of

CAPCO primarily consists of finance lease income, operating lease and lease service income from CLP Power.

Revenue of CAPCO also includes income earned on sales of electricity by CLP Power to the Chinese mainland.

The SoC contemplates a special arrangement for supply to the Chinese mainland. Pursuant to a separate

agreement between CLP Power, CAPCO and the Hong Kong Government, 80% of the profit from sales to the

Chinese mainland is credited to a SoC Tariff Stabilisation Fund for the benefit of the customers of CLP Power.

The remaining 20% of the profit from such sales is shared between CAPCO and CLP Power in the ratio of 60%

and 40% respectively.

As compared to the previous year, revenue increased by HK$1,196 million in 2011 and HK$893 million in 2012

mainly attributable to higher fuel expenses over these two years. Revenue decreased by HK$124 million for the

first half of 2013 as compared to the same period in 2012 mainly attributable to lower fuel expenses.

PROFIT BEFORE INCOME TAx

Profit before income tax of CAPCO for each of the three years ended 31 December 2010, 2011 and 2012 was

HK$3,457 million, HK$3,688 million and HK$3,786 million respectively. Profit before income tax of CAPCO

for each of the six-month periods ended 30 June 2012 and 2013 was HK$1,869 million and HK$1,841 million

respectively. The increases in profit before income tax during the three years ended 31 December 2010, 2011

and 2012 were primarily due to increases in operating lease income and finance lease income from finance lease

receivables as CAPCO continued to invest as described below under “Financial Position”, and the decreases in

interest on lower interest rates and loan balances. The decrease in profit before income tax for the first half of

2013 as compared to the same period in 2012 was mainly due to the unrealised exchange loss on retranslation of

shareholders’ advances at the end of the reporting periods.

CAPITAL STRUCTURE

As at 31 December 2010, 2011 and 2012, and 30 June 2013, CAPCO had outstanding bank loans of HK$3,600

million, HK$3,250 million, HK$4,115 million and HK$4,327 million (of which HK$3,102 million, HK$3,250

million, HK$4,115 million and HK$4,327 million were due in less than one year) respectively. Bank loans

were mainly denominated in Hong Kong dollars and since July 2012, all have been at variable rates. The

other borrowings of HK$2,063 million as at 31 December 2010, 2011 and 2012, and 30 June 2013 are from

ExxonMobil Hong Kong Limited, a fellow subsidiary of EMEL, and are unsecured, bear fixed interest rate of

2.85% per annum and are repayable in full on 31 December 2013, and will be subject to refinancing at such time.

The effective interest rates of fixed rate loans and loans swapped to fixed rates were 2.9% to 7.2%, 2.9% to 7.2%,

2.9% and 2.9%, and variable rate loans were 0.6% to 0.8%, 0.7% to 2.8%, 0.6% to 2.0% and 0.9% to 1.5% as at

31 December 2010, 2011 and 2012, and 30 June 2013 respectively.

51


As at 31 December 2010, 2011 and 2012, and 30 June 2013, CAPCO had total debt to total capital ratios of

20.3%, 19.0%, 21.0% and 21.4% respectively. For the purpose of the calculation of total debt to total capital

ratios, shareholders’ funds comprise shareholders’ advances and shareholders’ equity. Shareholders’ advances

are mainly denominated in U.S. dollars, unsecured, interest free and have no fixed terms of repayment.

Pursuant to a deed of subordination, shareholders’ advances to CAPCO are subordinated to certain debt financing

of CAPCO and may be repaid up to a defined ratio of CAPCO’s borrowed moneys to shareholders’ funds.

CAPCO adopts prudent liquidity risk management which implies maintaining sufficient cash and making

available an adequate amount of committed credit facilities with staggered maturities to reduce refinancing risk

in any year and to fund working capital, debt servicing, dividend payments and capital investments.

FOREIGN ExCHANGE RISK MANAGEMENT

Under the terms of the Electricity Supply Contract with CLP Power, CAPCO is permitted to charge CLP Power

for all properly incurred foreign exchange payments, converted into Hong Kong dollars.

FINANCIAL POSITION

The total assets of CAPCO were HK$33,474 million as at 31 December 2010, and increased to HK$34,138

million as at 31 December 2011 mainly due to the increase in the finance lease receivables balance as a result

of the increase in assets leased to CLP Power upon the commissioning of emissions control asset and from the

replacement and refurbishment of assets for the operational generating plants, partly offset by the repayment

of finance lease receivables. The total assets of CAPCO increased to HK$35,965 million as at 31 December

2012 mainly due to the increase in property, plant and equipment under construction in relation to facilities

for receiving new gas supply, and increase in fuel inventory partly offset by the repayment of finance lease

receivables. The total assets decreased to HK$35,405 million as at 30 June 2013 mainly due to the repayment of

finance lease receivables.

As at 31 December 2010, CAPCO had total liabilities of HK$33,095 million which were increased to

HK$33,624 million as at 31 December 2011 mainly due to the increase in shareholders’ advances. The total

liabilities increased to HK$35,426 million as at 31 December 2012 mainly due to the increase in borrowings for

financing assets under construction and the increase in shareholders’ advances. The total liabilities decreased to

HK$34,663 million as at 30 June 2013 mainly due to the decrease in creditors for capital works.

EMPLOYEES AND REMUNERATION POLICIES

CAPCO does not have any of its own employees. CLP Power operates CAPCO’s generating facilities under an

Operating Service Agreement with CAPCO. The staff expenses of CAPCO represented the amounts recharged

from CLP Power under the Operating Service Agreement. Total staff expenses for each of the three years ended

31 December 2010, 2011 and 2012 were HK$261 million, HK$269 million and HK$282 million respectively.

Total staff expenses for each of the six-month periods ended 30 June 2012 and 2013 were HK$142 million and

HK$128 million respectively. The increase in total staff expenses in 2012 was mainly due to higher actual in-

posts and pay increases. The decrease in total staff expenses for the first half of 2013 as compared to the same

period in 2012 was mainly due to lower provision for annual incentives in 2013.

CLP Power’s remuneration policy is broadly aligned with companies with whom CLP Power competes for human

resources and remuneration reflects performance, complexity and responsibility.

52


CAPITAL COMMITMENTS, CHARGES ON ASSETS AND CONTINGENT LIABILITIES

As at 31 December 2010, 2011 and 2012 and 30 June 2013, CAPCO had capital commitments amounting

to HK$3,283 million, HK$3,709 million, HK$2,561 million and HK$2,247 million respectively. These

commitments mainly relate to the maintenance and refurbishment of the operational generating plants, the

budgets of which had been authorised or their contracts had been placed but the amounts had not yet been

brought into the financial statements. The higher capital commitments in 2010 and 2011 were mainly due to an

emissions control project and gas receiving facilities projects under construction. These projects were gradually

completed after 2011. CAPCO had no charges on assets and contingent liabilities as at 31 December 2010, 2011

and 2012 and 30 June 2013.

53

APPENDIX IV ACCOUNTANT’S REPORT ON PSDC

The fo l lowing i s t he t ex t o f a repor t rece i ved f rom the Company’s repor t ing accoun tan t ,

PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this

circular.

10 December 2013

The Directors

CLP Holdings Limited

Dear Sirs,

We report on the financial information of Hong Kong Pumped Storage Development Company, Limited

(“PSDC”) which comprises the statements of financial position of PSDC as at 31 December 2010, 2011 and 2012

and 30 June 2013, and the statements of profit or loss, the statements of profit or loss and other comprehensive

income, the statements of changes in equity and the statements of cash flows of PSDC for each of the years

ended 31 December 2010, 2011, 2012 and the six months ended 30 June 2013 (the “Relevant Periods”) and a

summary of significant accounting policies and other explanatory information. This financial information has

been prepared by the directors of CLP Holdings Limited (the “Company”) and is set out in Sections I to III

below for inclusion in Appendix IV to the circular of the Company dated 10 December 2013 (the “Circular”) in

connection with the proposed acquisition of PSDC by the Company.

PSDC was incorporated in Hong Kong on 28 April 1989 as a limited liability company.

The financial statements of PSDC for each of the years ended 31 December 2010, 31 December 2011 and 31

December 2012 and the interim financial statements of PSDC for the six months ended 30 June 2013 were

audited by PricewaterhouseCoopers pursuant to separate terms of engagement with PSDC.

The directors of PSDC during the Relevant Periods are responsible for the preparation of the financial statements

of PSDC that give a true and fair view in accordance with Hong Kong Financial Reporting Standards (“HKFRS”)

issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), and for such internal

control as the directors determine is necessary to enable the preparation of financial statements that are free from

material misstatement, whether due to fraud or error.

The financial information has been prepared based on the audited financial statements of PSDC with no

adjustment made thereon.

54


Directors’ Responsibility for the Financial Information

The directors of the Company are responsible for the preparation of the financial information that gives a true

and fair view in accordance with HKFRS and accounting policies adopted by the Company and its subsidiaries

(together, the “Group”) as set out in the interim report of the Company for the period ended 30 June 2013.

Reporting Accountant’s Responsibility

Our responsibility is to express an opinion on the financial information and to report our opinion to you. We

carried out our procedures in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting

Accountant” issued by the HKICPA.

Opinion

In our opinion, the financial information gives, for the purpose of this report, a true and fair view of the state of

affairs of PSDC as at 31 December 2010, 2011 and 2012 and 30 June 2013 and of PSDC’s results and cash flows

for the Relevant Periods then ended.

Review of stub period comparative financial information

We have reviewed the stub period comparative financial information set out in Sections I to II below included

in Appendix IV to the Circular which comprises the statement of profit or loss, the statement of profit or loss

and other comprehensive income, the statement of changes in equity and the statement of cash flows of PSDC

for the six months ended 30 June 2012 and a summary of significant accounting policies and other explanatory

information (the “Stub Period Comparative Financial Information”).

The directors of the Company are responsible for the preparation and presentation of the Stub Period

Comparative Financial Information in accordance with the accounting policies adopted by the Group as set out in

the interim report of the Company for the period ended 30 June 2013.

Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on

our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410,

“Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the

HKICPA. A review of Stub Period Comparative Financial Information consists of making inquiries, primarily of

persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on

Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant

matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the Stub Period

Comparative Financial Information, for the purpose of this report is not prepared, in all material respects, in

accordance with the accounting policies set out in Note 2 of Section II below.

55


I FINANCIAL INFORMATION OF PSDC

The following is the financial information of PSDC as at 31 December 2010, 2011 and 2012 and 30 June 2013

and for each of the years ended 31 December 2010, 2011 and 2012 and the six months ended 30 June 2012 and

2013 (“Financial Information”):

1. Statements of Profit or Loss


Revenue 4 403,068 419,024 433,446 217,065 223,898

Expenses Operating expenses 5 155,732 159,817 163,449 82,340 83,998

Depreciation 9 1,412 1,328 1,296 663 620

Amortisation 10 37,660 37,735 37,934 18,958 18,975

Staff expenses 5 8,503 8,962 8,986 4,830 3,484

203,307 207,842 211,665 106,791 107,077

Operating profit 5 199,761 211,182 221,781 110,274 116,821

Finance costs 6 (2,184) (3,734) (3,920) (1,366) (2,450)

Finance income 6 3 5 3 1 1

(2,181) (3,729) (3,917) (1,365) (2,449)

Profit before income tax 197,580 207,453 217,864 108,909 114,372

Income tax expense 7 (49,489) (51,957) (54,593) (27,274) (28,655)

Profit for the year/period attributable to shareholders 148,091 155,496 163,271 81,635 85,717

Dividends Interim dividends paid 8 133,200 139,900 147,000 49,000 51,400

Final dividends proposed 8 14,900 15,600 16,300 – –

148,100 155,500 163,300 49,000 51,400

56


I FINANCIAL INFORMATION OF PSDC (continued)

2. Statements of Profit or Loss and Other Comprehensive Income

Six months Year ended 31 December ended 30 June 2010 2011 2012 2012 2013HK$’000 (unaudited)

Profit for the year/period 148,091 155,496 163,271 81,635 85,717

Other comprehensive income for the year/period, net of tax – – – – –

Total comprehensive income attributable to shareholders 148,091 155,496 163,271 81,635 85,717

57



3. Statements of Financial Position

As at As at 31 December 30 JuneHK$’000 Note 2010 2011 2012 2013

Non-current assetsFixed assets 9 3,815 2,487 1,257 1,001Intangible assets 10 888,951 861,428 828,603 815,045Deferred tax asset 11 250,786 268,273 286,188 295,141

1,143,552 1,132,188 1,116,048 1,111,187

Current assetsSundry debtors and prepayments 12 94,010 92,017 92,236 43,220Current account with CLP Power Hong Kong Limited 13 36,447 30,155 40,642 32,372Bank balances and cash 295 325 425 439

130,752 122,497 133,303 76,031

Current liabilitiesTrade and other payables 14 (2,348) (1,931) (1,827) (1,110)Bank loans 15 (119,005) (308,810) (197,762) (121,990)Tax payable (18,186) (7,239) (7,703) (20,601)Advances from shareholders 16 (422,105) (295,721) (196,021) (132,193)

(561,644) (613,701) (403,313) (275,894)

Net current liabilities (430,892) (491,204) (270,010) (199,863)

Total assets less current liabilities 712,660 640,984 846,038 911,324

Financed by:EquityShare capital 17 10,000 10,000 10,000 10,000Retained profits 61 57 28 34,345Proposed dividend 14,900 15,600 16,300 –

24,961 25,657 26,328 44,345

Non-current liabilitiesBank loans 15 165,000 – 110,000 110,000Deferred revenue 18 522,699 615,327 709,710 756,979

687,699 615,327 819,710 866,979

Equity and non-current liabilities 712,660 640,984 846,038 911,324

58



4. Statements of Changes in Equity RetainedHK$’000 Share capital profits Total

Balance at 1 January 2010 10,000 14,170 24,170

Total comprehensive income for the year – 148,091 148,091Dividends 2009 final – (14,100) (14,100) 2010 interim – (133,200) (133,200)

Balance at 31 December 2010 10,000 14,961 24,961








Total comprehensive income for the period (unaudited) – 81,635 81,635Dividends 2011 final – (15,600) (15,600) 2012 interim – (49,000) (49,000)

Balance at 30 June 2012 (unaudited) 10,000 32,692 42,692


Total comprehensive income for the period – 85,717 85,717Dividends 2012 final – (16,300) (16,300) 2013 interim – (51,400) (51,400)

Balance at 30 June 2013 10,000 34,345 44,345

59



5. Statements of Cash Flows


Operating activitiesNet cash inflow from operations 19 343,376 366,207 361,547 233,216 249,455Interest received 3 5 3 1 1PRC business tax, and other taxes/fees paid (14,829) (16,794) (17,561) (8,632) (9,108)Income tax paid – outside Hong Kong (66,190) (80,434) (72,251) (23,878) (24,857)

Net cash inflow from operating activities 262,360 268,984 271,738 200,707 215,491

Investing activitiesCapital expenditure (6,161) (10,212) (5,175) (552) (5,781)Proceeds from disposal of fixed assets – – – – 127

Net cash outflow from investing activities (6,161) (10,212) (5,175) (552) (5,654)

Net cash inflow before financing activities 256,199 258,772 266,563 200,155 209,837

Financing activitiesDecrease in shareholders’ advances (106,337) (126,403) (99,209) (98,948) (63,950)Proceeds from long-term borrowings 165,000 – 110,000 – –Repayment of long-term borrowings (145,000) – (165,000) – –(Decrease)/increase in short-term borrowings (20,208) 24,805 53,952 (35,197) (75,772)Interest paid (2,249) (2,344) (3,606) (1,471) (2,401)Dividends paid (147,300) (154,800) (162,600) (64,600) (67,700)

Net cash outflow from financing activities (256,094) (258,742) (266,463) (200,216) (209,823)

Increase/(decrease) in cash and cash equivalents 105 30 100 (61) 14

Cash and cash equivalents at beginning of year/period 190 295 325 325 425

Cash and cash equivalents at end of year/period 295 325 425 264 439

Analysis of cash and cash equivalentsBank balances and cash 295 325 425 264 439

60


II NOTES TO THE FINANCIAL INFORMATION OF PSDC

1 GENERAL INFORMATION

The principal activity of PSDC is providing pumped storage services to CLP Power Hong Kong Limited (“CLP Power”) in the Chinese mainland in accordance with the Pumped Storage Services Agreement.

PSDC is a limited liability company incorporated in Hong Kong. The address of its registered office is 8 Laguna Verde Avenue, Hung Hom, Kowloon, Hong Kong.

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The principal accounting policies adopted in the preparation of the Financial Information are set out below. These policies have been consistently applied to all the periods presented.

The Financial Information has been prepared in accordance with HKFRS issued by HKICPA.

The preparation of the Financial Information in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying PSDC’s accounting policies.

The Financial Information has been prepared under the historical cost convention.

PSDC has assessed the net current liabilities position as at the end of each reporting period and believe that PSDC can continue in operational existence for the foreseeable future based on a stable operating cash flow from the Pumped Storage Services Agreement with CLP Power and continued support from shareholders. Therefore, PSDC continues to adopt the going concern basis in preparing the Financial Information.

The following new/revised HKFRS have been issued and are mandatory for adoption by PSDC for accounting periods beginning on or after 1 January 2014, but PSDC has not early adopted:

• AmendmentstoHKAS32“OffsettingFinancialAssetsandFinancialLiabilities”• AmendmentstoHKAS36“RecoverableAmountDisclosuresforNon-FinancialAssets”• HKFRS9“FinancialInstruments”

The adoption of these new/revised HKFRS will have no significant impact on the results and financial position of PSDC.

(b) Revenue

Revenue primarily represents service fee income from providing pumped storage services to CLP Power. The service fee income is recognised when pumped storage services are rendered and is determined based on the annual fee earned plus the expenses recognised by PSDC in the period. The portion of the amount received from CLP Power which is in excess of the service fee income recognised as revenue in a period is deferred in the statements of financial position as deferred revenue.

(c) Fixed assets

Fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the fixed asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to PSDC and the cost of the item can be measured reliably. For any asset replacement, the carrying amount of the replaced part is derecognised. All other repairs and maintenance are recognised as expenses in the period in which they are incurred.

61


II NOTES TO THE FINANCIAL INFORMATION OF PSDC (continued)


(c) Fixed assets (continued)

Depreciation of fixed assets is provided on a straight line basis commencing from the date of commissioning over the depreciation period as follows:

Land use right and Buildings 20 yearsFurniture, construction equipment, tools, communication and office equipment 10 yearsComputers and office automation equipment 5 yearsMotor vehicles 5 years

The gain or loss on disposal of a fixed asset is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in profit or loss.

The assets’ residual values are reviewed and adjusted, if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

(d) Intangible assets

Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses. Intangible assets are amortised on a straight-line basis over their useful life. PSDC’s intangible assets comprise the pumped storage capacity right which expires in 2034. The remaining useful life of the capacity right as at 1 January 2010 was 24 years.

(e) Cash and cash equivalents

Cash and cash equivalents comprise cash at banks and on hand.

(f) Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

(g) Current and deferred tax

The tax expense for the period comprises current and deferred tax.

The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the People’s Republic of China.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Information. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

62




(h) Borrowings and interest

Borrowings are recognised initially at fair value, net of transaction costs incurred. Transaction costs are incremental costs that are directly attributable to the acquisition or issue of a financial liability. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is amortised to profit or loss or to the cost of the qualifying assets over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless PSDC has an unconditional right to defer settlement of the liabilities for at least 12 months after the end of the reporting period.

Interest on borrowings arranged to finance the acquisition, construction or production of fixed assets is:

(i) incorporated in capital expenditure during the period of time that is required to complete and prepare the asset for its intended use; and

(ii) charged to finance costs when incurred after commissioning.

(i) Foreign currency

The Financial Information is presented in Hong Kong dollars which is PSDC’s functional and presentation currency.

Foreign currency transactions are translated into Hong Kong dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rate of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

(j) Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under an operating lease are charged to profit or loss on a straight-line basis over the period of the lease.

(k) Related parties

Related parties are individuals and companies, including key management personnel, where the individual or company has the ability, directly or indirectly, to control or joint control the other party or exercise significant influence over the other party in making financial and operating decisions. A close family member of any such individual is considered to be a related party. Parties are also considered to be related if they are joint ventures of the same third party; or one party is a joint venture and the other is an associate of the same third party.

3 FINANCIAL RISK MANAGEMENT

(a) Financial risk factors

PSDC’s activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. PSDC’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise the impact of exchange rate and interest rate fluctuations on PSDC’s financial performance.

Risk management for PSDC is carried out by the CLP Group’s central treasury department (Group Treasury) under policies approved by the Board of Directors of PSDC.

(i) Foreign exchange risk

PSDC’s major foreign exchange risk arises from U.S. dollar payment obligations with regard to shareholders’ advances repayment. Foreign exchange gains and losses are ultimately recovered from CLP Power under the current Pumped Storage Services Agreement and as a result PSDC does not retain any foreign exchange risk.

63





(ii) Interest-rate risk

PSDC’s interest-rate risk arises from debt borrowings. Borrowings issued at variable rates expose PSDC to cash flow interest rate risk whilst borrowings issued at fixed rate expose PSDC to fair value interest rate risk. PSDC is currently not exposed to interest rate risk as all the interest paid by PSDC can be recoverable from CLP Power under the Pumped Storage Services Agreement.

(iii) Credit risk

All PSDC’s revenue comes from CLP Power which has investment grade credit ratings of A and A1 from S&P and Moody’s respectively as at 31 December 2010, 2011 and 2012 and 30 June 2013. The receivables from CLP Power under the Pumped Storage Services Agreement are the only trade receivables of PSDC. The outstanding trade receivables from CLP Power for a given month will be settled in the following month. None of the balance outstanding at the end of the reporting period is past due and no provision for impairment is recorded.

PSDC’s exposure to credit risk from treasury transactions arises from default of the counterparty, with a maximum exposure equal to the carrying amount of the respective financial instrument as reported on the statement of financial position. All finance-related transactions and deposits of PSDC are made with counterparties with investment grade credit rating to minimise credit risk.

(iv) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and making available an adequate amount of committed credit facilities with staggered maturities to reduce refinancing risk in any year and to fund working capital, debt servicing, dividend payments and capital investments. PSDC maintains significant flexibility to respond to opportunities and events by ensuring that adequate committed credit lines are available and shareholders’ advances can be called upon to meet future funding requirements. Management monitors rolling forecasts of PSDC’s undrawn borrowing facilities and cash and cash equivalents on the basis of expected cash flows.

The table below analyses the remaining contractual maturities at the end of the reporting period of PSDC’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows:

Between Between Within 1 to 2 2 to 5 OverHK$’000 1 year years years 5 years Total

As at 31 December 2010Non-derivative financial liabilitiesBank loans 122,588 166,788 – – 289,376Trade & other payables 2,348 – – – 2,348Advances from shareholders 422,105 – – – 422,105

547,041 166,788 – – 713,829

64







As at 31 December 2011Non-derivative financial liabilitiesBank loans 311,299 – – – 311,299Trade & other payables 1,931 – – – 1,931Advances from shareholders 295,721 – – – 295,721

608,951 – – – 608,951

As at 31 December 2012Non-derivative financial liabilitiesBank loans 202,691 2,150 111,162 – 316,003Trade & other payables 1,827 – – – 1,827Advances from shareholders 196,021 – – – 196,021

400,539 2,150 111,162 – 513,851

As at 30 June 2013Non-derivative financial liabilitiesBank loans 125,748 2,521 110,025 – 238,294Trade & other payables 1,110 – – – 1,110Advances from shareholders 132,193 – – – 132,193

259,051 2,521 110,025 – 371,597

(b) Fair value estimation

The fair value of financial instruments that are not traded in an active market is determined by using appropriate valuation techniques and making assumptions that are based on market conditions existing at the end of each reporting period. A discounted cash flow method is used to determine the fair value for long-term borrowings.

The nominal value of the current account with CLP Power and advances from shareholders and other current assets and liabilities approximate their fair values.

65




(c) Capital management

The primary objective of PSDC’s capital management is to safeguard PSDC’s ability to continue as a going concern and maintain a healthy capital ratio to support the business and to enhance shareholder value.

PSDC manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, PSDC may adjust the dividend payment to shareholders or raise and repay debts and shareholders’ advances. PSDC’s capital management objectives, policies or processes were unchanged during each of the reporting periods.

Pursuant to a bank covenant, PSDC undertakes to maintain a defined ratio of borrowed moneys to shareholders’ fund. PSDC has complied with this requirement during each of the reporting periods.

PSDC monitors capital using a total debt to total capital ratio. Total debt comprises PSDC’s bank loans. For the purpose of the calculation of total debt to total capital ratio, shareholders’ funds comprise shareholders’ advances and shareholders’ equity. The total debt to total capital ratios at each of the reporting periods is set out in the table below:


Bank loans (Note 15) 284,005 308,810 307,762 231,990

Shareholders’ funds 447,066 321,378 222,349 176,538

Total capital 731,071 630,188 530,111 408,528

Total debt to total capital ratio 38.85% 49.00% 58.06% 56.79%

4 REVENUE

Revenue represents income from pumped storage services rendered to CLP Power. Revenue is recognised when services are rendered.

5 OPERATING PROFIT

Operating profit is stated after charging/(crediting) the following:


Staff expenses (Note (a)) 8,503 8,962 8,986 4,830 3,484Auditor’s remuneration 59 63 67 32 36Operating lease expense (Note (b)) 100,000 100,000 100,000 49,913 49,913Operating lump sum service charge to GPSC 31,952 32,674 34,399 17,106 18,130PRC business tax, and other local taxes/fees 14,986 16,837 17,768 8,832 9,254Net exchange loss/(gain) 355 164 340 (29) 483

Note:

(a) The staff expenses represented the amounts recharged from CLP Power under the Operating Services Agreement with PSDC.

(b) Under the Capacity Purchase Contract with Guangdong Pumped Storage Company, Limited (“GPSC”), a fixed annual payment of HK$100,000,000 is payable to Guangzhou Pumped Storage Power Station every year commencing from 1 December 2009 for the use of the land, other resources and infrastructural facilities. The arrangement is treated as operating lease. The fixed annual payment made will be recognised as prepayment in the statements of financial position and amortised evenly as operating lease expense over twelve months.

66



6 FINANCE COSTS AND INCOME


Finance costs:Interest expenses on bank loans 2,489 2,307 3,524 1,435 2,130Loan charges 458 124 1,487 582 170Exchange (gain)/loss (763) 1,303 (1,091) (651) 150

2,184 3,734 3,920 1,366 2,450

Finance income:Interest income on bank deposits 3 5 3 1 1

7 INCOME TAx ExPENSE

People’s Republic of China (“PRC”) profits tax has been provided for at the rate of 25% on the estimated assessable profits for each of the reporting period.


Taxation in the statement of profit or loss represents:

PRC profits tax – current year/period 66,867 69,444 72,508 36,217 37,608 – under provision in prior years 88 – – – –

66,955 69,444 72,508 36,217 37,608

Deferred taxation relating to temporary differences (Note 11) – credit for the year/period (17,378) (17,487) (17,915) (8,943) (8,953) – under provision in prior years (88) – – – –

(17,466) (17,487) (17,915) (8,943) (8,953)

Income tax expense 49,489 51,957 54,593 27,274 28,655

The taxation on PSDC’s profit before taxation is calculated as follows:


Profit before taxation in the profit or loss 197,580 207,453 217,864 108,909 114,372

Taxation charge calculated at the PRC taxation rate of 25% 49,395 51,863 54,466 27,227 28,593Revenue not subject to tax (31) (31) – (15) –Expenses not deductible for tax purpose 125 125 127 62 62

Taxation expenses 49,489 51,957 54,593 27,274 28,655

No Hong Kong profits tax has been provided for the years ended 31 December 2010, 2011 and 2012 and for the six-month periods ended 30 June 2012 and 30 June 2013 as PSDC has no estimated profit assessable to Hong Kong profits tax for these periods.

67



8 DIVIDENDS

Year ended 31 December Six months ended 30 JuneHK$’000 2010 2011 2012 2012 2013

Interim dividends paid 133,200 139,900 147,000 49,000 51,400Final dividend proposed 14,900 15,600 16,300 – –

148,100 155,500 163,300 49,000 51,400

Year ended 31 December Six months ended 30 JuneHK$ per share 2010 2011 2012 2012 2013

Interim dividends paid 1,332 1,399 1,470 490 514Final dividend proposed 149 156 163 – –

1,481 1,555 1,633 490 514

The proposed final dividend is not reflected as dividend payable in the Financial Information, but as a separate component of the shareholders’ funds in the statement of financial position. The final dividend proposed in each year end was paid in the first six-month periods of the following year.

Subsequent to 30 June 2013, an interim dividend in the amount of HK$51,400,000 (HK$514 per share) was paid on 16 September 2013, and another interim dividend of HK$51,400,000 (HK$514 per share) was declared on 25 November 2013 to be paid on 16 December 2013.

68



9 FIxED ASSETS

Furniture, Land use equipment, right and tools andHK$’000 buildings vehicles Total

At 1 January 2010Cost 16,832 4,636 21,468Accumulated depreciation (12,505) (3,749) (16,254)

Net book value 4,327 887 5,214

Year ended 31 December 2010Net book value at 1 January 2010 4,327 887 5,214Additions – 13 13Depreciation (1,082) (330) (1,412)

Net book value at 31 December 2010 3,245 570 3,815



Year ended 31 December 2011Net book value at 1 January 2011 3,245 570 3,815Depreciation (1,082) (246) (1,328)




Year ended 31 December 2012Net book value at 1 January 2012 2,163 324 2,487Additions – 66 66Depreciation (1,081) (215) (1,296)


69



9 FIxED ASSETS (continued)

Furniture, Land use equipment, right and tools andHK$’000 buildings vehicles Total



Six months ended 30 June 2013Net book value at 1 January 2013 1,082 175 1,257Additions – 364 364Depreciation (541) (79) (620)

Net book value at 30 June 2013 541 460 1,001

At 30 June 2013Cost 16,832 4,306 21,138Accumulated depreciation (16,291) (3,846) (20,137)

Net book value 541 460 1,001

The land use right is held in Conghua, Guangdong Province, People’s Republic of China.

10 INTANGIBLE ASSETS

The intangible assets of PSDC comprise the right to pumped storage capacity of Guangzhou Pumped Storage Power Station in Conghua.

Six months ended Year ended 31 December 30 JuneHK$’000 2010 2011 2012 2013

Net carrying valueAt beginning of year/period 920,463 888,951 861,428 828,603Additions 6,148 10,212 5,109 5,417Amortisation (37,660) (37,735) (37,934) (18,975)

Net carrying value at end of year/period 888,951 861,428 828,603 815,045

Cost 2,411,835 2,422,047 2,427,156 2,432,573Accumulated amortisation (1,522,884) (1,560,619) (1,598,553) (1,617,528)

Net carrying value at end of year/period 888,951 861,428 828,603 815,045

The cost of pumped storage capacity represents the capitalised purchase price and the related costs in relation to the development of Guangzhou Pumped Storage Power Station (“GPS”) in Conghua. The capitalised purchase price is for the right to use 50% of the capacity of Phase 1 of the GPS, as well as the corresponding right to use the associated transmission facilities. These rights have been valid since 1994 with the commencement of the commercial operation of the Pumped Storage unit and will end in 2034.

70



11 DEFERRED TAx ASSET

Deferred tax is calculated in full on temporary differences under the liability method using the tax rates enacted or substantively enacted by the end of respective reporting period in the PRC tax jurisdiction. The deferred tax asset is recognised at the applicable PRC tax rate of 25%. Most of the deferred tax balance is to be recovered or settled after more than twelve months.

The movement on the deferred tax asset account is as follows:

Tax depreciation on pumped DeferredHK$’000 storage capacity revenue Total

Balance as at 1 January 2010 145,696 87,624 233,320(Charge)/credit to profit or loss (5,584) 23,050 17,466

Balance as at 31 December 2010 140,112 110,674 250,786






Balance as at 30 June 2013 125,897 169,244 295,141

12 SUNDRY DEBTORS AND PREPAYMENTS


Sundry debtors 962 492 709 826Operating lease prepayment 91,507 91,507 91,507 41,594Other prepayments 1,541 18 20 800

94,010 92,017 92,236 43,220

13 CURRENT ACCOUNT WITH CLP POWER HONG KONG LIMITED

PSDC’s only trade receivables are the amounts due from CLP Power under the Pumped Storage Services Agreement with CLP Power. The amounts due from CLP Power as at 31 December 2010, 2011 and 2012 and 30 June 2013 mainly represent the trade receivables under the Pumped Storage Services Agreement for the month of December 2010, 2011, 2012 and June 2013 respectively, to be settled in their following month and with aging of 30 days or below. The carrying amounts approximate their fair values.

71



14 TRADE AND OTHER PAYABLES


Trade payables 62 83 80 62Accrued expenses 2,286 1,848 1,747 1,048

2,348 1,931 1,827 1,110

The aging analysis of PSDC’s trade payables (based on invoice date) is as follows:


30 days or below 62 83 80 6231 – 90 days – – – –Over 90 days – – – –

62 83 80 62

15 BANK LOANS


Current – Short-term bank loan 119,005 143,810 197,762 121,990 – Current portion of long-term bank loan – 165,000 – –

119,005 308,810 197,762 121,990Non-current – Long-term bank loan 165,000 – 110,000 110,000

284,005 308,810 307,762 231,990

The maturity of the bank loans is as follows:


Within one year 119,005 308,810 197,762 121,990Between one and two years 165,000 – – –Between two and five years – – 110,000 110,000

284,005 308,810 307,762 231,990

The denomination of the bank loans was in Hong Kong dollars.

All of PSDC’s borrowings at the end of the reporting period were at variable rates as follows:


Variable rate loans 0.7% – 1.0% 0.9% – 1.0% 1.4% – 1.8% 1.0% – 1.8%

The carrying amounts of the bank loans as at the end of each of the reporting period approximate their fair value.

72



16 ADVANCES FROM SHAREHOLDERS


ExxonMobil Energy Limited 215,272 150,817 99,971 67,418CLP Power 206,833 144,904 96,050 64,775

422,105 295,721 196,021 132,193

The advances from shareholders are unsecured, interest free and have no fixed terms of repayment. The shareholders’ advances are denominated in U.S. dollars and the carrying values approximate their fair values.

17 SHARE CAPITAL


Authorised, issued and fully-paid 100,000 shares of HK$100 each 10,000 10,000 10,000 10,000

18 DEFERRED REVENUE

31 December 30 JuneHK$’000 2010 2011 2012 2013

At beginning of year/period 430,502 522,699 615,327 709,710Revenue deferred during the year/period 92,197 92,628 94,383 47,269

At end of year/period 522,699 615,327 709,710 756,979

The deferred revenue represents the portion of the pumped storage service payments received from CLP Power which is in excess of the amount recognised as income. The balance of the deferred revenue accumulated in the statements of financial position is expected to be recognised to income commencing from year 2015 to 2034.

73



19 RECONCILIATION OF PROFIT BEFORE TAxATION TO NET CASH INFLOW FROM OPERATIONS


Profit before income tax 197,580 207,453 217,864 108,909 114,372Adjustments for: Finance costs 2,184 3,734 3,920 1,365 2,450 Finance income (3) (5) (3) (1) (1)

Operating profit 199,761 211,182 221,781 110,273 116,821Adjustments for: Depreciation 1,412 1,328 1,296 663 620 Amortisation 37,660 37,735 37,934 18,958 18,975 Gain on disposal of fixed assets – – – – (127) Other finance costs (458) (124) (1,487) (582) (170) PRC business tax, and other local taxes/fees 14,986 16,837 17,768 8,832 9,254

Operating profit before working capital changes 253,361 266,958 277,292 138,144 145,373(Increase)/decrease in sundry debtors and prepayments (1,711) 1,332 (219) 49,031 49,016Decrease/(increase) in current account with CLP Power 84 6,292 (10,487) (1,144) 8,270(Decrease)/increase in creditors (555) (1,003) 578 71 (473)Increase in deferred revenue 92,197 92,628 94,383 47,114 47,269

Net cash inflow from operations 343,376 366,207 361,547 233,216 249,455

20 COMMITMENTS

(a) Capital expenditure authorised but not brought into the Financial Information is as follows:


Contracted but not provided for – – – –Authorised but not contracted for 10,583 10,736 19,353 32,172

10,583 10,736 19,353 32,172

(b) The future aggregate minimum operating lease payments to GPSC in respect of the use of the land, other resources and infrastructural facilities are as follows:


Within one year 100,000 100,000 100,000 100,000Later than one year but no later than five years 400,000 400,000 400,000 400,000Over five years 1,891,507 1,791,507 1,691,507 1,641,507

2,391,507 2,291,507 2,191,507 2,141,507

74



21 RELATED PARTY TRANSACTIONS

(a) Related party transactions in the normal course of business

Summary of significant related party transactions, in addition to those disclosed in Notes 13 and 16, which were carried out in the normal course of business:


Pumped storage service fee received from CLP Power (i) – Pumped storage services to CLP Power 403,068 419,024 433,446 217,065 223,898 – Revenue received in advance of providing pumped service 92,197 92,628 94,383 47,114 47,269Costs reimbursed to CLP Power (ii) 12,309 12,817 13,932 6,705 4,174

(i) Under the Pumped Storage Services Agreement between PSDC and CLP Power, PSDC renders pumped storage services to CLP Power and receives an amount comprising an annual fee plus the costs as stipulated under the agreement. CLP Power owns a 49% share in PSDC.

(ii) In accordance with the Operating Services Agreement between CLP Power and PSDC, CLP Power is responsible to PSDC for the efficient and proper construction, commissioning, operation and maintenance of the Power Station and the Associated Transmission Facilities. In return, PSDC reimburses CLP Power for all costs incurred in performance of the agreement. The portion of the amount recharged by CLP Power which is accounted for as operating expenses by PSDC is covered under the pumped storage services in (i) above.

(b) Emoluments of key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of PSDC. It comprises all the Directors of PSDC’s board. Total Directors’ remuneration is as follows:


Directors’ remuneration – fees: Mr. Muschalik, James Frederick – 8 48 24 33 Mr. Mocatta, William Elkin 67 48 67 33 24 Mr. Ho, David 48 48 48 24 24 Mr. Brandler, Andrew Clifford Winawer 48 48 48 24 24 Mr. Lancaster, Richard Kendall 47 48 48 24 24 Mr. Chu, Richard Yiu Wah 48 48 24 24 – Mr. Neo, Kim Teck 48 59 – – – Mr. Cheung, Wai Man – – 24 – 24 Mr. Leung, Kin Chung Jonathan 48 12 – – – Ms. Luk, Siu-Kuen Rebecca – 36 48 24 24 Mrs Yuen So, Siu Mai Betty 1 – – – –

355 355 355 177 177

(c) PSDC has no employees and the staff costs are recharged from CLP Power under the Operating Services Agreement with CLP Power.

75



22 ULTIMATE AND IMMEDIATE HOLDING COMPANY

PSDC is 51% owned by ExxonMobil Energy Limited (“EMEL”) and 49% owned by CLP Power which is responsible for PSDC’s day to day operations. The ultimate holding company of EMEL is Exxon Mobil Corporation, a company incorporated in the United States of America. The ultimate holding company of CLP Power is CLP Holdings Limited, a company incorporated in Hong Kong.

23 SUBSEQUENT EVENTS

On 19 November 2013, EMEL and CLP Power entered into a sale and purchase agreement, whereby CLP Power will acquire EMEL’s 51% equity interest in, and the associated shareholder’s advances to, PSDC, subject to certain conditions being satisfied.

III SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by PSDC in respect of any period subsequent to 30 June

2013 up to the date of this report. Subsequent to 30 June 2013, an interim dividend in the amount of $51,400,000

was paid on 16 September 2013, and another interim dividend in the amount of $51,400,000 was declared on 25

November 2013 to be paid on 16 December 2013.

Yours faithfully,


Hong Kong

76

APPENDIX V MANAGEMENT DISCUSSION AND ANALYSIS ON PSDC

The following discussion and analysis is based on the Financial Information from the Accountant’s report on

PSDC contained in Appendix IV to this circular.

REVENUE

Revenue of PSDC for each of the three years ended 31 December 2010, 2011 and 2012 was HK$403 million,

HK$419 million and HK$433 million respectively. Revenue of PSDC for each of the six-month periods ended 30

June 2012 and 2013 was HK$217 million and HK$224 million respectively. Revenue of PSDC primarily consists

of service fee income from providing pumped storage services to CLP Power based on a Pumped Storage

Services Agreement with CLP Power. Under the Pumped Storage Services Agreement, the price paid by CLP

Power to PSDC for the pumped storage services is sufficient to cover all of PSDC’s operating expenses and net

return.

Revenue increased by HK$16 million and HK$14 million in the year 2011 and 2012 respectively, and increased

by HK$7 million for the first half of 2013 as compared to the same period in 2012, mainly attributable to the

increases in operating expenses and net return.

PROFIT BEFORE INCOME TAx

Profit before income tax of PSDC for each of the three years ended 31 December 2010, 2011 and 2012 was

HK$198 million, HK$207 million and HK$218 million respectively. Profit before income tax of PSDC for each

of the six-month periods ended 30 June 2012 and 2013 was HK$109 million and HK$114 million respectively.

Under the Pumped Storage Services Agreement, PSDC’s net return is based on a percentage of its net fixed assets

in a manner analogous to the SoC, subject to a minimum return level. The minimum return is HK$50 million

escalated at 5% per annum compounded from 1988. The increases in profit before income tax over the years/

periods represent the 5% escalation stipulated in the minimum return provision.

CAPITAL STRUCTURE

As at 31 December 2010, 2011 and 2012, and 30 June 2013, PSDC had outstanding bank loans of HK$284

million, HK$309 million, HK$308 million and HK$232 million (of which HK$119 million, HK$309 million,

HK$198 million and HK$122 million were due in less than one year) respectively. All bank loans were

denominated in Hong Kong dollars and carried at variable interest rates of 0.7% to 1.0%, 0.9% to 1.0%, 1.4% to

1.8% and 1.0% to 1.8% as at 31 December 2010, 2011 and 2012, and 30 June 2013 respectively.

As at 31 December 2010, 2011 and 2012, and 30 June 2013, PSDC had total debt to total capital ratios of

38.85%, 49.00%, 58.06% and 56.79% respectively. For the purpose of the calculation of total debt to total capital

ratios, shareholders’ funds comprise shareholders’ advances and shareholders’ equity. Shareholders’ advances

are denominated in U.S. dollars, unsecured, interest free and have no fixed terms of repayment.

Pursuant to a bank covenant, PSDC undertakes to maintain a defined ratio of borrowed moneys to shareholders’

funds.

PSDC adopts prudent liquidity risk management which implies maintaining sufficient cash and making available

an adequate amount of committed credit facilities with staggered maturities to reduce refinancing risk in any year

and to fund working capital, debt servicing, dividend payments and capital investments.

77

APPENDIX V MANAGEMENT DISCUSSION AND ANALYSIS ON PSDC

FOREIGN ExCHANGE RISK MANAGEMENT

Under the terms of the Pumped Storage Services Agreement, PSDC is permitted to charge CLP Power for all

properly incurred foreign exchange payments, converted into Hong Kong dollars.

FINANCIAL POSITION

As at 31 December 2010, 2011 and 2012, and 30 June 2013, PSDC had total assets of HK$1,274 million,

HK$1,255 million, HK$1,249 million and HK$1,187 million respectively. The decreases in total assets during

the years 2010 to 2012 were mainly due to the amortisation of the pumped storage capacity right, which is

treated as an intangible asset. The decrease in total assets as at 30 June 2013 from 31 December 2012 was mainly

due to the amortisation of the HK$100 million fixed annual payment made to Guangdong Pumped Storage

Company, Limited in December 2012.

As at 31 December 2010, 2011 and 2012, and 30 June 2013, PSDC had total liabilities of HK$1,249 million,

HK$1,229 million, HK$1,223 million and HK$1,143 million respectively. The decreases in total liabilities during

the reporting periods were mainly due to the repayment of advances from shareholders.

EMPLOYEES AND REMUNERATION POLICIES

PSDC does not have any of its own employees. CLP Power operates PSDC’s pumped storage facilities under an

Operating Services Agreement with PSDC. The staff expenses of PSDC represented the amounts recharged from

CLP Power under the Operating Services Agreement. Total staff expenses for each of the three years ended 31

December 2010, 2011 and 2012 were HK$8.5 million, HK$9.0 million and HK$9.0 million respectively. Total

staff expenses for each of the six-month periods ended 30 June 2012 and 2013 were HK$4.8 million and HK$3.5

million respectively. The increases in total staff expenses in 2011 and 2012 were mainly due to pay increases.

The decrease in total staff expenses for the first half of 2013 as compared to the same period in 2012 was mainly

due to lower average salary costs as a result of staff movements during 2012.

CLP Power’s remuneration policy is broadly aligned with companies with whom CLP Power competes for human

resources and remuneration reflects performance, complexity and responsibility.

CAPITAL COMMITMENTS, CHARGES ON ASSETS AND CONTINGENT LIABILITIES

As at 31 December 2010, 2011 and 2012 and 30 June 2013, PSDC had capital commitments amounting to

HK$10.6 million, HK$10.7 million, HK$19.4 million and HK$32.2 million respectively. These commitments

mainly relate to overhaul and refurbishment projects for the pumped storage power station and associated

transmission facilities, the budgets of which had been authorised or their contracts had been placed but the

amounts had not yet been brought into the financial statements. PSDC had no charges on assets and contingent

liabilities as at 31 December 2010, 2011 and 2012 and 30 June 2013.

78

APPENDIX VI UNAUDITED PRO FORMA FINANCIAL INFORMATIONOF THE ENLARGED CLP GROUP

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED CLP GROUP

The following is an illustrative and unaudited pro forma statement of assets and liabilities of the Enlarged Group (the “Unaudited Pro Forma Financial Information”), which has been prepared on the basis of the notes set out below and in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effects of the Acquisitions on the Group, assuming that the Acquisitions had been completed on 30 June 2013.

The Unaudited Pro Forma Financial Information has been prepared using accounting policies consistent with that of the Group, as set out in the Company’s 2013 Interim Report.

The Unaudited Pro Forma Financial Information of the Enlarged Group should be read in conjunction with the financial information contained in this circular and the accountant’s report on CAPCO as set out in Appendix II and the accountant’s report on PSDC as set out in Appendix IV to this circular.

The Unaudited Pro Forma Financial Information has been prepared by the Directors for illustrative purposes only and is based on a number of assumptions, estimates, uncertainties and currently available information. Because of its hypothetical nature, the Unaudited Pro Forma Financial Information may not reflect the true picture of the financial position of the Enlarged Group had the Acquisitions been completed at 30 June 2013 or at any future date.

79


B. UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP AT 30 JUNE 2013

Unaudited pro forma Unaudited statement of consolidated assets and statement of liabilities assets and of the liabilities of Enlarged the Group at Group at 30 June 2013 CAPCO PSDC Pro Forma Adjustments 30 June 2013

HK$M HK$M HK$M HK$M HK$M HK$M HK$M HK$M HK$M HK$M Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7(a) Note 7(b) Note 8

Non-current assets Fixed assets 127,582 2,010 1 – – – – – – 129,593 Leasehold land and land use rights under operating leases 1,826 3,002 – – – – 943 – – 5,771 Goodwill and other intangible assets 25,496 – 815 – – – 7,904 4,995 – 39,210 Interests in joint ventures 19,272 – – 14,000 (4,508) 8,470 (23,493) (3,922) – 9,819 Interest in an associate 1,358 – – – – – – – – 1,358 Finance lease receivables 1,523 24,216 – – (24,216) – – – – 1,523 Deferred tax assets 890 – 295 – – – – (295) – 890 Derivative financial instruments 3,228 – – – – – – – – 3,228 Available-for-sale investments 1,263 – – – – – – – – 1,263 Other non-current assets 131 – – – – – – – – 131

182,569 29,228 1,111 14,000 (28,724) 8,470 (14,646) 778 – 192,786

Current assets Inventories – stores and fuel 1,772 2,401 – – – – – – – 4,173 Renewable energy certificates 940 – – – – – – – – 940 Trade and other receivables 20,498 1,393 76 – – – (1,326) (32) – 20,609 Finance lease receivables 86 2,383 – – (2,383) – – – – 86 Derivative financial instruments 1,258 – – – – – – – – 1,258 Bank balances, cash and other liquid funds 7,640 – – (49) – – – – – 7,591

32,194 6,177 76 (49) (2,383) – (1,326) (32) – 34,657

Current liabilities Customers’ deposits (4,434) – – – – – – – – (4,434) Trade and other payables (17,140) (23,816) (133) – – – 17,198 164 (48) (23,775) Income tax payable (363) (448) (21) – – – – – – (832) Bank loans and other borrowings (10,612) (6,390) (122) (4,971) – – – – – (22,095) Obligations under finance leases (2,393) – – – 2,383 – – – – (10) Derivative financial instruments (1,482) (9) – – – – – – – (1,491)

(36,424) (30,663) (276) (4,971) 2,383 – 17,198 164 (48) (52,637)

Net current liabilities (4,230) (24,486) (200) (5,020) – – 15,872 132 (48) (17,980)

Total assets less current liabilities 178,339 4,742 911 8,980 (28,724) 8,470 1,226 910 (48) 174,806

Non-current liabilities Bank loans and other borrowings (52,043) – (110) (8,980) – – – – – (61,133) Obligations under finance leases (24,247) – – – 24,216 – – – – (31) Deferred tax liabilities (8,464) (3,513) – – – – (156) (954) – (13,087) Derivative financial instruments (3,806) – – – – – – – – (3,806) Fuel clause account (711) – – – – – – – – (711) Scheme of Control reserve accounts (264) – – – – – – – – (264) Other non-current liabilities (1,958) (488) (757) – – – – – – (3,203)

(91,493) (4,001) (867) (8,980) 24,216 – (156) (954) – (82,235)

Net assets 86,846 741 44 – (4,508) 8,470 1,070 (44) (48) 92,571

80


C. NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. Amounts are extracted from the unaudited consolidated statement of financial position of the Group

at 30 June 2013 as set out in the Company’s 2013 Interim Report.

2. Amounts are derived from the audited statement of financial position of CAPCO at 30 June 2013 as

set out in Appendix II to this circular.

3. Amounts are derived from the audited statement of financial position of PSDC at 30 June 2013 as

set out in Appendix IV to this circular.

4. Pursuant to the Acquisition Agreements, the consideration for the Acquisitions is HK$14 billion in

aggregate, of which HK$12 billion is attributable to the acquisition of 30% equity interest in, and

associated shareholder’s advances to, CAPCO and HK$2 billion is attributable to the acquisition

of 51% equity interest in, and associated shareholder’s advances to, PSDC. The consideration shall

be payable by the Group at Completion. For the purposes of the Unaudited Pro Forma Financial

Information, it is assumed that the consideration is wholly funded from available banking facilities

at 30 June 2013 and the loan facilities of HK$10 billion which HSBC has committed to enter into.

5. For the purposes of the Unaudited Pro Forma Financial Information and for illustrative purpose

only, the Group has carried out a consideration allocation exercise in accordance with Hong

Kong Financial Reporting Standard 3 (Revised) “Business Combinations” (“HKFRS 3”), which is

illustrated as follows:

CAPCO PSDC

(Note 7(a)) (Note 7(b))

HK$M HK$M

Settlement of a pre-existing finance lease payable

by the CLP Group to CAPCO 4,508 –

Acquisition of shareholder’s advances from EMEL

to CAPCO/PSDC 6,802 67

Acquisition of identifiable net assets and liabilities 690 1,933

12,000 2,000

With respect to CAPCO, the consideration allocated to the settlement of a pre-existing finance lease

payable of HK$4,508 million is calculated as the difference between the fair value of the finance

lease payable of HK$31,998 million and its carrying amount of HK$26,599 million, net of deferred

tax of HK$891 million. This amount of HK$4,508 million is recognised in the Group’s consolidated

statement of profit or loss as required by HKFRS 3.

This adjustment reflects the settlement of the current and non-current portions of the pre-existing

finance lease payable by the Group to CAPCO totalling HK$26,599 million at 30 June 2013 and a

further adjustment to allocate consideration.

81


C. NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP (continued)

6. The Group owns a 40% equity interest in CAPCO and a 49% equity interest in PSDC (“Initial

Equity Investments”) before the Acquisitions. The acquisition of the additional 30% equity interest

in CAPCO and 51% equity interest in PSDC gives the Group control over CAPCO and PSDC and

thus CAPCO and PSDC will become subsidiaries of the Group upon Completion. The acquisitions

of the 30% equity interest in CAPCO and 51% equity interest in PSDC are treated as “step

acquisitions” under HKFRS 3.

According to HKFRS 3, a step acquisition is accounted for using the acquisition method of

accounting, and the Initial Equity Investments are remeasured to fair value at the Completion

date and any gain or loss arising thereon is recognised in the statement of profit or loss. As such,

the Initial Equity Investments are deemed to have been disposed of in return, together with the

consideration transferred, for the total 70% equity interest in CAPCO and the total 100% equity

interest in PSDC. Upon Completion, the fair values of the Initial Equity Investments form one of

the components to calculate goodwill, along with the consideration transferred and non-controlling

interests, if any, less the fair value of the identifiable net assets of CAPCO and PSDC.

This adjustment reflects the fair value gains upon the deemed disposal of the Initial Equity

Investments (which are presented as interests in joint ventures in the unaudited consolidated

statement of financial position of the Group at 30 June 2013) of HK$6,635 million with respect to

CAPCO and HK$1,835 million with respect to PSDC.

7. These adjustments reflect the fair value adjustments on acquisition and the elimination of intra-

group balances.

Upon Completion, the identifiable assets and liabilities of CAPCO and PSDC will be accounted

for in the consolidated financial statements of the Enlarged Group at their fair values under the

acquisition method of accounting in accordance with HKFRS 3.

For the purposes of the Unaudited Pro Forma Financial Information and for illustrative purpose

only, the Directors have determined the fair values of the identifiable net assets and liabilities

of CAPCO and PSDC at 30 June 2013. The fair values and carrying amounts of the assets and

liabilities of CAPCO and PSDC at 30 June 2013 and the financial effects of the Acquisitions are

analysed as follows:

82



(a) CAPCO

Carrying

amount Fair value

HK$M HK$M

Fixed assets 2,010 2,010

Leasehold land and land use rights under operating leases 3,002 3,945

Finance lease receivable 26,599 31,998

Inventories – stores and fuel 2,401 2,401

Trade and other receivables 1,393 1,393

Trade and other payables (23,816) (23,816)

Income tax payable (448) (448)

Bank loans and other borrowings (6,390) (6,390)

Derivative financial instruments (9) (9)

Deferred tax liabilities (3,513) (4,560)

Other non-current liabilities (488) (488)

Net assets 741 6,036

HK$M HK$M

Consideration for 70% equity interest in CAPCO

Cash consideration (see Note 5) 690

Fair value of existing 40% interest in joint venture 6,931*

Total consideration for 70% equity interest in CAPCO 7,621

Non-controlling interests 1,811

Less:

Fair value of net assets (6,036)

Consolidation adjustment on settlement of

the pre-existing finance lease and

the associated deferred tax 4,508

Fair value of net assets attributable to the Group (1,528)

Goodwill 7,904

* The fair value of existing 40% interest in CAPCO is implied from the consideration paid for the acquisition of the 30% interest of HK$5,198 million (being the consideration of HK$12 billion less the amount paid for the acquisition of the shareholder’s advances of HK$6,802 million).

The Enlarged Group recognises the non-controlling interest in CAPCO at the non-controlling

interest’s proportionate share of the fair value of CAPCO’s identifiable net assets and

liabilities as set out above. The total non-controlling interests for the Enlarged Group at

30 June 2013, amounted to HK$1,924 million (being the original non-controlling interests

of HK$113 million plus the non-controlling interest that arises from the acquisition of

HK$1,811 million). Based on the assumptions set out above, goodwill of HK$7,904 million

is recognised which represents the excess of consideration and non-controlling interest over

the fair values of the identifiable net assets and liabilities of CAPCO at 30 June 2013.

83



(b) PSDC

Carrying

amount Fair value

HK$M HK$M

Fixed assets 1 1

Intangible assets 815 5,810

Deferred tax assets 295 295

Trade and other receivables 76 76

Trade and other payables (133) (133)

Income tax payable (21) (21)

Bank loans and other borrowings (232) (232)

Deferred tax liabilities – (1,249)

Other non-current liabilities (757) (757)

Net assets 44 3,790

HK$M HK$M

Consideration for 100% equity interest in PSDC

Cash consideration (see Note 5) 1,933

Fair value of existing 49% interest in joint venture 1,857

Total consideration for 100% equity interest in PSDC 3,790

Less: Fair value of net assets (3,790)

Goodwill –

The Directors have determined that the consideration is equal to the fair value of the identifiable net assets of PSDC at 30 June 2013 and therefore no goodwill is recognised.

The adjustments also include the elimination of intra-group balances between CLP Power and CAPCO of HK$17,198 million, which comprise shareholder’s advances of HK$15,872 million and current accounts of HK$1,326 million, and intra-group balances between CLP Power and PSDC of HK$164 million, which comprise shareholder’s advances of HK$132 million and current accounts of HK$32 million, upon the Acquisitions.

Since the fair values and the carrying amounts of the identifiable net assets and liabilities of CAPCO and PSDC as at the Completion date may be materially different from their respective values used in the preparation of the Unaudited Pro Forma Financial Information, the actual amounts of the assets, liabilities and goodwill to be recorded in the consolidated financial statements of the Enlarged Group upon Completion may be materially different from the estimated amounts shown in this Appendix.

8. The adjustment represents the estimated amounts for legal and professional fees and other expenses payable by the Group relating to the Acquisitions of approximately HK$48 million.

9. No other adjustments have been made to reflect any trading result or other transactions of the Group, CAPCO and PSDC entered into subsequent to 30 June 2013. Unless otherwise stated, the adjustments above do not have a recurring effect.

84


D. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report received from PricewaterhouseCoopers, Certified Public Accountants,

Hong Kong, for the purpose of incorporation in this circular.

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION INCLUDED IN A CIRCULAR

TO THE DIRECTORS OF CLP HOLDINGS LIMITED

We have completed our reasonable assurance engagement to report on the compilation of unaudited pro

forma financial information of CLP Holdings Limited (the “Company”) and its subsidiaries (collectively

the “Group”) and, CAPCO and PSDC (together the “Target Companies”, and collectively the Group and

the Target Companies form the “Enlarged Group”) as prepared by the directors for illustrative purpose

only. The unaudited pro forma financial information consists of the unaudited pro forma statement

of assets and liabilities as at 30 June 2013, and related notes (the “Unaudited Pro Forma Financial

Information”) as set out on pages 78 to 83 of the Company’s circular dated 10 December 2013, in

connection with the proposed acquisition of the Target Companies (the “Transaction”) by the Company.

The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma

Financial Information are described in notes 1 to 9.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the

impact of the Transaction on the Group’s financial position as at 30 June 2013 as if the Transaction had

taken place at 30 June 2013. As part of this process, information about the Group’s financial position has

been extracted by the directors from the Group’s financial statements for the period ended 30 June 2013,

on which a review report has been published.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance

with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong

Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro

Forma Financial Information for Inclusion in Investment Circulars” (“AG 7”) issued by the Hong Kong

Institute of Certified Public Accountants (“HKICPA”).

85


D. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP (continued)

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on

the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any

responsibility for any reports previously given by us on any financial information used in the compilation

of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were

addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420

“Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in

a Prospectus”, issued by the HKICPA. This standard requires that the reporting accountant complies with

ethical requirements and plans and performs procedures to obtain reasonable assurance about whether the

directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph

4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For the purposes of this engagement, we are not responsible for updating or reissuing any reports or

opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial

Information, nor have we, in the course of this engagement, performed an audit or review of the financial

information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of unaudited pro forma financial information included in a circular is solely to illustrate

the impact of a significant event or transaction on unadjusted financial information of the entity as if the

event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the

illustration. Accordingly, we do not provide any assurance that the actual outcome of the Transaction at 30

June 2013 would have been as presented.

A reasonable assurance engagement to report on whether the unaudited pro forma financial information

has been properly compiled on the basis of the applicable criteria involves performing procedures to

assess whether the applicable criteria used by the directors in the compilation of the unaudited pro forma

financial information provide a reasonable basis for presenting the significant effects directly attributable

to the event or transaction, and to obtain sufficient appropriate evidence about whether:

• Therelatedproformaadjustmentsgiveappropriateeffecttothosecriteria;and

• Theunaudited pro forma financial information reflects the proper application of those adjustments

to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting

accountant’s understanding of the nature of the company, the event or transaction in respect of which

the unaudited pro forma financial information has been compiled, and other relevant engagement

circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial

information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

86


D. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP (continued)

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the

Company on the basis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information

as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.


Hong Kong, 10 December 2013

87

APPENDIX VII GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes

particulars given in compliance with the Listing Rules for the purpose of giving information with regard

to the CLP Group. The Directors, having made all reasonable enquiries, confirm that to the best of their

knowledge and belief the information contained in this circular is accurate and complete in all material

aspects and is not misleading or deceptive, and there are no other matters the omission of which would

make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

Interests of Directors and Chief Executive Officer

This section sets out, as at the Latest Practicable Date, the interests and short positions (or a negative statement) of the Directors and the Chief Executive Officer of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required under (a), (b) or (c) below (the “Required Disclosures”):

(a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or

(b) pursuant to section 352 of the SFO, to be entered in the register of the Company referred to therein; or

(c) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, to be notified to the Company and the Stock Exchange.

(1) Aggregate long position in the shares, underlying shares and debentures of the Company and its associated corporations

Total interests in % of theDirectors Capacity number of Shares issued Shares

The Hon. Sir Michael Kadoorie Note (a) 479,372,780 18.97416

Mr. William Mocatta Note (b) 400,000 0.01583

Mr. R. J. McAulay Note (c) 288,811,649 11.43152

Mr. J. A. H. Leigh Note (d) 224,314,077 8.87863

Dr. Y. B. Lee Note (e) 15,806 0.00063

Mrs. Fanny Law Personal 16,800 0.00066

Mr. Nicholas C. Allen Note (f) 12,000 0.00047

Mr. Richard Lancaster (Chief Executive Officer) Personal 600 0.00002

Mr. Andrew Brandler Note (g) 10,600 0.00042

88


Notes:

(a) The Hon. Sir Michael Kadoorie was deemed (by virtue of the SFO) to be interested in 479,372,780 Shares. These Shares were held in the following capacity:

i) 1,243 Shares were held by his spouse, Lady Kadoorie in a personal capacity.

ii) 70,146,655 Shares were ultimately held by discretionary trusts, of which The Hon. Sir Michael Kadoorie is one of the discretionary objects.

iii) 233,044,212 Shares were ultimately held by a discretionary trust, of which The Hon. Sir Michael Kadoorie is one of the beneficiaries and the founder.

iv) 170,180,670 Shares were ultimately held by a discretionary trust, of which The Hon. Sir Michael Kadoorie is one of the beneficiaries and the founder.

v) 2,000,000 Shares were ultimately held by each of three discretionary trusts, all of which The Hon. Sir Michael Kadoorie is one of the beneficiaries and the founder.

For the purpose of the SFO, the spouse of The Hon. Sir Michael Kadoorie was taken to have a discloseable duty in Hong Kong in relation to the Shares referred to in (ii) to (v) above. The spouse of The Hon. Sir Michael Kadoorie was therefore deemed to be interested in 479,372,780 Shares representing approximately 18.97% of the issued share capital of the Company, of which 1,243 Shares were held by her in a personal capacity and an aggregate of 479,371,537 Shares were attributed to her pursuant to the SFO for disclosure purposes. Nevertheless, she has no interest, legal or beneficial, in these 479,371,537 Shares attributed to her for disclosure purposes.

(b) Mr. William Mocatta was deemed (by virtue of the SFO) to be interested in 400,000 Shares. These Shares were held in the following capacity:

i) 250,000 Shares were held in the capacity as the founder of a discretionary trust.

ii) 150,000 Shares were held by a trust of which Mr. William Mocatta is one of the beneficiaries.

(c) Mr. R. J. McAulay was deemed (by virtue of the SFO) to be interested in 288,811,649 Shares. These Shares were held in the following capacity:

i) 13,141 Shares were held in a personal capacity.

ii) 70,146,655 Shares were ultimately held by discretionary trusts, of which Mr. R. J. McAulay is one of the discretionary objects.

iii) 218,651,853 Shares were ultimately held by a discretionary trust, of which Mr. R. J. McAulay, his wife and members of his family are discretionary objects.

(d) Mr. J. A. H. Leigh was deemed (by virtue of the SFO) to be interested in 224,314,077 Shares. These Shares were held in the following capacity:

i) 100,000 Shares were held in a beneficial owner capacity.

ii) 5,562,224 Shares were ultimately held by a discretionary trust. Mr. J. A. H. Leigh was deemed to be interested in such 5,562,224 Shares in his capacity as one of the trustees of a trust which was deemed to be interested in such 5,562,224 Shares.

iii) 218,651,853 Shares were ultimately held by a discretionary trust. Mr. J. A. H. Leigh was deemed to be interested in such 218,651,853 Shares in his capacity as one of the trustees of a trust which was deemed to be interested in such 218,651,853 Shares.

(e) 600 Shares were held in a personal capacity and 15,206 Shares were held jointly with spouse.

(f) 12,000 Shares were held in a beneficial owner capacity and jointly with spouse.

(g) 600 Shares were held in a personal capacity and 10,000 Shares were held in a beneficial owner capacity.

89


Messrs. I. D. Boyce, V. F. Moore, Paul A. Theys and Vincent Cheng, Ms. Irene Lee, Professor Judy

Tsui, Sir Rod Eddington and Dr. Rajiv Lall who are Directors of the Company, and Mr. David

Moore who is an Alternate Director, have each confirmed that they had no interests in the shares,

underlying shares and debentures of the Company or any of its associated corporations (within the

meaning of Part XV of the SFO) for the purposes of the Required Disclosures.

(2) Aggregate short position in the shares, underlying shares and debentures of the Company and its

associated corporations

None of the Directors and the Chief Executive Officer of the Company had any short positions in

the shares, underlying shares and debentures of the Company or any of its associated corporations

(within the meaning of Part XV of the SFO) for the purposes of the Required Disclosures.

3. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets

which, since 31 December 2012, being the date to which the latest published audited consolidated

financial statements of the CLP Group were made up, had been acquired, or disposed of by, or leased to

any member of the Enlarged Group, or was proposed to be acquired, or disposed of by, or leased to any

member of the Enlarged Group.

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which any Director

was materially interested and which was significant in relation to any business of the Enlarged Group.

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts

with any member of the CLP Group which will not expire or is not determinable by the CLP Group within

one year without payment of any compensation (other than statutory compensation).

4. DIRECTORS’ INTEREST IN COMPETING BUSINESSES

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors and their

respective associates had any interest in businesses that competed or was likely to compete, whether

directly or indirectly, with the business of the CLP Group.

5. MATERIAL CONTRACTS

Save as disclosed below, no material contracts (not being contracts entered into in the ordinary course of

business carried out by the Enlarged Group) had been entered into by any member of the Enlarged Group

within the two years preceding the Latest Practicable Date:

(a) the placing agreement dated 13 December 2012 entered into between the Company and Goldman

Sachs (Asia) L.L.C., J.P Morgan Securities plc and UBS AG, Hong Kong Branch, as placing agents

in relation to the placing of 120,307,170 new Shares at HK$63.25 per Share;

(b) the acquisition agreement dated 25 July 2013 entered into between EnergyAustralia Pty Ltd,

EnergyAustralia NSW Pty Ltd and EnergyAustralia Holdings Limited, all being wholly-owned

subsidiaries of CLP Group, and Delta Electricity, and the NSW State Government (Australia) in

respect of the acquisitions of the Mount Piper Power Station and the Wallerawang Power Station;

90


(c) the CAPCO Acquisition Agreement; and

(d) the PSDC Acquisition Agreement.

6. LITIGATION

Save as disclosed below and in Appendix I to this circular under the paragraph “B. Contingent Liabilities”

of the section entitled “2. Indebtedness” which relates to litigation, arbitration or claims of material

importance, neither the Company nor any member of the Enlarged Group was engaged in any litigation

or arbitration of material importance and no litigation or claim of material importance is known to the

Directors to be pending or threatened by or against the Company or any member of the Enlarged Group as

at the Latest Practicable Date.

CLP Power is challenging the amount of rent and rates levied by the Hong Kong Government dating back

to the year of assessment 1999/2000. While the Lands Tribunal judgment was received in CLP Power’s

favour in April 2013, final resolution of the appeals will be subject to further appeals on detailed valuation

matters and possible subsequent appeals against the Lands Tribunal judgment on points of law. The Hong

Kong Government has made interim refunds to CLP Power in relation to CLP Power’s claims and as

reported in the 2013 Interim Report, HK$1,641 million in interim refunds have been received. Refunds

received by CLP Power have been fully expended by way of rent and rates special rebate to CLP Power’s

customers. The interim refunds were made by the Hong Kong Government without prejudice to the final

outcome of the appeals which means that these amounts will be adjusted by reference to the decision

of the Lands Tribunal and subsequent appeals. CLP Power maintains that it would recover no less than

interim refunds received to date in the final outcome of these appeals.

7. ExPERTS AND CONSENTS

The following is the qualification of the professional advisor who has given an opinion or advice, which is

contained in this circular:

Name Qualification

PricewaterhouseCoopers Certified Public Accountants

PricewaterhouseCoopers has given and has not withdrawn its written consent to the issue of this circular

with the inclusion therein of its reports and reference to its name in the form and context in which they are

included.

As at the Latest Practicable Date, PricewaterhouseCoopers did not have any shareholding in any member

of the CLP Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons

to subscribe for securities in any member of the CLP Group.

As at the Latest Practicable Date, PricewaterhouseCoopers did not have any direct or indirect interest

in any assets which had been, since 31 December 2012, the date to which the latest published audited

financial statements of the CLP Group were made up, acquired, or disposed of by, or leased to any

member of the CLP Group, or which were proposed to be acquired, or disposed of by, or leased to any

member of the CLP Group.

91


8. GENERAL

(a) The secretary of the Company is Mrs. April Chan Yiu Wai Yee, who is a Fellow of The Institute

of Chartered Secretaries & Administrators and a Fellow of The Hong Kong Institute of Chartered

Secretaries.

(b) The registered office of the Company is at 8 Laguna Verde Avenue, Hung Hom, Kowloon, Hong

Kong.

(c) The Company’s Registrars and transfer office is Computershare Hong Kong Investor Services

Limited, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

(d) The English text of this circular and proxy form shall prevail over the Chinese text, in case of any

inconsistency.

9. DOCUMENTS AVAILABLE FOR PUBLIC INSPECTION

Copies of the following documents are available for inspection during normal business hours on any

weekday other than public holidays, up to and including the date of the EGM at 8 Laguna Verde Avenue,

Hung Hom, Kowloon, Hong Kong:

(a) the memorandum and articles of association of the Company;

(b) the accountant’s report from PricewaterhouseCoopers on CAPCO, the text of which is set out in

Appendix II to this circular;

(c) the accountant’s report from PricewaterhouseCoopers on PSDC, the text of which is set out in

Appendix IV to this circular;

(d) the report from PricewaterhouseCoopers on the unaudited pro forma financial information of the

Enlarged CLP Group, the text of which is set out in Appendix VI to this circular;

(e) the written consent as referred to in the paragraph headed “Experts and Consents” in this Appendix;

(f) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix;

(g) the annual reports of the Company for each of the three financial years ended 31 December 2010,

2011 and 2012 respectively;

(h) the interim report of the Company for the six months ended 30 June 2013; and

(i) this circular.

92

NOTICE OF EXTRAORDINARY GENERAL MEETING

中電控股有限公司CLP Holdings Limited(incorporated in Hong Kong with limited liability)(stock code: 00002)

NOTICE OF ExTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting (“EGM”) of CLP Holdings Limited

中電控股有限公司 (“CLP Holdings” or “Company”) will be held at Lower Level I, Kowloon Shangri-La Hong Kong, 64 Mody Road, Kowloon, Hong Kong on Wednesday, 22 January 2014, at 2:30 p.m. for the purpose of

considering and, if thought fit, passing (with or without amendments) the following ordinary resolutions:

(1) “THAT the CAPCO Acquisition Agreement and PSDC Acquisition Agreement (each as defined in the

circular dated 10 December 2013 (the “Circular”) despatched to the shareholders (the “Shareholders”)

of the Company), copies of which have been produced to this meeting marked “A” and “B” respectively,

and signed by the Chairman of this meeting for the purpose of identification, and the transactions

contemplated therein (including, without limitation, the CAPCO Acquisition and the PSDC Acquisition,

each as defined in the Circular), be and are hereby generally and unconditionally approved, confirmed

and ratified and the Directors of the Company be and are hereby authorised on behalf of the Company

to do such things or acts (including but not limited to signing any further documents, instruments and

agreements) as they may consider necessary, desirable or expedient to give effect to such transactions.”

(2) “THAT Mr. Richard Kendall Lancaster be elected as Director of the Company.”

(3) “THAT Dr. Rajiv Behari Lall be elected as Director of the Company.”

By order of the Board

April ChanCompany Secretary

Hong Kong, 10 December 2013

Registered Office:

8 Laguna Verde Avenue

Hung Hom, Kowloon

Hong Kong

93


ExPLANATORY NOTES TO THE NOTICE OF EGM

Proxy Information and Voting Record Date

1. A Shareholder entitled to attend and vote at the EGM to be held on 22 January 2014 convened by the

notice of EGM (the “Notice”) is entitled to appoint not more than two proxies to attend and vote in his/her

stead. The proxy need not be a Shareholder.

2. Proxy forms for use at the EGM were sent to Shareholders together with the Notice on 10 December

2013. The proxy form is published on the website of the Stock Exchange and can be downloaded from

CLP Group website www.clpgroup.com. In order to be valid, proxy forms must be completed, signed and

deposited at the Company’s Registrars, Computershare Hong Kong Investor Services Limited, 17th Floor,

Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time for

holding the EGM or any adjournment thereof.

3. Completion and return of the form of proxy will not preclude Shareholders from attending and voting in

person at the EGM or any adjournment thereof, should they so wish.

4. The Register of Shareholders will be closed from 21 January 2014 to 22 January 2014, both days

inclusive, during which period the registration of transfers of shares will be suspended. To be entitled to

attend and vote at the EGM, all transfers should be lodged with the Company’s Registrars, Computershare

Hong Kong Investor Services Limited, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai,

Hong Kong, for registration not later than 4:30 p.m. on Monday, 20 January 2014.

Acquisitions

5. In relation to the proposed Resolution (1) regarding the Acquisitions, Shareholders are advised to refer

to the Company’s Circular on Major Transaction dated 10 December 2013 which was despatched to

Shareholders together with this Notice.

Directors

6. As at the date of the Notice, the Directors of the Company are:

Non-executive Directors: The Hon. Sir Michael Kadoorie, Mr. William Mocatta,

Mr. R. J. McAulay, Mr. J. A. H. Leigh, Mr. I. D. Boyce,

Dr. Y. B. Lee and Mr. Paul A. Theys (Mr. David Moore as

Mr. Theys’ alternate)

Independent Non-executive Directors: Mr. V. F. Moore, Professor Judy Tsui, Sir Rod Eddington,

Mr. Nicholas C. Allen, Mr. Vincent Cheng, Mrs. Fanny Law,

Ms. Irene Lee and Dr. Rajiv Lall

Executive Directors: Mr. Richard Lancaster and Mr. Andrew Brandler

7. In relation to the proposed Resolutions (2) and (3) in the Notice regarding election of Directors, Mr.

Richard Lancaster and Dr. Rajiv Lall were respectively appointed by the Board with effect from 3 June

2013 and 13 August 2013. As mentioned in the announcements of their appointments dated 20 May

2013 and 31 May 2013, Mr. Richard Lancaster and Dr. Rajiv Lall will retire at the EGM, being the first

general meeting after their appointment, in accordance with the CLP Code on Corporate Governance and,

being eligible, offer themselves for election by Shareholders at the EGM. The election of these retiring

Directors will be individually voted on by Shareholders. The biographical details, including qualifications,

previous experience, length of service with the Company, interests in the Shares and remuneration of Mr.

Richard Lancaster and Dr. Rajiv Lall, as required by rule 13.51(2) of the Listing Rules as at 4 December

2013 (being the latest practicable date prior to the printing of this Notice), are set out below to enable

Shareholders to make an informed decision on their election.


94


8. Mr. Richard Kendall Lancaster (aged 51)

8.1 Mr. Richard Lancaster is the Chief Executive Officer (“CEO”) of the Company, the Chairman of the

Sustainability Committee and a Member of the Finance & General Committee of the Board. He also

serves on the boards of various wholly-owned subsidiaries of the Company; namely the Chairman

and Director of CLP India Private Limited, the Chairman and Executive Director of CLP Power

Asia Limited (and the Chairman of its Finance and General Committee), the Deputy Chairman

of EnergyAustralia Holdings Limited (and a member of its Nomination and Remuneration

Committee), the Deputy Chairman and Executive Director of CLP Properties Limited, the Deputy

Chairman of CLP Property Investment Limited (formerly known as Kar Ho Development Company

Limited), and a Director of CLP Power Hong Kong Limited (and a member of its Finance &

General Committee), CLP Energy Infrastructure Limited, CLP Nuclear Investment Company

Limited, CLP Enterprises Limited and CLP Treasury Services Limited. Mr. Lancaster also serves as

a Director of Castle Peak Power Company Limited (and a member of its Finance Committee) and

Hong Kong Pumped Storage Development Company, Limited. He is also a Director of The Business

Environment Council. In the past three years, Mr. Lancaster has not served as a director of any

other listed public companies in Hong Kong or overseas.

8.2 Mr. Lancaster holds a bachelor degree in electrical engineering from the University of New South

Wales. Before assuming his role as CEO on 30 September 2013, Mr. Lancaster was the Managing

Director of CLP Power Hong Kong Limited since 2010, and as such, held overall responsibility

for the operations of the Hong Kong business. Mr. Lancaster began his career with the Electricity

Commission of New South Wales in Australia and has 30 years’ experience in the power industry

and in other industrial operations in Australia, U.K. and Hong Kong. He joined the CLP Group in

1992 and has wide management experience in the operations, projects, commercial and finance

areas.

8.3 Mr. Lancaster has a personal interest in 600 Shares within the meaning of Part XV of the Securities

and Futures Ordinance (“SFO”). He has no financial or family relationships with any other

Directors, Senior Management or substantial or controlling shareholders of the Company.

8.4 Being the CEO of the Company effective from 30 September 2013, Mr. Lancaster is entitled to

a base compensation of HK$7.1 million per annum together with other non-remuneration related

employment benefits. He is also entitled to participate in (i) the Senior Executive Annual Incentive

Scheme; (ii) the Senior Executive Long-term Incentive Scheme; and (iii) the CLP Group Provident

Fund Scheme, in accordance with terms as implemented by the Company from time to time.

Details of the Annual Incentive, Long-term Incentive and Group Provident Fund schemes for

Senior Management, of which Mr. Lancaster is a member, are set out in the Human Resources &

Remuneration Committee Report, which forms part of the Company’s 2012 Annual Report and is

available on the CLP Group website www.clpgroup.com.


95


9. Dr. Rajiv Behari Lall (aged 56)

9.1 Dr. Rajiv Lall is currently the Executive Chairman of IDFC Limited (formerly known as Infrastructure Development Finance Company Limited), a company listed on the National Stock Exchange of India Limited and the Bombay Stock Exchange. Dr. Rajiv Lall is an Independent Non-executive Director of the Company appointed on 13 August 2013. He is a Member of the Finance & General Committee of the CLP Holdings Board. He has submitted to the Stock Exchange a written confirmation concerning his independence to the Company. In his written confirmation, Dr. Lall has advised that he has no material interest in any principal business activity of or is not involved in any material business dealings with CLP Holdings or its subsidiaries or with any connected persons of CLP Holdings. He has also confirmed that: a) he has no personal involvement in any of the loan arrangements between CLP India Private Limited (CLP Holdings’ wholly-owned subsidiary) and IDFC Limited; b) such loans were obtained in the normal course of business to finance CLP India’s power projects and were not material to the business of CLP Holdings and its subsidiaries, nor to IDFC Limited; and c) since his appointment to the Board of CLP Holdings, Dr. Lall has not participated in any decisions related to those loans and will not do so in future for as long as he serves on the Board of CLP Holdings. He has also given to the Company a confirmation of his independence. The Board, therefore, considers him to be independent and believes that he should be elected.

9.2 Dr. Lall holds a Bachelor of Arts Degree in Politics, Philosophy and Economics from Oxford University and a Ph. D. in Economics from Columbia University. He has over 30 years’ experience with leading global investment banks, multilateral agencies and in academia. His areas of expertise include project finance, private equity/venture capital, international capital markets, trade, infrastructure and macroeconomic policy issues with a focus on emerging markets including India and China in particular.

9.3 Dr. Lall is also a director of The Great Eastern Shipping Co. Ltd., a company listed on the Bombay Stock Exchange, National Stock Exchange of India Limited and with its global depository receipts listed on the Luxembourg Stock Exchange. Dr Lall is a former independent director of SATS Ltd. (2008-2011), a company listed on the Main Board of Singapore Exchange Securities Trading Limited, and a former director of National Stock Exchange of India Limited (2007-2012). He has been a director of NSDL e-Governance Infrastructure Limited (formerly known as National Securities Depository Limited) since 2005. He is also holding directorships in the Group Companies of IDFC Limited and a few overseas subsidiaries namely IDFC Capital (Singapore) Pte Limited and IDFC Securities Singapore Pte Limited. In addition to the above, Dr. Lall chairs the board of IDFC Foundation and Lok Social Services, which are engaged in activities pertaining to corporate social responsibility.

9.4 Dr. Lall chairs the Infrastructure Council of CII (Confederation of Indian Industry) a leading business chamber in India and is the Vice Chair of the Global Agenda Council on Infrastructure of the World Economic Forum. He is a member of the Managing Committee of the Associated Chambers of Commerce and Industry of India and was President of Bombay Chamber of Commerce and Industry. In India, he is also member of the Planning Commission’s Steering Committee on Urban Development Management set up to help formulate the country’s 12th Five-Year Plan; the Prime Minister’s Committees on Infrastructure Finance and Transport Sector Development; Expert Group on Modernization of Indian Railways of Ministry of Railways Government of India, and the Reserve Bank of India’s Committee on Non-Banking Finance Companies. Dr. Lall has served on several other Government committees including those focused on urban infrastructure, bond market development and financial sector reform. Internationally, he is also a member of the Advisory Board of the Columbia Global Centres, South Asia, set up by the Columbia University, New York. He is also on the International Advisory Board of the Centre for the Advanced Study of India at the University of Pennsylvania.

96


9.5 Dr. Lall was India’s representative to the G20 Workgroup on Infrastructure and a member of the

City of London’s Advisory Council on India. Prior to joining IDFC Limited, Dr. Lall was variously,

a Partner with Warburg Pincus in New York; Head of Asian Economic Research with Morgan

Stanley in Hong Kong; a senior staff member of the World Bank in Washington, D.C. and of the

Asian Development Bank in Manila respectively; and faculty member of the Florida Atlantic

University Department of Economics.

9.6 Dr. Lall has no interest in the Shares within the meaning of the SFO. He has no financial or

family relationships with any other Directors, Senior Management or substantial or controlling

shareholders of the Company.

9.7 Dr. Lall, as an Independent Non-executive Director, is entitled to receive a fee of HK$424,000 per

annum, together with HK$282,400 being additional fees per annum for service on the Finance &

General Committee of the Company; both fees are payable to Dr. Lall on a pro-rata basis for his

service in 2013. Level of fees for each Non-executive Director and Board Committee for each of

the financial years ending 31 December 2013, 2014 and 2015 are set out in the Human Resources

& Remuneration Committee Report, which forms part of CLP Holdings’ 2012 Annual Report and is

available on the CLP Group website www.clpgroup.com. These fees were approved by Shareholders

at the Annual General Meeting of the Company held on 30 April 2013.

10. Save for the information set out in this paragraph 10 and in paragraphs 6 to 9 above, there is no

information to be disclosed pursuant to any of the requirements of the provisions under paragraphs

13.51(2)(h) to 13.51(2)(v) of the Listing Rules nor are there other matters that need to be brought to the

attention of Shareholders in respect of the Directors who stand for election at the EGM.

Recommendation

11. The Board considers that the Resolutions (1) to (3) as set out in the Notice of EGM are in the best

interests of the Company and its Shareholders as a whole and, accordingly, recommends Shareholders to

vote in favour of the Resolutions (1) to (3) to be proposed at the EGM.

Right to demand a poll

12. The Listing Rules have been amended in 2009 to require any vote of shareholders at a general meeting

be taken by poll and in 2012, the Listing Rules have been further revised to allow a resolution which

relates purely on a procedural or administrative matter to be voted on by a show of hands. Since 2004,

the Chairman has demanded a poll on each of the resolutions submitted for determination at Annual

General Meetings. The Chairman will continue to demand a poll on each of the questions submitted for

determination at the forthcoming EGM. The results of the poll will be published on the Company’s and the

Stock Exchange’s websites not later than the business day following the EGM, as well as in the Minutes of

the EGM which will also be published on the CLP Group website.


97


Procedure for Shareholders to put forward proposals at the EGM

13. Pursuant to Article 106 of the Articles of Association of the Company, if a Shareholder wishes to propose

a person other than a Director of the Company for election as a director at the EGM, he/she can deposit

a written notice to that effect at the registered office of the Company for the attention of the Company

Secretary. In order for the Company to inform Shareholders of that proposal, the written notice must state

the full name of the person proposed for election as a director, include the person’s biographical details

as required by rule 13.51(2) of the Listing Rules, and be signed by the Shareholder concerned and that

person indicating his/her willingness to be elected. The period for lodgment of such a written notice will

commence no earlier than 11 December 2013 being the day after the despatch of the Notice and end no

later than 15 January 2014 which is seven days prior to the date of the EGM. If the notice is received less

than 15 days prior to the EGM, the Company will need to consider the adjournment of the EGM in order

to allow Shareholders 14 days’ notice of the proposal.

14. For other proposals including requisitions to move a resolution at the EGM, Shareholders are requested

to follow the requirements and procedures as set out in section 115A of the Hong Kong Companies

Ordinance and further explained on the CLP Group website. A hard copy of this procedure can be obtained

free of charge on request to the Company Secretary.

Guide for Shareholders to attend the EGM

How to Vote?

As a registered member of the Company, a Shareholder is entitled to attend the EGM and cast his/her vote in

person. If you are a registered Shareholder and do not plan to attend the EGM, you may appoint a proxy and

instruct your proxy to cast your vote at the EGM. For appointment of proxy, please refer to Explanatory Notes 1

to 4 of this Notice.

As a non-registered member of the Company (i.e. your Shares are held through a nominee), you may instruct

your broker to appoint you as a corporate representative to attend and vote at the EGM.

A voting paper/device will be given to every Shareholder/proxy upon his/her registration at the EGM. Please use

the voting paper/device to cast your votes on a poll at the EGM.

Typhoon or Black Rainstorm Warning

Shareholders are requested to telephone the Company’s hotline on (852) 2678 8228 for arrangements of the EGM

in the event that a No. 8 (or above) typhoon or black rainstorm warning is hoisted on the day of the EGM.

Others

Shareholders are asked not to take items such as large bags, cameras, audio recording equipment or video

recorders to the EGM. For security reasons, Shareholders may have their bags searched and will be requested to

leave all such items at the entrance of the EGM venue before entering.

Choice of language and means of receipt of corporate communications

You may change your choice of language (i.e. the English language version only, the Chinese language

version only or both the English language version and the Chinese language version) and means of receipt (in

printed form or through our website) of the Company’s future corporate communications (Note), free of charge, at

any time by reasonable notice in writing (not less than 7 days) to the Company or the Company’s Registrars

or via e-mail ([email protected] or [email protected]).

If you prefer to receive a printed copy of this document in another language (English or Chinese), please write

to the Company or the Company’s Registrars, Computershare Hong Kong Investor Services Limited or via

e-mail to [email protected] or [email protected]. The document of your choice of language

in printed form will be sent to you promptly free of charge. In case you have previously chosen (or have been

deemed to have consented) to receive the Company’s corporate communications by electronic means, but for

any reason you have difficulty in receiving or gaining access to this document, we will promptly, upon your

request, send the document of your choice of language in printed form to you free of charge.

Note: Corporate communications refer to Interim/Annual Reports, Quarterly Statements, notices, documents or other publications of the Company (including any “corporate communication” as defined in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited).

mailto:[email protected]

mailto:[email protected]

中電控股有限公司 CLP HOLDINGS LIMITED...A letter from the Chairman of CLP Holdings Limited...

Documents

Transcript of 中電控股有限公司 CLP HOLDINGS LIMITED...A letter from the Chairman of CLP Holdings Limited...