FUELLING A CLEANER FUTURE - hld.com · MTK PLANT Planned high pressure or intermediate pressure...

The Hong Kong and China Gas vision is to become Asia’s leading energy supplier. It has 138 projects in mainland China covering city-gas, midstream and upstream ventures, new energy development and utilization, as well as water businesses, telecommunications and other projects. As a major piped city-gas supplier on the mainland, Hong Kong and China Gas provides clean energy natural gas to about 14 million homes and businesses. During the year, its new methanol plant in Inner Mongolia commenced operations, reinforcing the leading role it is taking in the new energy sector where it is making solid progress in the development and utilization of unconventional, environmentally friendly energy.

FUELLING ACLEANER FUTURE

FUELLING ACLEANER FUTURE

ReviewofOperations

Subsidiary&AssociatedCompanies

HendersonLandDevelopmentCompanyLimitedAnnualReport201182

For the year ended 31 December 2011,HIL’s turnover amounted to HK$299million,representingadecreaseofHK$18million, or 6%, compared to HK$317million for the previous year ended 31December2010.Suchdecreaseinturnoveris mainly attributable to the period-on-period decrease of approximately 25% intheaveragemonthlytrafficvolumeofthetollbridgeinHangzhou,whichwasHIL’score asset, during the period from1 July2011to31December2011.Thiswasdueto(i)accidentaldamagetooneofthelinkbridgesofthetollbridgeon15July2011which resulted in the four lane two-waytraffic being temporarily reduced to twolanes of two-way traffic in the affectedareaofthetollbridgeuntilthetollbridgewasfullyopento traffic,effectivefrom1October2011;and(ii)theimplementationby Hangzhou Municipal Government ofcertain new policies which control thetrafficflowofvehiclesduringcertainpeakhours each day, effective from8October2011.

Profit attributable to equity shareholdersfor the year ended 31 December 2011amountedtoHK$108million,representingadecreaseofHK$55millionor34%fromHK$163 million for the year ended 31December2010.Thedecreaseinprofitwasattributabletothefactthatinthepreviousyear, a totalprofitofHK$39millionwasreceivedfromcertainone-offitemswhichincludedanetgainofHK$26millionfromthedisposalofatollhighwayinMaanshan,AnhuiProvince.

HIL has a 60% interest in HangzhouHenderson Qianjiang Third BridgeCompany Limited (“the Joint VentureCompany”) which has been granted theoperating right of the above-mentionedQianjiangThirdBridgeforaperiodof30yearsfrom20March1997(commencementdateofbridgeoperation).ThisprojectwasapprovedbyHangzhouForeignEconomicRelationsandTradeCommission(杭州市對外經濟貿易委員會) in 1997 and wasfurtherapprovedbyNationalDevelopmentand Reform Commission (formerlyknownasStateDevelopment&PlanningCommittee) (發展和改革委員會(前稱為國家發展計劃委員會)) in 1999. TheGeneralOfficeofthePeople’sGovernmentof Zhejiang Province notified ZhejiangProvinceDepartment ofCommunicationsandother relevantgovernmentauthoritiesin2003toprovisionallyfixtheperiodforentitlementtotollfeeinrespectof39tollroads and highways in the province. InthecaseofQianjiangThirdBridge,whichwas also included in the list, the periodwasprovisionallyfixedat15years (from20March 1997 to 19March 2012). TheJointVentureCompany immediately tookaction for clarification and had obtainedfrom the Hangzhou Municipal Bureauof Communications awritten pledge thatthe operation period for 30 years wouldremain unchanged and theywere also ofthe view that the operating right and thetoll fee collection right should be for asameperiod.Forthesakeofreassurance,the Joint Venture Company wrote to the

People’sGovernmentofZhejiangProvinceand Zhejiang Province Departmentof Communications (collectively the“Authorities”)inJune2011requestingfortheir confirmation that both the operatingright and the toll fee collection right lastforasameperiodof30years.SinceJune2011 when the Joint Venture CompanywrotetotheAuthoritiesrequestingfortheconfirmation, the JointVenture Companyhas been chasing after the relevantgovernmentofficialsonseveraloccasions,but no reply had been received from theAuthoritiesforoversixmonths.TheJointVenture Company therefore decided totake one further step and on 9 February2012filedwithLegislativeAffairsOffice,the People’s Government of ZhejiangProvinceanadministrativereconsiderationapplication.TheapplicationwastoseekanordertoobligetheAuthoritiestocarryouttheir statutory duties to officially confirmthat the toll fee collection right of theQianjiang Third Bridge should be for aperiod of 30 years. WhilstHILwas stillwaiting for the result of the application,the JointVentureCompany on 20March2012 received a letter dated 18 March2012 from 杭州市城巿“四自”工程道路綜合收費管理處 (Hangzhou City“Sizi” Engineering & Highway GeneralToll Fee Administration Office) (the“Hangzhou Toll Office”), which is therelevantgovernmentbodyinHangzhoutorecord the trafficflowandmakepaymentof toll fee of theQianjiangThird Bridgepursuant to the terms of an agreement

Henderson Investment Limited (“HIL”)(67.94%-owned by the Company)Stock code: 97 Website: www.hilhk.com

ReviewofOperations–Subsidiary&AssociatedCompanies

HendersonLandDevelopmentCompanyLimitedAnnualReport2011 83

dated 5 February 2004 (the “CollectionAgreement”) entered into between theJointVentureCompanyandtheHangzhouToll Office. In the letter, the HangzhouTollOfficestatedthat,becausetheGeneralOffice of the People’s Government ofZhejiang Province in 2003 provisionallyfixedtheperiodofentitlementtotollfeeinrespectofQianjiangThirdBridgetoendon19March2012,theywould,commencingfrom 20 March 2012, provisionallysuspend payment of toll fee to the JointVentureCompanyinrespectofQianjiangThirdBridge. TheHangzhouTollOfficealsostatedintheletterthattheywould,inaccordancewiththetermsoftheCollectionAgreement, continue to record the trafficflowofQianjiangThirdBridgeandworkwiththeJointVentureCompany.TheJointVentureCompany has been instructed byHILtowritetotheHangzhouTollOfficetostatethattheactiontakenbytheHangzhouToll Office has no legal or contractualbasis and is unacceptable and to ask theHangzhouTollOffice to clarify the basisoftheiractionandtocontinuetoperformtheir obligations under the CollectionAgreement,failingwhichtheJointVentureCompanywouldhavenoalternativebuttotakelegalactionstoprotectitsinterest.

HIL has obtained legal opinion from anindependentPRClawfirmandhasreceivedfirmadvicethatthetollfeecollectionrightenjoyed by the Joint Venture Companyshouldbeforthesameperiodof30yearsas the operating right enjoyed by the Joint Venture Company. Based on suchadvice, amortization and calculation ofthe recoverable amount of the intangibleoperating right in the preparation of the consolidatedaccountsofHILfortheyearended31December2011areonthebasisthat both the operating right and the tollfeecollectionrightoftheBridgelastforaperiod of 30 years expiring on 19March2027. There is, however, uncertainty asto the response of the Authorities and whether they would ultimately confirmthat the toll fee collection right of theQianjiang Third Bridge should be for aperiod of 30 years. HIL will continue tonegotiatewiththeAuthoritiesandtakeallnecessary actions to protect its interest.If theAuthoritiesconfirmthat the toll feecollection right of the Qianjiang ThirdBridge should last for a period differentfrom the period of the operating rightand/or the Authorities negotiate otherarrangementswithHIL(suchasbuyingoutHIL’s interest in Qianjiang Third Bridge

or paying compensation to HIL), all ofwhicharestilluncertain,HILwouldhavetoreconsidertheremainingusefullifeand/ortherecoverableamountoftheintangibleoperatingright.

Currently, the operating assets of HILcompriseitsinterestintheQianjiangThirdBridge.IfHILceasestohaveaneconomicinterest in the Qianjiang Third Bridge,thedirectorsofHILwould, ifappropriateopportunity arises, identify suitableinvestments forHIL. In theevent thatnosuitable investments are identified andacquiredbyHIL, its assetswould consistsubstantially of cash. As a result, TheStock Exchange of Hong Kong Limitedmay consider that HIL does not have asufficient level of operations or sufficientassets to warrant the continued listing ofHIL’ssharesandmaysuspenddealingsinorcancelthelistingoftheshares.

Fanling

GuangdongLNG Terminal

SheungShui

Ma On Shan

Sha Tin

Sai Kung

Tsuen Wan

Chuen Lung

Ta Pang Po

Tai HoTung Chung

Chek Lap Kok

Tai Lam Kok

Tuen Mun

Yuen LongTin Shui Wai

Au Tau

Tseung Kwan O

Chai WanWong Nai Chung

Tsing Yi

Hong KongInternationalTheme Park

Kwun Tong

Stanley

HONG KONG ISLAND

KOWLOON

NEW TERRITORIES

LANTAU ISLAND

SHENZHEN

TAI PO PLANT

MTK PLANT Planned high pressure or intermediate pressure town gas pipelines

Under construction high pressure or intermediate pressure gas pipelines

Completed high pressure town gas pipelinesCompleted intermediatepressure town gas pipelinesCompleted natural gas submarine pipeline fromGuangdong LNG Terminal to Tai Po plant

Existing areas of supplyPlanned new areas of supply

Hong Kong and China Gas’ network in Hong Kong



Background and Lines of Business

(I) Hong Kong Core Businesses Founded in the United Kingdom in

1862andlistedinHongKongsince1960,TheHongKongandChinaGasCompanyLimited(“HongKongandChinaGas”)wasHongKong’sfirstpublic utility and today remains itssolesupplierofpipedtowngas.

Hong Kong and China Gas’s pipedcity-gas, referred to as “town gas”,isproducedattwoproductionplantslocatedatTaiPoandMaTauKokinHongKong.Majorsuppliesof97%comefromtheTaiPoPlant,withtheMaTauKokPlantmakinguptherest.With a pipeline network consistingofmore than3,400kmofgaspipes,HongKongandChinaGassuppliestown gas to over 1.75 millioncustomers inHongKong.Basedon

theratioofthenumberofHongKongand China Gas’s total residentialcustomerstothenumberofdomestichouseholds, ithasapenetration rateofmorethan70%amongHongKonghouseholds. Its gas infrastructurehas grown and improved over theyears,suchthat thecustomerstodayenjoyasupplycontinuityrateofover99.99%,oneofthebestintheworld.

The Hong Kong and China Gas Company Limited(39.88%-owned by the Company)Stock code: 3 Website: www.towngas.com

Towngas China Company Limited(66.18%-owned by The Hong Kong and China Gas Company Limited)Stock code: 1083 Website: www.towngaschina.com



City high pressurepipeline network

Upstream projects

Provincial natural gaspipeline network

Liquefied natural gasreceiving station

Towngas piped city-gas projects

Towngas China piped city-gas projects

Water projects

Towngas Group Hong Kong Headquarters

Yellow Sea

Towngas’ Businesses in Mainland China in 2009

East China Sea

Beijing

Heilongjiang

Jilin

Liaoning

Hebei

Shanxi

Inner Mongolia

Shaanxi

SichuanChongqing

Hubei

Hunan

Henan

Jiangxi

GuangdongGuangxi

Hainan

Zhejiang

Jiangsu

Anhui

Shandong

Compressed natural gas / liquefied natural gas filling stations

Coal mining

Coal-based chemical processing

Telecommunication Projects

Hong Kong

Coal logistic project

Other projects

Hong Kong and China Gas’ business in mainland China

Commencing in 2006, Hong Kongand China Gas has used naphtha and naturalgastoproducetowngas,withan increasing focus on natural gas.The signingof a 25-year agreementwithGuangdongDapengin2004hasensured a stable price and reliablesupplyofnaturalgastoHongKongandChinaGas.

(II) Mainland China Businesses Hong Kong and China Gas first

began its mainland business with ajointventureinGuangdongprovincein 1994, at which time it servedapproximately 5,000 customers. Asignificantmilestonewasreached inDecember 2006 when it agreed toacquire an approximately 43.97%

equity stake in Towngas ChinaCompany Limited (“TowngasChina”, formerly known as PanvaGas Holdings Limited), a well-established mainland China pipedcity-gas operator, in exchange forinterests in ten Hong Kong and China Gas’s piped city-gas projects inShandongandAnhuiprovinces.



Inordertocomplementdownstreampipedcity-gasjointventureprojects,Hong Kong and China Gas has made investments in mid-streamtransportation projects that connect the upstream supplier and thedownstreampipedcity-gasprovider.It has also participated in someupstream projects including theexploitation and sale of petroleumand natural gas. Hong Kong andChinaGasalsooperateswatersupplyprojectsinWujiang,Jiangsuprovinceand in Wuhu, Anhui province, andmanages an integratedwater supplyand wastewater joint venture inSuzhou Industrial Park, Suzhou,Jiangsuprovince.

(III) Diversified Businesses Throughitswholly-ownedsubsidiary,

ECO Environmental InvestmentsLimited and its subsidiaries(collectively known as “ECO”),Hong Kong and China Gas has diversified into various alternativeenergyandenvironmentally-friendlybusinesses including LiquefiedPetroleum Gas (“LPG”) vehiclefilling stations and the utilisationof landfill gas. To date, ECO isoperatingfivededicatedLPGfillingstationsinChaiWan,MeiFoo,TuenMun,WestKowloonandWanChai,providing24-hourgasfillingservicesfor approximately 20,000 taxis andlight buses in Hong Kong. ECO’slandfillgasprojectbeganoperationsinMay2007,followingseveralyearsofconstruction.TreatedlandfillgasistransportedtoitsTaiPoPlant,servingasapartialsubstitutefornaphthaasafeedstock for town gas production.

Theuseoflandfillgasgreatlyreducesthe amount of methane and carbondioxide (both significant sourcesof global warming) released intothe atmosphere, whilst the reduceduse of naphtha, which comes fromthe cracking of fossil fuel, willalso enable greater conservation ofresources.

In the mid-1990s, Hong Kong andChinaGasenteredthelocalpropertydevelopmentbusinessinHongKong,withtheaimofrealisingthepotentialofitslandresourcesandmaximisingreturns to its shareholders bydeploying its excess cash. In 1995,Hong Kong and China Gas took a 45% equity interest in the King’sPark Hill development project,whichwas completed in early 2000withamixtureofluxuryhousesandapartments. In 1996, it participatedin the development of InternationalFinance Centre, a landmark projectin the heart of Hong Kong, and itcurrentlyholdsa15.8%stakeinthedevelopment.GrandPromenadeandGrand Waterfront, two residentialdevelopments, were also co-developedbyHongKongandChinaGas and Henderson Land. It has a50%interestintheGrandPromenadeprojectatSaiWanHo,whilefortheGrandWaterfrontattheformersouthplantsiteatMaTauKok,itisentitledto 73%of the net sales proceeds ofthe residential portion. In addition,HongKong andChinaGas has fullinterest in the commercial portioncomprising 150,000 square feetand approximately 300 car parkingspaces.

Results for the Year Ended 31 December 2011

Profit after taxation attributable toshareholders of this group for the yearamounted to HK$6,149.6 million, anincrease of HK$564.8 million comparedto2010mainlyduetogrowthinprofitofmainlandbusinesses.Duringtheyearunderreview, this group invested HK$4,725.1million in production facilities, pipelines,plantsandotherfixedandintangibleassets.

(I) Gas business in Hong Kong ThetotalvolumeofgassalesinHong

Kongfortheyear2011roseby2.1%,whilstappliancesalesalsoincreasedby about 8%compared to 2010.Asat the end of 2011, the number ofcustomerswas1,750,553,anincreaseof26,237comparedto2010.Layingofa15kmpipeline tobringnaturalgas from Tai Po to Ma Tau Kokgas production plant, to partiallyreplacenaphthaas feedstock for theproduction of towngas, is expectedtobesubstantiallycompletedwithin2012.Constructionofa9kmpipelinein the western New Territories to strengthen supply reliability is alsoin progress. In tandem with thegovernment’s development of WestKowloon, South East Kowloon anda cruise terminal,networkplanning,design and construction in these locationsareunderway.Constructionof a new submarine pipeline fromMa Tau Kok to North Point willcommencein2012.Meanwhile,newgasmainshavebeenlaidtoLeiYueMun.



(II) Utility businesses in Mainland China

At the end of December 2011,this group had an approximately66.18% interest in Towngas ChinaCompany Limited (“TowngasChina”; stock code: 1083), whoseprofitaftertaxationattributabletoitsshareholders amounted to HK$709million in 2011, an increase ofapproximately 62.6% over 2010.In 2011, Towngas China acquiredfivenewprojects locatedinXiushuicounty andWuning Industrial Park,both in Jiujiang, Jiangxi province;inMiluo,thisgroup’sfirstinHunanprovince; in Bowang New District,Maanshan, Anhui province; and inBeipiao,Liaoningprovince.

This group’s city-gas businessesprogressed well in 2011, with twonewprojectssuccessfullyestablishedin Chaozhou, Guangdong provinceand Jingxian county, Hengshui,Hebei province. Inclusive of fivenewprojectsestablishedbyTowngasChinain2011,thisgrouphad100city-gasprojectsinmainlandcitiesspreadacross 19 provinces/municipalities/autonomousregionsasattheendof2011.Duringtheyearunderreview,thenumberofgascustomerson themainlandreachedapproximately13.2millionandtotalvolumeofgassalesalsoexceededtenbillionforthefirsttime, attaining 10,300million cubicmetres.Thisgroupisnowthelargestcity-gasenterpriseonthemainland.

This group’s midstream natural gasprojectsincludehigh-pressurenaturalgas pipeline joint ventures inAnhuiprovince,Hebeiprovince,Hangzhou,ZhejiangprovinceandJilinprovince;the Guangdong Liquefied NaturalGasReceivingTerminalproject;anda natural gas valve station project

in Suzhou Industrial Park, Suzhou,Jiangsuprovince.

During the third quarter of 2011,this group added a second integrated wastewater treatment project, fora special industry, to its existingintegrated water supply andwastewater joint venture in SuzhouIndustrial Park, Suzhou, Jiangsuprovince.TogetherwithwatersupplyprojectsinWujiang,Jiangsuprovinceand in Wuhu, Anhui province, thisgroup has so far invested in andoperatesfourwaterprojects.

(III) Emerging environmentally-friendly energy businesses

This group’s development ofemerging environmentally-friendlyenergy projects, through itswholly-owned subsidiary ECOEnvironmental Investments Limitedandthelatter’ssubsidiaries(togetherknown as “ECO”), is progressingwell.

ECO’s coalbed methane and non-conventional methane utilisationbusinesseshavebeendevelopedbasedon the technology and operationalexperience gained from its landfillgas utilisation project which hasbeensuccessfullyoperatinginHongKong for severalyears.Since2008,ECO has been developing similarclean and environmentally-friendlyenergy projects on the mainland.AcoalbedmethaneliquefactionfacilitylocatedinJincheng,Shanxiprovincewas fully commissioned during thefirst quarter of 2011. The annualproduction capacity of the wholefacilityis250millionstandardcubicmetresofliquefiedcoalbedmethane.The facility has now become thelargest liquefaction and utilisationprojectofitskindonthemainland.

ECO’s coal-mine methaneliquefaction project in Yangquanmining district, Shanxi province,is progressing as scheduled;constructionisexpectedtocommencein 2012 for commissioning in thefirstquarterof2014.Coal-minegas,which typically contains about 40%methane, will be used to produceliquefiedmethanebydeployingcoal-mine gas deoxidisation and coalbedmethane cryogenic liquefactiontechnologies. This project has anestimatedannualproductioncapacityof about 80 million standard cubicmetres.

ECOstartedtodevelopcoalresourcesand coal chemical processingbusinesses in 2009. ECO hasconstructed a methanol productionplant, with an annual capacity of200,000 tonnes, in Junger, Erdos,Inner Mongolia. The plant is nowat the pilot production stage and isexpected to be fully commissionedin mid-2012. Construction ofECO’sXiaoyugoucoalmine,whichis associated with the methanolproduction plant, is also completeandpilot production started in early2012. ECO acquired an operativeopen-pitcoalmineinInnerMongoliain September 2011 and this is nowstarting to contribute additionalprofits.ECO’scokingcoalmineandcoking plant project in Fengcheng,Jiangxiprovince,isalsoonschedule;commissioning is expected in 2012.Themainproduct,coke,willbeusedforrefiningsteel,anditsby-product,coke oven gas, will provide anadditionalgassourceforthisgroup’sFengchengcity-gasproject.

ECO’s energy-related logistics andfacilities businesses originated fromitsfivededicatedliquefiedpetroleum

Eco Aviation Fuel Facility consists of two jetties for berthing tankers



gasvehicularfillingstationsinHongKong. ECO started its gas fillingstation business on the mainland in2008.Sincethen,ECOhasgraduallyestablishedanetworkofcompressedand liquefied natural gas fillingstations servicing heavy-duty trucksin Shaanxi, Shandong, Liaoning,HenanandAnhuiprovinces.

ECO’s aviation fuel facility inArea38,TuenMun,servicingHongKongInternational Airport, is operatingsmoothly.Thefacilitysuppliedover5

milliontonnesofaviationfueltotheairport in 2011. Jetties are availablefor berthing large-scale tankers andforunloadingthesetankers’aviationfuel. ECO’s facility, with a totalstorage capacity of 264,000 cubicmetres, is now a major logisticsbase for supply of aviation fuel inHongKong.

ECOhasalsostartedacoallogisticsbusiness and to this end has set up logistics platforms in importantcoal distribution areas such as

Qinhuangdao, Hebei province andDandong, Liaoning province fromwhichtolaunchitsoperations.ECOis also investing in the constructionof an inland coal and bulk cargologistic port in Jining, Shandongprovince to connect an upstreamdedicatedcoaltransportationrailwaywith a downstream canal runningto eastern China. The logistic port,with an annual throughput of 10million tonnes, is expected to becommissionedin2012.



ECOsetupanew-energyresearchanddevelopmentcentrein2010focusingon related application technologies.The centre has achieved goodprogress in developing innovativetechnologiesforconvertingmaterialsof lowvalue, suchasnon-edibleoiland coal tar oil, into clean fuel andsubstancesofhighvalue.

Overall, as at the end of 2011,inclusiveoftheprojectsofTowngasChina, this group had 138 projectson themainland, 18more than thatin2010,spreadacross21provinces/municipalities/autonomous regionsand encompassing upstream,midstream and downstreamnatural gas sectors, water supplyand wastewater treatment sectors,natural gas vehicular fillingstations, environmentally-friendlyenergy applications, energyresources, logistics businesses andtelecommunications.

(IV) Property developments All residential units of the Grand

Waterfront property developmentproject located at Ma Tau Koksouth plant site had been sold bytheendofDecember2010,whereasthose of Grand Promenade hadalso been sold by the end of thefirst quarter of 2011. Leasing ofthe commercial area of the GrandWaterfront property developmentproject is good. Rental demand forthe shoppingmall andoffice towersof IFC complex, in which anapproximately15.8%interestisheldbythisgroup,continuestoberobust.The occupancy rate of the project’shotel complex, comprising the Four

Seasons Hotel and rental servicedapartments,remainshigh.

Financing programmesIn February 2011, this group concludeda HK$3,800 million 5-year syndicatedterm loan and revolving credit facility,mainlyforrefinancingaHK$3,000millioninaugural syndicated facility, taken up in2006, and for its business development.The facility carries an interest margin of0.49%perannumoverHIBOR.

This group issued its first renminbi-denominated notes in Hong Kong inlate March 2011 with a total amount ofRMB1,000 million for a term of fiveyears at a coupon interest rate of 1.4%(the “RMB Notes”). This group is thefirst company among Hang Seng IndexConstituent Stocks in Hong Kong to raise funds through the offshore renminbi debtcapital market. Inclusive of the RMBNotes,thisgrouphasissuedmediumtermnoteswith,uptonow,anaggregateamountequivalent toHK$6,070millionunder itsmediumtermnoteprogramme.

InApril2011,Moody’s InvestorsServiceupgradedbothTowngasChina’sissuerandseniorunsecuredbondratingsfromBaa3toBaa2withastableoutlook.

In 2011, Standard & Poor’s RatingsServices launched the first credit ratingbenchmark developed especially for theregion to assign credit ratings to borrowers active in mainland China, Hong Kong,and Taiwan (including the fast-growingoffshore renminbi debt market). HongKong and China Gas was assigned the highestratingofcnAAA,whilstTowngasChina was assigned cnA under this Greater Chinalong-termcreditratingscale.

This group predicts an increase of about 25,000 new customers in Hong Kongduring2012andthecombinedresultsofitsemergingenvironmentally-friendlyenergybusinessesandmainlandutilitybusinesseswillovertaketheresultsofitsHongKonggasbusinessin2012,andwillhavefastergrowthmomentumthanitsHongKonggasbusinessthereafter.



Background and Lines of Business

After running a passenger ferry operation in the territory forover70yearssince itsestablishment in 1923,HongKong Ferry(Holdings) Company Limited (“HongKong Ferry”, formerly known as TheHongkong and Yaumati Ferry CompanyLimited prior to a corporate restructuringin 1989) currently focuses on propertydevelopment and investment; ferry,shipyardandrelatedoperations;andtraveloperations.

(I) Property Development and Investment

This group’s completed propertydevelopmentsarelistedasfollows:

Metro Harbour View: Located at8 Fuk Lee Street, Tai Kok Tsui,Kowloon, it consists of 10 blocksof residentialbuildings,divided into3,520residentialunits,plusa2-storeycommercial arcade and about 1,100carparkingspaces.

ShiningHeights:Theproject,situatedat83SycamoreStreet,isa60-storeybuildingof700feethighwithgrossfloor areaof approximately336,000squarefeet.Itisthehighestbuildinginthedistrict.

TheSpectacle:Theprojectat8ChoYuen Street, Yau Tong has a totalgross floor area of approximately160,000squarefeet.

MetroRegalia: Situated at 51 TongMiRoad,theprojecthasatotalgrossfloor area of approximately 53,000squarefeet.

Italsohas3houses inCheungSha,LantauandawarehousesiteinYuenLongasinvestmentproperties.

(II) Ferry, Shipyard and Related Operations

Its passenger ferry operations ceased upon transfer of the localferry licences in January 2001. Theferry operation is now confined toa dangerous goods vehicular ferryservice. Meanwhile, it also runs aharbourcruiseandrestaurantservice.

Its shipyard,builtonasiteofabout

210,000 square feet at North TsingYi, provides ship repairing andmaintenance services as well ascertain civil engineering services.Withover60yearsofexperience inmarine engineering, the shipyard isequipped with the largest and mostadvanced Syncrolift inHongKong.TheSyncrolifthasa liftingcapacityup to 3,400 tonnes, and can lift upvariousvesselsrangingfrom40feetto200feet.Equippedwithaflexibleshiptransfersystem,theShipyardcandrydocktenvesselssimultaneously.

By converting four vehicular ferries

into cruise vessels with each vesselaccommodating over 300 guests,“Harbour Cruise – Bauhinia” hasprovided cruise services in Hong

Kong waters since 1998 andpassengerscanenjoystunningviewsofbothsidesofVictoriaHarbour.

(III) Travel Operations Establishedin1983,HYFCOTravel

provides comprehensive travelservicesincludinglocaltours,Chinatours, overseas tours, ship and trainticketing, and hotel reservation.HYFCOTravelhasatotalof9agencyoffices located all over Hong KongandMacau.


Thisgroup’sturnoverfortheyearended31December2011amountedtoapproximatelyHK$635 million, representing a decreaseof 30% when compared to the previousyear. This was mainly attributed to thedecreaseinthesalesoftheShiningHeightsandTheSpectacle. Its consolidatedprofitafter taxation amounted to approximatelyHK$565 million, an increase of 17% ascomparedwith theprofitafter taxationofHK$483millionin2010.

This group sold 30 units in TheSpectacle and 7 units in ShiningHeightswhich accounted for a total profit ofapproximately HK$156 million for theyear under review. A profit of HK$37millionwas derived from the disposal ofcertain units of the commercial arcadeofMetroRegalia. Rental and other income

Hong Kong Ferry (Holdings) Company Limited(31.36%-owned by the Company)Stock code: 50 Website: www.hkf.com

Fanling Sheung Shui Town Lot No. 177, Fanling, Hong Kong (artist’s impression)



from its commercial arcade amountedto approximately HK$50 million. TheoccupancyrateofthecommercialarcadeatShiningHeightswas93%.Thecommercialarcade ofMetroHarbourViewwas fullylet.

ThefoundationworksofthedevelopmentprojectatFanlingSheungShuiTownLotNo.177 (“Fanling project”) have beencompleted. Superstructure works are inprogress.The propertywill be developedintothreeresidentialtowersbuiltonatwo-storey shoppingpodiummallwitha totalgrossfloorareaofapproximately540,000squarefeet.

As regards the project at 204-214 TungChau Street, demolition works havebeen done and superstructure works will commence at the end of the year.The project will be redeveloped into acommercial-cum-residential buildingwitha total gross floor area of approximately54,000squarefeet.

Thisgroupacquiredthesiteatthejunctionof Gillies Avenue South and BulkeleyStreet Hung Hom Inland Lot No.555 in2011. Foundation works will commenceuponthecompletionofdemolitionworks.The project will be developed into acommercial-cum-residential buildingwitha total gross floor area of approximately56,000squarefeet.

During the year, the Harbour CruiseOperations achieved a profit of HK$4.7million, representinga15%increaseoverthatoflastyear.FerryOperationsrecorded

a profit ofHK$4.7million, a decreaseof36% as comparedwith the profit for lastyear. Due to the provision for bad debtsand the increased operating costs incurred onannualdrydockoftheferries,theFerry,ShipyardandRelatedOperationsrecordedaprofitofonlyHK$5.5million,adecreaseof44%ascomparedwiththesameperiodoflastyear.

During the year under review, this groupachievedaprofitofHK$245millionuponthe disposal of Silvermine Beach Hotel.TheTravelOperationsDivisionregistered

an increaseof29% in itsoperatingprofitas compared with that for last year.Meanwhile,animpairmentlossofHK$45million was recorded in its available-for-salesecuritiesinvestmentduringtheyear.

ThisgroupexpectstheresidentialunitsoftheFanlingprojecttobesoldinthesecondhalfof thisyear.Thesalesproceedsfromthis project and the remaining units ofShining Heights and The Spectacle areexpectedtobeitsmainsourcesofrevenue.

Miramar Group’s new Italian restaurant, Assaggio Trattoria Italiana



Background and Lines of BusinessBasedinHongKong,MiramarHotelandInvestmentCompany,Limited(“Miramar”)wasestablishedin1957andhasbeenlistedon theHongKongStockExchangesince1970.Miramar has a diversified businessportfolio covering hotels and servicedapartments, property investment, food &beverage,travelservicesandapparelretailbusiness in Hong Kong, mainland ChinaandtheUnitedStates.

(I) Hotel and hotel Management business

Miramar solely owns and managesTheMiraHongKong andMiramarApartmentsinShanghai.Inaddition,it provides management servicesfor twohotels inShekou,aswellasfor a serviced apartment complex

in Hong Kong. In total, Miramarowns and/or provides managementservices forfivehotels and servicedapartments in Hong Kong andmainlandChina.

(II) Property business Opposite TheMira Hong Kong are

the Miramar Shopping Centre andMiramar Tower, Miramar’s premierinvestment properties with a totalgrossrentableareaofover1.0millionsquarefeet.

(III) Food and Beverage business In Hong Kong, Miramar operates

two Tsui Hang Village restaurants:onelocatedintheMiramarShoppingCentre, Tsim Sha Tsui and one intheNewWorldTower,Central.Thisgroup also operates one Sichuanrestaurant named Yunyan Sichuan

RestaurantattheMiramarShoppingCentre, two restaurant outlets at theIFC, namely Cuisine Cuisine andTheFrenchWindow,aswellasthreenew restaurants called Hide-ChanRamen (a popular Japanese Ramenrestaurant), Saboten (a traditionalJapanese pork cutlet restaurant)and Assaggio Trattoria Italiana (anItalianrestaurant)whichcommencedoperation in 2011. Starting from2011,italsointroduceditsCantoneserestaurant brand Cuisine Cuisine to Beijing and Wuhan in mainlandChina.

(IV) Travel business Miramar Express, with more than

two decades of experience, is theofficialHongKonggeneralagentforCrystal Cruises, voted the World’sBestCruisebyCondeNastTraveller.

Miramar Hotel and Investment Company, Limited(44.21%-owned by the Company)Stock code: 71 Website: www.miramar-group.com



Thiscompanyalsoprovidesbusinessand tourist shuttle services, airporttransfers and even wedding rentalsall theway toGuangdongProvince.With branches across Hong Kong,Kowloon and the New Territoriessince its establishment in 2006,MiramarTravelisthetrustedchoicefor providing worldwide tours,booking air tickets and hotels,cruise holidays, free and individualtravel packages. In May 2009,Miramar Travel was appointed asVirginGalactic’s “AccreditedSpaceAgent”– thefirst andonlyagent inHongKongallowedtoreserveseatsaboard Virgin Galactic’s suborbitalSpaceflights.Thefollowingyear,its“Accredited SpaceAgent” authorityexpanded to Singapore, Malaysia,Thailand,Philippines,IndonesiaandTaiwan.

(V) Apparel Retail business Miramarhasestablishedretailoutlets

in major cities in mainland China,starting with top fashion brand DKNY Jeans, offering the latestlooks to sophisticated consumers incities including Beijing, Shanghai,Shenzhen, Guangzhou, Wuhan andTianjin.


Forthefinancialyearended31December2011, Miramar’s turnover amountedto approximately HK$2,496 million,representing an increase of 18% ascomparedwith2010.Profitattributabletoshareholders posted a growth of 69% toapproximately HK$1,325 million (2010:HK$784 million). Excluding the netincreaseinthefairvalueofitsinvestment

properties,underlyingprofitattributabletoshareholders for 2011was approximatelyHK$411million(2010:HK$378million),representingayear-on-yearincreaseof9%.

Miramar operates five core businesses,namely Hotel and Hotel Managementbusiness, Property Rental business, Foodand Beverage business, Travel businessand the newly-developed Apparel Retailbusiness.

OccupancyrateforTheMiraHongKong(The “Mira”), its flagship hotel, rosefrom 80% in 2010 to 83% in the yearand average room rate posted a growthof 19% from HK$1,470 to HK$1,760.EBITDA (earnings before interest, taxes,depreciation and amortization) of TheMira grew 52% to reach approximatelyHK$206.5million.In2011,itobtainedthehotel management project for a boutiquehotel in Wan Chai. The boutique hotel,which is currently under construction,willbeoperatedunder thebrandnameof“TheMira”andisexpectedtocommenceoperation in 2013. The boutique hoteloffers a total of approximately 100 guestrooms.

For this year, overall income of PropertyRental Business recorded a growth of15%overthatof2010.Attheendof2011,occupancy rate of Miramar ShoppingCentre was approximately 100% andaverage unit rate also recorded a mildincrease. With the completion of workin the first half of 2011, GradeA officebuildingofMiramarToweralsoachievedapproximately100%occupancyrateattheendof2011withaverageunitrateslightlyincreased as compared to 2010. TherefurbishmentworkintheshoppingcentreatTheMirawas completed in the fourthquarterof2011.

Miramar operates Tsui Hang Villagerestaurants, Sichuan restaurant named

Yunyan Sichuan Restaurant, CuisineCuisine and The French Window thatare located at IFC, as well as three newrestaurants, namely Hide-Chan Ramen(a popular Japanese Ramen restaurant),Saboten(atraditionalJapaneseporkcutletrestaurant)andAssaggioTrattoriaItaliana(an Italian restaurant) which commencedoperationduringtheyear.

Miramar introduced its successful brand“Cuisine Cuisine” to themainlandChinamarket. The first Cuisine Cuisine islocated in the Central Business Districtof Chaoyang district, Beijing and wasopenedinSeptember2011.Varnishinganddecoration of the other Cuisine Cuisine in Wuhanwascompletedand isexpected tocommenceoperationinApril2012.Duringtheyear,twoTsuiHangVillagerestaurantswere temporarily closed for renovation.This, together with the write-off of pre-opening expenses of new restaurants,resultedinalossfortheoverallFoodandBeveragebusiness.

Turnoverof itsTravelBusiness increased7% to reach HK$1,055 million whilstEBITDAslightlydroppedtoapproximatelyHK$25millionin2011.

Miramar extended its reach to ApparelRetail Business in 2011 and became thedistributor of DKNY Jeans in mainlandChina.Atpresent,itownsandoperatesfiveDKNY Jeans stores in each of Shanghaiand Beijing. In addition, it secured andengaged over 20 franchisees to operateDKNYJeansfranchisedstores.Attheendof2011,therewereover40storesoperatedby Miramar and franchisees. A negativeEBITDAof approximatelyHK$4millionwassustainedduringtheyear.

FUELLING A CLEANER FUTURE - hld.com · MTK PLANT Planned high pressure or intermediate pressure...

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