Company report Nat Resources & Energy Electric Utilities abc

Equity – Hong Kong Global Research

CLP Holdings Ltd (2 HK)

Underweight UW: Increasing stakes in CAPCO and PSDC Target price (HKD) 60.00  CLP is buying a further 30% stake in CAPCO for HKD12bn Share price (HKD) 61.70 Forecast dividend yield (%) 4.2 and a further 51% stake in PSDC for HKD2bn from Potential return (%) 1.4 ExxonMobil Note: Potential return equals the percentage difference between the current share price and  Potential benefits include CAPCO’s high returns, low the target price, plus the forecast dividend yield Dec 2012 a 2013 e 2014 e gearing, potential for higher utilisation, long-term scarcity HSBC EPS 3.90 3.34 3.65 site value and better resource optimization HSBC PE 15.8 18.5 16.9 Performance 1M 3M 12M  Pending shareholders’ and other approvals, we maintain our Absolute (%) -0.6 -4.1 -6.7 Relative^ (%) -1.9 -8.7 -16.6 earnings estimates and TP of HKD60 and reiterate UW rating

Increasing stakes in CAPCO and PSDC: CLP is buying from ExxonMobil a further 30% 20 November 2013 stake in Castle Peak Power Company Limited (CAPCO) for unadjusted consideration of HKD12bn and a further 51% stake in Hong Kong Pumped Storage Development Company Jenny Cosgrove* Analyst (PSDC) for unadjusted consideration of HKD2bn. After the proposed acquisition, CLP will The Hongkong and Shanghai Banking own a 70% stake in CAPCO (China Southern Power Grid Co – CSG is acquiring the Corporation Limited +852 2996 6619 remaining 30% stake) and 100% of PSDC. jennycosgrove@hsbc.com.hk Purchase price: We value CLP’s existing 40% stake in CAPCO at HKD19.5bn based on Gloria Ho* Analyst DCF. This implies a value of HKD14.6bn for a 30% stake, which is HKD2.6bn (22% or The Hongkong and Shanghai Banking HKD1.0 per share) above the purchase consideration of HKD12bn. Based on 2012 financials, Corporation Limited the purchase price implies a PE of 13.3x and EV/EBITDA of 7.9x, both of which are below +852 29966941 [email protected] CLP’s current trading levels of 15.8x and 9.3x, respectively. If the deal is completed, it would

Ankit Gupta* increase our 2014e/15e net earnings estimates by 10%/7%. Associate Bangalore Benefits of CLP gaining control of CAPCO: 1) Highest returns of HK business across the group; 2) increasing the holding company’s exposure to Hong Kong SCA; 3) potential View HSBC Global Research at: recapitalisation of CAPCO, which has low gearing; 4) potential for higher utilization; 5) http://www.research.hsbc.com reaping the long-term scarcity value of the power stations sites in Hong Kong; and 6) better *Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not optimization of generation and T&D facilities. registered/qualified pursuant to FINRA regulations Valuation and investment thesis: We use a sum-of-the parts (SOTP) approach, with CLP Issuer of report: The Hongkong and Power HK and CAPCO valued using DCF (75% of the valuation), the Australia subsidiary at a Shanghai Banking Corporation Limited 10x 2014e PE (4% of the valuation) and the China business at a 12x 2014e PE (12% of the valuation). The 16.9x FY14e PE is above the historical average PE of 15.9x since 2007. CLP Disclaimer & is considered to run a quality business in HK; however, a macro environment with rising Disclosures interest rates makes share price outperformance difficult, in our view. This report must be read with the disclosures and the analyst certifications in Index^ HANG SENG INDEX Enterprise value (HKDm) 189,460 the Disclosure appendix, Index level 23,660 Free float (%) 75 and with the Disclaimer, RIC 0002.HK Market cap (USDm) 20,105 which forms part of it Bloomberg 2 HK Market cap (HKDm) 155,882 Source: HSBC Source: HSBC CLP Holdings Ltd (2 HK) Electric Utilities abc 20 November 2013

Financials & valuation

Financial statements Valuation data Year to 12/2012a 12/2013e 12/2014e 12/2015e Year to 12/2012a 12/2013e 12/2014e 12/2015e Profit & loss summary (HKDm) EV/sales 1.8 1.8 1.8 1.7 EV/EBITDA 9.3 9.3 8.8 8.3 Revenue 104,861 104,748 103,242 108,829 EV/IC 1.5 1.5 1.5 1.4 EBITDA 20,122 20,439 21,518 22,366 PE* 15.8 18.5 16.9 15.9 Depreciation & amortisation -7,021 -7,617 -7,570 -7,695 P/Book value 1.7 1.7 1.6 1.6 Operating profit/EBIT 13,101 12,822 13,948 14,670 FCF yield (%) 2.8 0.0 3.0 4.2 Net interest -6,101 -6,302 -6,310 -6,262 Dividend yield (%) 4.2 4.2 4.2 4.2 PBT 9,984 9,775 10,901 11,632 HSBC PBT 9,984 9,775 10,901 11,632 Note: * = Based on HSBC EPS (fully diluted) Taxation -1,692 -1,459 -1,682 -1,810 Net profit 8,312 8,315 9,217 9,821 HSBC net profit 9,406 8,444 9,217 9,821 Price relative 100 100 Cash flow summary (HKDm) 95 95 Cash flow from operations 23,915 16,938 20,544 21,823 90 90 Capex -10,177 -10,717 -9,353 -8,784 85 85 Cash flow from investment -8,654 -8,321 -6,949 -6,409 80 80 Dividends -6,135 -6,493 -6,493 -6,544 75 75 Change in net debt -8,483 5,531 1,703 519 70 70 FCF equity 3,686 -61 3,881 5,198 65 65 60 60 Balance sheet summary (HKDm) 55 55 Intangible fixed assets 28,479 27,917 27,422 26,986 2011 2012 2013 2014 CLP Holdings Ltd Rel to HANG SENG INDEX Tangible fixed assets 132,463 136,073 138,299 139,774 Current assets 37,153 32,654 32,273 34,615 Source: HSBC Cash & others 13,026 8,319 8,262 9,403 Total assets 228,756 231,539 235,217 241,726 Operating liabilities 62,987 61,308 60,457 61,041 Note: price at close of 18 Nov 2013 Gross debt 66,198 67,022 68,668 70,328 Net debt 53,172 58,703 60,406 60,925 Shareholders funds 91,127 93,148 96,073 99,550 Invested capital 122,082 127,016 129,274 130,930

Ratio, growth and per share analysis Year to 12/2012a 12/2013e 12/2014e 12/2015e Y-o-y % change Revenue 14.4 -0.1 -1.4 5.4 EBITDA -6.5 1.6 5.3 3.9 Operating profit -13.7 -2.1 8.8 5.2 PBT -8.7 -2.1 11.5 6.7 HSBC EPS -8.9 -14.4 9.2 6.5 Ratios (%) Revenue/IC (x) 0.9 0.8 0.8 0.8 ROIC 9.0 8.8 9.2 9.5 ROE 10.9 9.2 9.7 10.0 ROA 6.2 6.0 6.3 6.4 EBITDA margin 19.2 19.5 20.8 20.6 Operating profit margin 12.5 12.2 13.5 13.5 EBITDA/net interest (x) 3.3 3.2 3.4 3.6 Net debt/equity 58.3 63.0 62.8 61.2 Net debt/EBITDA (x) 2.6 2.9 2.8 2.7 CF from operations/net debt 45.0 28.9 34.0 35.8 Per share data (HKD) EPS reported (fully diluted) 3.45 3.29 3.65 3.89 HSBC EPS (fully diluted) 3.90 3.34 3.65 3.89 DPS 2.57 2.57 2.59 2.61 Book value 36.07 36.87 38.03 39.40

2 CLP Holdings Ltd (2 HK) Electric Utilities abc 20 November 2013

Acquisition benefits and impact

 We believe the purchase price for CAPCO is fair based on our DCF valuation and implied multiples  Benefits include CAPCO's high returns, low gearing, potential for higher utilisation, and long-term scarcity site value  If the deal it completed, it would increase our net earnings estimate for CLP by 10%/7% in 2014e/15e.

Acquisition of further stake in (NDRC), the State-owned Assets Supervision and CAPCO and PSDC Administration Commission of the State Council, the Ministry of Commerce and Guangdong Branch CLP is buying from ExxonMobil a further 30% of the State Administration of Foreign Exchange. stake in Castle Peak Power Company Limited (CAPCO) for unadjusted consideration of Current shareholding structure

HKD12bn and a further 51% stake in Hong Kong CLP Pumped Storage Development Company (PSDC) Holdings for unadjusted consideration of HKD2bn. After 100% the proposed acquisition, CLP will own a 70% CLP Power Exxo n M o b il stake in CAPCO (China Southern Power Grid Co – CSG is acquiring the remaining 30% stake) and 40% 60% 100% of PSDC. Subsequently, both CAPCO and CAPCO PSDC will become CLP Power’s subsidiaries and will be consolidated into CLP’s group accounting 49% 51% statements (currently accounted for using CLP Holdings equity method). Source: Company The cash payment on completion will be adjusted for distributions to and contributions made by ExxonMobil from valuation date of 1 July 2013 to the completion date (expected by mid-2014). The proposed acquisition requires CLP shareholder approval and CSG approvals (for CAPCO) from National Development and Reform Commission

3 CLP Holdings Ltd (2 HK) Electric Utilities abc 20 November 2013

Shareholding structure after acquisition completion Benefits of CLP gaining CLP control of CAPCO Holdings  Highest return across group: Hong Kong 100% provides the highest returns across CLP's CLP Power CSG HK geographical business interests and we believe each marginal dollar is best invested

70% 30% by CLP back in the Hong Kong business. A CAPCO further investment in CAPCO by CLP would potentially increase the stability of CLP’s 100% earnings and the overall return on investment. CLP Holdings  Increasing exposure to Hong Kong SCA:

Source: Company Although the proposed acquisition will not have any impact on SCA, It will increase the Purchase price holding company’s exposure to SCA.

We value CLP’s existing 40% stake in CAPCO at  Low gearing: CAPCO has lower gearing and HKD19.5bn based on DCF (cost of equity 5.5%, 0% could be recapitalised. Based on CLP’s terminal growth). This implies a value of accounts, non-current liabilities (HKD501m) HKD14.6bn for a 30% stake which is HKD2.6bn to non-current assets (HKD29.6bn) was 1.7% (22% or HKD1.0/share) above the purchase in 2012 (down from 8.4% in 2011). consideration of HKD12bn.  Higher utilisation: In 2010, the utilisation of Based on 2012 financials, the unadjusted purchase Black Point (gas) was 50% and Castle Peak price implies a PE of 13.3x and EV/EBITDA (based (coal) 42%. These power stations could be on cash EBITDA after adjusting for current lease run at higher utilisations if surplus capacity was utilized for electricity sales to accounting basis) of 7.9x, both of which are below Guangdong should that prospect emerge. CLP’s current trading levels of 15.8x and 9.3x, respectively. Thus, we believe the purchase  Site value: Power stations sites have long- consideration for CAPCO is reasonable. term scarcity value in Hong Kong. Deal financing  Better management of resources: CLP will be in a better position to optimize generation The consideration to be paid entirely in cash on and handle T&D facilities with a controlling completion will be funded by internal accruals and stake in CAPCO. existing banking facilities. CLP Group has secured a bridge loan facility of HKD10bn. The facility will be Longer-term risks available for drawdown at completion with 50%  Removal of SCA regulation for CAPCO each maturing 1 and 2 years after the deal completion. Since the acquisition is expected to be  Deregulation of power markets in Hong Kong completed by mid-2014, CLP Group is also  China allowing power to be freely traded reviewing other long-term financing options between Hong Kong and Guangdong including loans, bonds, hybrid securities, and equity.  A carbon tax without compensation

4 CLP Holdings Ltd (2 HK) Electric Utilities abc 20 November 2013

 Increasing operational problems associated Impact on gearing ratios: with the age of the power stations.  CLP’s2014e gearing (net debt/equity) will Financial impact of acquisition increase from 63% to 76% (92% to 105% including financial leases) Pending shareholders’ and other approvals, we maintain our earnings estimates and target price of  CLP’s 2014e EBITDA interest coverage will HKD60 for CLP. However, we perform a scenario slightly decrease from 3.3x to 3.2x. analysis in our model to determine the impact of Impact on valuation: acquisition on our 2014e/15e earnings and valuation. In the following analysis, we assume  Our target price for CLP will increase the completion of the proposed acquisition at marginally from HKD60 to HKD61 as our 2014-beginning using the HKD10bn bridge valuation for 30% stake in CAPCO is loan financing: HKD14.2bn, which is HKD2.6bn (or HKD1 per share) above the purchase price of Impact on earnings: HKD12bn.  The proposed acquisition will not have any  The share of SCA business as a % of our SOTP impact on the Scheme of Control Agreement valuation will increase from 75% to 83%. (SCA) between the HK SAR government, CLP, and CAPCO.

 CLP Power’s share of net return from SCA will increase 14%/13% in 2014e/15e to HKD7.9bn each.

 Segment earnings from China will increase 9%/8% in 2014e/15e to HKD1.8bn each.

 Consequently, CLP Holding’s net profit estimates are expected to increase 10%/7% in 2014e/15e to HKD10.1bn/HKD10.5bn.

5 CLP Holdings Ltd (2 HK) Electric Utilities abc 20 November 2013

Background and asset details

 CLP announced the discussions for acquiring a further stake in CAPCO in March 2012 and the long running negotiations have now reached an agreement  CAPCO owns three power plants in HK with a total installed capacity of 6,908MW  PSDC has the right to use 50% of the 1,200MW capacity of Phase 1 of the Guangzhou Pumped Storage Power Station

Background owned subsidiary of CLP Holdings). CAPCO owns the power generation assets, CLP Power CLP announced on 15 March 2012 that it, builds and operates all CAPCO’s power stations together with CSG, was in discussions to acquire and is the sole off-taker. ExxonMobil’s stakes in CAPCO and PSDC. These discussions have been ongoing for some Black Point (2,500MW, gas) years on an intermittent basis and have now Black Point power station commenced operations in reached an agreement and the companies have 1996 (Unit 1 & 2) and is located at the western tip signed contracts. of the New Territories, 4km north of Castle Peak. CAPCO assets With the commissioning of the last units (unit 8) in 2006, it is one of the largest combined cycle power Currently, CAPCO is owned 60% by ExxonMobil plants in the world with capacity of 2,500MW. Energy Limited and 40% by CLP Power (wholly-

CAPCO generation plants Commissioning Date Capacity Generation – 2010 Availability – 2010 Operating hours – 2010 (MW)(GWh) (%) (Hours) Black Point Power Station 8*312.5MW gas-fired 1996 2,500 10,851 90.80% 35,775

Castle Peak Power Station 4*350MW coal-fired / oil-fired 1982 1,400 15,167 72.00% 38,602 2*677MW coal-fired / oil-fired 1986 1,354 2*677MW coal-fired / gas-fired / oil-fired 1986 1,354

Penny Bay Power Station (Back-up) 3*100MW diesel-fired 1992 300 1 98.60% 14

Source: Company data

6 CLP Holdings Ltd (2 HK) Electric Utilities abc 20 November 2013

The Black Point power station ran at an utilisation CAPCO’s role in CLP power rate of 42% in 2009 and 50% in 2010 (latest supply figures not available). CLP’s power supply is approximately 67% from Castle Peak (4,108MW, coal) CAPCO; 31% from Daya Bay Nuclear and rest Castle Peak power station is a 4,108MW with from PSDC. Based on electricity use by CLP eight units; the oldest commissioned in 1982. In customers the fuel mix in 2011 was 30% nuclear, 1996, two 678MW units were modified to use 21% gas and 49% coal. natural gas as a backup fuel to coal. In 2011, a CLP electricity supply, gross generation (TWh) HKD9bn emission control project was completed 36 to substantially reduce nitrogen, sulphur, and particulate based emissions. 27

Castle Peak ran at an utilisation rate of 48% in 18 2009 and 42% in 2010. Within the overall 9 complex, the older Castle Peak A (1,400MW) has a lower utilisation than Castle Peak B (to which 0 the emission controls were retrofitted). 2011 2012 2013e 2014e 2015e CAPCO PSDC Daya Bay Penny Bay (300MW, diesel) Source: Company, HSBC estimates The three 100MW diesel-fired gas turbine units are utilised for peak load and emergency CAPCO fuel Consumption (PJ) generation only. Output is minimal. 250

PSDC assets 200

Currently, PSDC is owned 51% by ExxonMobil 150 and 49% by CLP Power. Under a capacity 100 purchase contract, PSDC has the right to use 50% 50 of the 1,200MW capacity of Phase 1 of the Guangzhou Pumped Storage Power Station. CLP 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Power has entered into a contract with PSDC to Coal Oil Gas make use of this capacity. Source: Company data, HSBC estimates The price paid by CLP Power to PSDC is sufficient to cover all of PSDC’s operating A longer-term growth project is a Castle Peak A expenses and net return. PSDC’s net return is re-powering from coal to gas. The Castle Peak A based on a percentage of its net fixed assets in a power station (4x350MW) is 30-years old and is manner analogous to the SoC, subject to a currently operating at a lower utilisation rate. It minimum return level. could be shut down and re-powered using gas rather than coal, helping to move Hong Kong away from coal for power generation.

7 CLP Holdings Ltd (2 HK) Electric Utilities abc 20 November 2013

Valuation and risks

 Pending shareholders’ and other approvals, we maintain our earnings estimates and target price of HKD60 for CLP  We use a SOTP approach with CLP Power HK and CAPCO valued using DCF representing 75% of our valuation  We reiterate our Underweight rating on the stock

Valuation and below the hurdle rate for Hong Kong equities of 8.5%. Our target price implies a potential return of Pending shareholders’ and other approvals, we 1.4% (including the forecast dividend yield of maintain our earnings estimates and target price of 4.2%), below the Neutral band; therefore, we HKD60 for CLP. maintain our Underweight rating on the stock. We use a sum-of-the parts (SOTP) approach, with Potential return equals the percentage difference CLP Power HK and CAPCO valued using DCF between the current share price and the target price, (75% of the valuation), EnergyAustralia at a 10x including the forecast dividend yield when indicated. 2014e PE (4% of the valuation) and China at a 12x Risks 2014e PE (12% of the valuation). These are based on peer group multiples. The stock is trading at a 16.9x Key upside risks include: higher capex under the FY14e PE, dividend yield of 4.2% and FCF yield of Scheme of Control Agreement (SCA), sale of 3.0%. The FY14e PE 16.9x is the above the development rights of its old head office, and higher historical average forward PE since 2007 of 15.9x. power prices in Australia.

Under our research model for stocks without a volatility indicator, the Neutral band is 5ppts above

CLP - SOTP Valuation Method FY14e net profit Equity Valuation Equity/share % of valuation FY13e (HKDm) (HKDm) (HKD) PE CLP Power DCF (CoE 5.5%, 1% TV growth) 95,115 37.65 62% CAPCO (40%) DCF (CoE 5.5%, 0% TV growth) 19,518 7.73 13% Total Hong Kong 6,986 114,633 45.37 75% 16.4x Australia 10x FY14e AUD net profit 588 5,881 2.33 4% 10.0x China 12x FY14e net profit 1,586 19,028 7.53 12% 12.0x India 13x FY14e net profit 161 2,096 0.83 1% 13.0x SE Asia 10x FY14e net profit 337 3,375 1.34 2% 10.0x Cash (1H FY13) 7,640 3.02 5% Total SOTP valuation 9,217 152,654 60.42 100% 16.6x Total SOTP valuation (rounded) 60.00 Source: HSBC estimates

8 CLP Holdings Ltd (2 HK) Electric Utilities abc 20 November 2013

Disclosure appendix

Analyst Certification The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Jenny Cosgrove and Gloria Ho Important disclosures Equities: Stock ratings and basis for financial analysis HSBC believes that investors utilise various disciplines and investment horizons when making investment decisions, which depend largely on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations. Given these differences, HSBC has two principal aims in its equity research: 1) to identify long-term investment opportunities based on particular themes or ideas that may affect the future earnings or cash flows of companies on a 12 month time horizon; and 2) from time to time to identify short-term investment opportunities that are derived from fundamental, quantitative, technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating. HSBC has assigned ratings for its long-term investment opportunities as described below.

This report addresses only the long-term investment opportunities of the companies referred to in the report. As and when HSBC publishes a short-term trading idea the stocks to which these relate are identified on the website at www.hsbcnet.com/research. Details of these short-term investment opportunities can be found under the Reports section of this website.

HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's existing holdings and other considerations. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations. Investors should carefully read the definitions of the ratings used in each research report. In addition, because research reports contain more complete information concerning the analysts' views, investors should carefully read the entire research report and should not infer its contents from the rating. In any case, ratings should not be used or relied on in isolation as investment advice. Rating definitions for long-term investment opportunities Stock ratings HSBC assigns ratings to its stocks in this sector on the following basis:

For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate, regional market established by our strategy team. The price target for a stock represents the value the analyst expects the stock to reach over our performance horizon. The performance horizon is 12 months. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, must exceed the required return by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock must be expected to underperform its required return by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands are classified as Neutral.

Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation of coverage, change of volatility status or change in price target). Notwithstanding this, and although ratings are subject to ongoing management review, expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily triggering a rating change.

9 CLP Holdings Ltd (2 HK) Electric Utilities abc 20 November 2013

*A stock will be classified as volatile if its historical volatility has exceeded 40%, if the stock has been listed for less than 12 months (unless it is in an industry or sector where volatility is low) or if the analyst expects significant volatility. However, stocks which we do not consider volatile may in fact also behave in such a way. Historical volatility is defined as the past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility has to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change. Rating distribution for long-term investment opportunities As of 19 November 2013, the distribution of all ratings published is as follows: Overweight (Buy) 44% (33% of these provided with Investment Banking Services) Neutral (Hold) 38% (34% of these provided with Investment Banking Services) Underweight (Sell) 18% (28% of these provided with Investment Banking Services)

Share price and rating changes for long-term investment opportunities

CLP Holdings Ltd (0002.HK) Share Price performance HKD Vs HSBC rating Recommendation & price target history history From To Date Neutral N/A 17 June 2011 N/A Neutral 22 August 2012 Neutral Underweight 29 October 2013 72 Target Price Value Date 67 Price 1 65.60 16 June 2011 Price 2 N/A 17 June 2011 62 Price 3 N/A 17 July 2011 57 Price 4 69.00 22 August 2012 Price 5 66.00 13 December 2012 52 Price 6 70.00 07 February 2013 Price 7 73.00 14 March 2013 47 Price 8 69.00 13 June 2013 Price 9 67.00 12 August 2013 42 Price 10 60.00 29 October 2013 Source: HSBC Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Source: HSBC

10 CLP Holdings Ltd (2 HK) Electric Utilities abc 20 November 2013

HSBC & Analyst disclosures Disclosure checklist Company Ticker Recent price Price Date Disclosure CLP HOLDINGS LTD 0002.HK 62.15 19-Nov-2013 2, 4, 5, 6, 7, 11 Source: HSBC

1 HSBC has managed or co-managed a public offering of securities for this company within the past 12 months. 2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next 3 months. 3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this company. 4 As of 31 October 2013 HSBC beneficially owned 1% or more of a class of common equity securities of this company. 5 As of 30 September 2013, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of investment banking services. 6 As of 30 September 2013, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-investment banking securities-related services. 7 As of 30 September 2013, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-securities services. 8 A covering analyst/s has received compensation from this company in the past 12 months. 9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as detailed below. 10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this company, as detailed below. 11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in securities in respect of this company

HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments (including derivatives) of companies covered in HSBC Research on a principal or agency basis.

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking revenues.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research. Additional disclosures 1 This report is dated as at 20 November 2013. 2 All market data included in this report are dated as at close 18 November 2013, unless otherwise indicated in the report. 3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner. 4 As of 08 November 2013, HSBC owned a significant interest in the debt securities of the following company(ies) :CLP HOLDINGS LTD

11 CLP Holdings Ltd (2 HK) Electric Utilities abc 20 November 2013

Disclaimer

* Legal entities as at 8 August 2012 Issuer of report ‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation Limited, The Hongkong and Shanghai Banking Hong Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Bank Canada, Toronto; HSBC Bank, Corporation Limited Paris Branch; HSBC France; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf; 000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and Capital Markets (India) Private Limited, Mumbai; ‘JP’ HSBC Securities (Japan) Limited, Level 19, 1 Queen’s Road Central Tokyo; ‘EG’ HSBC Securities Egypt SAE, Cairo; ‘CN’ HSBC Investment Bank Asia Limited, Beijing Representative Hong Kong SAR Office; The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch; The Hongkong and Telephone: +852 2843 9111 Shanghai Banking Corporation Limited, Seoul Securities Branch; The Hongkong and Shanghai Banking Telex: 75100 CAPEL HX Corporation Limited, Seoul Branch; HSBC Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv; ‘US’ HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Fax: +852 2596 0200 Degerler AS, Istanbul; HSBC México, SA, Institución de Banca Múltiple, Grupo Financiero HSBC; HSBC Bank Website: www.research.hsbc.com Brasil SA – Banco Múltiplo; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC Saudi Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR This document has been issued by The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) in the conduct of its Hong Kong regulated business for the information of its institutional and professional investor (as defined by Securities and Future Ordinance (Chapter 571)) customers; it is not intended for and should not be distributed to retail customers in Hong Kong. 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Global Natural Resources & Energy

Research Team Metals and Mining Chemicals EMEA Europe Andrew Keen Dr Geoff Haire Global Sector Head, Metals and Mining +44 20 7991 6892 [email protected] +44 20 7991 6764 [email protected] Sebastian Satz, CFA Thorsten Zimmermann, CFA +44 20 7991 6894 [email protected] +44 20 7991 6835 [email protected] Jesko Mayer-Wegelin, CFA Emma Townshend +49 211 910 3719 [email protected] +27 21 794 8345 [email protected] Derryn Maade CEEMEA + 27 11 676 4519 [email protected] Yonah Weisz +972 3 710 1198 [email protected] North America & Latin America James Steel Sriharsha Pappu, CFA +1 212 525 3117 [email protected] +971 4 423 6924 [email protected] Patrick Chidley, CFA Nicholas Paton, CFA +1 212 525 4915 [email protected] + 971 4 423 6923 [email protected] Botir Sharipov, CFA Asia +1 212 525 5150 [email protected] Dennis Yoo, CFA Howard Wen +852 2996 6917 [email protected] +1 212 525 3726 [email protected] Leonardo A Correa Utilities +55 11 3847 5433 [email protected] Europe Luiz G Fornari Adam Dickens + 55 11 3847 5436 [email protected] +44 20 7991 6798 [email protected] Asia Verity Mitchell Simon Francis +44 20 7991 6840 [email protected] Regional Head of Metals and Mining, Asia Pacific Asia +852 2996 6620 [email protected] Jenny Cosgrove Thomas Zhu, CFA Regional Head of Utilities and Alternative Energy, Asia Pacific +852 2822 4325 [email protected] +852 2996 6619 [email protected] Chris Chen Neel Sinha +852 2822 4277 [email protected] Analyst Jeff Yuan +65 6658 0606 [email protected] +852 3941 7010 [email protected] Arun Kumar Singh Brian Cho Analyst +822 3706 8750 [email protected] +91 22 2268 1778 [email protected] Jigar Mistry, CFA +91 22 2268 1079 [email protected] Gloria Ho +852 2996 6941 [email protected] Jena Han +822 3706 8772 [email protected] Summer Y Y Huang +852 2996 6976 [email protected] Energy Europe Yeon Lee David Phillips +822 3706 8778 [email protected] Global Sector Co-head, Oil and Gas Latin America +44 20 7991 2344 [email protected] Sandra Boente Peter Hitchens +1 212 525 4441 [email protected] +44 20 7991 6822 [email protected] Osmar Camilo Phillip Lindsay +55 11 3847 9502 [email protected] +44 207 991 2577 [email protected] Kirtan Mehta, CFA CEEMEA +91 80 3001 3779 [email protected] Levent Bayar Analyst CEEMEA +90 212 376 46 17 [email protected] Bülent Yurdagül +90 212 376 46 12 [email protected] Dmytro Konovalov Ildar Khaziev, CFA +7 495 258 3152 [email protected] +7 495 645 4549 [email protected] Alternative Energy Latam Jenny Cosgrove Luiz F Carvalho Regional Head of Utilities and Alternative Energy, Asia Pacific + 55 11 3371 8178 [email protected] +852 2996 6619 [email protected] Filipe M Gouveia Charanjit Singh + 55 11 3847 5451 [email protected] +91 80 3001 3776 [email protected] Asia Gloria Ho Thomas Hilboldt +852 2996 6941 [email protected] Regional Head of Oil, Gas and Petrochemical Research, Asia Pacific +852 2822 2922 [email protected] Specialist Sales Dennis Yoo, CFA +852 2996 6917 [email protected] Annabelle O'Connor +44 20 7991 5040 [email protected] Kumar Manish +91 22 2268 1238 [email protected] James Lesser Alok P Deshpande +44 207 991 1382 [email protected] +91 22 681245 [email protected] SI Tingting +852 2996 6590 [email protected]