Powering ’s Sustainable Development

Betty Yuen Managing Director CLP Power

6 December 2006

1 Powering the Development of Hong Kong

HK’s Electricity Consumption

CLP Power’s Operating Statistics

Population Served 5 million + 20-fold increase Customer Number 2.2 million in 40 years Installed Capacity 8,888 MW

Sales 30,000 GWh

1890 1930 1950 1970 2005 2 Some Facts about Hong Kong’s Energy Requirements

• HK’s total energy requirement is about the same as that of New Zealand, 2/3 of Singapore and 1/6 of Taiwan

• HK is 100% dependent on imported energy

• HK is an international finance centre with 50% of the population living or working above 15th floor

3 HK’s Primary Energy Requirements

46%

Coal Fuel for Oil / 33% power Naphtha generation Fuel for Nuclear transportation, towngas, industrial and other uses Natural Gas 7% 14% * Source: Hong Kong Energy Statistics 2005 Annual Report

Fuel for electricity generation accounts for almost 70% of all energy consumed in Hong Kong

4 CLP Provides Highly Reliable Supply at Competitive Prices

• 99.99% reliability, among the Power interruption time world’s best (mins per customer per year*) • Tariffs frozen since 1998 CLP Power 6 • Affordable tariffs – account for 1.9% New York 11.8 of monthly household expenditure Paris 12.8 • Tariffs among the lowest in major London 40 metropolitan cities Sydney 42

Residential Tariff HK cents/kWh (as of January 2006) *Average 2002-2004. Source: UMS Group; EDF; EnergyAustralia 220 200 Regulated market 180 160 Competitive market 140 120 100 80 60 40 20

0 Luxembourg Lumpur Jakarta Taipei Vancouver Shanghai Shenzhen Power CLP Sydney Seoul Singapore Paris Wellington Lisbon London Tokyo Madrid Amsterdam Brussels Rome Berlin YorkNew Kuala

Remarks: Comparison based on annual domestic consumption of 3,300 kWh. Tariff and exchange rate at Jan 2006 5 Higher Reliability at Comparable Tariffs to Mainland Cities 120 Tariff in 2006 (HK cents/kWh) 100 Large Industrial Commercial

80

60

40

20

0 C B Sh Fo G Z H Ji S Z Z D LP ei a sh ua hu ui an he ha ho on P jin ng an ng ha zh gm nz oq ng gg ow g ha zh i ou e he in sh ua er i ou n n g an n

14 12 Interruption Hours in 2004 (hours/year) 10 8 6 4 2 0 Source: Beijing Power Supply Co; Shanghai Municipal Electricity Power Co; Guangdong Price Information; China Electricity Council 6 CLP’s Fuel Diversification – Similar to Developed Countries

Japan * North America* CLP (2005) Others 2% Others 2% Oil Hydro Hydro 13% 1% 10% Coal Nuclear Coal Nuclear 28% Nuclear Coal 18% 46% 23% 29% 39% Oil 13% Gas Gas 16% Oil 24% 5% Gas Others 3% Nuclear 2% 31% Hydro Hydro GasNuclear 1% 2% 15% 15% Coal Oil 3% 30% Coal 79% Nuclear Coal A balanced fuel mix is 29% 79% Gas Oil 5% important for supply reliability 18% and tariff management Europe * Mainland China *

* Percentages quoted for fuel combination are 2003 figures Source: International Energy Agency 7 Significant Environmental Improvements

Emissions Reduction (1990-2005) SO 44% Electrostatic Nuclear Power 2 Precipitator NOx 77% (1982-85) Particulates 70% 200 Note: Local sales grew by 70% in the period Low NOx Burner

150

Natural Gas Use of ultra-low 100 sulphur coal

50 Total Emission (kilotonne) Total Emission 0 Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Achieved significant emissions reductions from early 1990s through the use of emissions abatement technology and introduction of cleaner energy sources

8 CLP is Committed to Meeting 2010 Target

• Import Liquefied Natural Gas (LNG)

• Install Emissions Control Equipment for Coal Units

• Increase use of Ultra Low Sulphur Coal

• Promote energy efficiency

• Feasibility studies of Onshore and Offshore Wind Projects

• Other possible options to be explored

9 Natural Gas is Crucial to Supply Reliability and Clean Air

• CLP’s Black Point Power Station (2,500 MW) is one of largest gas- fired power station in the world, using natural gas for more than 10 years

• The existing gas supply to Black Point, the Yacheng gas field, is expected to deplete early next decade

• A secure and reliable gas supply is needed to refuel Black Point

10 Benefits of Using LNG

• LNG transportation and usage has an outstanding safety record extending over 40 years

• LNG is the cleanest fossil fuel available for power generation

CO (carbon dioxide) 2 NOx (nitrogen oxide)

Natural gas Coal Oil Natural Gas Coal Oil Natural Gas produces no 100 80 57 100 71 20-37 particulates & SO2

11 The LNG Supply Chain

HONG KONG

Liquefaction Marine Receiving Natural Gas Transportation Terminal Field Terminal

Sendout LNG Natural gas by pump via pipeline

LNG Vaporizer Black Point Storage Tank (for regasification) Power Station (for temporary storage) (for power generation) 12 Why Hong Kong Needs a LNG Terminal?

• South China gas reserves either committed to others or insufficient to meet CLP’s large volume requirements

• CLP’s requirements of 2.6 MTA are 8 times the size of Towngas or Hongkong Electric • Could take up almost all the volume currently available for the Shenzhen Dapeng LNG Terminal which serves more than 10 users

• Timing for new terminals in Guangdong is uncertain

• Only a Hong Kong LNG terminal can meet CLP’s large volume in the time-frame required

13 A Local LNG Receiving Terminal is the Best Option for Hong Kong

• Time certainty : Faster project development under one jurisdiction. Upon timely GOHK approval, project development can start in 2007 for completion in 2011

• Supply security : • CLP could directly deal with LNG suppliers without a middleman • Hong Kong’s gas needs would be served as priority

• Air Quality Improvement : Availability of LNG enables CLP’s flexibility to increase the use of natural gas up to half of its electricity demand, which will result in further reduction of emissions by 17% to 40%

Annual Reduction in Emissions Achievable

SO2 NOx CO2 20,000 tonnes 10,000 tonnes 3 million tonnes (43%) (35%) (17%) 14 Significant Progress since 2003 to Bring LNG to Hong Kong

Intensive activities over the last 3½ years : Stakeholders Engagement Engineering & design

EIA study Gas supply

Overseas experience Site selection Legend Black Point Power Station Hong Kong SAR Boundary LNG ship Isometric Circles Potential Site Sites

1 - Black Point 2 - Lung Kwu Tan 29 3 - Castle Peak North 4 - West Brothers 5 - Yam Tsai New Territories 6 - Brothers Point

7 - Sham Wat Wan m 1 k

0 8- North 1 m k

0 9- Yi O 2

m k 10- Peaked Hill Island 2 0 11- Fan Lau West 3 3

m k

12- Fan Lau East 0 13- North Sokos 4

14- South Sokos m k

0 15- Shek Kwu Chau 6 5 4 5 Kowloon 16- Sunshine Island 28 27 17- Man Kok Peninsula 18 18- Tsing Yi 19- Beaufort Island 20- Po Toi Island 7 21- Fury Rocks 22- Waglan Island Hong Kong 8 16 Island 26 23- Stanley Peninsula 17 24- Cape Collinson 24 25 25- Tung Lung Chau 9 26- Area 137 ² 27- Wang Chau Kilometres 10 024681 28- Town Island 15 23 29 - Tap Mun 11 21 12 13 19 22

14 20 Hong Kong SAR Boundary

Comprehensive project to bring LNG to Hong Kong as early as possible 15 South Soko and Black Point Sites Studied

Black Point

South Soko Island

An overall evaluation of the EIA study together with other considerations show that the South Soko option provides the most benefits to Hong Kong

16 The Proposed Enhancement Plan

17 Further Emissions Reductions Initiatives KT 150 SO2 • Ongoing improvement plans/projects include: 75 Reduced − Ultra Low Sulphur Coal by 44%

− Emissions Control Retrofit 0 1990 2005 Projects Completion − Liquefied Natural Gas KT 150 NOx

• Completion of these plans/projects Reduced 75 by 77% critical to meet 2010 emissions reduction targets 0 1990 2005 Projects Completion

• Other initiatives: KT 10 RSP − Feasibility studies of onshore and offshore wind projects 5 Reduced by 70% − Other options to be explored

0 1990 2005 Projects Completion 18 Emissions Comparable to Developed Economies

kg/MWh SO Emission CLP’s 2005 emissions per unit sold 5 2 CLP’s 2005 emissions per unit sold inin HongHong KongKong comparecompare favourablyfavourably 4 withwith majormajor utilitiesutilities inin developeddeveloped 3 countriescountries 2 Further significant reductions upon 1 Further significant reductions upon completioncompletion ofof majormajor projectsprojects 0

Source: Company websites; 2003, 2004 and 2005 data Southern Delta HEC (HK) Pacific CorpScottish CLP (HK) KEPCO EDF SA CLP TEPCO Company Electricity (USA) Power (UK) (Korea) (France) (projects (Japan) kg/MWh(USA) (Australia) completion) kg/MWh

0.3 3 NOx Emission Particulates Emission

0.2 2

0.1 1

0 0

Eskom Progress Scottish HEC (HK) Delta Pacific Corp CLP (HK) CLP KEPCO Energy Power (UK) Electricity (USA) (projects (Korea) Delta Pacific CorpHEC (HK) Southern Scottish CLP (HK) KEPCO EDF SA CLP TEPCO (South Africa) (USA) (Australia) completion) Electricity (USA) Company Power (UK) (Korea) (France) (projects (Japan) 19 (Australia) (USA) completion) Renewable Energy (RE) Development

To date, RE accounts for about 1.8% of CLP Group’s generating capacity:

HK – offshore feasibility

Operation Guangdong, Shandong, Australia, Australia,

Huaiji Changdao Bluff Point* Cathedral Rocks* Photo by Elsam 82MW Hydro 27MW Wind 65MW Wind 66MW Wind

Shandong, Jilin, Guangdong, Shandong,

Construction HK – Wind Turbine Pilot Weihai Shuangliao* Nanao Rongcheng* 19.5MW Wind (2006/7) 49MW Wind (2006/7) 45MW Wind (2007) 49MW Wind (2007) Demonstration (2008)

* Thru’ Roaring 40’s

CLP Group has set a target to have 5% of total generating capacity from renewable energy sources by 2010 20 The Way Forward

• CLP relies on a fair and balanced regulatory framework to maintain its excellent performance – provide customers with reliable, efficient and environmentally friendly supply at affordable prices

• CLP has demonstrated unwavering commitment to manage the environmental impact of our operations, and we have taken other initiatives to further improve our performance facilitating the sustainable development of the community

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