Hong Kong Electricity Business
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Management’s Discussion and Analysis – Business Review The purpose of this business review of Control became effective in is to explain the various business 1993 and runs until 2008. The streams within the CLP Group, the Scheme of Control obliges CLP major progress made during 2001 Power to meet electricity demand and outline objectives for the at the lowest reasonable cost. In coming year and the longer term. return, the Government recognises that CLP Power is entitled to receive a reasonable HONG KONG return on its investment. ELECTRICITY BUSINESS CLP Power does not directly own generation facilities, but purchases The CLP Group, through its power from Castle Peak Power its wholly-owned Company Limited (in which CLP subsidiary, CLP Power, Power owns a 40% interest) and Guangdong Nuclear Power Station owns and operates the (in which CLP Holdings owns a 25% larger electric utility interest) at Daya Bay, Guangdong business in the Hong Province. These sources of power, together with CLP Power’s right to Kong Special use capacity at the Guangzhou Administrative Region. Pumped Storage Power Station, amount to a total installed capacity CLP Power supplies electricity to of 8,263MW. 2 million customers, representing a population of approximately 5.4 Business Strategy million in Kowloon, the New The strategic vision of CLP Power is Territories, Lantau and a number of to be a world-class power company outlying islands. CLP Power’s providing excellent services to supply area covers approximately Hong Kong customers. CLP Power 1,000 square kilometres, through a is fulfilling that vision by delivering company-owned and operated reliable energy supplies and high 10,859 kilometres advanced quality services at competitive transmission and distribution prices to its customers, while network. In addition to sales to Hong meeting or exceeding all safety and Kong customers, approximately 6% environmental requirements for the of CLP Power’s electricity sales was community, and providing a for distribution to customers in challenging and rewarding work Guangdong Province. environment for its employees. CLP Centenary Substation in West Kowloon CLP Power’s electricity generation The long-term interests of our and supply business is regulated shareholders are best served by by the Hong Kong Government ensuring that CLP Power’s pursuant to a Scheme of Control customers receive value for Agreement. The current Scheme money and good service. If a 30 CLP Holdings Annual Report 2001 utility company consistently fails clause reduction to all its will offset costs for CLP’s Hong to meet its customers’ reasonable customers in 2002. This is the Kong customers and contribute expectations, it cannot expect to third time CLP Power has to shareholder earnings. continue to receive the support provided rebates to its • To meet rising customer of the community it serves. customers in three years. On top expectations, three larger Hence, customer satisfaction of the rebate and fuel clause customer services centres were is a cornerstone of CLP Power’s reduction package, all CLP acquired during the year to strategy for creating value non-residential customers will provide a comprehensive range to shareholders. receive additional benefit from a of value-added services, such as Business Relief Rebate of HK¢0.2 sales of energy-efficient electrical In fact, demand for CLP Power’s per unit of electricity appliances, in addition to the services is greater than ever. On a consumption for a period of 12 existing core services of bill typical working day, CLP Power lays months. This Rebate is provided payment and account enquiries. about two kilometres of in light of the difficult • In April, CLP Power achieved the distribution cable, installs one environment currently being highest rating in a public substation, processes 860 account faced by commercial and opinion survey. The overall rate applications and amendments, and business users. The entire rebate of satisfaction, based on handles more than 6,400 and reduction package is customers’ feedback on telephone enquiries. expected to amount to HK$560 restoration of supply, customer million and will be funded mainly centres, customer installation Achievements for 2001 by the Development Fund. inspection and customer 2001 was marked by significant • CLP Power has signed a second telephone services was 98.28%. accomplishments and supply arrangement with CLP Power’s efforts in customer developments of CLP Power. Guangdong that extends into services improvements and • Through its on-going drive for 2002. This will assist achievements were recognised efficiency and cost control, CLP Guangdong in meeting its by the Customer Service Grand Power was able to announce a electricity demand and provide Award under the Hong Kong package of rebates and fuel additional sales revenue that Awards for Services 2001 CLP Holdings Annual Report 2001 31 Management’s Discussion and Analysis – Business Review Plans and Activities for 2002 Over the next year, CLP Power will build on this progress and focus on the following major strategies and initiatives: • CLP Power will benchmark its performance against other comparable utility companies and market leaders around the world to identify specific areas where it can further improve efficiency and drive down “Hand Talk” service for hearing-impaired customers operating costs. • In order to reduce pressure on organised by the Hong Kong CLP Power and the best fuel costs, CLP Power will look for Retail Management Association. performing utilities. fuel procurement synergy within • CLP Power has delivered a Improvement plans were the CLP Group. CLP Power will challenging capital works developed to keep CLP Power at closely manage its fuel suppliers programme, totalling HK$4.6 the forefront of world practice. to ensure good performance, and billion, including 132kV Tseung • CLP Power has actively managed complete improvements to the Kwan O Town Centre Substation, its fuel costs and achieved Castle Peak Coal Plant to provide 132kV Tin Shui Wai ‘B’ remarkably low costs despite the flexibility in burning a wider Substation, 132kV West Kowloon price escalation and volatile fuel range of coals. Substation and diversion market environment in recent • Although Hong Kong’s recent rate projects for West Rail. This years. The delivered coal price of growth has slowed down investment enhanced our supply for the year was lower than the significantly, on-going quality and reliability, as well as market by 35%. This was development projects and new provided for demand created by achieved through the infrastructure projects, mostly in new towns and infrastructure development of new coal CLP Power’s supply area, will development projects in CLP sources, operational changes to continue to require upgrades and Power’s supply area. Unplanned accommodate a wider variety of extensions to the transmission customer minutes lost per qualities and careful timing of and the distribution networks. annum (a standard measure of contract placement. Major work includes the supply reliability) have been • The strategic purchasing implementation of the reliability improved by about 50% within initiative achieved significant improvement plan to further the last four years. cost reductions in both capital reduce the customer minutes • A benchmark of CLP Power equipment and operating lost, the application of 11kV live operations showed that its expenses. CLP Power also line work to minimise the need performance, compared to explored possibilities offered by for power outages on these international power utilities, the “new economy” to improve circuits and the overhead line was well above average, with speed and efficiency of its improvement work. many areas at world-best procurement activities. CLP • CLP Power will continue its focus practices. However, through Power has used e-catalogues, on delivering high performance these benchmarking exercises, e-tendering and on-line bidding and flexibility from its generating gaps were identified between since September 2000. assets. Priority tasks for the 32 CLP Holdings Annual Report 2001 generation business are the REGIONAL power station at Daya Bay; completion of Castle Peak Power • 29.4% in Shandong Zhonghua Station refurbishment projects ELECTRICITY Power Company (SZPC) in and construction and BUSINESSES Shandong Province. SZPC owns commissioning of Black Point CLP Power China (CLP-PC) two existing operating power Power Station units 7 & 8 to stations, Shiheng I and II schedule and budget. leads the Group’s (totalling 1,200MW), and has two • In order to deliver a level of operations in the power stations under service that meets or exceeds Chinese mainland while construction, Liaocheng and our customers’ expectations, CLP Power International Heze II (totalling 1,800MW); CLP Power will continue to • 49% in CLP Guohua Power revamp its customer services (CLP-PI) undertakes our Company Limited, which owns centres and conduct a series of activities in the wider and operates three power customer reach initiatives to Asia-Pacific region. stations with a total generating collect feedback as the basis for capacity of 2,100MW in the further improvements and new Beijing-Tianjin-Tangshan area; CLP-PC and CLP-PI develop and services. CLP Power will • 49% of Shenmu II Power Station own power projects in the region cultivate relationships with (2 x 100MW coal-fired units), and serve as vehicles for growth in customers and provide total Shaanxi Province; the CLP Group to create energy solutions to them.