CLP : Announcement of Interim Results as from 1 January 2017 to 30 June 2017, Dividend Declaration and Closure of Books (7 August 2017)

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中電控股有限公司

(Stock Code: 00002)

• Group operating earnings for the first half of 2017 declined 3.8% to HK$5,914 million; total earnings decreased by 3.5% to HK$5,909 million.

• Operating earnings from our local electricity business in Hong Kong rose 1.9% to HK$4,356 million.

• Consolidated revenue rose 12.1% to HK$43,337 million.

• Second interim dividend of HK$0.59 per share.

I am pleased to report that in the face of accelerating change brought by energy transitions underway in each of our major markets, the Group secured regulatory certainty in Hong Kong and delivered largely steady results in the first half of 2017.

During this period, the Group's operating earnings were HK$5,914 million, a decrease of 3.8% compared with the first half of 2016, largely due to unfavourable market conditions in Mainland China and the impact of increased volatility in the Australian market. Total earnings decreased by 3.5% to HK$5,909 million. The Board decided to increase the level of our first and second interim dividends from HK$0.57 per share in 2016 to HK$0.59 per share this year.

In the first six months of 2017, our electricity business in Hong Kong continued to be the Group's major earnings contributor, reporting a 1.9% rise in operating earnings to HK$4,356 million compared with the same period last year. I am particularly pleased that we signed a new Scheme of Control (SoC) Agreement with the Hong Kong Government in April. As I have often said, the SoC Agreement has served Hong Kong well for over half a century by ensuring a reliable, safe, and reasonably‐priced supply of electricity to power the city's growth through good and not‐so‐good times. This is all the more important as we face the challenges of climate change and rapid technological development brought by the digital revolution.

The new Agreement, which will run for 15 years from 2018 to 2033, provides the regulatory and economic certainty required for CLP to plan ahead and make appropriate investments to deliver the Government's energy objectives and meet the emerging needs of our customers.

In support of the Hong Kong Government's target to increase natural gas use to about 50% in 2020, we continued the construction of our new 550MW gas‐fired generation unit at the Black Point Power Station. We plan to commission the new unit before 2020. This project will also play an important part in Hong Kong's plan to reduce carbon intensity by 65‐70% by 2030.

Looking beyond our home market, our overseas businesses reported mixed performances amid increasingly challenging market conditions. This is a reflection of the global transformation that is taking place in the power sector in Mainland China, Australia and India, as well as the specific conditions pertaining to these markets. Our diversified portfolio has helped us navigate these challenges and mitigate their impact.

In Mainland China, higher coal prices and overcapacity were the main factors behind a 24.3% drop in our operating earnings to HK$637 million. The country's slowing pace of economic growth and structural reform to shift away from heavy industry affected the performance of our thermal power plants. However, earnings from our renewable projects held up well due to the continuous growth of our wind portfolio and the good solar resources available. Generation from Daya Bay also increased. This underlines the benefit of having a diversified generation portfolio such as ours, especially as Mainland China continues to transition to a low carbon economy.

Our acquisition of a 17% stake in Yangjiang Nuclear Power Co., Ltd. in Guangdong is an important step to increase the Group's non‐carbon emitting portfolio and to support China's commitment to reducing coal's dominance in the energy mix. The Yangjiang Nuclear Power Station, when fully commissioned, will add over 1,100MW of non‐carbon emitting generation capacity to CLP's portfolio. We expect the transaction to be completed in the coming months.

In India, our renewable energy portfolio and our gas‐fired station at Paguthan continued to contribute steady earnings during the reporting period. In the first six months, operating earnings increased by 21.0% to HK$242 million, compared with the same period in 2016. We continued with the construction of our first solar project in India, the Veltoor Solar Power Plant, which will be commissioned in the second half of the year. Moreover, the performance of our coal‐fired Jhajjar Power Station was overall solid in the period outside the planned two‐month maintenance outage.

We expect Mainland China and India to remain our growth markets in the medium to long term, especially in renewable energy, as both countries seek to reduce their reliance on fossil fuels. However, we take note of the dwindling subsidies as renewable technologies have matured to the point where they are now often on a competitive footing with conventional energy sources. Going forward, we will also explore growth opportunities along the energy supply chain in these markets.

I would like to focus for a moment on our Australia business. In the first half of the year, EnergyAustralia's operating earnings decreased 15.5% to HK$758 million, largely due to the impact of significant volatility in the market on the value of energy contracts. Against a backdrop of uncertain energy policies, the energy market in Australia remains very challenging, leading to a period of high and volatile wholesale prices. EnergyAustralia is both a buyer and seller in the wholesale market and in times of high volatility the prospective value of those energy contracts can vary significantly. Our integrated business model and the good operational performance of the business have helped minimise the impact of this volatility. Looking to the longer term, a recent review of the Australian power sector has yielded proposed recommendations for Australia's electricity future. We will work closely with the governments, regulators, industry players and customers to understand its implications and discuss the best way to implement it as we continue to restore value to the business and enhance our operation.

The energy industry is in the midst of a period of unprecedented uncertainty and challenge brought about by climate change and rapidly evolving technologies. As a company that has experienced many changes and challenges over the past century, CLP is well‐prepared to recognise and seize the opportunities that such changes are bringing. We have a diversified portfolio in terms of fuel, operations and geographical footprint, and the expertise and professionalism of a world‐class team with a strong track record of delivering results. In the coming years, we will continue to be guided by our "Focus • Delivery • Growth" strategy as we seek to meet the challenges of the global transition to a low carbon future.

In closing, I am saddened to report two separate fatal accidents that resulted in the deaths of four contractor workers in our Hong Kong business this year. I want to express my deepest condolences to the families of the men who lost their lives. Safety is our first priority and we attach greatest importance to it for protecting our customers, our staff and contractor workers. We will learn from these accidents and redouble our efforts to avoid similar events in the future.

Operating earnings and total earnings decreased by 3.8% and 3.5% respectively to HK$5.9 billion

* Hong Kong related includes PSDC, Hong Kong Branch Line and sales to Guangdong from Hong Kong

The financial performance of individual business segment is analysed as below:

Hong Kong : Higher net return on increased average net fixed assets partly offset by unfavourable fair value movement on forward foreign exchange contracts used to hedge the perpetual capital securities

Mainland China : Higher coal prices and overcapacity in generation adversely impacted coal‐fired projects; improved renewable performance due to continuous portfolio growth and good solar resources available partially offset by less rainfall at Huaiji; higher nuclear earnings due to more output from GNPJVC

India : Stable operations at Paguthan and Jhajjar; for renewable portfolio, write‐off of capitalised cost after cancellation of Yermala wind project partly compensated by higher generation and lower interest expenses

SEA and Taiwan : Higher coal costs and lower energy tariff partially offset by more generation from Ho‐Ping; stable operation at Lopburi solar farm

Australia : Lower contribution from Energy segment resulting from higher gas supply costs, additional electricity spot purchases at high prices and unfavourable fair value movement of energy derivatives caused by significant increase in wholesale prices; higher contribution from Customer segment driven by higher gross margins as a result of higher prices and usage by mass market customers