June 21, 2019 / 4:08 AM / 25 days ago

Shares in Hong Kong's CLP Holdings tumble on Australian power woes

MELBOURNE, June 21 (Reuters) - Shares in Hong Kong’s CLP Holdings posted their worst drop in over a decade on Friday after the power company warned it would book a first-half loss due to a big writedown on the value of its Australian business.

Shares in the company fell as much as 5.5% after it said in a statement to the Hong Kong exchange after the market closed on Thursday that it would take an impairment charge of between HK$6 billion and HK$7 billion ($768 million and $896 million) on its EnergyAustralia retail business. The broader market was down 0.3%.

The writedown reflects the impact of new retail power price caps that will be imposed by the Australian government from July, CLP said.

Looking to appease voters ahead of an election in May, the Australian government required Australia’s big power retailers, led by Origin Energy, AGL Energy and EnergyAustralia, to set a new “default market offer” to cut bills for customers who had failed to shop around for the best deals.

CLP said the new “safety net” tariffs and efforts by Energy Australia to lure new customers with cheaper deals would cut its second-half earnings before tax from the Australian retail business by between HK$240 million and HK$300 million.

“This reduction will likely sustain into the future, but may vary as market participants and customers adjust to these new market conditions,” CLP said.

It also said operating earnings at EnergyAustralia for the first five months of 2019 had dropped to HK$731 million ($94 million). That was down sharply from the HK$2.25 billion it reported for the six months to June 30 last year due to weaker generation from the Australian unit’s two biggest power plants: Yallourn and Mount Piper.

“We do not expect these issues to be repeated during the second-half of the year at Yallourn and we are also undertaking efforts at Mt. Piper to improve the coal quality,” CLP Chief Executive Richard Lancaster told investors on a conference call on Thursday.

$1 = 7.8092 Hong Kong dollars Reporting by Sonali Paul; Editing by Joseph Radford

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