June 21, 2019 / 8:34 AM / 8 months ago

UPDATE 1-Australian power woes knock Hong Kong's CLP Holdings

* CLP faces up to $900 mln writedown on Australian retail arm

* Earnings dented by new Australian power tariff caps

* Mt Piper power plant faces coal supply problem (Adds CLP comment on power plant problem)

By Sonali Paul

MELBOURNE, June 21 (Reuters) - Shares in Hong Kong’s CLP Holdings posted their biggest 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.

Hong Kong’s broader market was down 0.3% on Friday.

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 the nation’s big power retailers, led by Origin Energy, AGL Energy and EnergyAustralia, to set a “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 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, attributing the drop to weaker output 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.

The Mount Piper plant has generated about 42 percent less power so far this year compared to the same period last year due to coal supply problems from the Springvale mine nearby, owned by Thailand’s Banpu Pcl.

CLP said it wants to continue receiving coal from nearby mines for the remainder of the plant’s life to 2042, but that it is considering alternatives. The Mount Piper plant supplies up to 15 percent of the electricity in Australia’s most populous state, New South Wales.

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

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