CLP and Renewable Energy in Asia

May 2010

Andrew Brandler

CEO

CLP Holdings

1

Disclaimer

This presentation contains some comments about future events including our expectations about the performance of CLP Group's business. The comments are not audited and are based on a number of

factors that we cannot control. We cannot be certain that the comments

will be accurate or complete and so they should not be relied on. As circumstances change we will update our website at www.clpgroup.com

and, where relevant, notify the Hong Kong Stock Exchange.

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Global Energy Challenge

How to provide energy necessary for social and economic development, yet avoid serious environmental impacts?

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CHINESE MAINLAND – 6,579 MW� Largest external investor in electricity industry

� Diversified portfolio

- Coal

- Nuclear

- Hydro

- Wind

- Biomass

INDIA – 2,421 MW� Largest foreign investor in

electricity industry

� Top investor in wind

� Diversified portfolio:

- Coal

- Gas

- Wind

AUSTRALIA –3,188 MW

� Largest foreign investor in

electricity industry

� No. 2 Private Generator

� No. 3 Private Retailer

SOUTHEAST ASIA – 853MW� Largest shareholder in EGCO,

Thailand after EGAT

� JV with Mitsubishi in Thailand

and Taiwan

� Development of 2 coal projects in

Vietnam

HONG KONG – 6,908 MW� Vertically integrated power company

- Generation

- Transmission & Distribution

- Retail

� Largest HK Power Utility

- 2.2 million customers

- Supplying 80% of HK’s population

CLP Group Portfolio – Cross Regional Presence

4

CLP’s Climate Vision 2050

CO2 Emissions Intensity

0.8(kg CO2/kWh)

0.7(kg CO2/kWh)

0.45(kg CO2/kWh)

0.2(kg CO2/kWh)

0.83(kg CO2/kWh)

Towards The Future

Energy Efficiency & Conservation

Renewable

Energy

Natural Gas

Nuclear

Clean Coal

By

Non-carbon Emitting

20%Non-carbon

OngoingReview of

Target

2009

2010

2020

2035

2050

2004

>75%

>45%

~5%

<1% RE

11% RE15% Non-carbon

Our Manifesto to Climate Change

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Five major initiatives to implement our climate commitment

� Renewable Energy

− Largest external investor in RE both in China and India

− Exploring solar energy projects –with first project in Thailand to start construction in June

− Secured Environmental Permit to develop a 200MW offshore wind farm in Hong Kong

� Natural Gas

− Participating in measures to bring additional, long-term supplies of natural gas to HK to move to a +/- 50% target for Hong Kong electricity supply

− Commissioned a new 420MW CCGT plant in Australia which is amongst the most efficient fossil-fuelled power station in Australia

� Nuclear Power

− Obtained approval to extend the Daya Bay joint venture through to 2034

− Looking to extend our involvement in nuclear energy in China

� Clean Coal Technology

− Using latest efficient technology for any new coal-fired plant that we build

− Looking at ways to reduce emissions at Yallourn in Victoria, Australia through experimental coal drying and CCS projects

� Energy Efficiency and Conservation

− Carried out over 800 energy audits for large customers in Hong Kong and extended such services services to Hong Kong-owned manufacturers in Guangdong

− Offer energy efficiency services to our customers in Hong Kong and Australia

Climate Vision 2050

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…Different Energies, Different Markets

� Different Energies

− Wind and hydro power making the major contribution to the growth of RE capacity in Asia

− Solar gradually moving into commercial scale deployment

− Large-scale deployment of clean coal technology, absent significant policy and technological development, is unlikely in the near to medium future

Powering Asia Responsibly

� Different markets offer different opportunities

− Wide variances in national or local policy support

- There are no national feed-in tariffs for Solar in China at present- Indonesia and Hong Kong do not offer feed-in tariffs for renewable generation at

present- In Australia, wholesale tariff in Victoria, South Australia, Queensland, New South

Wales and Tasmania is determined by National Electricity Market

20% 20%

2%

10.60%10% 10%

0

50

100

150

200

250

300

350

400

450

China India Thailand Australia Hong Kong Indonesia

Maxim

um

Feed

-in

Tarr

if A

vail

ab

le (

US

D/M

Wh

)

0%

5%

10%

15%

20%

25%

Ren

ew

ab

le E

nerg

y T

arg

ets

(vari

ou

s d

ead

lin

es)

Solar Tariff Wind Hydro Bioenergy Renewable Energy Targets

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Renewables Portfolio ~2,000 Equity MW

Our Footprints

Australia

India

China

Thailand

AUSTRALIA – total 142 MWOperational� Bluff Point 65/33 MW (w)� Cathedral Rocks 66/16 MW (w)� Studland Bay 75/37 MW (w)Construction� Waterloo 111/56 MW (w)

INDIA – total 446 MWOperational� Khandke Wind 50/50 MW (w)� Samana Wind-I 50/50 MW (w)� Samana Wind-II 38/38 MW (w) � Saundatti 21/21 MW (w)� Theni 21/21 MW (w)Construction� Samana Wind-II 12/12 MW (w)� Saundatti 62/62 MW (w)� Andhra Lake 114/114 MW (w)� Theni 78/78 MW (w)

THAILAND – total 60 MWOperational� Small Biomass 33/3 MW (b)Construction� Solar project 55/21 MW (s)� Nam Theun 2 1,087/36 MW (h)

� Changdao 27/12 MW (w)� Weihai I & II 69/31 MW (w)� Nanao II 45/11 MW (w)� Shuangliao I&II 99/49 MW (w)� Rongcheng 49/24 MW (w)� Datong 49/24 MW (w)� Laizhou 41/18 MW (w)� Changling II 50/22 MW (w)� 3 Shandong 149/73 MW (w)� Qujiagou 49/12 MW (w)� Mazongshan 49/12 MW (w)� CGN Wind 246 MW (w)� Huaiji 125/106 MW (h)� Dali Yang_er 50/50 MW (h)� Boxing Biomass 15/12 MW (b)

� Rongcheng II /III 99/49 MW (w)� 3 Shandong 149/73 MW (w) � Qian’an 50/50 MW (w)� Nanao III 15/4 MW (w)� CGN Wind 170 MW (w)� Jiangbian 330/330 MW (h)

• Station Name Gross MW / CLP Equity MW

Solar project (s)

Hydro projects (h)

Biomass projects (b)

Wind projects (w)

OperationalWind 534 MWHydro 156 MWBiomass 12 MW

ConstructionWind 346 MWHydro 330 MW

CHINA – total 1,378 MW

8Geographical and fuel diversity

Wind (1,468 MW)

� 22 wind farms in China (464 MW)

� Strategic investor in CGN Wind in China (416MW)

� 4 wind farms in Australia (142 MW)

� 6 wind farms in India (446 MW)

Equity Capacity

Hydro (522 MW)

� 3 hydropower projects in China (486MW)

� 1 hydropower project in Laos (through EGCO) (36MW)

Biomass (15 MW)

� 1 plant in China (12MW)

� 3 plants in Thailand (through EGCO) (3MW)

CLP Group Renewables Portfolio

Solar (21 MW)

� 1 solar project in Thailand (21MW)

� Various solar opportunities in Australia and India

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Our Portfolio

� Largest external investor in the RE sector in China

� Repositioning of our portfolio towards low carbon generation

� CLP has 1,378 Equity MW in operation or under construction

− 31 Mar 10 cumulative investment of ~HK$3.9 billion with total commitment of ~HK$4.4 billion

− Included strategic stake in CGN Wind

Policy Target

� Renewable Energy Law provides for robust regulatory framework and ancillary infrastructure facilitation

� NDRC targets increase in renewable consumption to 15% by 2020

China

HEILONGJIANG

JILIN

LIAONING

HEBEISHANXININGXIA

SHAANXI

GANSU

XINJIANG

TIBET

QINGHAI

SICHUAN

HENAN

YUNNAN

GUIZHOU

HUNAN

HUBEI

ANHUI

JIANG

SU

JIANGXI

FUJIAN

GUANGDONGGUANGXI

INNER

MONGO

LIA TIANJIN

BEIJI

NG

SHANDONG

ZHEJIANGCHONGQING

SHAN

GHAI

HAINAN

Hydro projects

Biomass project

Wind projects

Disciplined growth in wind energy

� Continue to develop majority-owned projects

� Build out expansion of existing minority-owned project sites

� Strategic acquisition in CGN Wind

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Our Portfolio

� Largest wind investor / developer in India (foreign or domestic)

� A portfolio of 446MW wholly-owned wind projects and significant development pipeline

− 180MW in operation

− 152MW commissioning by 2010

− 114MW commissioning by 2011

� 31 Mar 10 cumulative investment of ~HK$1.3 billion with total commitment of ~HK$1.8 billion

Government policies

� RE Law – nationwide review of industry with long-term targets for Renewable Purchase Obligations, Tariff-Fixing mechanisms, inter-state trading

� New Generation Based Incentive Scheme provides additional top up tariff for wind projects

� National Solar Mission to provide attractive framework for Solar Thermal and PV projects

India

Wind projects

Theni

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Australia

� Established R40s with Hydro Tasmania

� A portfolio of 142 Equity MW

� 3 operational wind farms and 1 wind farm under construction

Policies

� The Government implemented the Renewable Energy Target Scheme to ensure that 20% of Australia’s electricity supply will come from renewable sources by 2020

� Legislative change to split target between large RE projects and small RE projects pending

Thailand

� Formed a joint venture with EGCO and Mitsubishi Corp to build a 73MWdc

(55MWac) solar project in Thailand

� The project is one of the largest solar photovoltaic projects in the world

Policies

� Renewable energy policy with an aim to increase the use of renewable energy to end user to 20% of total energy consumption by 2022

� Tariff based on energy payment with adder tariff given for 7 to 10 years from COD

� Income tax incentives and preferential treatment on import and export duties

Australia and Thailand

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Massive amounts of stable funding needed for the development and demonstration of technologies

� Expensive; solar PV has low capacity factor

� Costs expected to reduce over medium term

� Energy storage under development

Solar

� Appropriate as baseload generation

� Heat-to-electricity conversion efficiency lower than conventional generation

� High exploration costs and resource uncertainties

Geothermal

� CCS can help reduce emissions significantly

� Construction costs 5 times more than conventional plant

� Inconceivable without government support / high and firm price of carbon

Carbon Capture and Storage

� More appropriate for managing agricultural waste – too many challenges to make it suitable for electricity generation on a widespread basis

Biomass

� Small to medium (up to ~300MW) better option

� Challenges: Sites, safety, remoteness of location, grid connection

Hydro

� Best renewable energy option for now

� Price of wind turbine are commoditised, technology continuing to improve

� Challenges: Sites, grid connection, grid capacity

Wind

Technologies

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0 100 200 300 400 500 600

Biomass

Hot Dry Rock

Conventional Geothermal

Small Hydro

Large Hydro

Solar PV

Wind offshore

Wind onshore

Wave

Tidal Current

Tidal Barrage

Coal

Gas

Nuclear

Levelized Cost (USD / MWh)

0 100 200 300 400 500 600

Biomass

Hot Dry Rock

Conventional Geothermal

Small Hydro

Large Hydro

Solar PV

Wind offshore

Wind onshore

Wave

Tidal Current

Tidal Barrage

Coal

Gas

Nuclear

Levelized Cost (USD / MWh)

� Conventional generation technologies remain competitive in short to medium term

� Some RE such as onshore wind are close to competitive under favourable conditions such as good resources

� In general RE are more expensive than conventional generation today and they need appropriate policy and technology advancement to support their deployment in coming years

� In particular, solar photovoltaic (PV) could become attractive vs conventional generation between 2015 and 2020, depending on the actual cost reduction and technological advancement path achieved by the industry

Generation Cost – Today & 2030

Today 2030

Source: IEA Energy Technology Perspectives 2006 & 2008, IEA Energy Technology Essentials – Nuclear Power

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Market Uncertainty

� Practical difficulties in the CDM process

� CER prices are volatile

− CER Dec 10 contract prices fell from c. €24 to c. €8 between Jul 08 and Feb 09 and now stand at c. €13

� As a consequence of the price volatility, the CDM has not been a reliable source of revenue

� Uncertainty on whether there will be any CDM program post 2012

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10

EUA (€/t) CER (€/t) EUA-CER Spread

Source: ECX; Bloomberg

Carbon Markets

Carbon Price

� Currently there are benchmarks for CERsup to 2012. These can easily be sourced from the European Climate Exchange (ECX) or BlueNext

� But there are no post 2012 futures contracts on ECX or BlueNext

� Market signs are bearish

− E.g. the EUA-CER spread for Dec 12 futures contract are sharply higher than those for spot

− E.g. the Dec 12 contract spread continues be higher than that of Dec 10

� As at 27 April’s close the EUA vs. CER spread for:

− the Dec10 CERs was €1.72 (€15.59 vs €13.87)

− the Dec11 CERs was €2.43 (€16.03 vs €13.60)

− the Dec12 CERs €3.35 (€16.77 vs. €13.42)

We need a clear, long-term stable price of carbon to support renewable energy in Asia

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Supplementary

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3.0

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1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0

Australia Wholesale Tariff

Thai Wholesale Tariff

PRC Wholesale Tariff

Tariff and cost spectrum for projects

Project Cost in USD Mn. / MW

Ta

riff

in

US

¢/ kW

hr

PRC Wind

Solar Projects still far to compete with

wind

Project Cost ~ US$ 3 – 4 Mn per MW

Feed in Tariffs at US¢ 30-35 per kWhr

India wind

Thai Wind

Australia Wind

Note: No CDM benefits are included

India Wholesale Tariff

India current short-term merchant tariffs

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General Observations & Ending Remarks� Regulations drive RE - not markets

− Wind tariffs are not at “grid parity”

� Cost reduction for wind has slowed

� Less attractive onshore sites and cost of offshore installation is still very high

− Cost of solar power is “off the chart” - literally...

� Downward cost trajectory is not infinite

� Even if cost of cells/silicon goes to zero - there is still the 20%-25% cost of steel/fixtures

� Market mechanisms do not produce more RE

− RE is only possible through government regulatory regime that is� Predictable

� Simple

� And, of course, has a high enough tariff

� Designing RE regulatory support through artificial markets is not very efficient

− REC market in Australia

� Uncertainty on REC supply and demand, and the future price of RECs

� Limits the number of eligible developers

− CER/CDM markets by UNFCCC

� Uncertainty on registration process and post-2012 value - could be zero!

� Numerous inefficiencies (cost of consultants, etc)

General Observations