1

Powering Hong Kong’s Sustainable Development

Betty YuenManaging DirectorCLP Power

6 December 2006

2

Powering the Development of Hong Kong

CLP Power’s Operating Statistics

Population Served 5 million +

Customer Number 2.2 million

Installed Capacity 8,888 MW

Sales 30,000 GWh

1890 20051930 1950 1970

HK’s Electricity Consumption

20-fold increase in 40 years

3

Some Facts about Hong Kong’s Energy Requirements

• HK’s total energy requirement is about the same as that of New Zealand, 2/3 of Singapore and 1/6 of Taiwan

• HK is 100% dependent on imported energy

• HK is an international finance centre with 50% of the population living or working above 15th floor

4

46%

33%

7%14%

Oil / Naphtha

Natural Gas

Coal

* Source: Hong Kong Energy Statistics 2005 Annual Report

HK’s Primary Energy Requirements

Fuel for electricity generation accounts for almost 70% of all energy consumed in Hong Kong

Nuclear

Fuel for power

generation Fuel for transportation,

towngas, industrial and other uses

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• 99.99% reliability, among the world’s best

• Tariffs frozen since 1998• Affordable tariffs – account for 1.9%

of monthly household expenditure• Tariffs among the lowest in major

metropolitan cities

020406080

100120140160180200220

Kuala

Lumpur

Jakarta

Taipei

Vancouver

Shanghai

Shenzhen

CLP Pow

er

Sydney

Seoul

Singapore

Paris

Wellington

Lisbon

London

Tokyo

Madrid

Am

sterdam

Brussels

Rom

e

Berlin

Luxembourg

New

York

Regulated market

Competitive market

Remarks: Comparison based on annual domestic consumption of 3,300 kWh. Tariff and exchange rate at Jan 2006

Residential Tariff HK cents/kWh (as of January 2006)

Power interruption time (mins per customer per year*)

CLP Power 6

New York 11.8

Paris 12.8

London 40

Sydney 42*Average 2002-2004. Source: UMS Group; EDF; EnergyAustralia

CLP Provides Highly Reliable Supply at Competitive Prices

6

0

2

4

6

8

10

12

14Interruption Hours in 2004 (hours/year)

0

20

40

60

80

100

120

CLP Power

BeijingShanghai

FoshanGuangzhou

ZhuhaiHuizhou

Jiangmen

Shenzhen

Zhaoqing

Zhongshan

Dongguan

Large Industrial Commercial

Tariff in 2006 (HK cents/kWh)

Source: Beijing Power Supply Co; Shanghai Municipal Electricity Power Co; Guangdong Price Information; China Electricity Council

Higher Reliability at Comparable Tariffs to Mainland Cities

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Coal39%

Gas

Nuclear

Oil

31%

29%

1%

CLP (2005)

* Percentages quoted for fuel combination are 2003 figures Source: International Energy Agency

Coal30%

Others 3%

Hydro15%

Nuclear 29%

Gas 18%

Oil 5%

Europe *

Coal28%

Hydro10%

Nuclear 23%

Gas 24%

Oil 13%

Others 2%

*North America

Coal46%

Others 2%

Hydro13%

Nuclear 18%

Gas 16% Oil

5%

CLP’s Fuel Diversification – Similar toDeveloped Countries

Coal79%

Nuclear 2%Hydro15%Gas 1%

Oil 3%

Nuclear 2%

Coal79%

*Mainland China

*Japan

A balanced fuel mix is important for supply reliability

and tariff management

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Significant Environmental Improvements

0

50

100

150

200

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005Year

Tota

l Em

issi

on (k

iloto

nne)

Nuclear Power

Natural Gas

Low NOx Burner

Achieved significant emissions reductions from early 1990s through the use of emissions abatement technology and

introduction of cleaner energy sources

NOx

SO2

Particulates

Emissions Reduction(1990-2005)

44%77%70%

Note: Local sales grew by 70% in the period

Electrostatic Precipitator(1982-85)

Use of ultra-low sulphur coal

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CLP is Committed to Meeting 2010 Target

• Import Liquefied Natural Gas (LNG)

• Install Emissions Control Equipment for Coal Units

• Increase use of Ultra Low Sulphur Coal

• Promote energy efficiency

• Feasibility studies of Onshore and Offshore Wind Projects

• Other possible options to be explored

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Natural Gas is Crucial to Supply Reliability and Clean Air• CLP’s Black Point Power Station (2,500 MW) is one of largest gas-

fired power station in the world, using natural gas for more than 10 years

• The existing gas supply to Black Point, the Yacheng gas field, is expected to deplete early next decade

• A secure and reliable gas supply is needed to refuel Black Point

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Benefits of Using LNG

• LNG transportation and usage has an outstanding safety record extending over 40 years

• LNG is the cleanest fossil fuel available for power generation

Coal 100

Oil 80

Natural Gas 57

Coal 100

Oil 71

Natural Gas20-37

CO2 (carbon dioxide) NOx (nitrogen oxide)

Natural gas produces no

particulates & SO2

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The LNG Supply Chain

Natural Gas Field

Receiving Terminal

Liquefaction Terminal

Marine Transportation

HONG KONG

LNG Storage Tank

(for temporary storage)

Black Point Power Station

(for power generation)

Vaporizer (for regasification)

Natural gas via pipeline

Sendout LNG by pump

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Why Hong Kong Needs a LNG Terminal?

• South China gas reserves either committed to others or insufficient to meet CLP’s large volume requirements

• CLP’s requirements of 2.6 MTA are 8 times the size of Towngasor Hongkong Electric

• Could take up almost all the volume currently available for the Shenzhen Dapeng LNG Terminal which serves more than 10 users

• Timing for new terminals in Guangdong is uncertain

• Only a Hong Kong LNG terminal can meet CLP’s large volume in the time-frame required

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A Local LNG Receiving Terminal is the Best Option for Hong Kong

• Time certainty : Faster project development under one jurisdiction. Upon timely GOHK approval, project development can start in 2007 for completion in 2011

• Supply security :• CLP could directly deal with LNG suppliers without a middleman• Hong Kong’s gas needs would be served as priority

• Air Quality Improvement : Availability of LNG enables CLP’s flexibility to increase the use of natural gas up to half of its electricity demand, which will result in further reduction of emissions by 17% to 40%

Annual Reduction in Emissions AchievableSO2 NOx CO2

20,000 tonnes

(43%)

10,000 tonnes

(35%)

3 million tonnes

(17%)

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Significant Progress since 2003 to Bring LNG to Hong KongIntensive activities over the last 3½ years :

Comprehensive project to bring LNG to Hong Kong as early as possible

Gas supply

Site selectionLNG ship

EIA study

Overseas experience

Stakeholders Engagement

Engineering & design

Hong Kong SAR Boundary

Hong KongIsland

Kowloon

New Territories

1

2

654

7

8

9

10

1112 13

14

15

16

17

18

19

20

2221

23

24 25

26

2728

29

3

0 2 4 6 81Kilometres

²

10 k

m

20 k

m

30 k

m

40 k

m

50 k

m

Legend

Potential Site

Black Point Power Station

Sites

1 - Black Point 2 - Lung Kwu Tan3 - Castle Peak North4 - West Brothers5 - Yam Tsai6 - Brothers Point7 - Sham Wat Wan8- North Tai O9- Yi O10- Peaked Hill Island11- Fan Lau West12- Fan Lau East13- North Sokos14- South Sokos15- Shek Kwu Chau16- Sunshine Island17- Man Kok Peninsula18- Tsing Yi19- Beaufort Island20- Po Toi Island21- Fury Rocks22- Waglan Island23- Stanley Peninsula24- Cape Collinson25- Tung Lung Chau26- Area 13727- Wang Chau28- Town Island29 - Tap Mun

Hong Kong SAR BoundaryIsometric Circles

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South Soko and Black Point Sites Studied

An overall evaluation of the EIA study together with other considerations show that the South Soko option provides the most benefits to Hong Kong

Black PointBlack Point

South Soko IslandSouth Soko Island

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The Proposed Enhancement Plan

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Further Emissions Reductions Initiatives KT SO2

0

75

150

1990 2005 Projects Completion

Reduced by 44%

KT RSP

0

5

10

1990 2005 Projects Completion

Reduced by 70%

KT NOx

0

75

150

1990 2005 Projects Completion

Reduced by 77%

• Ongoing improvement plans/projects include:−Ultra Low Sulphur Coal

− Emissions Control Retrofit

− Liquefied Natural Gas

• Completion of these plans/projects critical to meet 2010 emissions reduction targets

• Other initiatives:− Feasibility studies of onshore and

offshore wind projects

−Other options to be explored

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Emissions Comparable to Developed Economies

0

1

2

3

DeltaElectricity(Australia)

Pacific Corp(USA)

HEC (HK) SouthernCompany

(USA)

ScottishPower (UK)

CLP (HK) KEPCO(Korea)

EDF SA(France)

CLP(projects

completion)

TEPCO(Japan)

NOx Emission

kg/MWh

0

0.1

0.2

0.3

Eskom(SouthAfrica)

ProgressEnergy(USA)

ScottishPower (UK)

HEC (HK) DeltaElectricity(Australia)

Pacific Corp(USA)

CLP (HK) CLP(projects

completion)

KEPCO(Korea)

Particulates Emission

kg/MWh

CLP’s 2005 emissions per unit sold in Hong Kong compare favourablywith major utilities in developed countries

Further significant reductions upon completion of major projects

CLP’s 2005 emissions per unit sold in Hong Kong compare favourablywith major utilities in developed countries

Further significant reductions upon completion of major projects

Source: Company websites; 2003, 2004 and 2005 data

0

1

2

3

4

5

SouthernCompany

(USA)

DeltaElectricity(Australia)

HEC (HK) Pacific Corp(USA)

ScottishPower (UK)

CLP (HK) KEPCO(Korea)

EDF SA(France)

CLP(projects

completion)

TEPCO(Japan)

SO2 Emission

kg/MWh

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Renewable Energy (RE) Development To date, RE accounts for about 1.8% of CLP Group’s generating capacity:

CLP Group has set a target to have 5% of total generating capacity from renewable energy sources by 2010

HK – Wind Turbine Pilot Demonstration (2008)

HK – offshore feasibility

Photo by Elsam

Guangdong,Huaiji82MW Hydro

Australia,Bluff Point*65MW Wind

Australia,Cathedral Rocks*66MW Wind

Shandong,Changdao27MW Wind

Ope

ratio

n

Shandong,Weihai19.5MW Wind (2006/7)

Guangdong,Nanao45MW Wind (2007)

Jilin,Shuangliao* 49MW Wind (2006/7)

Shandong,Rongcheng*49MW Wind (2007)

Con

stru

ctio

n

* Thru’ Roaring 40’s

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The Way Forward

• CLP relies on a fair and balanced regulatory framework to maintain its excellent performance – provide customers with reliable, efficient and environmentally friendly supply at affordable prices

• CLP has demonstrated unwavering commitment to manage the environmental impact of our operations, and we have taken other initiatives to further improve our performance facilitating the sustainable development of the community