(The following statement was released by the rating agency)
Aug 24 - Standard & Poor's Ratings Services said today that the ratings on CLP Holdings Ltd.
(CLPH; A-/Stable/A-2; cnAA/cnA-1) are not affected by a profit decline in the first
half of 2012. We have been expecting CLPH's financial performance in 2012 to take a hit. In our
view, the company's cash flow adequacy ratios will revert to longer-term trend
levels by 2013. We also note that CLPH's core Hong Kong electricity business
is performing steadily.
CLPH's operating margin in the first half of 2012 fell 22.4% year over year.
CLPH's Australia business reduced the company's operating cash flows following
flood-related outages at its Yallourn plant, remediation costs, lower
wholesale electricity prices, and higher corporate costs. The negative fair
value movement of cap contracts further dampened net earnings. Coal supply
shortages at CLPH's Jhajjar operations in India also undermined the bottom
We believe CLPH's ratio of funds from operations to total debt is likely to
weaken to about 22%-24% by end-2012. Nevertheless, we expect improvement
thereafter to come from a return to normal generation at Yallourn; A$257
million cash compensation from the Australian carbon policy implementation,
which will suppress net debt; and solid output at Jhajjar due to improved coal
In our view, the movement of wholesale electricity prices and demand in
Australia and the coal supply performance under Jhajjar's contract with Coal
India will be key drivers of the group's performance in 2013. We expect the
operating costs of the Australian business to remain elevated before it
completely integrates its energy acquisitions in New South Wales.