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To operate successfully, we must overcome a number of sustainability
challenges. These include regulatory requirements, stakeholder expectations,
the future of the electricity market, fuel supply and the economic environment.
For information about financial aspect, please refer to our Annual Report.
Challenges and Strategies
Our Key Challenges
Regulatory Requirements and
Stakeholder Expectations
Hong Kong’s laws and regulations are constantly reviewed
and updated. HKEI may be exposed to a number of legal
and regulatory compliance risks. Our main operating
company, HK Electric, also needs to comply with various
industry laws and regulations; in particular, the tightening
emission allowances for the power sector.
Stakeholders everywhere now demand that companies act
as responsible corporate citizens. Ours are the same. They
expect HKEI to follow the highest standards of conduct in
various areas, such as service delivery, health and safety,
and environmental protection. A high level of operational
transparency is also a requirement.
The Future of the Electricity Market
The operations of our electricity business in Hong Kong are
subject to a Scheme of Control Agreement (“SCA”) with
the Government, which sets a permitted level of earnings
based principally on the average net fixed assets of
electricity-related operations along with a broad spectrum
of operation, performance and service requirements.
The SCA was renewed in 2008 for a term of ten years, with
an option for the Government to extend it for five more.
The implementation of the 2014-2018 Development Plan
under the SCA, the extension of SCA beyond 2018, the
structure and regulation of the power industry in Hong
Kong, the Government’s policies on fuel mix, and the
competition of the electricity market over the medium to
long term are all factors affecting our business, as well as
our stakeholders.
Fuel Supply
Coal and natural gas are practically the exclusive fuels
used for our generating units at Lamma Power Station.
Any interruptions or shortages in fuel supply, or
substandard fuel quality, could result in significant
disruption. Moreover, the use of natural gas is to fulfill the
need for a cleaner fuel mix, and gas supply interruptions
could also hamper our ability to meet the legislative
emission allowances. Although the global fuel price
decreased over the past year, the possible fuel price
fluctuation is still a key challenge for us in the future.
Economic Environment
Global economic growth has been weaker than expected,
with sluggish demand for consumer goods and energy
seen in the major economies. Hong Kong’s economy is also
highly affected by mainland China. In particular, economic
slowdown on the mainland, slackening trade flows and
decreasing tourist spending are pushing an economic
downturn in Hong Kong and have a gradual adverse
impact on our customers’ businesses. This will inevitably
lead to a lower demand for electricity. Hong Kong’s
electricity market is highly developed with limited growth
opportunities, so these slowdowns are harder to weather.