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Our CSR Policy
SUSTAIN
8
Challenges and Strategies
In this chapter, we set out our key challenges in running a sustainable
business, the factors affecting our performance, and the strategies we
have adopted for addressing them. Financial challenges and related
issues are discussed separately in our Annual Report.
Key Challenges
Regulatory Requirements and
Stakeholder Expectations
Hong Kong’s laws and regulations are constantly being
reviewed and updated, exposing HKEI to legal and
regulatory compliance risks. Our main operating company,
HK Electric, must also comply with applicable laws and
regulations, particularly those related to tightening
emission allowances.
Additionally, we must anticipate and address the concerns
of our stakeholders who expect us to follow the highest
standards in areas such as service delivery, health and
safety, and environmental protection, and to operate with
a high degree of transparency.
The Future of the Electricity Market
Our electricity business in Hong Kong is subject to a
Scheme of Control Agreement (SCA) signed with the
Government. It sets a permitted level of earnings based
principally on the average net fixed assets of electricity-
related operations along with a broad spectrum of
operational, performance and service requirements.
The current SCA was renewed in 2008 for a term of ten
years commencing 1 January 2009.
The implementation of the 2014–2018 Development Plan
under the SCA, together with the structure and regulation
of the power industry in Hong Kong upon the expiry of
the current SCA, affect our business and, ultimately, our
stakeholders. Other key factors include the Government’s
policies on the fuel mix for electricity generation to
improve air quality and combat climate change as well
as competition in the electricity market over the
medium to long term.
Fuel Supply
Coal and natural gas are used for our generating units
at Lamma Power Station. Any interruptions or shortages
in the supply of fuel, or instances of substandard fuel
quality, could result in significant impact on our electricity
generation. Moreover, interruptions to gas supply could
hamper our ability to meet legislated emission allowances.
Volatility of global fuel prices could also be a challenge
in securing a reliable and quality fuel supply at
reasonable prices.
Economic Environment
Global economic growth remained slow with subdued
demand across the major economies. The outcomes of the
UK’s “Brexit” referendum and the US presidential election
also heightened uncertainty in the world economy and
global financial market.
In Hong Kong, the economy grew at a modest pace as
reflected in weak exports, slow retail sales and declines in
visitor arrivals. All these could cause an economic downturn
and have an adverse impact on our customers’ businesses,
leading to lower demand for electricity. As Hong Kong’s
electricity market is highly developed, with limited
opportunities for growth, any economic slowdown could
be a serious challenge to us.