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For Sustainable Energy: Our Vision

This annual report summarizes Power Assets Holdings Limited's performance and operations for 2021. The company is a global investor in energy and utility assets, with interests spanning electricity, gas, oil, waste-to-energy and renewables. In 2021, Power Assets saw profit attributable to shareholders of HK$6.14 billion, with earnings per share of HK$2.88. The company has a presence across Hong Kong, the UK, Australia, mainland China, Thailand, Canada, the Netherlands and New Zealand, bringing energy to 19 million customers. Power Assets aims to create a portfolio of sustainable energy assets that deliver long-term value through its diverse operating companies.

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0% found this document useful (0 votes)
157 views140 pages

For Sustainable Energy: Our Vision

This annual report summarizes Power Assets Holdings Limited's performance and operations for 2021. The company is a global investor in energy and utility assets, with interests spanning electricity, gas, oil, waste-to-energy and renewables. In 2021, Power Assets saw profit attributable to shareholders of HK$6.14 billion, with earnings per share of HK$2.88. The company has a presence across Hong Kong, the UK, Australia, mainland China, Thailand, Canada, the Netherlands and New Zealand, bringing energy to 19 million customers. Power Assets aims to create a portfolio of sustainable energy assets that deliver long-term value through its diverse operating companies.

Uploaded by

Sam Chan
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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(Stock Code : 6)

Our Vision
for Sustainable Energy

Annual Report 2021


A Strategic Global Investor
in the Energy Sector
Power Assets Holdings Limited (“Power Assets” Our investments comprise primarily of acquisitions,
or the “Group”) is a global investor in energy supplemented by green-field development activities.
and utility-related businesses, with interests in We follow an active yet prudent strategy for
the transmission of electricity, gas and oil, the sustainable growth over the long-term by focusing
distribution of electricity and gas, as well as the on appropriately-priced companies operating in
generation of energy from thermal, waste, and well-regulated and mature markets that deliver
renewable sources. predictable income streams. The Group invests
systematically in innovation and technology to
From our origins in Hong Kong over a century ago, support the decarbonisation efforts and COP26
the Group also has a presence today in the United commitments of the communities it operates in.
Kingdom, Australia, New Zealand, Mainland China,
Thailand, the Netherlands, Canada and the United Listed on the Stock Exchange of Hong Kong as a
States, bringing reliable, affordable energy to about constituent share of the Hang Seng Index,
19 million homes and businesses. The bulk of our Power Assets has been a constituent of
business derives from our interests in 516,700 km the Hang Seng Corporate Sustainability Index
of power, gas and oil networks, supplemented since 2010.
by investments in around 10,000 MW of power
generation facilities.
Our Vision
for Sustainable Energy
The mission of the Power Assets Group is to create and operate a
portfolio of sustainable energy assets that deliver long-term value for
our stakeholders. Across our diverse operating companies, spanning
electricity, gas, oil, waste-to-energy and renewable energy, we use a
wide range of approaches to deliver this. The image on the cover of our
annual report utilises a dual metaphor of binoculars and an infinity sign
to illustrate our vision, as well as the infinite possibilities for sustainable
development.

Contents
Business Review Financial Statements
2 Performance Highlights 65 Independent Auditor’s Report
4 Chairman’s Statement 69 Consolidated Statement of Profit or Loss
7 Long-Term Development Strategy 70 Consolidated Statement of Comprehensive Income
8 Year at a Glance 71 Consolidated Statement of Financial Position
10 CEO’s Report 72 Consolidated Statement of Changes in Equity
12 United Kingdom 73 Consolidated Cash Flow Statement
16 Hong Kong 74 Notes to the Financial Statements
18 Australia 135 Five-Year Group Profit Summary and
24 Mainland China, Thailand Group Statement of Financial Position
26 Canada
28 Netherlands Other Information
29 New Zealand 136 Corporate Information
Financial Calendar and Share Information
Corporate Governance
30 Board of Directors and Management Team
35 Corporate Governance Report
55 Risk Management
57 Risk Factors
60 Financial Review
62 Report of the Directors
Performance Highlights

19,344,000
NUMBER OF CUSTOMERS

1,064 MW
GENERATION CAPACITY

114,200 km
- RENEWABLE ENERGY /
ENERGY-FROM-WASTE

5,214 MW GAS / OIL PIPELINE LENGTH

GENERATION CAPACITY
- GAS-FIRED 402,500 km
3,815 MW POWER NETWORK LENGTH

GENERATION CAPACITY
- COAL / OIL-FIRED

Netherlands
Dutch Enviro Energy
Holdings B.V.

Canada
United Kingdom
TransAlta Cogeneration
United States of America UK Power Networks
Meridian
Okanagan Wind Power Energy Developments Northern Gas Networks
Husky Midstream Limited Partnership Wales & West Utilities
Energy Developments Seabank Power
Energy Developments

LEGENDS

Oil Pipelines & Storage Energy-from-waste Gas Transmission &


Facilities Distribution

Electricity Transmission
Renewables
Generation & Distribution

2 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

2021 2020
Financials HK$ HK$

Profit attributable to shareholders (million) 6,140 6,132


Earnings per share 2.88 2.87
Dividends per share 2.82 2.81
Total equity (million) 86,767 84,766
Cash on hand (million) 4,610 5,427
Debts (million) 3,433 3,640
Net debt to net total capital ratio Net Cash Net Cash
S&P credit rating A / Stable A / Stable

Thailand
Mainland China Ratchaburi Power

Jinwan Power
Dali Wind Power
Laoting Wind Power
Hong Kong
HK Electric New Zealand
Wellington Electricity Lines

Australia
Australian Gas Networks
SA Power Networks
Victoria Power Networks
Australian Energy Operations
United Energy
Dampier Bunbury Pipeline
& AGI Development Group
Multinet Gas
Energy Developments

Annual Report 2021 3


Chairman’s Statement

The energy sector is seeing a dramatic transformation as all


players seek to supply energy needs with minimal impact
on the environment. Most of our operating markets have
committed to supporting zero-carbon targets within the
coming decades. Transformative innovation from every
energy player is essential to enable this to be realised, and
many of our operating companies are at the vanguard of
change through research and innovation in collaboration
with cross-sector stakeholders.

Dividends
The Board of Directors has recommended a final dividend
of HK$2.04 (2020: HK$2.04) per share, payable on
7 June 2022 to shareholders whose names appear in the
Company’s Register of Members on 24 May 2022. This,
together with the interim dividend of HK$0.78 per share,
takes the total dividend for the year to HK$2.82 (2020:
HK$2.81) per share.

International Energy Investment


Portfolio
Regulatory resets were completed for several operating
companies in the UK and Australia, ensuring a stable
environment for smooth operations in the coming years.

United Kingdom portfolio


Solid Full Year Results The Group’s portfolio in the UK, our largest market of
2021 saw the Power Assets Group deliver steady operation, made a profit contribution of HK$2,819 million
performance based on its diversified portfolio of long-term (2020: HK$2,460 million). All our operating companies
investments in the power generation, transmission and once again delivered market-leading performance in
distribution; gas transmission and distribution; and oil reliability, safety and customer service. Appeals to the
storage and transmission sectors. This model of investing Competition and Markets Authority to challenge the final
in low-risk energy infrastructure has helped to insulate us determinations for Northern Gas Networks (NGN) and
from the lingering macroeconomic impact of the global Wales & West Utilities (WWU) have been completed; thus
COVID-19 pandemic and fluctuations in fuel prices. offering stable and predictable cash flow for the five-year
regulatory period of 2021-2026.
The Group’s audited profits attributable to shareholders
amounted to HK$6,140 million (2020: HK$6,132 million). In 2021, the Group recorded non-cash transactions on a
Excluding the non-cash deferred tax related charges for tax credit in respect of deferred tax liabilities on intangible
the operating companies in the United Kingdom in 2020 assets of a joint venture and a higher deferred tax charges
and 2021 as well as the disposal gain from the sale of as a result of the 6% increment in UK corporate tax rate.
Portugal investment, Iberwind, in 2020, the adjusted
profits attributable to shareholders would have increased UK Power Networks (UKPN) was the best in class for
by 10%. performance, safety and customer satisfaction, beating
regulatory targets. The company remains focused on
The Group’s financial position remained solid with funds
innovations to drive improved performance as well
received from operations for 2021 totalling HK$5,300
million (2020: HK$5,533 million). as initiative to facilitate Net Zero. Its market-leading
innovation projects have delivered benefits since 2015,
The Power Assets Group is a strategic investor in the with 50 innovative solutions deployed to business.
global energy sector. Our portfolio includes primarily
regulated businesses across stable energy markets: the UK, NGN conducted extensive engagements with the regulator
Australia, Hong Kong, Mainland China, the Netherlands, and its stakeholders, and received an incentive payment
New Zealand, Thailand, Canada and the United States. for having the best business case for the new regulatory
In 2021, our operating companies kept their focus on period. It also successfully progressed the future use of
providing uninterrupted, reliable energy to our commercial hydrogen as an energy source, by supplying a blended
and residential customers while continuing to digitalise gas containing 20% hydrogen by volume to 668 homes,
and upgrade our operations as well as observe due a school and some small businesses in Gateshead in North
precautions associated with the COVID-19 pandemic. East England. In support of the government’s Ten Point

4 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Plan, NGN has further developed, and officially opened With a capacity of 30 MW of green power, the assets
to public, two semi-detached homes with all household have met expectations and started to contribute to the
appliances fuelled 100% by hydrogen - our gas network’s Group’s revenues and green portfolio. The Sheerness
vision towards zero-emission home heating. power station completed its conversion from coal-fired
to gas-fired during the year, signifying the end of the
WWU was recognised by the Institute of Customer Group’s coal-fired generation portfolio in OECD countries.
Service for customer satisfaction, and ranked as a leader Husky Midstream, having completed a number of major
in this area amongst national household brands, not just expansion projects in 2020, has placed its focus on
within the utility business sector. In addition, WWU has safety, reliability and efficiency optimisation of its system,
connected 19 biomethane plants to the network since facilitating future growth.
2013, enabling decarbonised heating for 151,000 homes.
In the Netherlands, AVR-Afvalverwerking B.V. (AVR)
Seabank Power completed its scheduled overhaul and installed a new back pressure steam turbine, thereby
exceeded targets for operational efficiency and starting substantially increasing cycle efficiency, which will supply
performance. low-carbon heat and power to 60,000 households in the
Rotterdam region. During the year, the company was
Australian portfolio successfully named preferred bidder for AEB, a waste-
to-energy business in the Netherlands; the acquisition is
The Australian portfolio delivered a profit contribution
poised to extend AVR’s core business.
of HK$1,283 million (2020: HK$1,329 million) to the
Group. In light of the massive growth in roof top solar
Wellington Electricity completed a major three-year
and distributed battery energy systems, the Australian
programme of works to enhance earthquake readiness
Energy Regulator is conducting a comprehensive process
across its network in New Zealand; the project included
to review the regulatory regime for energy companies and
seismic strengthening of 91 buildings. In Thailand,
our operating companies have been collaborating with the
Ratchaburi Power Plant delivered stable performance.
regulator through this process.
In Mainland China, the Jinwan co-generation power
Victoria Power Networks (VPN) has invested in widespread
plant increased electricity sent out in response to strong
network improvements and vegetation management
industrial demand despite coal supply scarcities. The two
techniques with a view to significantly improving bushfire
wind farms in Dali and Laoting met targets and jointly
safety, while United Energy (UE) achieved incentive
offset 207,000 tonnes of carbon emissions.
payments from the regulator for customer service and
reliability. As for SA Power Networks (SAPN), its IT systems,
including billing and customer relationship management Investment in HK Electric
were upgraded to provide improved functionality and
system stability over the coming years.
Investments
HK Electric Investments (HKEI) once again provided stable
Australian Gas Networks (AGN) exceeded regulatory income to the Group and delivered a profit contribution of
targets on customer and emergency call response times, HK$979 million (2020: HK$912 million).
repairs, and customer service. AGN and Multinet Gas are
at the forefront of gas network innovation and made HKEI’s wholly owned subsidiary HK Electric continues to
encouraging progress on the hydrogen park projects for work towards its goal of building a sustainable future.
blending green-hydrogen into the natural gas distribution In support of the Government’s “Hong Kong’s Climate
network to decarbonise the gas supply. Action Plan 2050”, which seeks to halve carbon emissions
compared to the 2005 level before 2035 and achieve
Dampier Bunbury Pipeline delivered satisfactory carbon neutrality before 2050, the company is undertaking
performance, while Energy Developments was named a phased retirement of all coal-fired generating units and
one of Australia’s Most Innovative Companies by the increasing support for renewable energy.
Australian Financial Review following its development of
groundbreaking techniques in hybrid energy solutions. During the year, progress was made on its programme of
Australian Energy Operations initiated planning for capital works that will see the commissioning of two new
augmentation of two terminal stations to advance a gas-fired generating units in 2022 and 2023 respectively,
state-wide network infrastructure enhancement initiative. together with an offshore liquefied natural gas (LNG)
receiving terminal scheduled for commissioning in 2022.
In addition, planning was under way for a large-scale
Other portfolios offshore wind farm in Hong Kong waters.
The Canadian portfolio progressed with decarbonisation
and delivered stable performance. Canadian Power The company’s smart meter installation programme
acquired two wind farms in Okanagan in June 2021, continued in 2021 with more than 120,000 smart meters
marking its entry into renewable energy generation. already deployed. Through a new corporate mobile

Annual Report 2021 5


Chairman’s Statement

app, customers installed with smart meters can now to build a 10-MW renewable hydrogen electrolyser which
access detailed energy consumption information which will deliver hydrogen-blended gas to over 40,000 homes
empowers them to optimise their energy use. Other and businesses.
customers will progressively enjoy this function under the
smart meter installation programme, which is targeted
for completion by 2025. HK Electric also offered technical
Outlook
consultancy to customers to facilitate wider adoption of We continue to maintain a strong financial position, in line
electric vehicles (EVs) while also assisted the construction with our prudent strategy of seeking out appropriately
sector to reduce carbon emissions through a new “Smart valued investments that meet our criteria for accretive
Power for Construction Site” service. growth. Though there is a strong likelihood of interest
rate hikes in the coming months, our strong cash position
A range of funds, services and schemes were implemented allows us to continue to pursue our strategy and manage
to support consumers and businesses which were facing operating costs without negative impact.
difficulties in the wake of the economic slowdown
resulting from the COVID-19 pandemic. Fluctuations in commodity prices – notably those of coal
and natural gas – have affected the performance of all
players in the energy space during the year. Our well-
Initiatives to tackle climate established strategy of investment diversification across
change the energy value chain with strategic focus on regulated
infrastructure has ensured that our exposure to these
We believe that climate change is a global challenge,
fluctuations has been negligible, enabling us to deliver
and breakthrough solutions are essential to deliver clean,
consistent returns to shareholders.
affordable energy to all. Many markets are on the route
to carbon neutrality, reaffirming commitment to COP26
The global upsurge in fuel prices and a worldwide
targets. Across the board, we are seeing exponential
shortage in coal and gas supply mean energy price
growth in rooftop solar, EV adoption, and more. Although
increase is inevitable for end consumers. In this context,
this transition is placing unprecedented pressure on
we are making it a priority to support the energy-poor and
existing systems, this is a crucial stage in which customers,
underprivileged. HK Electric has set aside HK$63 million
government and energy players can collaborate to create
from three existing funds to assist those in need, promote
a greener planet.
energy efficiency and conservation, as well as strengthen
outreach to the community regarding the advantages of
We are evolving many of our electricity transmission and
and paths to low-carbon living.
distribution networks to become “Distribution System
Operators”, placing us at the heart of the new renewable
Our approach to decarbonisation transcends our own
energy future. A case in point is that in South Australia,
operating companies. Under the leadership of our
34% of households have solar panels installed for rooftop
Sustainability Committee, we will continue to collaborate
solar generation. To facilitate this shift, SAPN has invested
across the industry and with governments to deliver on
in digital technology to make the automated network
societal decarbonisation goals. Areas like hydrogenising
more agile and dynamic, enabling the receiving and
the gas supply, promoting EV rollout, increasing the
redistributing of electricity across the grid.
grid’s ability to optimise connections of renewables, and
investing in renewables are all part of this effort.
EVs are another essential part of a low-carbon future.
UKPN has been investing systematically in readying their
While recent regulatory resets have been challenging, their
networks for large-scale charging requirements of EVs in
conclusion has given us a stable platform on which to
the coming years. UKPN and UE are also conducting trials
invest in decarbonisation and offer consumers the highest
to investigate EV charging patterns and how they affect
standards in reliability, safety, affordability and customer
networks in real time to help identify affordable ways
service while maintaining controls over operating costs.
to promote their rollout and inform network and tariff
planning.
In closing, I express my gratitude to our board,
management and stakeholders, and all our employees
In gas distribution, blending hydrogen with natural gas
around the world for your support, your flexibility in the
while utilising existing gas distribution network is an
face of societal change, and your dedicated efforts during
inexpensive but efficient way to transport and store energy
the year.
as well as reduce carbon emissions. In May 2021, AGN
opened the 1.25-MW Hydrogen Park South Australia,
the first facility in Australia to produce renewable
green-hydrogen. It is currently progressing a Hydrogen
Park project in Gladstone, Queensland involving a 175-
Fok Kin Ning, Canning
Chairman
kW electrolyser. It has also commenced larger-scale plans
Hong Kong, 16 March 2022

6 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Long-Term Development Strategy

With global investments in energy generation, transmission and distribution


across four continents, Power Assets serves millions of customers with power
and heating.

Three key principles underpin our growth


and development

Grow shareholder value


through expertise and innovation
The Group aspires to deliver long-term earnings growth
through investing in a portfolio of carefully selected companies.
Supported by our loyal base of committed shareholders who share
this ethos, Power Assets pursues this goal by addressing itself to sectors
where it has natural expertise, within stable, well-structured international
markets: namely, renewables, energy-from-waste, electricity, and oil and
gas infrastructure businesses.

We actively invest in innovation to improve energy affordability and


reliability, and support worldwide efforts to combat climate change.
Our innovation and development focus seeks to improve our
performance across the board in a range of areas including
decarbonisation, automation, storage and transmission of
renewable energy, support for distributed power
generation, electric transportation, smart metering
and grid technology, emissions reduction and
energy efficiency.

Pursue global Maintain a strong


diversification while balance sheet as
minimising risks a foundation for agility
Power Assets believes that a strong balance
Power Assets’ approach to expanding its portfolio is
sheet is the foundation of sustainable growth.
active but disciplined. First we identify and rigorously
Since 2018, we have maintained a long-term
evaluate suitable opportunities that operate in stable,
issuer credit rating of “A” from Standard and
well-regulated energy markets around the world to deliver
Poor’s in recognition of our prudent financial
progress with minimal impact on investor risk. We target
management. This credit rating and our
enterprises that are appropriately priced and yield steady
strong cash position give us sufficient
revenues under government regulation, or whose income
financial power to be agile while
is safeguarded by long-term power purchase agreements.
pursuing appropriate
Our due diligence process ensures that the technologies,
opportunities.
sources of fuel and customer base of potential
investments are proven and sustainable.

The Group is active in Europe, North America,


Asia and Australia to minimise exposure to
the economic cycles of any one
single market.

Annual Report 2021 7


Year at a Glance

2021
JAN - JUN
The Multinet Gas network control centre
relocates to a new centre of excellence
in Perth to improve customer service
performance and efficiency.

1 AGN completes construction of a 1.25-MW


electrolysis plant at the Tonsley Innovation 1
District and starts to supply green
hydrogen into the local gas network.

2 Following damage caused by a severe


windstorm in Victoria, Powercor and UE
complete a record repair and restoration 2
effort to restore power to more than
200,000 customers.

The Sheerness power station in Canada is


successfully converted from coal to natural
gas, cutting carbon emissions significantly.

Beon Energy Solutions (a VPN business)


completes a 12-MW solar farm at
Melbourne Airport, one of the largest
such installations in Australia. It can
generate 17 GWh of renewable energy
annually – nearly 15% of the airport’s
yearly electricity consumption.

Jinwan Power Plant completes a major


overhaul of one of its generating units,
completing resynchronisation to the
power grid.

3 Canadian Power acquires the Okanagan


wind farms and expands to renewable
energy generation.

EDL wins a competitive contract for the 3


Jabiru Hybrid Renewable Power Station
in the Northern Territory in Australia. The
project includes diesel, solar and battery
asset development.
4
To alleviate the continuing impact of
COVID-19, HK Electric distributes dining
coupons that benefit around 40,000
underprivileged families and over 200 SME
eateries.

8 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

2021
JUL - DEC
4 NGN builds two homes fuelled entirely by
hydrogen, to demonstrate the potential of
5
hydrogen energy in helping the government
achieve net zero emissions by 2050.

5 A UK Power Networks business helps design and


6 test a charging solution for hybrid electric planes
– demonstrated through the first landing at Exeter
Airport.

6 WWU secures clearance to inject bio-substitute


natural gas containing up to 1% hydrogen into
the existing gas network in Swindon, England.
This will eliminate up to 5,000 tonnes of
carbon emissions for almost 2,500 local homes
immediately.

The NGN-operated public gas network in


Winlaton, North England, initiates a 10-month
trial project to supply a blend of hydrogen and
natural gas to about 700 customers.

Residents in parts of Adelaide’s southern suburbs


participate in a world-leading pilot that allows
SAPN’s new customers to export up to 10 kW per
phase from their solar panels – double the current
standard export limit.

WELL develops an industry roadmap to identify


the steps which facilitate the integration of electric
vehicles by coordinating with existing network
load.

7 7 HK Electric successfully synchronises another new


gas-fired generating unit, L11, for commissioning
in 2022.

8 8 In Victoria, UE progresses a range of major


enhancements to zone substations to modernise
the system and maintain high reliability.

AVR installs a new back pressure steam turbine


for power production and optimisation of the
district heating network around Rotterdam, the
Netherlands, extracting even more energy from
residual waste.

UKPN and the ED1SON Alliance run a £40 million


project at Wimbledon, in collaboration with
National Grid, to enable greater network flexibility
and capacity for future growth.
Annual Report 2021 9
CEO’s Report

Tsai Chao Chung, Charles


Chief Executive Officer

Power Assets is an innovative and dynamic participant During the year, we maintained our active approach
in the global energy business. The companies in our to investing in low-risk essential infrastructure assets at
portfolio, spread across four continents, are stable, appropriate pricing. Canadian Power acquired wind farm
well-established businesses that offer earnings assets in Okanagan, marking the company’s first step
predictability and are relatively insulated from economic into renewable energy generation and carbon offsetting
cyclicity and commodities price fluctuations. Our regime. In the Netherlands, AVR-Afvalverwerking
diversified operations cover electricity generation, B.V. entered into an agreement to purchase an
transmission and distribution, gas transmission and energy-from-waste company, AEB Holding N.V..
distribution, as well as oil storage and transmission
businesses, all of which allow us to fulfil our mission The 26th United Nations Climate Change Conference
of delivering long-term sustainable earnings growth in of the Parties (COP26) held in Glasgow in November
mature international markets. 2021 mandated that all countries come forward with
ambitious 2030 emissions reductions targets to support
In 2021, despite a global surge in fuel prices, our global reaching net zero by the middle of the century. To
portfolio of companies achieved satisfactory results amid meet these challenging goals, an accelerated pathway
the COVID-19 pandemic as around 80% of our Group’s is needed for the phase-down of coal, switch to electric
share of total fixed assets of joint ventures and associates vehicles (EVs), and investment in renewables. As a Group,
comprise of regulated networks for the transmission we fully support these goals. Our operating companies
and distribution of gas and electricity. Our operating are working to cut their own operating carbon footprints
companies in the UK, Australia, Hong Kong, Mainland and those of the markets in which they operate. These
China, the Netherlands, New Zealand, Thailand, Canada strategies will remain a key priority for us in the years
and the United States all achieved performance in line ahead.
with expectations.

10 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

When completed, the Sebastopol Solar Farm will generate enough


clean energy for more than 40,000 Australian households,
offsetting nearly 77,600 tonnes of carbon emissions annually.

We also believe that decarbonisation should not come at


the expense of energy affordability and reliability. In line
with this ethos, all our operating companies maintained
a strong focus on operating efficiencies, affordability,
reliability and safety. HK Electric, Victoria Power
Networks, UK Power Networks, and Wales & West
Utilities succeeded in reducing or freezing energy costs,
while all our UK and Australian operating companies
have surpassed targets in reliability and operating
efficiency. HK Electric has achieved a world-leading
supply reliability level in excess of 99.9999% for the
second year.

Annual Report 2021 11


CEO’s Report

UNITED KINGDOM

Since 2013, the UK has been the largest geography of


operation for the Group. Our portfolio currently consists
of four companies across the electricity generation and With widespread COVID-19 and vaccine rollout, we
distribution, and gas distribution sectors that serve more continued to observe all appropriate precautions and
than 13 million domestic, commercial, and industrial social distancing measures to keep employees and the
customers. Our assets in the market consist of a generation general public safe.
capacity of 1,140 MW, electricity network length of
189,500 km, and gas pipeline length of 71,100 km. During the year, the UK government set in law its
sixth carbon budget to cut emissions by 78% by 2035
During the year, our two gas companies, Northern compared to 1990 levels, en route to achieving carbon
Gas Networks and Wales & Wests Utilities, started on neutrality by 2050. With projects underway to support
a new 5-year regulatory period. The stable operating the electrification of public transport, hydrogen-blended
environment will enable us to make the needed household heating, and modernisation of the grid to
investments to meet more challenging requirements for accommodate the massive influx of EVs and renewables,
emissions control and other operating parameters. Our our companies are in the lead of these innovations.
electricity distribution business, UK Power Networks,
commenced with stakeholder engagement and the Against this backdrop, all our operating companies led
groundwork needed for its regulatory reset, which will their respective sectors for efficiency, safety, reliability
take place in 2023. and customer services.

UKPN completes a substation upgrade to improve power reliability for customers in Bedfordshire and Cambridgeshire.

12 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

UK Power Networks surveys conducted by the regulator Ofgem. Thanks to


the focus on investing efficiently, UKPN’s customers pay
UK Power Networks (UKPN) owns, operates, and less than the UK average for the use of the electricity
manages three of the 14 regulated distribution distribution system.
network operators (DNOs) in the UK. UKPN’s
licensed distribution networks are in London, the A paradigm shift is taking place in electricity distribution,
East, and the South East of England. and UKPN is investing systematically in innovation to
stay ahead in reliability, efficiency and emissions. The
company has implemented 50 cutting-edge projects
UK Power Networks
since 2015. Its Distributed Energy Resource Management
System was named Green Infrastructure Project of the
Year at the highly respected Business Green Leaders
Power Assets Interest: Joined Since: Awards in September 2021.
40% October 2010
UKPN’s capital projects team, ED1SON Alliance,
Network Length: No. of Customers:
completed its fifth anniversary on 1 March 2021. It
189,500 km 8,400,000
currently has around 280 projects in construction, which
are adding essential and smart network capacity across
UKPN’s areas of operation.
In 2021, UKPN’s networks supported 8.4 million
customers. It distributed 74,000 GWh of electricity (2020: UKPN is looking to the future of sustainable transport.
72,063 GWh) over a total network length of 189,500 km. With up to three million EVs forecast to connect to its
The business led the sector in best performance over the network by 2030, UKPN is developing a smart, flexible
period 2015 to 2021. energy system to support widespread EV charging. One
of the initial steps to meeting this demand is building
During the year, UKPN maintained its position as the high-capacity electrical supplies at motorway services,
safest DNO group, with the most reliable networks, so drivers can feel more confident to undertake long
and secured best-in-class customer satisfaction scores in electric-powered journeys on major UK routes.

Helping rewire South London

Notable projects handled by UKPN under the ED1SON


Alliance currently underway include a major investment
at Wimbledon, in collaboration with the National Grid.
This effort involves installing a new 31-bay gas-insulated
switchgear switch house, diverting 24 cable circuits in
an existing operational site, and decommissioning two
live air-insulated switchgear units.

The project will increase network resilience and


capacity, by alleviating fault level issues and providing
additional 132-kV positions for new customer
connections across the network. It will also enable
smooth decommissioning of old asset structures in
poor condition.

Annual Report 2021 13


CEO’s Report

NGN’s total gas throughput for 2021 was 68,803 GWh


Northern Gas Networks
(2020: 66,975 GWh). It started a new regulatory period
Northern Gas Networks (NGN) is one of the UK’s in April 2021 which will last for five years. NGN retained
eight gas distribution network operators, serving its position as the most efficient of the eight UK gas
about 2.7 million customers in the North and distribution networks and received an incentive payment
North East of England. It is also responsible for the from the regulator for having the best business case
maintenance of gas mains, provision of essential during the reset process.
gas connections, and emergency services related to
gas supply. Over the next five years, NGN will invest in capital
projects for network improvement and replacement to
increase efficiency, reliability and safety. During 2021,
Northern Gas Networks
it replaced over 500 km of old iron mains, which also
helped minimise fugitive methane emissions. NGN
achieved or exceeded all regulatory operating targets
Power Assets Interest: Joined Since: and earned high scores on customer satisfaction surveys
41.29% June 2005 about planned repairs and new connection works.
Gas Pipeline Length: No. of Customers:
36,100 km 2,700,000 IT infrastructure enhancement works moved forward,
providing NGN with capabilities such as AI, machine
learning and advanced analytics to enable predictive
maintenance and better insight into system performance.

Low-carbon heating with


hydrogen

With 85% of UK households using gas, domestic


heating accounts for 14% of UK emissions and
contributes to climate change. Hydrogen can
play a key role in addressing this and helping the
UK achieve net-zero carbon emissions by 2050.
Unlike natural gas, it does not create any carbon
dioxide during combustion.

NGN is leading the sector in research on how the


network can be adapted to transport hydrogen
in the future. The findings will play a key role in
informing the UK government’s understanding
of this area and future policy direction.

Following the success of the HyDeploy project, which started supplying gas containing 20% hydrogen to
Winlaton village in 2021, NGN partnered with other industry players to develop an East Coast hydrogen network.
The partnership will enable hydrogen production at scale and develop a network to transport the gas effectively.

To enhance consumer understanding and acceptance of hydrogen heating, NGN opened the UK’s first
Hydrogen Homes so everyone can see and experience the reality of a house fuelled by clean-burning hydrogen.
The homes, which include a range of hydrogen-fed appliances such as boilers, hobs, fires and barbecues, will
be open to educational visits, helping young people learn more about saving energy and building a greener
future.

14 Power Assets Holdings Limited


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continues to grow, with 24 inquiries for connection to


the network received in the last 12 months. Currently,
seven more sites have reserved network capacity,
offering an additional 450 GWh annual capacity.

To support cleaner transportation, three compressed


natural gas bus fuelling stations and a freight refuelling
station, supporting 111 buses, were connected to
the network. A further heavy truck fuelling station
was connected to the network in 2021; it will be
commissioned in early 2022. Connections were provided
to several large industrial developments, as well.

WWU is progressing strategic projects in partnership with


WWU continues to invest in infrastructure to support low- UKPN to support the UK’s decarbonisation effort. The
emission public transport on a broad scale.
joint HyCompact project demonstrated the viability and
benefits of integrated hybrid heating systems and seeks
Wales & West Utilities to serve as a catalyst for large-scale deployment at a low
cost.
Wales & West Utilities (WWU) is a gas distribution
network operator, serving Wales and South West
England and covering an area of 42,000 sq. km of a Seabank Power
diverse mix of urban and rural geography.
Seabank Power (SPL) is the Group’s UK electricity
generation business, operating two combined-cycle
Wales & West Utilities gas turbine units with a capacity of 1,140 MW. SPL’s
output is governed by an agreement via a long-
term contract with a single customer based on a
Power Assets Interest: Joined Since: combination of factors including plant availability
36% October 2012 and sales into the energy market.
Gas Pipeline Length: No. of Customers:
35,000 km 2,600,000 Seabank Power

Entering into a new five-year regulatory period, WWU Power Assets Interest: Joined Since:
achieved a total gas throughput of 59,562 GWh in 25% June 2010
2021 (2020: 58,200 GWh). Over the past five years,
Gas-Fired Combined Cycle Gas Turbine:
WWU has successfully improved affordability for
customers, achieving an average 18% reduction in
1,140 MW
customer bills. Operating performance for reliability,
emergency response, and customer satisfaction achieved
or exceeded targets, and the company maintained its SPL’s generating hours in 2021 were slightly lower than
service mark accreditation from the UK Institute of budget, while its contribution exceeded expectations due
Customer Service. Approximately 329 km of mains were to higher energy prices in the 4th quarter.
laid during the year.
Operational efficiency and starting performance were
WWU continued to build out its biomethane and green better than budget. The first of two major scheduled
gas solutions to support decarbonisation, increasing maintenance outages was completed, and the second
annual capacity to 1.82 TWh during the year. This area has been deferred until 2022.

Annual Report 2021 15


CEO’s Report

HONG KONG

The Hongkong Electric Company


milestones achieved. Under the plan, the second of
HK Electric is the Group’s flagship company which
three new gas-fired generating units was synchronised
generates and supplies electricity to around 584,000
on schedule in November 2021. At the same time, the
customers on Hong Kong Island and Lamma Island.
construction of the jetty, laying of pipelines, and vessel
It is one of the world’s longest established power
design for an innovative offshore liquefied natural gas
suppliers, with operations spanning over 130 years.
terminal using Floating Storage and Regasification
Unit technology to augment gas supply security also
The Hongkong Electric Company progressed well. Both will commence commercial
operations in 2022. Construction on the station building
for a third generating unit continued in tandem for
launch in 2023.
Power Assets Total Installed No. of
Interest: Capacity: Customers:
33.37% 3,617 MW 584,000
Year Established: Network Length:
1889 6,700 km

In 2021, HK Electric focused on realigning its operations


and infrastructure to support Hong Kong’s overall
decarbonisation efforts while providing highly reliable,
safe, and affordable electricity to its customers.

The company sold a total of 10,361 GWh (2020: 10,134


GWh) of electricity over the year, of which about 50%
was from natural gas, keeping emissions below statutory The construction of an offshore liquefied natural gas terminal in
Hong Kong reaches critical milestones.
caps. HK Electric once again achieved a world-leading
supply reliability level in excess of 99.9999%, which
means that its customers suffered less than 30 seconds HK Electric continued its support for electric transport by
of unplanned power loss on average during the year. All offering free technical consultancy for customers seeking
pledged customer service standards were achieved or to install EV charging points at their premises, providing
surpassed. support on EV charging stations to our customers for
about 400 cases and covering 50,000 parking spaces. It
A development plan for 2019 to 2023 to establish the also provided technical support to the government, as
infrastructure needed to further increase natural gas-fired well as Hong Kong’s public bus and ferry operators on
generation reached its midway point with several major providing charging facilities for EVs.
16 Power Assets Holdings Limited
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A large-scale project to roll out smart meters across the farm, which will account for about 4% of the company’s
entire customer base is under way, together with the total electricity output. A Government working group
establishment of the advanced metering infrastructure is being set up to evaluate the application of hydrogen
(AMI) to support this. System development, testing, and energy in Hong Kong. Drawing on the Group’s expertise in
commissioning of the AMI solution were completed this area, the company will engage with the government
in 2021. More than 120,000 smart meters have been and industry experts on global best practices.
deployed as of the end of 2021.
Net tariffs were frozen at 126.4 cents per unit of
electricity in 2021, to support customers through
the economic slowdown following the COVID-19
pandemic. A range of relief measures was implemented
to help customers, especially small businesses, caterers
and underprivileged families. These included dining
vouchers and funding support for the installation of
energy-efficient equipment. Over 40,000 families and
300 small businesses benefited from these initiatives.
Apart from maintaining due precautions and social
distancing, HK Electric conducted a vaccination drive for
its employees to keep them safe from COVID-19.

A significant increase in coal and natural gas costs led to


an increase in the fuel clause charge of the tariff, which
Smart meters and Advanced Metering Infrastructure will help means net tariffs for 2022 has increased by 8.9 cents
HK Electric improve efficiency and help customers optimise energy
usage. per unit. HK Electric has commenced a HK$63 million
programme to support the underprivileged, promote
In support of the Hong Kong Government’s Climate energy efficiency and conservation, and strengthen
Action Plan 2050 and Clean Air Plan 2035, HK Electric education on low carbon living to help alleviate tariff
will progressively phase out all coal-fired generating units impact on the general public under the current economic
and seek a pathway to zero-carbon operations. It moved climate.
forward with planning for a large-scale offshore wind

Customer autonomy and


self-service

To support the increasing trend among customers to adopt self-service channels,


HK Electric expanded its range of digital services. Most notably, it launched a new
mobile app that aims to provide greater convenience for customers to manage their
electricity usage anytime, anywhere. The app allows customers with smart meters to
track their usage at half-hourly intervals and get personalised bill and consumption
alerts.

A new online platform was launched in June 2021 for customers to track the progress of their applications
concerning supply application, account transfer, account termination, special meter reading, and autopay round
the clock. To take this one step further, the Customer Emergency Services hotline was integrated with back-end
IT systems to enable higher efficiency and transparency in handling customer calls and tracking service requests.

To promote an environmentally-friendly and paperless operating model, customers switching to e-Bill and
autopay/Faster-Payment-System received a HK$30 incentive that they could use to pay for electricity charges or
donate to a green group.

Annual Report 2021 17


CEO’s Report

AUSTRALIA

Since 2000, Australia has developed into one of the


Group’s major markets of operation with a portfolio
spanning renewables, energy-from-waste, as well as generate almost 80% of the state’s energy needs and,
electricity, gas transmission, and distribution. It is a when combined with large, utility-scale solar farms,
flagship market for solar power, hybrid energy systems solar power can meet 100% of these needs at certain
and energy from landfill gas. periods – a world first in gigawatt-scale power systems.
Our distribution networks are working actively to evolve
The Australian Energy Regulator (AER) is conducting a into smart networks capable of dynamic two-way energy
comprehensive review of its Rate of Return Instrument. flows in this new energy future.
When completed in December 2022, it will set key
parameters that determine the allowed rate of return Our Australian gas companies are working with the
for the next regulatory period. Engaging with the government to help increase the production of green
regulator and achieving synergies in their submissions hydrogen and make Australia an exporter of the
while maintaining reliability, affordability and excellent hydrogen to other countries. Green hydrogen can
customer service was a key focus for all our Australian significantly drive down emissions when blended with
operating companies during the year. natural gas for power generation or household heating
as hydrogen combustion only produces water vapour.
Nearly 34% of consumers in South Australia have
adopted solar power systems. Rooftop solar alone can
SA Power Networks
SA Power Networks (SAPN) is the sole electricity
distributor in the state of South Australia, serving
residential and commercial customers and also
builds electricity networks for strategic private
organisations.

SA Power Networks

Power Assets Interest: Joined Since:


27.93% January 2000
Network Length: No. of Customers:
89,800 km 899,000
Our Australian companies maintain their excellence in reliability
and customer service.

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SAPN expands operations with a new depot, equipped with a 94-kW solar system, in Barossa Valley.

In 2021, SAPN distributed 9,634 GWh of electricity (2020: During the year, SAPN successfully brought the notable
9,727 GWh). Despite storms and numerous outages SA Water project to near completion. The project
– caused by bats coming in contact with high-voltage involved the supply and installation of approximately
power lines and equipment located at the top of poles 242 GWh of roof and ground mounted solar generation
– impacting electricity supply, the company successfully capacity and 34 MWh of battery storage at 33 of
maintained system reliability, restricting customer minutes SA Water’s sites across the state.
lost to an average of 126 minutes in 2021.

The utility maintained excellent customer service and


exceeded regulatory service and telephone response
targets, securing incentive payments across various
parameters. SAPN continues to be recognised as the
most productive distribution business in Australia by the
AER.

During the year, SAPN replaced its existing telephony,


billing and marketing system with a state-of-the-art
solution, which will provide improved, modern
functionality, more flexibility, and better system stability
to handle future growth and evolution.

It developed a roadmap to support South Australia’s


energy transition to renewables, including the
implementation of dynamic management technologies
to maximise the network’s capacity and network
intelligence to respond to capacity changes in real-time,
while managing tens of thousands of residential solar
power systems.

A “Solar Sponge” Time-of-Use based tariff was SAPN workers conduct maintenance of critical infrastructure to
introduced to encourage consumers to spread out their maintain reliability and safety.

consumption to balance it with peak generation times.

Annual Report 2021 19


CEO’s Report

Victoria Power Networks beat regulatory targets for customer service and system
reliability.
Victoria Power Networks (VPN) through CitiPower
VPN commenced a new regulatory period during the
and Powercor Australia operates electricity year, providing a stable foundation for the next five years
distribution networks in Victoria, including the to enable reliable and safe electricity while investing in
Melbourne metropolitan area. the network infrastructure and technology needed to
fight climate change, such as rooftop solar, EVs, and
batteries. Customers will benefit from more affordable
Victoria Power Networks
power with residential network tariffs falling for both
Powercor and CitiPower customers in the first year of the
new regulatory period.
Power Assets Interest:
27.93% CitiPower and Powercor continued to experience
CitiPower Powercor steady growth in the number of customers connecting
Joined Since: Joined Since:
solar power systems to the network, with more than
188,800 connections as at 31 December 2021. Powercor
July 2002 September 2000
will install a 150kW/388kWh battery in Melbourne’s
Network Length: Network Length: fast-growing western suburbs to allow customers to
7,700 km 90,400 km supply power back to the community, reduce emissions
No. of Customers: No. of Customers: and make the most of the strong local rooftop solar
334,000 868,000 penetration in the area.

CitiPower partnered with the Yarra Energy Foundation


and Australian National University to investigate the
VPN distributed 16,076 GWh of electricity during the
potential of community-scale battery storage on the
year (2020: 15,836 GWh), with an increase in the
low-voltage electricity network across inner-Melbourne.
number of customers and more than 29,000 new
The partnership is also exploring a ground-breaking
connections added. While underlying consumption
new model of community battery ownership, including
increased by 1.64% over 2020, CitiPower and Powercor
crowdsourcing local investment.

A solar-powered airport

To reduce its carbon footprint and operational costs and support sustainable growth, Melbourne Airport
commissioned Beon Energy Solutions, a VPN business, to build a 12-MW solar farm. It is one of Australia’s
largest customer-side installations. The solar farm has more than 38,000 individual solar panels installed in an
area of around 192,000 sq. m, equivalent to the size of about 26 football pitches.

Construction of the solar farm was completed in six months. It generates 17 GWh of electricity per annum,
enough to power all four passenger terminals at Melbourne airport – equivalent to nearly 15% of the airport’s
annual electricity consumption. The project is expected to deliver significant annualised energy cost savings, a
timely benefit, considering the impacts of COVID-19 on the aviation industry.

20 Power Assets Holdings Limited


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During the year, 260 km of cast iron and unprotected


steel pipelines were replaced with polyethylene pipes.
Construction progressed on a 16-km polyethylene
main in Caboolture and the complex Melbourne CBD
mains replacement project. A major IT infrastructure
programme saw works progressing on a geo-spatial
information system project and the enhancement of
enterprise resource planning systems.

AGN is at the forefront of the industry’s investment


in renewable hydrogen for blending into the gas
network to reduce emissions. In May 2021, it launched
commercial operation of a 1.25-MW electrolysis plant at
the Tonsley Innovation District in South Australia, which
will supply renewable hydrogen to the gas network.
It is also progressing with a 175-kW electrolyser for a
VPN employees continue to progress maintenance activities with Hydrogen park project in Gladstone, Queensland. The
robust health and safety measures. electrolyser will produce enough hydrogen for 10%
blending into the Gladstone gas distribution network for
Australian Gas Networks residential, small industrial and commercial customers.

Australian Gas Networks (AGN) is one of Australia’s


largest distributors of natural gas, serving
customers in Victoria, South Australia, Queensland,
New South Wales, and the Northern Territory.

Australian Gas Networks

Power Assets Interest: Joined Since:


27.51% August 2014
Gas Pipeline Length: No. of Customers:
26,700 km 1,367,000

Total gas deliveries in 2021 maintained a level of


100 million GJ (2020: 100 million GJ). Leak repair
performance, response times to customer and emergency
calls, and customer satisfaction all exceeded targets.
During the year, the AER completed its reset process of
the South Australian regulated network for the period
2021-2026, largely in line with AGN’s revised proposal.
AGN exceeds its targets for customer service thanks to timely
AGN is working on proposals for Victoria and Albury responses and high engagement.
for the 2023-2028 period, with customer engagement
underway.

Annual Report 2021 21


CEO’s Report

CK William the final stages of commissioning. The West Australian


Department of Mines, Industry Regulation, and Safety
selected EDL and its customer, Gold Fields, as winners
CK William owns and operates four energy
of the 2021 Golden Gecko Award for Environmental
companies across electricity and gas distribution, Excellence for the Agnew Hybrid Renewables Project.
and sustainable distributed energy production.
They are (i) Dampier Bunbury Pipeline and AGI MG distributed 57.3 million GJ (2020: 54.6 million GJ)
Development Group (collectively known as “DBP”), of gas during the year, serving more than 717,500
(ii) Multinet Gas (MG), one of Victoria’s three gas customers and managing about 10,100 km of networks.
distribution networks, (iii) United Energy (UE), an As part of its comprehensive mains replacement
electricity distribution business in Victoria, and programme, 146 km of mains with cast iron and
(iv) Energy Developments Pty Ltd (EDL), a leading unprotected steel pipes were replaced with polyethylene.
It is preparing for the next regulatory reset period, which
global producer of sustainable distributed energy.
will run from 2023 to 2028. MG collaborated with AGN
on its hydrogen projects in the Tonsley Innovation District
CK William (South Australia) and Gladstone (Queensland).

UE distributed 7,475 GWh (2020: 7,512 GWh) of


electricity during the year and added more than 10,000
Power Assets Interest: Joined Since:
new customers to the network. In April, the regulator
approved UE’s operating plan for the 2021-2026 period.
20% May 2017
The plan will enable the company to invest in the
Network Length: No. of Customers: network to provide reliable, safe and affordable electricity
13,500 km 1,420,000 while also building the capability needed to support
rooftop solar, EVs, and batteries. UE saw a 41% increase
Gas Pipeline Length: Total Installed Capacity:
in the number of customers installing rooftop solar
14,200 km 1,156 MW systems, with a total of 103,108 systems connected.

DBP achieved a total gas throughput of 377 million GJ


over its 4,100-km gas transmission pipeline, compared to
380 million GJ in 2020, serving 62 industrial customers.
Compressor stations achieved 99.9% reliability. A
regulatory reset for our West Australian gas transmission
network was completed during the first half, in which
the company’s proposal for the 2021-2025 period was
largely accepted.

EDL’s mission is to be the leading global producer of


sustainable distributed energy. It has a total installed
capacity of 1,156 MW across five countries, covering waste
coal mine gas, landfill gas, remote energy, and renewables.
In particular, EDL plays a pivotal role in carbon offsetting
as methane generated from coal mines and landfill, that
possesses a much higher heat trapping ability has 28 times
the global warming impact of carbon dioxide. In 2021, EDL
generated 4,859 GWh (2020: 5,207 GWh) globally, and
supplied energy to around 90 customers.

EDL is a climate-positive global energy producer. In


2021, EDL reduced greenhouse gas emissions by
3 million tCO2e through converting 18 million tCO2e
from customers’ waste gases into electricity and
renewable natural gas. Construction of Wood Road
and Tessman Road Renewable Natural Gas projects in
Michigan and Texas was completed in 2021, with Wood
Road operating since November 2021 and Tessman in The Australian Energy Regulator’s final determination on UE’s
proposal means lower costs for customers.

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Community battery storage

In August 2021, UE began work on an innovative way to


enable customers to share power in their local communities
with Australia’s largest rollout of community-based
batteries.

The AUD11-million ”Electric Avenue” programme will


install 30-kW batteries on power poles at 40 sites across
Melbourne’s east, southeast, and the Mornington Peninsula,
each with the capacity to service an average of 125 homes.

The batteries will benefit all local customers, whether they have solar or not, by storing energy from both UE’s
network and nearby solar panels, that can then be used locally when needed. They will charge at times of the
day when there is low electricity demand or when local rooftop solar systems are exporting into the network.
Power from the batteries can then be used later in the day to make more power available when demand is
high and solar systems are no longer generating.

The project helps sustain 99.99% electricity reliability and allows those with rooftop solar panels to get the
most out of their investment. In particular, the batteries will improve the quality and reliability of electricity
during peak demand days when everyone is using power – for example, on hot summer days.

When completed in 2023, the fleet of batteries will be able to store the electricity needed to support 5,000
homes. The innovative project provides an opportunity for customers to participate in a clean energy future.

are part of a wider project known as the Western Victoria


Australian Energy Operations Transmission Network Project, with the main proponent
of that project currently progressing the associated
Australian Energy Operations (AEO) builds, owns, planning approvals.
and operates electricity transmission lines and
terminal stations that connect the Mt Mercer, AEO continued to yield stable revenues for the Group
based on long-term contracts with the four wind farms.
Ararat, Moorabool, and Elaine wind farms to the
national power grid.

Australian Energy Operations

Power Assets Interest: Joined Since:


50% July 2012
Network Length:
71 km

In 2021, AEO undertook design upgrade of the Elaine AEO connects two additional wind farms to its Elaine Terminal
terminal station to support the reinforcement of the Station in Victoria, reaching an output of more than 500 MW.
transmission grid in western Victoria. Construction is
forecast to be completed by the end of 2024. The works

Annual Report 2021 23


CEO’s Report

MAINLAND CHINA

Power Assets operates one coal-fired co-generating plant


in Jinwan (Guangdong province) and two wind farms in
Dali (Yunnan province) and Laoting (Hebei province). of 2021, which drove spot coal prices up by 60% or
more. In response, Jinwan increased tariffs on a small
Steep increases in coal prices affected the power industry volume of the power sent out. The plant generated
as a whole, but new pricing reforms that came into effect 3.72 million GJ of steam – the same as 2020 – and has
in the fourth quarter of 2021 allowed the coal-fired power expanded capacity to meet future growth in low-pressure
plants to partially offset these increased costs through steam in the Gaolan industrial zone.
higher tariffs.
Jinwan significantly outperformed all statutory emissions
caps. The plant sold around 900 kT of surplus carbon
Jinwan Power Plant emission rights to various local power plants, the
proceeds from which partially offset the impact of
The Jinwan power plant operates two coal-fired soaring fuel costs. With gross profit margins severely
heat and power generating units under a long-term eroded by the uptick in prices, the plant continues to
joint venture agreement with a partner in Mainland deliver a steady cash flow to shareholders.
China.

Jinwan Power

Power Assets Interest: Joined Since:


45% April 2009
Coal-Fired:
1,200 MW

Electricity sold rose to 5,681 GWh (2020: 3,767 GWh)


due to strong industrial demand, persistent high
temperatures, and an approximate 8% decrease in
power supply from Western China to Guangdong
province. While generation increased, the Jinwan power
plant faced coal supply scarcities during the second half

Despite a coal shortage, Jinwan Power Plant maintains excellent


power generation output.

24 Power Assets Holdings Limited


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Dali and Laoting wind farms Dali Wind Power

The Dali and Laoting wind farms have a combined


capacity of 97.5 MW. Power Assets Joined Wind
Interest: Since: Turbine:

The two wind farms met all their operating parameters


45% December 2007 48 MW
in 2021. A total of 213 GWh of electricity was generated
(2020: 207 GWh). The output of the two wind farms
Laoting Wind Power
offset 207,000 tonnes of carbon emissions within their
respective provinces.

Power Assets Joined Wind


Interest: Since: Turbine:
45% June 2008 49.5 MW

THAILAND

Ratchaburi Power Company


Ratchaburi Power Company (RPCL) is a generation Total electricity generated by RPCL in 2021 was 2,920
company located in the Ratchaburi province in GWh (2020: 2,801 GWh). Blocks 1 and 2 at the plant
Thailand. Its revenues are guaranteed by a achieved equivalent availability factors at 89.33% and
25-year take-or-pay Power Purchase Agreement 92.25% respectively.
with Thailand’s Electricity Generating Authority.
In addition, the power plant secured additional revenue
Ratchaburi Power attributable to fuel cost savings by delivering plant
operations that outperformed budgets. There was no
lost time injury in 2021.

Power Assets Interest: Joined Since:


In order to take advantage of government incentives
25% October 2001 and help encourage renewable energy development,
Gas-Fired Combined Cycle Gas Turbine: RPCL has developed a rooftop solar farm of about
1,400 MW 1 MW capacity which was successfully commissioned in
December 2021, helping to reduce house load electricity
cost from the grid.

Annual Report 2021 25


CEO’s Report

CANADA

The Canadian energy market is steadily evolving from


a dependence on fossil fuels to a strong emphasis on
renewables. Under its new climate plan, the government Canadian Power Holdings
introduced heavier penalties on carbon emissions that
require suppliers to gradually reduce carbon intensity Canadian Power Holdings (Canadian Power)
over time. In addition, funding was introduced to help operates the gas-fired Meridian cogeneration
consumers and businesses adopt low-carbon electricity, power plant in Saskatchewan, two wind farms
industrial technologies, and transport. in Okanagan, and has a holding in TransAlta
Cogeneration, which operates four power plants in
To support this goal, the Group’s Sheerness plant Ontario and Alberta.
has migrated from coal-fired to gas-fired generation
and Canadian Power has invested in wind farms in TransAlta Cogeneration
Okanagan, which has an installed capacity of 30 MW to
directly offset carbon, supplying renewable electricity to
the British Columbia region. Power Assets Total Installed
Interest: Joined Since: Capacity:
25% December 1,064 MW
2007

Meridian

Power Assets Gas-fired Combined


Interest: Joined Since: Cycle Cogeneration:
50% December 220 MW
2007

Okanagan Wind Power

Power Assets
Interest: Joined Since: Wind Turbine:
50% June 30 MW
2021
Sheerness power station converts to solely gas-fired operations.

26 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

The two wind farms in Okanagan were acquired in June


Husky Midstream Limited Partnership
2021, marking Canadian Power’s successful transition
into renewable energy generation to offset carbon
emission. With a generation capacity of 30 MW, the
assets have started contributing to the Group’s revenue Power Assets Interest: Joined Since: Oil Pipeline Length:
and green portfolio. 48.75% July 2016 2,200 km
Pipeline Gathering
During the year, Canadian Power generated a total Oil Storage Capacity: System Capacity:
of 3,087 GWh of electricity, of which 53,000 kWh of 5.9 million barrels 409,000 barrels/day
electricity came from renewables, and 1,232 kT of steam.

The Sheerness power station was successfully converted


The North American crude oil market environment
from coal-fired to gas-fired. With favourable market
has continued to improve and recover from 2020.
conditions, the plant increased its profit contribution in
The sustained economic recovery throughout 2021
2021 following the expiry of its long-term power offtake
has resulted in increased production from customers
contract.
and throughput volumes. In 2021, HMLP met
operating budgets and achieved targets for safety and
The Meridian cogeneration plant in Lloydminster,
reliability. Following the completion of several major
Saskatchewan continues to operate as a highly reliable,
network expansion projects in 2020, the focus was on
efficient supplier of electricity and thermal energy to
optimisation of the entire network system for efficiency
large, long-term contracted clients.
to enable future growth.

Thirteen customers shipped on the HMLP pipeline system,


Husky Midstream Limited which had a blended crude capacity of approximately
Partnership 409,000 barrels per day. Fifty-seven customers were
active within the Hardisty terminal during the year,
Husky Midstream Limited Partnership (HMLP) which had a peak throughput capacity of approximately
operates the Hardisty oil storage terminal 700,000 barrels per day.
and has operations spread across Alberta and
HMLP has a strong focus on safety that helps protect
Saskatchewan. It serves oil companies and crude
its workers, its assets, the environment, and the public.
oil producers with a network of oil-gathering A shared database provides improved access to health
systems and pipelines, transporting crude oil from and safety information for all employees and contractors
producing fields to processing facilities. and fosters continuous improvement in safety culture.
Remote operating tank cleaning was initiated to
minimise human exposure, and leak detection cameras
with artificial intelligence technology were implemented
to timely identify any leakage.

HMLP’s Hardisty terminal has a peak throughput capacity of approximately 700,000 barrels per day and a storage capacity of 4.9 million barrels.

Annual Report 2021 27


CEO’s Report

NETHERLANDS

Dutch Enviro Energy Holdings B.V.


Dutch Enviro Energy Holdings B.V., which owns AVR is in the process of acquiring ISO 50001
AVR-Afvalverwerking B.V. (AVR), is an energy-from- certification, which is expected to be completed in
waste producer based in Rotterdam. It currently 2022, further cementing a strong focus on energy usage
treats a total of 1.7 million tonnes of residual in environmentally-friendly operations and policies.
waste per year and supplies enough electricity to An inventory of energy consumption at all locations
the national grid for the needs of about 190,000 has been compiled and a multi-year energy reduction
households per year. programme is under way, including an energy plan with
annual performance indicators that focus on continuous
improvement.
Dutch Enviro Energy Holdings B.V.
AVR entered into an agreement with the Municipality of
Amsterdam to acquire an energy-from-waste company,
Power Assets Interest: Joined Since:
AEB Holding N.V. (AEB) in December 2021. AEB’s facilities
27% August 2013
consist of the largest single-site incinerator, strategically
Waste-to-Energy Units: Biomass-Fired Units:
located near the densely-populated Amsterdam
138 MW 30 MW metropolitan area. It also operates a biomass plant and
Energy-From-Waste: Paper Residue Incineration: waste sorting installation. The acquisition, which is subject
1,713 kT/yr 141 kT/yr to approval from the Netherlands Authority for Consumers
Liquid Waste Treatment: Biomass Energy: and Markets, is expected to be completed in 2022 and will
281 kT/yr 131 kT/yr enhance AVR’s position in the market.

AVR’s total throughput of waste in 2021 was stable at


2,266 kT (2020: 2,270 kT) while energy output during
the year was 8,264 TJ (2020: 8,179 TJ). Carbon dioxide
capture increased to 43 kT (2020: 31 kT) and the amount
of plastic recycled was 29 kT (2020: 26 kT).

The company increased its installed capacity for heat and


power with the construction of a new back pressure steam
turbine with enough capacity for the needs of 60,000
households in the Rotterdam region. The new turbine will
increase the security of heat and steam supply and allow
AVR to meet future growth in district heating and steam
demand. The turbine uses back pressure technology,
which can extract even more energy from residual waste.
AVR’s CO2 capture, biomass energy and thermal conversion plants
focus on operational excellence through the year.
28 Power Assets Holdings Limited
Business Review Corporate Governance Financial Statements Other Information

NEW ZEALAND

Wellington Electricity Lines


Wellington Electricity Lines Limited (WELL) owns seismic strengthening of 91 buildings, providing three
and operates electricity distribution networks in the new data centres and upgrading the communications
Wellington metropolitan area of New Zealand. It systems.
serves customers across the domestic, commercial,
and industrial sectors. WELL customers include the The year saw initial climate change recommendations
New Zealand Parliament, Wellington Airport and made to the New Zealand government, which mandate
the Wellington Hospital. electrification of road transport and decarbonisation of
electricity generation. To support this, WELL is developing
a roadmap to identify the steps to facilitate EV charging
Wellington Electricity Lines
in coordination with existing network loads. A 30-year
model is being developed to forecast the investment
needed to meet the increased electrification from climate
Power Assets Interest: Joined Since:
change initiatives, demand for which could increase by
50% July 2008 80% by 2050.

Network Length: No. of Customers:


4,800 km 172,000

WELL distributed 2,240 GWh (2020: 2,237 GWh)


of electricity and served about 172,000 customers
during the year, maintaining strong network reliability
performance. Major capital works progressed smoothly
despite COVID-19 distancing restrictions, including the
installation of new plastic insulated cables to replace the
aging gas-insulated cables to a critical zone substation
supplying the Wellington City CBD. The new substation
cables are scheduled to be commissioned in 2022.

A three-year capital project to improve earthquake


readiness was completed on schedule. The project
includes the construction of two new mobile substations,
WELL invests in disaster preparedness infrastructure, such as mobile
transformers, to supply uninterrupted power during emergencies.

Annual Report 2021 29


Board of Directors and Management Team

Board of Directors
Executive Directors
FOK Kin Ning, Canning Chairman

Aged 70. Appointed to the Board in 1985 and became the Chairman in 2005. He is a Director of certain subsidiaries
of the Company. He is also the Chairman of HK Electric Investments Manager Limited (“HKEIML”) which is the
trustee-manager of HK Electric Investments (“HKEI”), HK Electric Investments Limited (“HKEIL”) and its wholly-owned
subsidiary, The Hongkong Electric Company, Limited (“HK Electric”). Mr. Fok is an Executive Director and Group
Co-Managing Director of CK Hutchison Holdings Limited (“CK Hutchison”), and the Deputy Chairman of
CK Infrastructure Holdings Limited (“CKI”). Mr. Fok is the Chairman of Hutchison Telecommunications (Australia) Limited,
Hutchison Telecommunications Hong Kong Holdings Limited (“HTHKH”), Hutchison Port Holdings Management Pte.
Limited (“HPHMPL”) which is the trustee-manager of Hutchison Port Holdings Trust (“HPH Trust”) and TPG Telecom
Limited, a Director of Cenovus Energy Inc. (“Cenovus Energy”), and a Deputy President of the Board of Commissioners of
PT Indosat Tbk. All the companies mentioned above, except HKEIML, HK Electric and HPHMPL, are listed companies, and
HPH Trust and HKEI are listed business/investment trusts. Mr. Fok acts as a Director of certain substantial shareholders of
the Company within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”), and a Director of certain
companies controlled by certain substantial shareholders of the Company. Mr. Fok holds a Bachelor of Arts degree and a
Diploma in Financial Management, and is a Fellow of Chartered Accountants Australia and New Zealand.

TSAI Chao Chung, Charles Chief Executive Officer

Aged 64. Appointed to the Board and Chief Executive Officer in January 2014. He has been with the Group since June
1987. Mr. Tsai is the General Manager of Power Assets Investments Limited, a wholly-owned subsidiary of the Company.
He is also a Director or Alternate Director of most of the subsidiaries and certain joint ventures of the Company. Mr. Tsai
has been responsible for the Group’s investments outside Hong Kong since 1997. He holds a Bachelor of Applied Science
Degree in Mechanical Engineering, and is a Registered Professional Engineer and a Chartered Engineer.

CHAN Loi Shun

Aged 59. Appointed to the Board in June 2012. Mr. Chan is a Director of most of the subsidiaries and certain
joint ventures of the Company. He is also an Executive Director of HKEIML which is the trustee-manager of
HKEI, and HKEIL, and a Director of HK Electric. Mr. Chan is an Executive Director and Chief Financial Officer
of CKI, a substantial shareholder of the Company within the meaning of Part XV of the SFO. Mr. Chan joined
the CK Group in January 1992. All the companies mentioned above, except HKEIML and HK Electric, are listed
companies, and HKEI is a listed investment trust. He also holds directorships in certain companies controlled by
certain substantial shareholders of the Company within the meaning of Part XV of the SFO. Mr. Chan is a fellow
of the Hong Kong Institute of Certified Public Accountants (“HKICPA”), a fellow of the Association of Chartered
Certified Accountants and also a member of the Institute of Certified Management Accountants (Australia).

Andrew John HUNTER

Aged 63. Appointed to the Board in 1999, prior to which he was Finance Director of the Hutchison Property Group.
Mr. Hunter was Group Finance Director from 1999 to January 2006, and is a Director of certain joint ventures of the
Company. Mr. Hunter is currently Deputy Managing Director of CKI, a listed company and a substantial shareholder
of the Company within the meaning of Part XV of the SFO. Mr. Hunter also holds directorships in certain companies
controlled by certain substantial shareholders of the Company. Mr. Hunter holds a Master of Arts degree and a Master’s
degree in Business Administration and is a member of the Institute of Chartered Accountants of Scotland and of the
HKICPA. He has over 39 years of experience in accounting and financial management.

30 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Neil Douglas MCGEE

Aged 70. Appointed to the Board in 2005 as an Executive Director, and re-designated as a Non-executive Director
in August 2012 and as an Executive Director in January 2014. He was Group Finance Director from February 2006
to August 2012. Mr. McGee has held various legal, corporate secretarial and finance positions with the Group and
the CK Hutchison Group. He is also a Director or Alternate Director of certain subsidiaries and joint ventures of
the Company. Mr. McGee is currently the Managing Director of Hutchison Whampoa Europe Investments S.à r.l.
Mr. McGee holds a Bachelor of Arts degree and a Bachelor of Laws degree.

WAN Chi Tin

Aged 71. Appointed to the Board in 2005. He was Group Managing Director from January 2013 to January 2014.
Mr. Wan is a Director of most of the subsidiaries and certain joint ventures of the Company. He is also the Chief Executive
Officer and an Executive Director of HKEIL, a company listed together with HKEI, an Executive Director of HKEIML
which is the trustee-manager of HKEI and the Managing Director of HK Electric. He has worked for the Group since
1978, holding various positions including Director of Engineering (Planning & Development), Chief Executive Officer of
Powercor Australia Limited and CitiPower Pty., associate companies of the Group in Australia. Mr. Wan holds a Bachelor
of Science degree in Electrical Engineering and is also a Chartered Engineer. He is an Honorary Fellow of the Energy
Institute, a Fellow of the Institution of Engineering and Technology, an Honorary Fellow of The Hong Kong Institution of
Engineers and a Fellow of The Hong Kong Management Association. Mr. Wan is a member of the Audit Committee of
The University of Hong Kong. He was previously Vice Chairman of the Engineers Registration Board of Hong Kong.

Non-executive Directors
LEUNG Hong Shun, Alexander

Aged 59. Appointed to the Board in May 2021. Mr. Leung is a practicing solicitor and notary public in Hong Kong and a
China-Appointed Attesting Officer appointed by the Ministry of Justice of the People’s Republic of China. He is presently
a partner of Messrs. S.H. Leung & Co., Solicitors. Mr. Leung holds a Bachelor of Laws degree.

LI Tzar Kuoi, Victor

Aged 57. Appointed to the Board in 1994 and re-designated from an Executive Director to a Non-executive Director
in January 2014. He is also a Director of a joint venture of the Company. He is the Chairman and Group Co-Managing
Director of CK Hutchison, and the Chairman and Managing Director, and the Chairman of the Executive Committee
of CK Asset Holdings Limited. Mr. Li is the Chairman of CKI and CK Life Sciences Int’l., (Holdings) Inc. Mr. Li is also
a Non-executive Director of HKEIML which is the trustee-manager of HKEI, a Non-executive Director and the Deputy
Chairman of HKEIL and a Director of HK Electric. All the companies mentioned above, except HKEIML and HK Electric,
are listed companies, and HKEI is a listed investment trust. Mr. Li is also the Deputy Chairman of Li Ka Shing Foundation
Limited and Li Ka Shing (Global) Foundation, the Member Deputy Chairman of Li Ka Shing (Canada) Foundation,
and a Director of The Hongkong and Shanghai Banking Corporation Limited. He serves as a member of the Standing
Committee of the 13th National Committee of the Chinese People’s Political Consultative Conference of the People’s
Republic of China. He is also a member of the Chief Executive’s Council of Advisers on Innovation and Strategic
Development of the Hong Kong Special Administrative Region, and Vice Chairman of the Hong Kong General Chamber
of Commerce (the “Chamber”). Mr. Li is the Honorary Consul of Barbados in Hong Kong. He acts as a Director of
certain substantial shareholders of the Company within the meaning of Part XV of the SFO, and a Director of certain
companies controlled by certain substantial shareholders of the Company. Mr. Li holds a Bachelor of Science degree in
Civil Engineering, a Master of Science degree in Civil Engineering and a degree of Doctor of Laws, honoris causa (LL.D.).

Annual Report 2021 31


Board of Directors and Management Team

Independent Non-executive Directors


IP Yuk-keung, Albert

Aged 69. Appointed to the Board in January 2014. Mr. Ip is an international banking and real estate professional
with over 30 years of banking experience in United States, Asia and Hong Kong. He was formerly Managing Director
of Citigroup and Managing Director of Investments at Merrill Lynch (Asia Pacific). Mr. Ip is Adjunct Professor of and
advisor to a number of universities in Hong Kong, United States and Macau. He is a Council Member of The Hong Kong
University of Science and Technology and a member of the Court of City University of Hong Kong. Mr. Ip is an Honorary
Fellow of Vocational Training Council, an Honorary Fellow of and a Beta Gamma Sigma Honoree at City University of
Hong Kong, and a Beta Gamma Sigma Honoree at The Hong Kong University of Science and Technology. Mr. Ip is
an Independent Non-executive Director of Eagle Asset Management (CP) Limited which is the manager of Champion
Real Estate Investment Trust, Lifestyle International Holdings Limited, New World Development Company Limited and
HTHKH. All the companies mentioned above except for Eagle Asset Management (CP) Limited are listed companies,
and Champion Real Estate Investment Trust is a listed real estate investment trust. Mr. Ip was formerly an Executive
Director and the Chief Executive Officer of LHIL Manager Limited which is the trustee-manager of Langham Hospitality
Investments, and Langham Hospitality Investments Limited, and an Independent Non-executive Director of Hopewell
Holdings Limited and TOM Group Limited. Mr. Ip holds a Bachelor of Science degree in Applied Mathematics and
Computer Science, a Master of Science in Applied Mathematics and a Master of Science in Accounting and Finance. He
is the Chairman of the Board of Governors of World Green Organisation.

KOH Poh Wah

Aged 65. Appointed to the Board in May 2021. Ms. Koh has more than 30 years of working experience in the areas of
operations management, technology, financial and business re-engineering. Ms. Koh is an Independent Non-executive
Director of ARA Asset Management (Fortune) Limited which is the manager of Fortune Real Estate Investment Trust,
a listed real estate investment trust. Ms. Koh is also an Independent Non-executive Director of HKEIML which is the
trustee-manager of HKEI, and HKEIL, and a Director of HK Electric. Ms. Koh was previously the Regional Accountant
(Alpha Asia Pacific) of Alpha International, a non-profit organisation, from 2012 to 2015 in charge of the finance
functions for Alpha Asia Pacific region, Alpha Singapore and AAP Publishing Pte. Ltd. Prior to this role she was a Director
with Future Positive Pte. Ltd. working extensively on information technology and business re-engineering consultancy
areas. Ms. Koh also worked for American International Assurance Co. Ltd. for 15 years during the period from 1986 to
2000, with her last position as Vice President – Quality Support & Operations Management. Ms. Koh holds a Master of
Science in Management Science and Operational Research, a Bachelor of Arts Degree (Honours) in Accounting, and a
Diploma from Institute for the Management of Information Systems (previously known as Institute of Data Processing
Management, UK) and a Fellow of Life Management Institute (USA).

LUI Wai Yu, Albert

Aged 71. Appointed to the Board in March 2020. Mr. Lui has over 30 years of experience in project management. He
joined the CK Group in 1978, with his last position before retirement in 2006 as the Senior Project Manager of the
Development Department of Cheung Kong (Holdings) Limited (which was then listed company). Mr. Lui holds a Higher
Certificate in Civil Engineering and a Diploma in Management Studies

32 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Ralph Raymond SHEA

Aged 88. Appointed to the Board in 1985. Mr. Shea has been an Independent Non-executive Director of HKEIML which
is the trustee-manager of HKEI, and HKEIL which is a company listed together with HKEI, and a Director of HK Electric,
since October 2015. Mr. Shea is a solicitor of England and Wales and of Hong Kong.

WU Ting Yuk, Anthony

Aged 67. Appointed to the Board in June 2014. He is a member of Standing Committee of the Chinese People’s
Political Consultative Conference National Committee. Mr. Wu was formerly the chairman of the Hong Kong Hospital
Authority, the chairman of the Bauhinia Foundation Research Centre, a member of the Task Force on Land Supply
of the Hong Kong Special Administrative Region, the Deputy Chairman and an executive director of Sincere Watch
(Hong Kong) Limited, and an independent non-executive director of Fidelity Funds and Agricultural Bank of China
Limited. He also served as the chairman, and is currently a member of the Chamber Council, of the Chamber. Mr. Wu
is a member of the Chief Executive’s Council of Advisers on Innovation and Strategic Development of the Hong Kong
Special Administrative Region. Mr. Wu is a member of the People’s Republic of China State Council’s Medical Reform
Leadership Advisory Committee, a member of the Public Policy Advisory Committee and an advisor of the National
Health Commission of the People’s Republic of China, the Principal Advisor to the State Administration of Traditional
Chinese Medicine of the People’s Republic of China and a member of the Chinese Medicine Reform and Development
Advisory Committee of the People’s Republic of China. He is also the Chief Advisor to MUFG Bank, Ltd., the Chairman
of the China Oxford Scholarship Fund and an Honorary Professor of Faculty of Medicine of the Chinese University of
Hong Kong and Peking Union Medical College Hospital. Mr. Wu was the Chairman of the board of directors and is
currently an independent non-executive director of China Resources Medical Holdings Company Limited. He is also the
Chairman and a non-executive director of Clarity Medical Group Holding Limited, an independent non-executive director
of Guangdong Investment Limited, China Taiping Insurance Holdings Company Limited, CStone Pharmaceuticals,
Venus Medtech (Hangzhou) Inc., Ocumension Therapeutics and Sing Tao News Corporation Limited. All the companies
mentioned above are listed companies. Mr. Wu is an Honorary Fellow of Hong Kong College of Community Medicine.
He is a Fellow of the HKICPA and the Institute of Chartered Accountants in England and Wales, and an Honorary
Chairman of The Institute of Certified Management Accountants (Australia) Hong Kong Branch.

Annual Report 2021 33


Board of Directors and Management Team

Management Team
CHAN Kee Ham, Ivan

Aged 59. Chief Financial Officer, has been with the Group since May 2012. He is also the Chief Planning and
Investment Officer of CK Infrastructure Holdings Limited. He has over 35 years of experience in investment, banking and
finance. He holds a Bachelor’s degree in Science, a Bachelor’s degree in Chinese Law and a Master’s degree in Business
Administration.

FUNG Siu Tong, Thomas

Aged 53. Assistant General Manager (Business Development), has been with the Group since September 1990. He is
responsible for business development activities which include both acquisition and greenfield development globally. He
holds a Bachelor of Science degree in Mechanical Engineering.

Jeffrey KWOK

Aged 64. Senior Manager (International Business), joined the Group in 1981 and has been engaged in the development
of various power and renewable projects. He is currently responsible for managing the Group’s global investments with
a focus on their sustainability development. He holds a Master of Science degree in Engineering and is a Chartered
Engineer in the United Kingdom, a member of The Hong Kong Institution of Engineers, the Institution of Mechanical
Engineers and the Energy Institute in the United Kingdom.

NG Wai Cheong, Alex

Aged 52. Group Legal Counsel and Company Secretary, has been with the Group since November 2008. Mr. Ng is also
the Group Legal Counsel and Company Secretary of HK Electric Investments Manager Limited (the trustee-manager of
HK Electric Investments) and HK Electric Investments Limited. He has over 20 years of experience in legal, regulatory and
compliance fields. Mr. Ng holds a Bachelor’s degree in Science and a Bachelor’s degree in Laws. He was admitted as a
solicitor in Hong Kong and in England and Wales.

PAK Tak Kei, Keith

Aged 57. Senior Manager (Business Development), has been with the Group since December 1993. He is responsible
for initiation of the Group’s investments globally. He holds a Bachelor of Engineering degree in Mechanical Engineering,
a Master of Science degree in Building Services Engineering and a Master of Business Administration degree. He is a
Chartered Engineer in the United Kingdom, a member of The Hong Kong Institution of Engineers and the Institution of
Mechanical Engineers in the United Kingdom.

YU Ka Man, Jenny

Aged 49. Senior Manager (International Business), joined the Group in September 2016 and has over 20 years of
experience in energy industry with international business exposure. She is responsible for asset management of the
Group’s investments globally, and assumes active role in new energy development projects. Miss Yu holds a Master of
Business Administration degree. She is a fellow of the Association of Chartered Certified Accountants, a member of the
Hong Kong Institute of Certified Public Accountants and a member of The Hong Kong Institute of Directors. Miss Yu
is also a Certified Environmental, Social and Governance Analyst of The European Federation of Financial Analysts
Societies.

34 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Corporate Governance Report

Corporate Governance Vision, Missions and Core


The Board is committed to maintaining high standards Values
of corporate governance, and recognises that sound and The Company has the vision to excel in the energy
effective corporate governance practices are fundamental business in key international markets, and is dedicated to
to the smooth, effective and transparent operation of the missions of enhancing shareholder value, nurturing
the Company and its ability to attract investment, protect a harmonious, efficient and committed workforce, and
the rights of shareholders and other stakeholders, and caring for the environment and placing health and safety
enhance shareholder value. The Group’s corporate at the forefront of all its activities. Guided by the four
governance practices are designed to achieve these core values – pursuit of excellence, integrity, respect and
objectives and are maintained through a framework of trust, and caring – the Group is committed to operating
processes, policies and guidelines. its business lawfully, ethically and responsibly.

The Company has complied with the applicable code The Company is committed to ensuring the long-term
provisions in the Corporate Governance Code set out sustainability of the Group’s business and has formulated
in Appendix 14 of the Rules Governing the Listing the Sustainability Policy, which is published on the
of Securities on The Stock Exchange of Hong Kong Company’s website, to set out the sustainability
Limited (the “Listing Rules”) throughout the year ended approach for its operations.
31 December 2021.

Annual Report 2021 35


Corporate Governance Report

Under the leadership of the Board, the Company instils Board Proceedings
these vision, missions, core values and sustainability The Board have four regular meetings each year at
approach in our staff and stakeholders while integrating approximately quarterly intervals and additional meetings
them into the Group’s day-to-day operations. Information will be held when warranted. Regular meetings are
on the Company’s performance and the basis on which scheduled during the last quarter of the preceding year
the Company generates value over the longer term and providing Directors with adequate time to plan their
the strategy for delivering the above vision and missions schedules to attend. The Directors may attend meetings
are set out in the Chairman’s Statement on pages 4 to 6, in person, by telephone or other electronic means in
the Long-term Development Strategy on page 7 and the accordance with the Company’s articles of association.
CEO’s Report on pages 10 to 29 of the Annual Report. Throughout the year, the Directors also consider and
approve matters by way of written resolutions, which
Board of Directors are circulated to Directors together with explanatory
The Board, led by the Chairman, is collectively responsible briefings from the Chief Executive Officer or the
for the management and operations of the Company. Company Secretary as required. Directors are required
Its responsibilities include approval and monitoring to declare their interests, if any, in the matters to be
of Group-wide strategies and policies, approval of considered by them during board meetings and in the
annual budgets and business plans, evaluation of circular resolutions.
the performance of the Group, and oversight of the
management. Management, led by the Chief Executive Directors receive at least fourteen days prior written
Officer, is responsible for the day-to-day operations of notice of a regular meeting and may propose matters
the Group. The senior management of the Company for discussion to be included in the agenda. An agenda
comprises the Executive Directors. with supporting board papers is sent to Directors no less
than three days prior to a regular meeting. The Company
Directors at all times have full and timely access to Secretary assists the Chairman in seeing that Directors
information of the Group, including board papers receive adequate information on each matter set out in
and related materials. A financial summary outlining the agenda and acts as co-ordinator for management in
the Group’s financial position and performance and providing clarification sought by Directors.
containing the actual and budgeted results from
different operations, with major variances explained, is The minutes of Board meetings are prepared by the
sent to Directors each month for their review. Company Secretary with details of the decisions reached,
any concerns raised and dissenting views expressed. The
Each Director has independent access to the draft minutes are sent to all Directors for their comments.
management team for information on the Group and The final minutes are kept by the Company Secretary and
unrestricted access to the services of the Company available for inspection by Directors. Copies are sent to
Secretary on governance matters and board procedures. Directors for their records within a reasonable time after
There is a procedure for Directors to seek independent each meeting. This arrangement also applies to meetings
professional advice whenever deemed necessary by of the board committees.
them at the expense of the Company.
Appointment and re-election
The Company has arranged insurance coverage in All Directors have been appointed on annual
respect of directors’ liability for all Directors. twelve-month basis (save for the initial period which
is for a period up to 31 December in the year of
The Board currently comprises six Executive Directors, appointment), subject to retirement from office by
two Non-executive Directors and five Independent rotation and re-election by shareholders at the annual
Non-executive Directors. Their names and biographical general meeting once every three years pursuant to the
details are set out in the Board of Directors and articles of association of the Company. Any Director
Management Team section on pages 30 to 34 of the appointed to fill the casual vacancy shall hold office until
Annual Report. An updated list of Directors containing the next following general meeting and in the case of an
biographical information is maintained on the website of addition, until the next annual general meeting, and shall
the Company. The names of all Directors and their role be eligible for re-election at that meeting.
and function are posted on the website of Hong Kong
Exchanges and Clearing Limited (“HKEX”).

36 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Directors retiring by rotation at the forthcoming As provided in these policies, appointment to the
annual general meeting are Mr. Fok Kin Ning, Canning Board should be based on merit and attributes that the
and Mr. Chan Loi Shun. Ms. Koh Poh Wah and selected candidate will bring to the Board with an aim
Mr. Leung Hong Shun, Alexander, who were appointed to build an effective and complementary board with the
as additions to the Board subsequent to the last annual skills, experience, expertise and diversity of perspectives
general meeting, will also retire at the forthcoming appropriate for the Group’s businesses, and taking into
annual general meeting. All the retiring Directors offer consideration the benefits of various aspects of diversity,
themselves for re-election. Information relating to these including gender, age, ethnicity, cultural and educational
Directors required to be disclosed under the Listing background, professional experience and qualifications
Rules is contained in the circular to be despatched to and other factors that may be relevant from time to
shareholders together with this Annual Report. time. The Nomination Committee will consider and make
recommendations to the Board on the appointment of
None of the Directors has a service contract which is additional, replacement or re-electing directors based on
not determinable by the Company within one year these factors, and where an additional or replacement
without payment of compensation (other than statutory Directors is required, deploy multiple channels for
compensation). identifying suitable candidates, including referral from
Directors, shareholders, management, advisors and
Nomination and Diversity external executive search firms. Shareholders may
The Company recognises the importance of having nominate a person other than a retiring Director to
qualified and competent Directors that possess a stand for election as a Director at any general meeting in
balance of skill set, experience, expertise and diversity accordance with article 122 of the Company’s articles of
of perspectives appropriate for its strategies, which can association, the procedures for which are posted on the
enhance decision-making capability and the overall Company’s website.
effectiveness of the Board to achieve corporate strategy
as well as promote shareholder value. During the year, the Board is pleased to welcome a
female Independent Non-executive Director in joining
The full Board is ultimately responsible for reviewing them on 13 May 2021, and will continue to embrace
the structure, size, diversity profile and skills matrix gender diversity of Directors.
of the Board, appointment of new Directors and
succession plan for Directors. They have delegated The diversity profile of the Board as at 31 December
their responsibility to the Nomination Committee of 2021 is as follows:
the Company, and established the Director Nomination
Policy and the Board Diversity Policy which are published
on the Company’s website, to provide guidance on
the approach and procedure for these processes.

Gender Male Female

Designation Executive Director Non-executive Director Independent Non-executive Directors

Ethnicity Chinese Others

Age Group 50-59 60-69 70 or above

Educational Accounting Engineering Legal


Background

0 1 2 3 4 5 6 7 8 9 10 11 12 13

No. of Directors

Annual Report 2021 37


Corporate Governance Report

During 2021, the number of board and committee meetings and the attendance of each Director at these meetings
and the annual general meeting are as follows:

Meetings
between Annual
Chairman and General
Audit Remuneration Nomination Sustainability Independent Meeting
Board Committee Committee Committee Committee Non-executive held on
Directors Meetings Meetings Meeting Meeting Meetings Directors 12 May 2021

Executive Directors
Fok Kin Ning, Canning (Chairman) 4/4 – 1/1 – – 3/3 3
Tsai Chao Chung, Charles
(Chief Executive Officer) 4/4 – – – 2/2 – 3
Chan Loi Shun 4/4 – – – 2/2 – 3
Andrew John Hunter 4/4 – – – – – 3
Neil Douglas McGee 4/4 – – – – – 3
Wan Chi Tin 4/4 – – – – – 3

Non-executive Directors
Leung Hong Shun, Alexander 2/2 – – – – – –
(Appointed on 13 May 2021)
Victor T K Li 3/4 – – 1/1 – – 3

Independent Non-executive Directors


Ip Yuk-keung, Albert 4/4 4/4 – 1/1 2/2 3/3 3
Koh Poh Wah 2/2 2/2 – – – 1/1 –
(Appointed on 13 May 2021)
Lui Wai Yu, Albert 4/4 – 1/1 – – 3/3 3
Ralph Raymond Shea 3/4 4/4 0/1 1/1 – 2/3 3
Wu Ting Yuk, Anthony 4/4 4/4 – – – 3/3 3

The Directors have each confirmed that he/she has made contributions to the Group that are commensurate with
his/her role and board responsibilities, and devoted sufficient time and attention to the affairs of the Group, and
disclosed their offices held in other public companies and organisations and updated the Company on any subsequent
changes in a timely manner.

38 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Independence
The Board must be satisfied that an Independent Non-executive Director does not have any material relationship with
the Group. It is guided by the criteria of independence as set out in the Listing Rules in determining the independence
of Independent Non-executive Directors.

All Independent Non-executive Directors of the Company have each provided a confirmation of his/her independence
(which also covers his/her immediate family members) to the Company for the financial year 2021 pursuant to Rule 3.13
of the Listing Rules. The Board continues to consider these Directors to be independent.

Directors’ Interests in Competing Business


In 2021 the interests of Directors in businesses which may compete with the Group’s business of energy and
utility-related investment were as follows:

Name of Director Name of Company Nature of Interests

Fok Kin Ning, Canning CK Hutchison Holdings Limited Group Co-Managing Director
CK Infrastructure Holdings Limited Deputy Chairman
Cenovus Energy Inc. Director
Chan Loi Shun CK Infrastructure Holdings Limited Executive Director and Chief Financial Officer
Andrew John Hunter CK Infrastructure Holdings Limited Deputy Managing Director
Victor T K Li CK Asset Holdings Limited Chairman and Managing Director
CK Hutchison Holdings Limited Chairman and Group Co-Managing Director
CK Infrastructure Holdings Limited Chairman

The Board is of the view that the Group is capable of carrying on the business of energy and utility-related investment
independent of, and at arm’s length from the businesses of the above companies. When making decisions on the
Group’s business and in the performance of their duties as Directors of the Company, the above Directors have acted
and will act in the best interest of the Group and its shareholders.

Directors’ Training and skills on the roles, functions and duties of a listed
The Company Secretary updates Directors on the latest company director. Directors also attend external forums
developments and changes to the Listing Rules and the or briefing sessions, or complete courses organised
applicable legal and regulatory requirements necessary in by professional bodies on relevant topics from time to
discharging their duties. The Company also arranges and time, which count towards their continuous professional
provides continuous professional development training development training.
and relevant materials to Directors to help ensure they
are apprised of the latest changes in the commercial, Directors have provided to the Company their records
legal and regulatory environment in which the Group of continuous professional development training during
conducts its business and to refresh their knowledge 2021, and they have participated in the following
training activities:

Annual Report 2021 39


Corporate Governance Report

1. Reading materials and e-trainings on directors’ Directors’ Securities Transactions


duties, compliance issues for listed companies The Company has established the Policy on Inside
and/or legal and regulatory requirements Information and Securities Dealing to explain the
meaning of inside information and the illegality of insider
2. Reading materials on corporate governance, risk dealing, set out the restrictions in securities dealing, and
management and internal control establish preventive controls and reporting mechanism
applicable to confidential or unpublished inside
3. Reading materials, e-trainings and seminars on information in relation to the Group and its securities.
sustainability
As stated in the policy, the Board has adopted the Model
Code for Securities Transactions by Directors (the “Model
1 2 3
Code”) set out in Appendix 10 of the Listing Rules as
the code of conduct regulating directors’ securities
Executive Directors transactions. In addition, senior managers, and other
Fok Kin Ning, Canning 3 3 3
nominated managers and staff who, because of their
Tsai Chao Chung, Charles 3 3 3
respective positions in the Company, are likely to be in
Chan Loi Shun 3 3 3
possession of inside information regarding the Company
Andrew John Hunter 3 3 3
and its securities, are also required to comply with the
Neil Douglas McGee 3 3 3
Model Code. Reminders are sent during the year to
Wan Chi Tin 3 3 3
these individuals on prohibitions against dealing in the
Non-executive Directors
securities of the Company during the “blackout period”
Leung Hong Shun, Alexander 3 3 3
specified in the Model Code.
(Appointed on 13 May 2021)
Victor T K Li 3 3 3
All Directors have confirmed, following specific
Independent Non-executive Directors
enquiry, that they have complied with the Model Code
Ip Yuk-keung, Albert 3 3 3
throughout the year ended 31 December 2021.
Koh Poh Wah 3 3 3
(Appointed on 13 May 2021)
Lui Wai Yu, Albert 3 3 3 Directors’ Responsibility for Financial
Ralph Raymond Shea 3 3 3
Reporting and Disclosure
Wu Ting Yuk, Anthony 3 3 3
Annual and Interim Reports and Financial Statements
The Directors acknowledge their responsibility to prepare
For newly appointed Directors, the Company offers financial statements for each half and full financial year
briefings and a package of orientation materials on which give a true and fair view of the state of affairs of
the operations and businesses of the Group, together the Company and the Group. The interim and annual
with information relating to duties and responsibilities results of the Company are published in a timely manner
of directors under statutory regulations and the Listing within two months and three months respectively after
Rules. Such briefings and materials were provided to the end of the relevant periods.
Ms. Koh Poh Wah and Mr. Leung Hong Shun, Alexander
who were appointed as an Independent Non-executive Accounting Policies
Director and a Non-executive Director respectively during The Directors consider that in preparing financial
the year. statements, the Group ensures statutory requirements
are met and applies appropriate accounting policies that
are consistently adopted, and makes judgments and
estimates that are reasonable and prudent in accordance
with the applicable accounting standards.

40 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Accounting Records The Chairman is responsible for providing leadership to,


The Directors are responsible for ensuring the Group and overseeing the functioning and effective running
keeps proper accounting records which disclose at any of, the Board to ensure that the Board acts in the best
time the financial position of the Group from which, the interests of the Group. He takes primary responsibility in
financial statements of the Group could be prepared ensuring that good corporate governance practices and
in accordance with statutory requirements and the procedures are established, and also acts in an advisory
appropriate accounting policies. capacity to the Chief Executive Officer in all matters
covering the interests and management of the Group.
Safeguarding Assets
The Directors are responsible for taking all reasonable The Chairman approves board meeting agendas
and necessary steps to safeguard the assets of the Group and ensures that meetings of the Board are planned
and to prevent and detect fraud and other irregularities and conducted effectively and that all Directors are
within the Group. properly briefed on issues arising at board meetings. In
addition to board meetings, the Chairman schedules
Going Concern meetings annually with Independent Non-executive
The Directors consider that the Group has adequate Directors, without the presence of other Directors, to
resources to continue in operational existence for encourage them to voice out their independent views
the foreseeable future and are not aware of material and promote an open and constructive dialogue. During
uncertainties relating to events or conditions that may the year, the Chairman had three such meetings with
cast significant doubt upon the Company’s ability to the Independent Non-executive Directors to discuss
continue as a going concern. The Group’s financial matters relating to the Group and its operations. All
statements have accordingly been prepared on a going Directors, including the Non-executive Directors and the
concern basis. Independent Non-executive Directors, have independent
access to management team and may seek independent
Disclosure professional advice if considered appropriate.
The Board is aware of the applicable requirements under
the Listing Rules and statutory regulations with regard to The Chief Executive Officer is responsible for managing
the timely and proper disclosure of inside information, the businesses of the Group, attending to the
announcements and financial disclosures, and authorises formulation and successful implementation of Group
their publication as and when required. policies and assuming full accountability to the Board
for all Group operations. He attends to developing
Chairman and Chief Executive Officer strategic operating plans and is directly responsible for
maintaining the operational performance of the Group.
The positions of the Chairman and the Chief Executive
Working with other Executive Directors and the general
Officer are held by separate individuals, and are subject
managers, the Chief Executive Officer ensures that the
to retirement from their directorship by rotation and
funding requirements of the businesses are met and
re-election once every three years at the annual general
closely monitors the operating and financial results of the
meeting. During 2021, the Chairman was Mr. Fok Kin
businesses against plans and budgets, taking remedial
Ning, Canning and the Chief Executive Officer was
action when necessary. He maintains an ongoing
Mr. Tsai Chao Chung, Charles.
dialogue with the Chairman and all other Directors to
keep them informed of all major business development
and issues. He is also responsible for building and
maintaining an effective team to support him in his role.

Annual Report 2021 41


Corporate Governance Report

Directors’ Interests and Short Positions in Shares, Underlying Shares and Debentures
As at 31 December 2021, the interests or short positions of the Directors and chief executives of the Company in the
shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning
of Part XV of the Securities and Futures Ordinance (“SFO”)) which were notified to the Company and The Stock
Exchange of Hong Kong Limited (the “Stock Exchange”) pursuant to Divisions 7 and 8 of Part XV of the SFO (including
interests and short positions which the Directors and the chief executives of the Company were deemed or taken to
have under such provisions of the SFO), or which were recorded in the register required to be kept by the Company
pursuant to section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the
Model Code were as follows:

Long Positions in Shares of the Company

Nature of Number of Approximate %


Name of Director Capacity Interests Shares Held of Shareholding

Tsai Chao Chung, Charles Beneficial owner Personal 4,022 ≃ 0%


Leung Hong Shun, Alexander Beneficial owner Personal 180,000 0.01%

Long Positions in Shares of Associated Corporation


HK Electric Investments and HK Electric Investments Limited

Number of Approximate %
Nature of Share Stapled of Issued Share
Name of Director Capacity Interests Units Held Stapled Units

Li Tzar Kuoi, Victor Interest of controlled Corporate 7,870,000 0.08%


corporations (Note 1)
Fok Kin Ning, Canning Interest of controlled Corporate 2,000,000 0.02%
corporation (Note 2)
Tsai Chao Chung, Charles Beneficial owner Personal 880 ≃ 0%

Notes:

(1) Such share stapled units of HK Electric Investments and HK Electric Investments Limited (“HKEI”) comprise:
(a) 2,700,000 share stapled units of HKEI held by a wholly-owned subsidiary of Li Ka Shing (Global) Foundation (“LKSGF”).
By virtue of the terms of the constituent documents of LKSGF, Mr. Victor T K Li may be regarded as having the ability to
exercise or control the exercise of one-third or more of the voting power at general meetings of LKSGF; and
(b) 5,170,000 share stapled units of HKEI held by Li Ka Shing Foundation Limited (“LKSF”). By virtue of the terms of the
constituent documents of LKSF, Mr. Victor T K Li may be regarded as having the ability to exercise or control the exercise of
one-third or more of the voting power at general meetings of LKSF.
(2) Such share stapled units of HKEI are held by a company which is equally owned by Mr. Fok Kin Ning, Canning and his wife.

Save as disclosed above, as at 31 December 2021, none of the Directors or chief executives of the Company had any
interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated
corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the
Company under section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant
to the Model Code.

42 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Audit Committee are available at all of these meetings to assist with any
information and resources as may be required to enable
The Audit Committee comprises four Independent committee members to carry out their functions.
Non-executive Directors. It is chaired by Mr. Ip
Yuk-keung, Albert, and the other members are Representatives from KPMG, the external auditor, were
Ms. Koh Poh Wah (appointed on 13 May 2021), invited to attended two of the meetings to discuss the
Mr. Ralph Raymond Shea and Mr. Wu Ting Yuk, Anthony. 2020 audited financial statements, the 2021 audit plan
None of the committee members is a partner or former and various accounting matters with the committee
partner of the Group’s external auditor. members.

The Audit Committee reports directly to the Board, Subsequent to the financial year end, the Audit
and acts as the key representative body for overseeing Committee reviewed at a meeting in March 2022 the
relations with the external auditor. Its principal Group consolidated financial statements for the year
responsibilities are to assist the Board in fulfilling its ended 31 December 2021 and Annual Report 2021,
duties through the review of the Group’s financial and resolved to recommend the approval of the Group
reporting, the review of financial information, the consolidated financial statements and the re-appointment
consideration of issues relating to external auditor and of KPMG as the Company’s external auditor for 2022.
their appointment, the review and development of
corporate governance functions and risk management
and internal control systems. The Audit Committee also
Nomination Committee
oversees the Company’s whistleblowing procedure. The Nomination Committee comprises three members,
Committee members may seek independent professional a majority of which are Independent Non-executive
advice where necessary to discharge their duties. The Directors. It is chaired by Mr. Ip Yuk-keung, Albert
terms of reference of the Audit Committee is published (an Independent Non-executive Director), and the
on the Company’s website and HKEX’s website. other members are Mr. Victor T K Li (a Non-executive
Director) and Mr. Ralph Raymond Shea (an Independent
The Audit Committee held four meetings in 2021. Non-executive Director).
During the meetings, the committee reviewed and
considered matters including the interim and annual The Nomination Committee reports directly to the Board.
results, the interim and annual reports, the quarterly Its principal responsibilities are to review the structure,
financial highlights, the risk management reports and size, diversity profile and skills matrix of the Board,
the assessment and declarations in respect of the to facilitate the selection and nomination process, to
effectiveness of the risk management and internal assess the independence of Independent Non-executive
control systems and the sustainability governance and Directors having regard to the criteria under the Listing
management, the effectiveness of the Company’s internal Rules, and to make recommendations to the Board on
audit function, the internal audit plan and all internal the appointment or re-appointment of Directors and
audit reports compiled during the year, compliance succession planning for Directors, as guided by the
of the Deed of Non-competition with HK Electric process and criteria in Director Nomination Policy and
Investments Limited, the corporate governance structure Board Diversity Policy as mentioned earlier in this report.
and compliance with the Corporate Governance Code Committee members may seek independent professional
and the Environmental, Social and Governance Reporting advice where necessary to discharge their duties. The
Guide, the continuous professional development terms of reference of the Nomination Committee are
activities undertaken by Directors and senior managers, published on the Company’s website and HKEX’s
the adequacy of resources, qualifications and trainings website.
of accounting and internal audit staff, auditor related
matters (including fee, engagement and independence). The Committee held a meeting in March 2021. During
In addition, the committee also reviewed and considered the meeting, members reviewed the structure, size
the Group’s outstanding litigation and claims, and the and composition of the Board, the implementation
statistics and registers on illegal or unethical behaviour of and effectiveness of the Board Diversity Policy, and
the Group (including whistleblowing cases). Management the independence of the Independent Non-executive

Annual Report 2021 43


Corporate Governance Report

Directors, and resolved to recommend the nomination respect of the 2021 financial year and their remuneration
of all the retiring Directors standing for re-election at the for 2022. No Director and member of the management
2021 annual general meeting. During the year, members team participated in the determination of his/her own
also considered and recommended the appointments of remuneration. The Committee, authorised by the Board,
Ms. Koh Poh Wah and Mr. Leung Hong Shun, Alexander also reviewed and approved the 2022 wage and salary
as an Independent Non-executive Director and a review proposal for the Group’s employees.
Non-executive Director respectively.
The emoluments paid to each Director for the 2021
Remuneration Committee financial year are shown in note 11 to the financial
statements on pages 92 to 94 of the Annual Report.
The Remuneration Committee comprises three members, The remuneration paid to members of the management
a majority of which are Independent Non-executive team for the 2021 financial year is disclosed by bands in
Directors. It is chaired by Mr. Ralph Raymond Shea (an the same note.
Independent Non-executive Director), and the other
members are Mr. Fok Kin Ning, Canning (the Chairman
of the Board) and Mr. Lui Wai Yu, Albert (an Independent
Sustainability Committee
Non-executive Director). The Sustainability Committee comprised three members.
It is chaired by Mr. Tsai Chao Chung, Charles (the Chief
The Remuneration Committee reports directly to the Executive Officer), and the other members are Mr. Chan
Board. Its principal responsibilities include the review and Loi Shun (an Executive Director) and Mr. Ip Yuk-keung,
consideration of the Company’s policy for remuneration Albert (an Independent Non-executive Director).
of Directors and management team, and the
determination of their individual remuneration packages. The Sustainability Committee reports directly to the
The terms of reference of the Remuneration Committee Board. Its principal responsibilities are to oversee
are published on the Company’s website and the HKEX’s management of, and advise the Board on the
website. development and implementation of the sustainability
initiatives of the Group, including reviewing the related
The Board has adopted a Policy on Remuneration of policies and practices, and assessing and making
Full Time Directors and Management Team to provide recommendations on matters concerning the Group’s
guidance on the determination of remuneration sustainability development and risks.
of Executive Directors and management team,
with reference to the Company’s performance and The Group’s Sustainability Management Committee,
profitability, industry remuneration benchmarks and a management-level committee chaired by the Chief
prevailing market conditions. Remuneration should Executive Officer, supports the Sustainability Committee
be performance-based and, coupled with an incentive to discharge its duties and drives and coordinates
system, competitive to attract and retain talented the Group’s sustainability efforts, and promotes
employees. understanding of sustainability within the Group.
Committee members may, if considered necessary, seek
In the discharge of its duties the Remuneration any information required from management or have
Committee is assisted by relevant remuneration data access to independent professional advice. The terms of
and market conditions provided by the human resources reference of the Sustainability Committee are published
function. Committee members may, if considered on the Company’s website and HKEX’s website.
necessary, seek independent professional advice to
perform their duties. The Group does not have any The Sustainability Committee held two meetings in 2021.
equity-based remuneration during the year. During the meetings members considered the Group’s
sustainability framework and its sustainability objectives,
The Committee held a meeting in December 2021. including the United Nations Sustainable Development
During the meeting and under delegated responsibility Goals action plan, and material sustainability issues.
from the Board, Committee members considered and They also assessed the Group’s sustainability strategies,
determined the performance-based bonus payable to the risks and opportunities, priorities, initiatives, goals
full time Executive Directors and management team in and performance in health and safety, environmental
management and other sustainability areas, and
44 Power Assets Holdings Limited
Business Review Corporate Governance Financial Statements Other Information

discussed areas for enhancing the Group’s sustainability Reporting Responsibility


performance and reporting. They also reviewed the The reporting responsibilities of KPMG are stated in the
Sustainability Report 2020 and a series of sustainability Independent Auditor’s Report on pages 65 to 68 of the
and governance policies. Annual Report.

Subsequent to the financial year, the Sustainability


Committee at a meeting held in March 2022 reviewed
Remuneration
and recommended for the Board’s approval the An analysis of the fees of KPMG and other external
Sustainability Report 2021. auditors for audit and non-audit services is shown in note
9 to the financial statements on page 90 of the Annual
Company Secretary Report.

The Company Secretary of the Company supports


Re-appointment
the Board by ensuring good information flow within
the Board and that board policy and procedures are A resolution for re-appointment of KPMG as auditor
followed. He is responsible for advising the Board of the Company will be proposed at the forthcoming
through the Chairman and/or the Chief Executive annual general meeting. There has been no change in
Officer on governance matters and also facilitates auditor in the preceding three years.
induction and professional development of Directors.
The Company Secretary also acts as the secretary to Risk Management and Internal
all board committees. Control
The appointment and removal of the Company Introduction
Secretary is subject to approval of the Board. Although The Board has overall responsibility for evaluating and
the Company Secretary reports to the Chairman and determining the nature and extent of the risks they are
the Chief Executive Officer, all Directors have access willing to take in achieving corporate strategic objectives,
for his relevant advice and service. Mr. Alex Ng, the and overseeing the risk management and internal control
Company Secretary of the Company, has knowledge of systems. The Audit Committee assists the Board in
the Group’s daily affairs. He has received no less than reviewing the effectiveness of the risk management and
15 hours of relevant professional training during the year internal control systems to ensure that appropriate and
to refresh his skills and knowledge. effective systems are in place.

External Auditor The Audit Committee reviews all significant aspects of


risk management and internal control, including financial,
Independence operational and compliance controls, the adequacy
KPMG, the external auditor and Public Interest Entity of resources, qualifications and experience, training
Auditor registered in accordance with the Financial programmes and budgets of the staff of the Group’s
Reporting Council Ordinance, have confirmed that they accounting, internal audit, and financial reporting
have been, for the year ended 31 December 2021, functions, the process by which the Group evaluates its
independent of the Group in accordance with the control environment and its risk assessment process, and
independence requirements of the Hong Kong Institute the way in which business and control risks are managed.
of Certified Public Accountants. The Audit Committee also reviews the effectiveness of
the internal audit function and its annual work plans, and
considers the reports of the Chief Executive Officer and
Rotation of Engagement Partner
an Executive Director on the effectiveness of the systems
KPMG adopt a policy of rotating the engagement
of risk management and internal control, and makes its
partner servicing their client companies every seven years.
recommendation to the Board for approval of the annual
The last rotation in respect of the Group took place in
consolidated financial statements.
the audit of the 2021 financial statements and the next
rotation will take place in the audit of the 2028 financial
statements.

Annual Report 2021 45


Corporate Governance Report

At the meetings held in March and July 2021, the Executive Directors review operational and financial
Audit Committee reviewed the effectiveness of the risk reports and key operating statistics and hold regular
management and internal control systems of the Group meetings with responsible managers to review their
for the year 2020 and for the half year ended 30 June reports.
2021 respectively, and considered the systems effective
and adequate. Executive Directors and senior executives are appointed
to the boards and board committees of all major
The Company’s risk management and internal control operating subsidiaries, associates and joint ventures for
functions outlined above is supported by the services monitoring the operations of those companies. There is a
including the relevant financial and accounting, treasury comprehensive system for reporting information by those
and internal audit services it shared with HK Electric companies to the Company’s management.
Investments Limited, pursuant to an agreement dated
14 January 2014 with such company. Budgets are prepared annually by the management and
are subject to review and approval firstly by the Chief
Risk Management and Internal Control Executive Officer and then by the Board. Re-forecasts of
operating results for the current year are prepared on a
Environment quarterly basis, reviewed for differences to the budget
Effective risk management is fundamental to the and for approval by the Executive Directors.
achievement of the corporate strategic objectives, and an
enterprise risk management policy is in place to outline The Group has established guidelines and procedures
the framework and processes adopted by the Group for the approval and control of expenditure. Operating
and provide top-down and bottom-up approaches expenditure is subject to overall budget control, with
to identify, assess, mitigate and monitor key risks at approval levels being set by reference to the level
corporate and business unit levels in a pro-active and of authority of each executive and officer. Capital
structured manner. These key risks include risks in expenditure is also subject to overall control within the
topics such as climate change, supply reliability, and approved budget of individual projects with more specific
health and safety which the Group considered to be key control and approval being required for overspending,
material environmental, social and governance issues. unbudgeted expenditure and material expenditure within
More details are given in the Risk Management and Risk the approved budget. Monthly reports of actual versus
Factors on pages 55 to 59 of the Annual Report. budgeted and approved expenditure are also reviewed.

The management encourages a risk aware and control The treasury function, reporting to an Executive
conscious environment, setting objectives, performance Director, oversees the Group’s investment and funding
targets or policies for the management of key risks activities. It regularly reports on the Group’s cash and
including strategic planning, business operations, liquid investments, borrowings, outstanding contingent
acquisitions, investments, legal and regulatory liabilities and financial derivatives commitments. The
compliance, expenditure control, treasury, environment, Board has approved and adopted a treasury policy
health and safety, and customer service. The Company governing the management of the financial risks of the
has a well-established organisational structure with Group (including interest rate risk, foreign exchange risk
defined levels of responsibility and authority and and liquidity risk) and the operational risks associated
reporting procedures. There are inherent limitations in with such risk management activities. The treasury policy
any systems of risk management and internal control and is reviewed by the Audit Committee from time to time.
accordingly the Group’s risk management and internal
control systems are designed to manage rather than The legal and company secretarial function reports to
eliminate the risk of failure to achieve business objectives, the Chief Executive Officer, and oversees, among other
and can only provide reasonable and not absolute things, the Group’s compliance of the Listing Rules and
assurance against material misstatement or loss. other legal and regulatory requirements.

46 Power Assets Holdings Limited


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The internal audit function, reporting to an Executive self-assessment with reference to five components
Director and the Audit Committee, provides independent of internal control, namely, Control Environment,
assurance as to the existence and effectiveness of the Risk Assessment, Control Activities, Information and
risk management activities and internal controls in the Communication, and Monitoring Activities. The second
operations of the Group’s business units. Staff members tier of internal control self-assessment at key business
are from a wide range of disciplines including accounting, process level is also conducted to assess the effectiveness
engineering and information technology. Using risk of controls over the operations within their areas of
assessment methodology and taking into account the accountability and compliance with applicable laws and
scope and nature of the Group’s activities and changes in regulations. These assessments form part of the bases
operating environment, internal audit prepares its yearly on which the Chief Executive Officer and an Executive
audit plan which is reviewed and approved by the Audit Director formulate their opinion on risk management
Committee. Its internal audit reports on the Group’s and internal control systems and report their results to
operations are also reviewed and considered by the Audit the Audit Committee and the Board.
Committee. The scope of work on the Group’s business
units performed by internal audit includes financial, The Chief Executive Officer and other Executive
operations and information technology review, recurring Directors also have the responsibility of developing and
and ad hoc audit, fraud investigation, productivity implementing risk mitigation strategies including the
efficiency review and laws and regulations compliance deployment of insurance to transfer the financial impact
review. Internal audit follows up audit recommendations of risk. The insurance function of HK Electric Investments
on implementation by business units and the progress is Limited supports the Group to arrange appropriate
reported to the Audit Committee regularly. insurance coverage.

With the assistance of the internal audit function, the Reports from the external auditor on material
Chief Executive Officer and an Executive Director review, non-compliance with procedures and significant internal
among other things, the profile of the significant risks control weaknesses, if any, are presented to the Audit
and how these risks have been identified, evaluated Committee. These reports are considered and reviewed
and managed, the changes since the last assessment and appropriate action is to be taken if required.
in the nature and extent of significant risks, and the
Group’s ability to respond to changes in its business Established guidelines for the acquisition of new
and the external environment, the scope and quality businesses, including those on detailed appraisal and
of management’s ongoing monitoring of the risk review procedures and due diligence processes, are in
management and internal control systems. In addition, place.
they review the work of internal audit function and
other assurance providers, the extent and frequency There are also procedures including pre-clearance on
of communication of monitoring results to the Audit dealing in the Group’s securities by designated Directors,
Committee which enables it to assess control of the notification of regular blackout period and securities
Group and the effectiveness of risk management, any dealing restrictions to Directors and relevant employees,
significant failings or weaknesses in internal control and dissemination of information for specified purpose
that have been reported, the necessary actions that are and on a need-to-know basis have been implemented to
being taken promptly to remedy any significant failings guard against possible mishandling of inside information
or weaknesses, and the effectiveness of the Group’s within the Group.
processes for financial reporting and Listing Rules
compliance.

In addition, they also review the results of the


self-assessment on internal controls. The assessment of
the effectiveness of entity-level controls is the first tier of
the internal control self-assessment. Management of each
business unit conduct surveys on entity-level controls

Annual Report 2021 47


Corporate Governance Report

Code of Conduct and Anti-corruption Whistleblowing


The Group recognises the need to maintain a culture of To ensure high standards of openness, probity and
corporate ethics and anti-corruption, and places great accountability, the whistleblowing procedures, as
emphasis on ethical standards and integrity in all aspects set out in the Code of Conduct and Whistleblowing
of its operations. Procedure, allow employees as well as customers,
suppliers, contractors, debtors and creditors to report
The Group’s Code of Conduct gives primary guidance any suspected violation of the Code of Conduct or
in dealing with ethical issues, provides mechanisms to improprieties, misconduct or malpractice within the
report unethical conduct and helps to foster a culture Group, including fraud and illegal acts. Investigations
of honesty and accountability. All employees of the are carried out on all reported cases. The results
Group, and other stakeholders in certain situations, are reported to the Audit Committee and the Chief
are required to adhere to the standards set out in the Executive Officer, and disciplinary and remedial actions
Code of Conduct. Guidance on specific matters are are taken as appropriate. During 2021, the Group had
supplemented by other policies and procedures of the no reported whistleblowing cases and no convicted case
Group, as appropriate. of corruption.

The Group has established the Anti-fraud and Shareholders


Anti-bribery Policy which, together with the Code of
Conduct, prohibit any form of bribery or corruption. Articles of Association
Accepting or offering advantages in any manner from The current version of the articles of association of the
or to clients, suppliers, or any person in connection Company is available on the Company’s and HKEX’s
with the Group’s business is prohibited. An anti-bribery websites. No changes were made during the year ended
control assessment is conducted biannually to evaluate 31 December 2021.
the effectiveness of controls for managing bribery risks.
A monitoring mechanism has been established to review
Public Float
compliance with anti-corruption laws and the Code of
Conduct. According to information that is available to the
Company and within the knowledge of the Directors, the
It is the responsibility of each Director and employee to percentage of the shares which are in the hands of the
avoid situations that may lead to or involve a conflict public exceeds 25% of the Company’s total number of
of interest, and make full disclosure of any dealings in issued shares.
case of potential or actual conflict. All Directors and
employees have access to and in control of the Group’s Dividend Policy
information are required to provide adequate safeguard The Board has adopted a dividend policy which outlines
to prevent any abuse or misuse of that information, and the principles of payment on dividend. The policy states
not to use it to secure personal advantage. that the Board is committed to maintaining an optimal
capital structure and investment grade credit ratings.
The Group ensure procurement of supplies and services This is pursued to deliver returns to shareholders and
are conducted in a manner of high ethical standards ensure that adequate capital resources are available
to promote fair and open competition. There are for business growth and investment opportunities.
procurement and tendering procedures in place to Subject to business conditions, market opportunities and
ensure impartial selection of suppliers and contractors, maintenance of the Company’s strong investment grade
and the hire of services and purchase of goods are based credit ratings, the Board aims to deliver a sustainable
solely upon price, quality, suitability and need. Business dividend that improves over time in line with the
partners, and products and service providers are expected Company’s underlying earnings performance, consistent
to adhere to a high level of ethical standards as set out in with its long-term growth prospects.
the Code of Practice for Suppliers, and no corruption will
be tolerated.

48 Power Assets Holdings Limited


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Registration and related matters General Meetings


The Company handles share registration and related Annual general meeting and other general meetings
matters for shareholders, such as transfer of shares, are the primary forums for communications with
change of address, change of dividend payment shareholders and their participation and for Directors to
instruction, issue and/or loss of share certificates and develop a balanced understanding of their views.
death of shareholders, through Computershare Hong
Kong Investor Services Limited, the Company’s share 2021 Annual General Meeting
registrar, whose contact details are set out on page 136 The 2021 Annual General Meeting (the “AGM”), held
of the Annual Report. at Harbour Grand Kowloon on 12 May 2021, was held
as a hybrid meeting for the first time. In addition to the
traditional physical attendance, shareholders had the
Financial Calendar and Other Information option of attending, participating and voting at the AGM
A financial calendar of the announced key dates for through online access. The online access option allowed
2021 and 2022 and other relevant share information are shareholders to participate in the AGM and helped to
set out on the inside back cover of the Annual Report. protect their health and safety against possible exposure
to the COVID-19 pandemic.
Rights relating to General Meeting
The notice of meeting, the annual report and the circular
Pursuant to section 566 of the Companies Ordinance,
containing information on the proposed resolutions were
shareholders representing at least 5% of the total voting
sent to shareholders on 7 April 2021, more than 20 clear
rights of all the shareholders of the Company having a
business days (as defined in the Listing Rules) and more
right to vote at general meetings may request for the
than 21 clear days (as required by the Company’s articles
convening of a general meeting. Pursuant to sections
of association) prior to the meeting.
580 and 615 of the Companies Ordinance, shareholders
qualified under sub-section (3) and sub-section (2) of
The AGM was attended by all Directors of the Company.
the respective sections may request for the Company’s
The chairmen and members of all board committees, as
circulation of statements with respect to proposed
well as representatives from KPMG, the external auditor,
resolutions to be considered at a general meeting and
were available at the meeting to answer questions,
the Company’s giving of notice of a resolution intended
which could be raised by shareholders at the meeting
to be moved at an annual general meeting. In both of
venue or participating online. A separate resolution
these cases, the request stating the general nature of
was proposed in respect of each substantially separate
the business to be dealt with at the meeting should be
issue, and voted by way of a poll, and the poll voting
signed by the requisitionists and sent to the Company
procedure was explained fully to shareholders at the start
in hard copy form or in electronic form in accordance
of the meeting. Computershare Hong Kong Investor
with the statutory provisions. Shareholders can refer to
Services Limited, the Company’s share registrar, acted as
the detailed requirements and procedures set forth in
scrutineer for the poll.
the relevant sections of the articles of association of the
Company when making any requisitions or proposals for
transaction at general meetings.

Shareholder Communication
The Company has established the Shareholder
Communication Policy, which is published on the website
of the Company, to lay down the framework and put
in place a range of communication channels between
themselves and shareholders and investors to promote
effective communication.

Annual Report 2021 49


Corporate Governance Report

All resolutions proposed at the meeting were ordinary Corporate Website


resolutions and were passed by more than 50% of the The Company’s corporate website at www.powerassets.com
votes, with the percentage of votes in favour set out is an information platform to facilitate communication
below: with shareholders, the investor community and other
stakeholders. It contains a wide range of information
– Audited Financial Statement, Report of the including financial results, notices of meetings,
Directors and the Independent Auditor’s Report for announcements required under the Listing Rules, circulars
the year ended 31 December 2020 (99.5007%); to shareholders, press releases and other corporate
publications. An e-subscription service is available to
– Declaration of a final dividend of HK$2.04 per enable subscribers to register and receive notification
share (99.4801%); when financial and sustainability reports and Listing Rules
announcements are posted.
– Election of Mr. Neil Douglas McGee (95.0163%),
Mr. Ralph Raymond Shea (79.8528%), Mr. Wan Shareholders may, as a standing or an ad hoc instruction,
Chi Tin (95.3326%) and Mr. Wu Ting Yuk, elect to receive certain corporate communication (such
Anthony (69.4083%) as Directors; as the notices of general meetings and accompanying
papers, circulars, annual reports and interim reports)
– Re-appointment of KPMG as auditor and by post. In the absence of any such instructions, they
authorisation of Directors to fix their remuneration will receive a notification letter informing them of the
(96.0744%); and release of the documents on the Company’s and HKEX’s
websites, but may at any time notify the Company by
– General mandates to Directors to issue and mail or email of any change in their choice of language
dispose of additional shares of the Company not (English or Chinese or both) or means of receiving (printed
exceeding 10% of the total number of shares in version or access through the Company’s website)
issue (93.4827%) and to repurchase shares of the corporate communications. Shareholders are encouraged
Company (99.8903%). to access corporate communications through the
Company’s website to support the environment and
The poll results, including the number of shares voted reduce paper consumption.
for and against each resolution, were announced to the
meeting on its conclusion and subsequently posted on Investor Relations
the Company’s and HKEX’s websites on the same day. All shareholders may put enquires to the Board at
general meetings, whether they attend the meetings
Financial and Other Reporting physically or through online access, and at other times by
The Company reports operating results for the first writing to the Company for the attention of an Executive
half of the financial year and the full financial year and Director, the Chief Financial Officer or the Company
produces interim and annual reports, and from time to Secretary, whose contact channels are set out on page
time communicates other information with shareholders 136 the Annual Report.
by way of announcement or circular, in accordance with
the requirements of the Listing Rules and applicable To facilitate communication with shareholders and the
laws. It also publishes sustainability report for the full investment community and solicit their views, meetings,
financial year to report on its approach, commitments briefings and roadshows with investors and analysts are
and strategy to sustainability, key achievements with held from time to time, as appropriate.
regard to its sustainability performance during the year
and plans and targets for the future.

50 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Interests and Short Positions of Shareholders


As at 31 December 2021, shareholders (other than Directors or chief executives of the Company) who had interests
or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company
under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be
kept under section 336 of the SFO, or as otherwise notified to the Company and the Stock Exchange were as follows:

Substantial Shareholders
Long Positions in Shares of the Company

Number of Approximate %
Name Capacity Shares Held of Shareholding

Venniton Development Inc. Beneficial owner 153,797,511 (Note 1) 7.21%


Interman Development Inc. Beneficial owner 186,736,842 (Note 1) 8.75%
Univest Equity S.A. Beneficial owner 279,011,102 (Note 1) 13.07%
Monitor Equities S.A. Beneficial owner & interest of 287,211,674 (Note 1) 13.46%
controlled corporation
Hyford Limited Interest of controlled corporations 767,499,612 (Note 2) 35.96%
CK Infrastructure Holdings Interest of controlled corporations 767,499,612 (Note 2) 35.96%
Limited
Hutchison Infrastructure Interest of controlled corporations 767,499,612 (Note 3) 35.96%
Holdings Limited
CK Hutchison Global Interest of controlled corporations 767,499,612 (Note 3) 35.96%
Investments Limited
CK Hutchison Holdings Interest of controlled corporations 767,499,612 (Note 3) 35.96%
Limited

Other Persons
(a) Long Positions in Shares and Underlying Shares of the Company

Number of Shares/
Underlying Approximate %
Name Capacity Shares of Shareholding

BlackRock, Inc. Interests of controlled corporations 106,726,434 (Note 4) 5.00%

Annual Report 2021 51


Corporate Governance Report

(b) Short Positions in Shares and Underlying Shares of the Company

Number of Shares/
Underlying Approximate %
Name Capacity Shares of Shareholding

BlackRock, Inc. Interests of controlled corporations 228,500 (Note 5) 0.01%

Notes:

(1) These are direct or indirect wholly-owned subsidiaries of Hyford Limited (“Hyford”) and their interests are duplicated in the
same 767,499,612 shares of the Company held by Hyford described in Note (2) below.
(2) CK Infrastructure Holdings Limited (“CKI”) is deemed to be interested in the 767,499,612 shares of the Company as referred
to in Note (1) above as it holds more than one-third of the issued share capital of Hyford indirectly. Its interests are duplicated
in the interest of CK Hutchison Holdings Limited (“CK Hutchison”) in the Company described in Note (3) below.
(3) CK Hutchison is deemed to be interested in the 767,499,612 shares of the Company as referred to in Note (2) above as
it holds more than one-third of the issued voting shares of CK Hutchison Global Investments Limited (“CKHGI”). Certain
subsidiaries of CKHGI hold more than one-third of the issued voting shares of Hutchison Infrastructure Holdings Limited which
in turn holds more than one-third of the issued share capital of CKI.
(4) Such long position includes derivatives interests in 326,000 underlying shares of the Company derived from unlisted and cash
settled derivatives.
(5) Such short position includes derivatives interests in 227,500 underlying shares of the Company derived from unlisted and cash
settled derivatives.

Save as disclosed above, as at 31 December 2021, there was no other person (other than Directors or chief executives
of the Company) who had interests or short positions in the shares or underlying shares of the Company as recorded
in the register required to be kept by the Company under section 336 of the SFO, or as otherwise notified to the
Company and the Stock Exchange.

Connected Transaction 1280164 B.C. also entered into a funding and acquisition
support agreement (the “Funding Agreement”),
Financial assistance and acquisition support whereby, among other things, CKI and the Company
agreed to provide, or cause the provision of, an amount
in relation to the acquisition of the
up to CAD70 million by way of loan to CPHI and/or
Okanagan Wind projects by CPHI subscription of new shares of CPHI on a 50:50 basis to
As announced by the Company on 5 February 2021, fund the Acquisition.
Canadian Power Holdings Inc. (“CPHI”) and 1280164
B.C. Ltd. (“1280164 B.C.”), both indirectly held as to CPHI is considered a material joint venture of the
50% each by the Company and CKI, entered into a Company. Each of CPHI and 1280164 B.C. is indirectly
share and debt purchase agreement on 4 February 2021 held as to 50% by CKI, a substantial shareholder of the
in relation to the acquisition of all the issued shares of Company, and is a connected person of the Company.
PSS Renewables Holdings Inc. (“PSS Holdings”) and the The transactions contemplated under the Funding
debt of PSS Renewables LP (which is wholly owned by Agreement therefore constituted connected transactions
PSS Holdings) (the “Acquisition”). PSS Holdings and PSS of the Company under Chapter 14A of the Listing Rules
Renewables LP indirectly own and operate the Okanagan and are subject to the reporting and announcement
Wind projects, comprising the Pennask Wind Farm requirements under Chapter 14A of the Listing Rules but
and the Shinish Creek Wind Farm, in British Columbia, exempt from the independent shareholders’ approval
Canada. Concurrently, CKI, the Company, CPHI and requirement.

52 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

(Revised) “Assurance Engagements Other


Continuing Connected Than Audits or Reviews of Historical Financial
Transactions Information” and with reference to Practice Note
Operation and Management Contract 740 “Auditor’s Letter on Continuing Connected
Transactions under the Hong Kong Listing Rules”
in respect of power plant investments in
issued by the Hong Kong Institute of Certified
Mainland China Public Accountants. The auditor have issued an
As announced by the Company on 29 September 2017, unqualified letter to the Board containing their
the operation and management contract dated 2 April finding and conclusions in respect of the above
2009 (the “Contract”) entered into between Outram continuing connected transactions, in which
Limited (“Outram”), an indirect wholly-owned subsidiary they have confirmed that nothing has come to
of the Company, and Cheung Kong China Infrastructure their attention that caused them to believe that
Limited (“CKCI”), was extended for a 3-year term from the continuing connected transactions in the
2 April 2018 to 1 April 2021. Pursuant to the Contract, 2021 financial year (i) had not been approved
CKCI agreed to provide Outram with services in relation by the Board; (ii) were not entered into, in all
to the operation and management of Outram’s power material respects, in accordance with the relevant
plant investments in Mainland China, at service fees agreement governing such transactions; and
payable monthly equivalent to CKCI’s costs for provision (iii) had exceeded the pro rata annual cap amount
of such services subject to a maximum annual aggregate for the relevant period.
maximum fee. For the period between 1 January 2021
and 1 April 2021, such maximum annual aggregate The Contract was extended for a further 3-year term
fee was HK$4.986 million, the pro rata amount of from 2 April 2021 to 1 April 2024 on the same terms,
HK$20.0 million for a full calendar year, and the actual save that the relevant maximum annual aggregate
amount paid was approximately HK$4.985 million. fee was reduced to HK$18 million due to reduction in
services following cessation of the Group’s interests
CKCI is an indirect wholly-owned subsidiary of CKI, a in the Zhuhai Power Plant and the Siping Power Plant
substantial shareholder of the Company. The transactions in 2019. As all the applicable percentage ratios based
under the Contract therefore constituted continuing on the new annual cap were less than 0.1%, the
connected transactions for the Company under the transactions under the Contract so extended ceased to
Listing Rules, and the Company has complied with the be subject to the announcement, annual review and
applicable annual review requirements under the Listing disclosure requirements under the Listing Rules.
Rules for the financial year 2021:

Transactions ceasing to be Continuing


(a) All the Independent Non-executive Directors
have reviewed the above continuing connected Connected Transactions – Services
transactions in the 2021 financial year and Agreements between HMGP and Husky
confirmed that those transactions had been
Energy’s affiliates
entered into (i) in the ordinary and usual course of
business of the Group; (ii) on normal commercial As announced by CKI and the Company jointly on
terms or better; and (iii) in accordance to the 26 April 2016 and by the Company on 16 March 2018,
agreement governing them on terms that are Husky Midstream General Partnership (“HMGP”, a
fair and reasonable and in the interests of the wholly-owned subsidiary of Husky Midstream Limited
shareholders of the Company as a whole. Partnership (“HMLP”)) and/or certain other subsidiaries of
HMLP on the one hand and certain subsidiaries of Husky
(b) Pursuant to Rule 14A.56 of the Listing Rules, Energy Inc. (“Husky Energy”) on the other hand entered
the auditor of the Company have been engaged into certain services agreements and supplemental
to report on the above continuing connected agreements (the “HMGP Services Agreements”). HMLP is
transactions in accordance with Hong Kong considered as a material joint venture of the Company.
Standard on Assurance Engagements 3000

Annual Report 2021 53


Corporate Governance Report

On 1 January 2021 Cenovus Energy Inc. and Husky Deed relating to investment opportunity
Energy completed a combination under the Canadian
in power projects with CK Infrastructure
law into a combined company (the “Combination”).
Prior to the completion of the Combination, Husky Holdings Limited
Energy as an associate of CKI, a substantial shareholder The Company entered into a deed relating to investment
of the Company, had been a connected person of the opportunity in power projects dated 10 January 2014
Company and therefore, the transactions under the (the “Investment Opportunity Deed”) with CKI to further
HMGP Services Agreements which took place prior to enhance the delineation between the business focus of
the Combination constituted continuing connected the Company and CKI in power projects and projects
transactions of the Company under the Listing Rules. other than power projects respectively. Pursuant to
Immediately following completion of the Combination, the Investment Opportunity Deed, CKI has undertaken
the combined company ceases to be an associate of CKI that if it is offered an opportunity to invest in any
and a connected person of the Company. Accordingly, power projects it will inform the Company and offer
any transactions under the HMGP Services Agreements the opportunity to the Company, and CKI may only
which take place after completion of the Combination invest in any power project if (i) the Company (with the
no longer constitute continuing connected transactions endorsement of its Independent Non-executive Directors
of the Company under the Listing Rules. or a committee thereof) invites CKI to participate as a
co-investor and (ii) the investment opportunity is in
Other Transactions respect of a power project of an enterprise value
exceeding HK$4 billion. Any co-investment by the
In connection with the spin-off and separate listing Company and CKI will be subject to compliance with the
of the Group’s electricity business in Hong Kong in applicable requirements of the Listing Rules, including
January 2014 the Company entered into the following independent shareholders’ approval if required.
transactions:
The Investment Opportunity Deed requires each of CKI
Non-competition Deed with HK Electric and the Company to review the deed’s implementation
as part of its internal audit plan and each company’s
Investments Limited
audit committee to review the deed’s compliance. A
The Company entered into a deed of non-competition
committee comprising all its Independent Non-executive
dated 14 January 2014 (the “Non-competition Deed”)
Directors has reviewed the compliance by CKI with
with HK Electric Investments Limited, pursuant to which
the terms of the deed and any decision by the Group
the Company has undertaken that save for certain
regarding any exercise of the rights under the deed.
exceptions the Group will not on its own account or
Having considered the Company’s internal control
with each other or in conjunction with or on behalf of
framework for ensuring the deed’s compliance,
any person, firm or company, carry on, or be engaged
internal audit’s compliance review report, CKI’s annual
in or interested in, directly or indirectly, whether as a
compliance confirmation to the Company and other
shareholder, partner, agent or otherwise (other than
relevant documents, the committee has confirmed its
through its holding of share stapled units in HKEI), the
view that during 2021, CKI complied with the terms
business of generation, transmission, distribution and
of the Investment Opportunity Deed and the Group’s
supply of electricity in Hong Kong.
decisions regarding any exercise of the rights under the
deed were made in accordance with the requirements
The Company has complied with the Non-competition
thereof.
Deed during 2021 and has, in accordance with the
Non-competition Deed, provided HK Electric Investments
Limited with its annual written confirmation.

54 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Risk Management

Effective risk management and internal control systems


are fundamental to the achievement of our strategic
Governance & Oversight
objectives. The Group is committed to fostering a risk aware and
control conscious environment. Responsibility for risk

Risk Management Framework management resides at all levels within the organisation.
The Board, through the Audit Committee, oversees the
The Group has in place an Enterprise Risk Management overall management of risks. The Risk Management
(ERM) framework to effectively identify, assess, mitigate Committee, supported by Internal Audit, assists the
and monitor key business, financial, operational and Board and Audit Committee to review and monitor key
compliance risks. The framework enables us to adopt risks faced by the Group. Management is responsible
a proactive and structured approach to identifying and for identifying and assessing risks of a strategic nature.
managing risks across the organisation, with on-going Business units are responsible for the identification and
monitoring and review in place. management of risks in their activities. The top-down
and bottom-up approaches complement each other and
enable us to identify and manage the Group’s key risks
in an effective manner, including material emerging risks
at corporate and business unit levels.

“Top-down” Risk Management Framework Governance


Oversight by the
Board / Audit The Board / Audit Committee Oversight
Committee
Independent Assurance from Internal and External Auditors

• Has overall responsibility for the Group’s risk management and


Assisted by Risk The Board internal control systems
(through Audit
Management • Determine and evaluate the nature and extent of the risks that the
Committee)
Committee and Group is willing to accept in pursuit of the Group’s strategic and
Management business objectives
• Discuss the risk management and internal control systems with
Identify & Manage management to ensure management has performed its duty to have
Risks at Corporate effective systems
Level
Risk Risk Review, Communication & Confirmation to the Board /
Management Audit Committee
Committee
(Chaired by the Chief
• Oversee the Group’s risk profile and assess if key risks are
Executive Officer)
appropriately mitigated
• Ensure that an on-going review of the effectiveness of the risk
management and internal control systems have been conducted and
provide such confirmation to the Board, via the Audit Committee

Risk & Control Monitoring


• Responsible for designing, implementing and monitoring the risk
Management management and internal control systems
• Identify and monitor key corporate risks
• Provide confirmation to the Risk Management Committee on the
“Bottom-up” effectiveness of the systems
Business Units
Front-Line Risk & Control Ownership
Identify, Manage &
Report Risks • Design, implement and monitor controls at business unit level,
escalate promptly on relevant risk issues
at Business
Unit Level Business • Provide assurance to the Risk Management Committee on the
Units effectiveness of risk management and internal control activities at
business unit level
• Seek continuous process improvement and re-assessment

Annual Report 2021 55


Risk Management

Risk Management Process register, which is updated and monitored on an on-going


basis, taking into account emerging risks that may have a
The risk management process is integrated into our material impact on the Group.
day-to-day activities and is an on-going process involving
all parts of the Group from the Board down to individual A risk management report that highlights key corporate
employees. and business level risks and action plans is reviewed by
the Risk Management Committee half-yearly. A register
The risk identification process takes into account of top corporate risks is presented to the Audit Committee
internal and external factors. These include economic, for reporting to the Board. Significant changes in key
political, social, technological, environmental, laws and risks on a day-to-day basis are handled as they arise and
regulations, Group strategy, as well as our stakeholders’ reported to management.
expectations in these aspects. Risks are grouped into
different categories to facilitate analysis. Each risk Fundamental to achieving our business goals is how we
identified is analysed on the basis of likelihood and can effectively manage existing and emerging risks in
impact in accordance with the risk appetite set by the different economic, social and political environments. A
Board. Action plans are in place to manage risks. The description of these risk factors is shown on pages 57 to
risk assessment process also includes a review of the 59 of this Annual Report. The Group works to continually
control mechanisms for each risk and a rating of the improve its risk management framework in order to keep
effectiveness of each control. The Group compiles a risk pace with the changing business environment.

Company Board
(Through Company
Audit Committee)
Setting the tone at the top
regarding the importance
of risk management and
Reporting & controls
Risk Appetite
Monitoring
Determining the extent of
Monitoring risk management risk that the Group is willing
activities pertaining to to accept in pursuit of its
achievement of objectives strategic and operational
and KPI management objectives

Strategic and
Operational
Objectives
Risk
Identification &
Accountabilities
Analysis
Taking ownership of risks and
Identifying and analysing
controls and achieving strategic
risks that undermine the
and operational objectives
achievement of strategic
according to the Group’s Mitigation, and operational
risk appetite Control and objectives
Assurance Activities
Developing and implementing
control activities to ensure
effective management of
risks

56 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Risk Factors

Risks and uncertainties can affect the Group’s businesses,


financial condition, operating results, or growth prospects
Outbreak of Highly Contagious
leading to a divergence from expected or historical Disease
results. Key risk factors affecting the Group are outlined Due to the continuing COVID-19 pandemic, the
below. In dealing with these, the Group remains in touch countries where our businesses operate are significantly
with its stakeholders with the aim of understanding and affected by various social distancing and lockdown
addressing their concerns. restrictions, bringing about declines in business activities
and consumption. Depending on the severity and extent
These factors are not exhaustive or comprehensive, and of the pandemic, it may have a lingering and adverse
there may be other risks in addition to those shown impact on our operations and overall business outcomes.
below which are not known to the Group or which may
not be material now but could become material in the As the essential service provider of energy generation,
future. transmission and distribution across four continents, we
have continuity plans, procedures and guidelines in place
Global Economy and Macro- to minimise the adverse impact on our core operations

Economic Conditions and services. Precautionary measures, such as social


distancing and working from home, were introduced
The global economic recovery continues despite on-going to help reduce the spread of the virus. The Group
COVID-19 pandemic. However, the threat of the more remains vigilant and is closely monitoring the impact on
infectious variants, rising inflation and commodity prices, the business caused by the COVID-19 pandemic and
supply chain bottlenecks, trade protectionism, and continuously reviews and improves the guidelines and
geopolitical tensions may pose downside risks to the procedures and provides necessary support to meet
world economy and global financial market. changing domestic needs and requirements.

The Group is a global investor in power and utility-related


businesses, with interests in Hong Kong, the United
Currency Markets and Interest
Kingdom, Australia, New Zealand, Mainland China, Rates
Thailand, the Netherlands, Canada and the United States. The Group’s currency exposure mainly arises from its
The industries in which the Group invests are affected by investments outside Hong Kong.
the economic conditions, population growth, currency
environment and interest rate cycles in these countries. The results of the Group are recorded in Hong Kong
Any combination of these factors or continuing adverse dollars, but its subsidiaries, associates and joint
economic conditions in these countries may negatively ventures may receive revenue and incur expenses in
affect the Group’s financial position, potential income, other currencies. Any currency fluctuations that occur
asset value and liabilities. during the process of translation of the results of these
subsidiaries, associates and joint ventures, or during the
To address macro-economic volatility, the Group’s repatriation of earnings, equity investments, or loans,
strategy is to pursue steady earnings growth via carefully may have an impact on the Group’s results.
selected investments in stable and well-regulated
international markets. On this basis, the Group has built The Group is also exposed to interest rate risk on its
up a robust and diverse portfolio of assets that deliver interest-bearing assets and liabilities. Volatility in interest
predictable income streams. rate markets may adversely affect the Group’s financial
conditions and results of operations.

The Group’s treasury policy guides the measures it


undertakes to manage the above exposure. Details of
the Group’s current practices to manage currency and
interest rate risks are in the Financial Review on pages 60
to 61.

Annual Report 2021 57


Risk Factors

Cyber Security Mergers and Acquisitions


The Group’s critical utility and information assets are The Group has undertaken merger and acquisition
exposed to attack, damage, or unauthorised access activities in the past and may continue to look for
in the cyber world, where cyber-attacks have become appropriate acquisition opportunities in the market.
increasingly sophisticated, highly coordinated and
targeted. Failure to protect the Group’s critical assets The Group is exposed to various hidden problems,
from cyber-attacks can result in reputational damage, potential liabilities and unresolved disputes that the
financial loss and disruptions in operations. target company may have. Valuations and analyses of the
target company conducted by the Group and external
Each of the Group’s investments has taken a risk-based professionals are based on numerous assumptions,
and integrated approach to combat cyber security which may become inappropriate over time due to new
risks. They have established their own cyber security facts and circumstances that emerge. The inability to
management framework or processes with the successfully integrate a target business into the Group
deployment of multiple layers of security controls across may prevent synergies from the acquisition being
the IT infrastructure to proactively identify, prevent, achieved, leading to increases in cost, time and resources
detect, respond to and recover from cybersecurity used.
attacks. Resources and development efforts are
focused on people, processes and various cybersecurity In undertaking merger and acquisition activities, the
technologies to ensure the confidentiality, integrity and Group may also be exposed to different and changing
availability of corporate information assets and critical political, social, legal and regulatory requirements at the
infrastructure. local, national and international level, as well as cultural
issues. Some of these merger and acquisition activities
Health and Safety are subject to complex regulatory approval processes in
their respective countries.
The Group’s investments, and the nature of its
operations, expose it to a range of significant health To manage these risks, the Group undertakes a rigorous
and safety risks. During the COVID-19 pandemic, we due diligence and analysis process covering operational,
are placing special attention on the health and safety of financial, legal and risk parameters before undertaking
our employees and endeavour to provide essential and any merger or acquisition activity. The Group seeks
emergency services to customers in need. growth in its areas of expertise within stable, well-
structured international markets that either yield
Major health and safety incidents from operations, stable revenues under government regulation or are
severe weather events, or infectious diseases, resulting safeguarded by long-term power purchase agreements.
in fatalities or injuries to members of the public or to The Group joins the management of new associate/joint
employees, could have significant consequences. These venture companies to guide and oversee performance
may include widespread distress and harm or significant and shares best practice to ensure synergies and
disruption to operations and could result in regulatory maximum efficiencies.
action, legal liability, material costs and damage to the
Group’s reputation.
Infrastructure Market
Each of the Group’s investments has in place a health The infrastructure investments of the Group globally
and safety management system to manage its exposure are subject to local government policy, regulatory
and protect its employees, customers, contractors and pricing and the need to adhere strictly to the licence
the public by conducting its business in a safe and requirements or provisions of relevant legislation. This
socially responsible manner. also applies to the codes and guidelines established by
the relevant regulatory authorities. Failure to comply
with the aforesaid requirements or rules and regulations

58 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

may lead to penalties, or, in extreme circumstances, the storm, lightning strike, flood, landslide, fire, incident
amendment, suspension or cancellation of the relevant of sabotage, terrorist attack, cyberattack, failure of the
licences by the authorities. The Group closely monitors critical information and control systems that operate and
changes in regulations, government policies and markets, protect the electricity and gas networks, or any other
and conducts scenario and sensitivity studies to assess unplanned event could lead to a prolonged and extensive
the impact of such changes. supply outage.

Impact of Local, National and The loss of cash flow resulting from supply interruption,
and the cost of recovery from network damage could
International Regulations be considerable. Such an incident could damage
Local business risks specific to individual countries and customer goodwill and lead to claims and litigation.
cities where the Group’s investments operate could have Substantial increases in the number or duration of
a material impact on its financial conditions, operating supply interruptions could result in increases in the costs
results and growth prospects. In addition, the Group’s associated with the operation of the supply networks.
investments in different parts of the world are subject This could have an adverse effect on the business,
to local legal and regulatory requirements, and their financial condition and efficiency of operations as well as
activities are regulated through applicable operating the reputation of the Group.
licences.
The Group’s investments conduct regular maintenance
With interests around the world, the Group is, and and upgrades of the power and gas supply equipment,
may increasingly become, exposed to different and provide comprehensive training to operational staff,
changing political, social, legal, tax, regulatory, listing undertake reliability reviews, and operate sophisticated
and environmental requirements at the local, national information technology control and asset management
and international level. New policies or measures systems. They also have fully tested contingency plans to
by governments, whether fiscal, tax, regulatory, ensure supply reliability standards are maintained.
environmental, or competition-related, may lead to
additional or unplanned increases in operating expenses Climate Change
and capital expenditures, pose a risk to the returns
delivered by the Group’s investments and may delay The Group is exposed to risks related to extreme
or prevent the commercial operation of an individual weather events, failure of the ecosystem to adapt to
business, with a resulting loss in revenue and profit. climate change and natural catastrophes that can cause
physical threats in specific regions and countries as well
The Group follows a proactive approach to monitoring as economic hazards associated with climate change
changes in government policies and legislation. Each transition. The countries and regions that the Group has
investment maintains high awareness of the need to operations may be vulnerable to water stress, prolonged
comply with applicable laws, regulations and licence periods of drought, heat waves leading to wildfires, or
requirements. It does so through a variety of means physical effects of global warming such as severe tropical
including engaging external advisors, performing regular cyclones and flooding.
audits and complying with both internal and external
regulatory reporting obligations. Adequate risk mitigation The Group has a long-term plan in place to address
measures are in place and are constantly reviewed for climate change risk by decarbonising our generation
enhancement. portfolio to reduce greenhouse gas emissions, help slow
global warming and reduce the physical impacts of
climate change. The Group is embracing the hydrogen
Reliability of Supply economy with business plans already in place in some
The Group’s power and utilities-related investments can of its operations for zero-carbon readiness in 2035, to
be exposed to supply interruptions. A severe earthquake, achieve a carbon-free vision for 2050.

Annual Report 2021 59


Financial Review

Financial Position, Liquidity and Debt Profile by Currency

Financial Resources 2021 100%


The Group’s financial position remained strong.
Capital expenditure and investments were primarily 2020 100%

funded by cash from operations, dividends and other


repatriation from investments. Interest in joint ventures 2019 100%

and associates at the year end were HK$87,135 million


2018 100%
(2020: HK$85,552 million). Total unsecured bank loans
outstanding at the year end were HK$3,433 million
2017 51% 36% 13%
(2020: HK$3,640 million). In addition, the Group had
bank deposits and cash of HK$4,610 million (2020: AUD GBP EUR
HK$5,427 million). The Group did not maintain any
undrawn committed bank facility at the year end (2020:
HK$Nil).
Debt Profile by Maturity

Treasury Policy, Financing 2021 100%

Activities and Debt Structure


2020 100%
The Group manages its financial risks in accordance
with guidelines laid down in its treasury policy, which is 2019 100%

approved by the Board. The treasury policy is designed


to manage the Group’s currency, interest rate and 2018 100%

counterparty risks. Surplus funds, which arise mainly


from dividends and other repatriation from investments, 2017 49% 51%

are generally placed in short-term deposits denominated


Within 1 year Between 2 and 5 years
primarily in United States dollars. The Group aims to
ensure that adequate financial resources are available for
refinancing and business growth, whilst maintaining a
prudent capital structure. Debt Profile by Types of Borrowings

2021 100%
The Group’s financial profile remained strong during
the year. On 28 December 2020, Standard & Poor’s
2020 100%
reaffirmed the “A” long-term issuer credit rating and
the “Stable” outlook of the Company, unchanged since
2019 100%
September 2018.
2018 100%
As at 31 December 2021, the net cash position of the
Group was HK$1,177 million (2020: HK$1,787 million). 2017 100%

Bank Loans
The profile of the Group’s external borrowings as at 31
December 2021, after taking into account interest rate
swaps, is set out in the tables below:

60 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Debt Profile by Interest Rate Structure entering into forward foreign exchange contracts or cross
currency swaps. The fair value of such borrowings at 31
2021 100%
December 2021 was HK$3,433 million (2020: HK$3,640
million). The fair value of forward foreign exchange
2020 100% contracts and cross currency swaps at 31 December
2021 was an asset of HK$1,112 million (2020: liability of
2019 100% HK$78 million). Foreign currency fluctuations will affect
the translated value of the net assets of investments
2018 100% outside Hong Kong and the resultant translation
difference is included in the Group’s reserve account.
2017 100%
Income received from the Group’s investments outside
Fixed Rate Hong Kong which is not denominated in Hong Kong
dollars is, unless otherwise placed as foreign currency
deposits, converted into United States dollars on receipt.
The Group’s policy is to maintain at least a significant
portion of its debt at fixed interest rates. Interest rate risk The contractual notional amounts of derivative financial
is managed by either securing fixed rate borrowings or instruments outstanding at 31 December 2021
by using interest rate derivatives. amounted to HK$34,407 million (2020: HK$35,010
million).
Currency and interest rate risks are actively managed in
accordance with the Group’s treasury policy. Derivative Contingent Liabilities
financial instruments are used primarily for managing
As at 31 December 2021, the Group had given
interest rate and foreign currency risks and not for
guarantees and indemnities totalling HK$363 million
speculative purposes. Treasury transactions are only
(2020: HK$438 million).
executed with counterparties with acceptable credit
ratings to control counterparty risk exposure.
Employees
The Group’s principal foreign currency exposures arise The Group continues its policy of pay-for-performance
from its investments outside Hong Kong. Foreign and the pay levels are monitored to ensure
currency transaction exposure also arises from settlement competitiveness is maintained. The Group’s total
to vendors which is not material and is managed mainly remuneration costs for the year ended 31 December
through purchases in the spot market or utilisation 2021, excluding directors’ emoluments, amounted to
of foreign currency receipts of the Group. Currency HK$24 million (2020: HK$25 million). As at 31 December
exposure arising from investments outside Hong Kong 2021, the Group employed 13 (2020: 13) employees. No
is, where considered appropriate, mitigated by financing share option scheme is in operation.
those investments in local currency borrowings, or by

Annual Report 2021 61


Report of the Directors
(Expressed in Hong Kong dollars)

The Directors have pleasure in submitting their annual


report together with the audited financial statements for
Dividends
the year ended 31 December 2021. An interim dividend of $0.78 (2020: $0.77) per ordinary
share was paid to shareholders on 14 September 2021.

Principal Activities and Business The Directors recommend a final dividend of $2.04
(2020: $2.04) per ordinary share payable on 7 June 2022
Review to shareholders who are registered on the register of
The principal activity of the Company is investment members on 24 May 2022.
holding. The principal activities of the subsidiaries are
investment in energy and utility-related businesses. Share Capital
Particulars of the Company’s principal subsidiaries as at
Details of the share capital of the Company are set out
31 December 2021 are set out in Appendix 2 on pages
in note 24(c) to the financial statements. There was no
130 to 131 of the financial statements. Further discussion
movement during the year.
and analysis of the Group’s activities as required by
Schedule 5 to the Companies Ordinance, including
a discussion of the principal risks and uncertainties Donations
facing the Group and an indication of likely future Charitable and other donations made by the Group
developments in the Group’s business, can be found in during the year amounted to $2 million (2020:
the Chairman’s Statement on pages 4 to 6, CEO’s Report $1 million).
on pages 10 to 29, Risk Management and Risk Factors
on pages 55 to 59 and Financial Review on pages 60 to
61 of this Annual Report.
Summary of Five-Year Financial
Results
A discussion on the Group’s relationships with its The summary of five-year financial results of the Group is
key stakeholders, and environmental policies and set out on page 135.
performance is contained in the Chairman’s Statement
on pages 4 to 6 and CEO’s Report on pages 10 to 29 of
this Annual Report, and the Sustainability Report to be
Major Customers and Suppliers
published at the same time as this Annual Report in April Sales to the largest customer is 25.9% (2020: 24.1%)
2022, whilst its compliance with the relevant laws and of the Group’s total revenue, and sales to five largest
regulations that have a significant impact on the Group customers combined is 79.5% (2020: 75.4%) of the
are included in the Corporate Governance Report on Group’s total revenue for the year ended 31 December
pages 35 to 54 and Risk Factors on pages 57 to 59 of 2021. The five largest customers for the year are the joint
this Annual Report. These discussions form part of this ventures or associates of the Company.
directors’ report.
Purchases from the largest supplier is 38.5% (2020:
Results 33.1%) of the Group’s total purchases of revenue items,
and purchases from the five largest suppliers combined is
The results of the Group for the year ended 31 December 73.4% (2020: 64.5%) of the Group’s total purchases of
2021 and the financial positions of the Group as at that revenue items for the year ended 31 December 2021.
date are set out in the financial statements on pages 69
to 134.

62 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Directors Management Contracts


The Directors in office during the year and up to the During the year the Group shared general office
date of this report were Mr. Fok Kin Ning, Canning, administration and other support services (such as legal,
Mr. Tsai Chao Chung, Charles, Mr. Chan Loi Shun, company secretarial, financial, accounting, treasury,
Mr. Andrew John Hunter, Mr. Ip Yuk-keung, Albert, internal audit, human resources, public affairs services,
Ms. Koh Poh Wah (appointed on 13 May 2021), information technology and administrative services)
Mr. Leung Hong Shun, Alexander (appointed on 13 May provided by HK Electric Investments Limited, an associate
2021), Mr. Li Tzar Kuoi, Victor, Mr. Lui Wai Yu, Albert, of the Company, pursuant to a support services
Mr. Neil Douglas McGee, Mr. Ralph Raymond Shea, agreement which was entered into on 14 January 2014
Mr. Wan Chi Tin and Mr. Wu Ting Yuk, Anthony. and came into effect on 29 January 2014, for an initial
term of three years and thereafter automatic renewal for
The list of directors and alternate directors who have successive periods of three years, subject to compliance
served on the boards of the subsidiaries of the Company with the relevant requirements under the Listing Rules
during the year and up to the date of this report is and termination at any time with six months’ prior
available under “Board of Directors” in “About Us” notice.
section on the Company’s website at
www.powerassets.com. Save as disclosed above, there are no contracts
concerning the management and administration of the
Permitted Indemnity whole or any substantial part of the business of the
Group were entered into or existed during the year.
Pursuant to Article 182(A) of the Company’s articles
of association, every Director shall be entitled to be
indemnified out of the assets of the Company against
Purchase, Sale or Redemption
all losses or liabilities which he may sustain or incur of Shares
in or about the execution of the duties of his office Neither the Company nor any of its subsidiaries
or otherwise in relation thereto, and no Director shall purchased, sold or redeemed any of the Company’s
be liable for any loss, damages or misfortune which issued shares during the year (2020: Nil).
may happen to or be incurred by the Company in the
execution of the duties of his office or in relation thereto.
Arrangement to Purchase
A Directors Liability Insurance is currently in place, and Shares or Debentures
was in place during the year, to protect the Directors of At no time during the year was the Company or any of
the Company and its subsidiaries against potential costs its subsidiaries a party to any arrangement to enable the
and liabilities arising from claims brought against them. Directors to acquire benefits by means of the acquisition
of shares in or debentures of the Company or any other
Directors’ Material Interests body corporate (2020: Nil).
in Significant Transactions,
Arrangements or Contracts Equity-linked Agreements
There were no other transactions, arrangements or No equity-linked agreements were entered into by the
contracts that are significant in relation to the businesses Group during the year or subsisted at the end of the
of the Company and its subsidiaries to which the year.
Company or any of its subsidiary was a party and in
which a Director of the Company or his connected entity
had a material interest, whether directly or indirectly,
subsisted at the end of the year or at any time during the
year.

Annual Report 2021 63


Report of the Directors
(Expressed in Hong Kong dollars)

Disclosure under Rule 13.22 of Chapter 13 of the Listing Rules


In relation to the provision of financial assistance by the Group to certain affiliated companies, a combined statement
of financial position of the affiliated companies as at 31 December 2021 required to be disclosed under Rule 13.22 of
Chapter 13 of the Listing Rules is set out below:

Combined statement of financial position of the affiliated companies


as at 31 December 2021 $ million

Non-current assets 424,130


Current assets 22,554
Current liabilities (47,067)
Non-current liabilities (286,883)

Net assets 112,734

Share capital 35,029


Reserves 77,705

Capital and reserves 112,734

As at 31 December 2021, the consolidated attributable interest of the Group in these affiliated companies amounted
to $55,609 million.

On behalf of the Board

Fok Kin Ning, Canning


Chairman
Hong Kong, 16 March 2022

64 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Independent Auditor’s Report


To the members of Power Assets Holdings Limited
(Incorporated in Hong Kong with limited liability)

Opinion
We have audited the consolidated financial statements of Power Assets Holdings Limited (“the Company”) and
its subsidiaries (“the Group”) set out on pages 69 to 134, which comprise the consolidated statement of financial
position as at 31 December 2021, the consolidated statement of profit or loss, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement
for the year then ended and notes to the consolidated financial statements, including a summary of significant
accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position
of the Group as at 31 December 2021 and of its consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong
Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly prepared in compliance with the
Hong Kong Companies Ordinance.

Basis for opinion


We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report. We are independent of the Group in accordance with
the HKICPA’s Code of Ethics for Professional Accountants (“the Code”) and we have fulfilled our other ethical
responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.

Key audit matters


Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit
of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.

Annual Report 2021 65


Independent Auditor’s Report
To the members of Power Assets Holdings Limited
(Incorporated in Hong Kong with limited liability)

Accounting for interests in associates and joint ventures

Refer to notes 14 and 15 to the consolidated financial statements and the accounting policy 2(e).

The Key Audit Matter How the matter was addressed in our audit

The Group’s associates and joint ventures operate in Our audit procedures to assess the accuracy of the
Hong Kong and outside Hong Kong (including the accounting for interests in associates and joint ventures
United Kingdom, Australia, Thailand, the People’s included the following:
Republic of China, Canada, the Netherlands, New
Zealand and the United States). The Group’s share of • performing an audit of the consolidated financial
profits less losses of associates and joint ventures for statements of the Hong Kong based associate,
the year ended 31 December 2021 and the Group’s HK Electric Investments Limited, in accordance
interests in associates and joint ventures at that date are with the requirements of HKSAs;
significant in the context of the Group’s consolidated
financial statements. • evaluating the independence and competence
of the auditors of associates and joint ventures
The financial information of associates and joint ventures outside Hong Kong;
with operations outside of Hong Kong is prepared in
accordance with the prevailing accounting standards • participating in the risk assessment process
in each relevant jurisdiction which may differ in certain undertaken by the auditors in respect of their
respects from HKFRSs. audits of significant associates and joint ventures
outside Hong Kong;
Converting the financial information of these entities
into HKFRSs for the purpose of equity accounting • understanding the procedures planned to
involves management making a number of manual be performed by the auditors of significant
adjustments some of which are complex in nature. associates and joint ventures outside Hong Kong
to address the significant risks identified and
We identified the accounting for interests in associates considering whether the planned procedures
and joint ventures as a key audit matter because of were appropriate for the purpose of the audit of
the material impact that these entities have on the the Group’s consolidated financial statements;
consolidated financial statements and also because of
the complex nature of certain adjustments made by • obtaining reporting from the component auditors
management which we consider increases the inherent of significant associates and joint ventures outside
risk of error. Hong Kong and discussing with these auditors
matters of significance in their audits which
could impact the Group’s consolidated financial
statements, the work performed thereon and
their conclusions;

• evaluating significant manual adjustments made


in respect of associates and joint ventures outside
Hong Kong to convert their financial information
into HKFRSs by comparing the adjustments to
underlying documentation or by re-performing
the calculations on which the adjustments were
based;

• assessing whether the financial information of


associates and joint ventures outside Hong Kong
after the adjustments made by management
was prepared in accordance with the Group’s
accounting policies.

66 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Information other than the consolidated financial statements and


auditor’s report thereon
The directors are responsible for the other information. The other information comprises all the information included
in the annual report, other than the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the consolidated financial


statements
The directors are responsible for the preparation of the consolidated financial statements that give a true and fair view
in accordance with HKFRSs issued by the HKICPA and the Hong Kong Companies Ordinance and for such internal
control as the directors determine is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.

The directors have delegated the oversight of the Group’s financial reporting process to the Audit Committee.

Auditor’s responsibilities for the audit of the consolidated


financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. This report is made solely to you, as a body, in accordance with section 405 of the Hong Kong Companies
Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person
for the contents of this report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional
scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations or the override of internal control.
Annual Report 2021 67
Independent Auditor’s Report
To the members of Power Assets Holdings Limited
(Incorporated in Hong Kong with limited liability)

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements
regarding independence and communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence and, where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the Audit Committee, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Lee Wai Shu, Wilson.

KPMG
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong

16 March 2022

68 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Consolidated Statement of Profit or Loss


For the year ended 31 December 2021
(Expressed in Hong Kong dollars)

2021 2020
Note $ million $ million

Revenue 4 1,276 1,270


Other net income 5 368 59
Other operating costs 7 (143) (154)

Operating profit 1,501 1,175

Finance costs 8 (125) (86)


Share of profits less losses of joint ventures 3,374 3,782
Share of profits less losses of associates 1,522 1,329

Profit before taxation 9 6,272 6,200

Income tax: 10
Current (54) (12)
Deferred (78) (56)

(132) (68)

Profit for the year attributable to equity


shareholders of the Company 6,140 6,132

Earnings per share


Basic and diluted 12 $2.88 $2.87

The notes on pages 74 to 134 form part of these financial statements. Details of dividends payable to equity
shareholders of the Company attributable to the profit for the year are set out in note 24(b).

Annual Report 2021 69


Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
(Expressed in Hong Kong dollars)

2021 2020
$ million $ million

Profit for the year attributable to equity


shareholders of the Company 6,140 6,132

Other comprehensive income for the year


Items that will not be reclassified to profit or loss
Remeasurement of net defined benefit asset/liability (2) (3)
Share of other comprehensive income of joint ventures and associates 1,681 (1,856)
Income tax relating to items that will not be reclassified to profit or loss (426) 358

1,253 (1,501)

Items that may be reclassified subsequently to profit or loss


Exchange differences on translating operations outside Hong Kong,
including joint ventures and associates (1,414) 3,120
Net investment hedges 1,108 (1,229)
Cost of hedging 47 73
Cash flow hedges:
Net movement of hedging reserve related to hedging instruments
recognised during the current year 219 (115)
Share of other comprehensive income of joint ventures and associates 1,040 (1,631)
Income tax relating to items that may be reclassified subsequently to
profit or loss (373) 401

627 619

1,880 (882)

Total comprehensive income for the year attributable to equity


shareholders of the Company 8,020 5,250

The notes on pages 74 to 134 form part of these financial statements.

70 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Consolidated Statement of Financial Position


At 31 December 2021
(Expressed in Hong Kong dollars)

2021 2020
Note $ million $ million

Non-current assets
Property, plant and equipment and leasehold land 13 20 17
Interest in joint ventures 14 60,234 59,147
Interest in associates 15 26,901 26,405
Other non-current financial assets 16 1,100 1,100
Derivative financial instruments 21 1,034 704
Deferred tax assets 23(b) 45 111
Employee retirement benefit assets 22(a) 7 6
89,341 87,490
Current assets
Trade and other receivables 17 353 635
Bank deposits and cash 18(a) 4,610 5,427
4,963 6,062
Current liabilities
Trade and other payables 19 (3,417) (3,603)
Current portion of bank loans and other interest-bearing
borrowings 20 – (3,642)
Current tax payable 23(a) (137) (161)
(3,554) (7,406)
Net current assets/(liabilities) 1,409 (1,344)
Total assets less current liabilities 90,750 86,146
Non-current liabilities
Bank loans and other interest-bearing borrowings 20 (3,433) –
Lease liabilities (3) –
Derivative financial instruments 21 (267) (1,181)
Deferred tax liabilities 23(b) (134) (57)
Employee retirement benefit liabilities 22(a) (146) (142)
(3,983) (1,380)
Net assets 86,767 84,766

Capital and reserves


Share capital 24(c) 6,610 6,610
Reserves 80,157 78,156
Total equity attributable to equity shareholders of the
Company 86,767 84,766

Approved and authorised for issue by the Board of Directors on 16 March 2022.

Tsai Chao Chung, Charles Chan Loi Shun


Director Director

The notes on pages 74 to 134 form part of these financial statements.

Annual Report 2021 71


Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
(Expressed in Hong Kong dollars)

Attributable to equity shareholders of the Company


Proposed/
Share Exchange Hedging Revenue declared
capital reserve reserve reserve dividend Total
(note (note (note (note (note
$ million 24(c)) 24(d)(i)) 24(d)(ii)) 24(d)(iii)) 24(b))

Balance at 1 January 2020 6,610 (6,118) (2,114) 82,781 4,333 85,492


Changes in equity for 2020:
Profit for the year – – – 6,132 – 6,132
Other comprehensive income – 1,964 (1,345) (1,501) – (882)

Total comprehensive income – 1,964 (1,345) 4,631 – 5,250

Final dividend in respect of the previous


year approved and paid
(see note 24(b)(ii)) – – – – (4,333) (4,333)
Interim dividend paid (see note 24(b)(i)) – – – (1,643) – (1,643)
Proposed final dividend (see note 24(b)(i)) – – – (4,354) 4,354 –

Balance at 31 December 2020 and


1 January 2021 6,610 (4,154) (3,459) 81,415 4,354 84,766
Changes in equity for 2021:
Profit for the year – – – 6,140 – 6,140
Other comprehensive income – (259) 886 1,253 – 1,880

Total comprehensive income – (259) 886 7,393 – 8,020

Final dividend in respect of the previous


year approved and paid
(see note 24(b)(ii)) – – – – (4,354) (4,354)
Interim dividend paid (see note 24(b)(i)) – – – (1,665) – (1,665)
Proposed final dividend (see note 24(b)(i)) – – – (4,354) 4,354 –

Balance at 31 December 2021 6,610 (4,413) (2,573) 82,789 4,354 86,767

The notes on pages 74 to 134 form part of these financial statements.

72 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Consolidated Cash Flow Statement


For the year ended 31 December 2021
(Expressed in Hong Kong dollars)

2021 2020
Note $ million $ million

Operating activities
Cash used in operations 18(b) (112) (33)
Interest paid (153) (91)
Interest received 1,287 1,125
Tax paid for operations outside Hong Kong (91) (43)
Tax refunded for operations outside Hong Kong 8 4

Net cash generated from operating activities 939 962

Investing activities
Payment for the purchase of property, plant and equipment – (2)
Decrease/(increase) in bank deposits with more than
three months to maturity when placed 1,670 (402)
Investment in a joint venture (270) (636)
Investment in an associate (174) –
New loan to a joint venture (204) –
Repayment from a joint venture – 1,158
Net cash received/(paid) on hedging instruments 548 (934)
Distribution from a joint venture – 1,379
Dividends received from joint ventures 2,501 3,073
Dividends received from associates 1,808 1,445
Dividends received from equity securities 52 53

Net cash generated from investing activities 5,931 5,134

Financing activities
Proceeds from bank loans 3,685 –
Repayment of bank loans (3,679) –
Capital element of lease rentals paid 18(d) (3) (3)
Dividends paid to equity shareholders of the Company (6,019) (5,976)

Net cash used in financing activities (6,016) (5,979)

Net increase in cash and cash equivalents 854 117


Cash and cash equivalents at 1 January 3,388 3,239
Effect of foreign exchange rate changes (1) 32

Cash and cash equivalents at 31 December 18(a) 4,241 3,388

The notes on pages 74 to 134 form part of these financial statements.

Annual Report 2021 73


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

1. General information
Power Assets Holdings Limited (“the Company”) is a limited company incorporated and domiciled in Hong
Kong. The address of its registered office is Unit 2005, 20th Floor, Cheung Kong Center, 2 Queen’s Road
Central, Hong Kong.

2. Significant accounting policies


(a) Statement of compliance
These financial statements have been prepared in accordance with all applicable Hong Kong Financial
Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong
Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued
by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally
accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. These financial
statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited. Significant accounting policies adopted by the
Group are set out below.

The HKICPA has issued certain amendments to HKFRSs that are first effective or available for early
adoption for the current accounting period of the Group. Note 3 provides information on any changes
in accounting policies resulting from initial application of these developments to the extent that they are
relevant to the Group for the current accounting period reflected in these financial statements.

(b) Basis of preparation of the financial statements


The consolidated financial statements for the year ended 31 December 2021 comprise the Company
and its subsidiaries (together referred to as “the Group”) and the Group’s interests in joint ventures and
associates.

The measurement basis used in the preparation of the financial statements is the historical cost basis
except as explained in the accounting policies set out below.

The preparation of financial statements in conformity with HKFRSs requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts of
assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and future
periods.

Judgements made by management in the application of HKFRSs that have significant effect on the
financial statements and major sources of estimation uncertainty are discussed in note 30.

74 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

(c) Basis of consolidation


The consolidated financial statements incorporate the financial statements of the Company and all its
subsidiaries made up to 31 December each year, together with the Group’s share of the results for the
year and the net assets at the end of the reporting period of its joint ventures and associates.

(d) Subsidiaries
Subsidiaries are entities (including structured entities) over which the Group has control. The Group
controls an entity when the Group is exposed to, or has the rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity.

Investments in subsidiaries are consolidated into the consolidated financial statements from the date that
control commences until the date that control ceases. Intra-group balances and transactions and any
unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated
financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same
way as unrealised gains but only to the extent that there is no evidence of impairment.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for
as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling
interests within consolidated equity to reflect the change in relative interests, but no adjustments are made
to goodwill and no gain or loss is recognised.

When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that
subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that
former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded
as the fair value on initial recognition of a financial asset (see note 2(g)) or, when appropriate, the cost on
initial recognition of an investment in a joint venture or an associate (see note 2(e)).

In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less
impairment losses (see note 2(l)(ii)).

(e) Joint ventures and associates


A joint venture is an arrangement whereby the Group or the Company and other parties contractually
agree to share control of the arrangement and have rights to the net assets of the arrangement.

An associate is an entity in which the Group or the Company has significant influence, but not control or
joint control, over its management, including participation in the financial and operating policy decisions.

An investment in a joint venture or an associate is accounted for in the consolidated financial statements
under the equity method, unless it is classified as held for sale (or included in a disposal group that is
classified as held for sale). Under the equity method, the investment is initially recorded at cost, adjusted
for any excess of the Group’s share of the acquisition-date fair values of the investee’s identifiable
net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post
acquisition change in the Group’s share of the investee’s net assets and any impairment loss relating to
the investment (see notes 2(f) and 2(l)(ii)). At each reporting date, the Group assesses whether there is any
objective evidence that the investment is impaired. Any excess of the Group’s share of the acquisition-date
fair values of the investee’s identifiable net assets over the cost of the investment, the Group’s share of the
post-acquisition, post-tax results of the investees and impairment losses for the year, if any, are recognised
in the consolidated statement of profit or loss, whereas the Group’s share of the post-acquisition, post-
tax items of the investees’ other comprehensive income is recognised in the consolidated statement of
comprehensive income.

Annual Report 2021 75


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

2. Significant accounting policies (Continued)


(e) Joint ventures and associates (Continued)
When the Group’s share of losses exceeds its interest in a joint venture or an associate, the Group’s
interest is reduced to nil and recognition of further losses is discontinued except to the extent that the
Group has incurred legal or constructive obligations or made payments on behalf of the investee. For this
purpose, the Group’s interest is the carrying amount of the investment under the equity method, together
with the Group’s long-term interests that in substance form part of the Group’s net investment in the joint
venture or the associate (after applying the ECL model to such other long-term interests where applicable
(see note 2(l)(i))).

Unrealised profits and losses resulting from transactions between the Group and its joint ventures and
associates are eliminated to the extent of the Group’s interest in the investee, except where unrealised
losses provide evidence of an impairment of the asset transferred, in which case they are recognised
immediately in profit or loss.

When the Group ceases to have joint control over a joint venture or significant influence over an associate,
it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being
recognised in profit or loss. Any interest retained in a former joint venture at the date when joint control
is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a
financial asset (see note 2(g)) or, when appropriate, the cost on initial recognition of an investment in
an associate. Any interest retained in a former associate at the date when significant influence is lost is
recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial
asset (see note 2(g)).

(f) Goodwill
Goodwill represents the excess of the cost of a business combination or an investment in a joint venture
or an associate over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities
and contingent liabilities.

Any excess of the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and
contingent liabilities over the cost of a business combination or an investment in a joint venture or an
associate is recognised immediately in profit or loss.

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination
is allocated to each cash-generating unit, or groups of cash-generating units, that is expected to benefit
from the synergies of the combination and is tested annually for impairment (see note 2(l)(ii)). In respect
of joint ventures or associates, the carrying amount of goodwill is included in the carrying amount of the
interest in the joint venture or associate and the investment as a whole is tested for impairment whenever
there is objective evidence of impairment (see note 2(l)(ii)).

(g) Investments in equity securities and other financial assets


The Group’s policies for investments in equity securities and other financial assets, apart from investments
in subsidiaries, joint ventures and associates, are set out below.

76 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Investments in equity securities and other financial assets are recognised/derecognised on the date the
Group commits to purchase/sell the investment. The investments are initially stated at fair value plus
directly attributable transaction costs, except for those investments measured at fair value through profit
or loss (“FVPL”) for which transaction costs are recognised directly in profit or loss. For an explanation
of how the Group determines fair value of financial instruments, see note 25(f). These investments are
subsequently accounted for as follows, depending on their classification.

Investments other than equity investments


Non-equity investments held by the Group are classified into one of the following measurement
categories:

– amortised cost, if the investment is held for the collection of contractual cash flows which represent
solely payments of principal and interest. Interest income from the investment is calculated using the
effective interest method.

– fair value through other comprehensive income (“FVOCI”) – (with subsequent reclassification to
profit or loss), if the contractual cash flows of the investment comprise solely payments of principal
and interest and the investment is held within a business model whose objective is achieved by
both the collection of contractual cash flows and sale. Changes in fair value are recognised in other
comprehensive income, except for the recognition in profit or loss of expected credit losses, interest
income (calculated using the effective interest method) and foreign exchange gains and losses.
When the investment is derecognised, the amount accumulated in other comprehensive income is
reclassified from equity to profit or loss.

– FVPL, if the investment does not meet the criteria for being measured at amortised cost or FVOCI (with
subsequent reclassification to profit or loss). Changes in the fair value of the investment (including
interest) are recognised in profit or loss.

Equity investments
An investment in equity securities is classified as at FVPL unless the equity investment is not held for
trading purposes and on initial recognition of the investment the Group makes an irrevocable election
to designate the investment at FVOCI (without subsequent reclassification to profit or loss) such that
subsequent changes in fair value are recognised in other comprehensive income. Such elections are made
on an instrument-by-instrument basis, but may only be made if the investment meets the definition
of equity from the issuer’s perspective. Where such an election is made, the amount accumulated in
other comprehensive income remains in the fair value reserve (without subsequent reclassification to
profit or loss) until the investment is disposed of. At the time of disposal, the amount accumulated in
the investment revaluation reserve (without subsequent reclassification to profit or loss) is transferred to
revenue reserve. Dividends from an investment in equity securities, irrespective of whether classified as
at FVPL or FVOCI (without subsequent reclassification to profit or loss), are recognised in profit or loss as
revenue.

(h) Derivative financial instruments


Derivative financial instruments are recognised initially at fair value. At the end of each reporting period,
the fair value is remeasured. The gain or loss on remeasurement to fair value is recognised immediately
in profit or loss, except where the derivatives qualify for cash flow hedge accounting or hedges of net
investment in a foreign operation, in which case recognition of any resultant gain or loss depends on the
nature of the item being hedged (see note 2(i)).

Annual Report 2021 77


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

2. Significant accounting policies (Continued)


(i) Hedging
The Group designates certain derivatives as hedging instruments to hedge the variability in cash flows
associated with variable rate borrowings (cash flow hedges), or as hedging instruments to hedge the
foreign exchange risk of a net investment in a foreign operation (net investment hedges).

(i) Fair value hedges


Changes in the fair value of derivatives that are designated and qualify as fair value hedges are
recognised in profit or loss, along with any changes in the fair value of the hedged assets or liabilities
that are attributable to the hedged risk.

(ii) Cash flow hedges


Where a derivative financial instrument is designated as a hedge of the variability in cash flows
of a recognised asset or liability, the effective portion of any gain or loss on remeasurement of
the derivative financial instrument to fair value is recognised in other comprehensive income and
accumulated separately in equity in the hedging reserve. The ineffective portion of any gain or loss is
recognised immediately in profit or loss.

If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset,


the associated gain or loss is reclassified from equity to be included in the initial cost of the non-
financial asset.

For all other hedged forecast transactions, the amount accumulated in the hedging reserve is
reclassified from equity to profit or loss in the same period or periods during which the hedged cash
flows affect profit or loss (such as when a forecast sale occurs or interest expense is recognised).

If a hedge no longer meets the criteria for hedge accounting (including when the hedging instrument
expires or is sold, terminated or exercised), then hedge accounting is discontinued prospectively.
When hedge accounting is discontinued, but the hedged forecast transaction is still expected to
occur, the amount that has been accumulated in the hedging reserve remains in equity until the
transaction occurs and it is recognised in accordance with the above policy. If the hedged transaction
is no longer expected to take place, the amount that has been accumulated in the hedging reserve is
reclassified from equity to profit or loss immediately.

(iii) Hedge of net investments in foreign operations


The portion of the gain or loss on remeasurement to fair value of an instrument used to hedge a
net investment in a foreign operation that is determined to be an effective hedge is recognised in
other comprehensive income and accumulated separately in equity in the exchange reserve until the
disposal of the foreign operation, at which time the cumulative gain or loss is reclassified from equity
to profit or loss. The ineffective portion is recognised immediately in profit or loss.

Forward element of forward foreign currency contracts and foreign currency basis spread of financial
instruments may be separated and excluded from the designated hedging instruments. If the Group
excludes the forward element of a forward foreign exchange contract or the foreign currency basis
spread of a financial instrument (the “excluded elements”) from the designation of a hedging
instrument, then the excluded elements may be separately accounted for as a cost of hedging. The
fair value changes of the excluded elements are recognised in a separate component of equity, i.e.
cost of hedging reserve, to the extent that it relates to the hedged items.

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Business Review Corporate Governance Financial Statements Other Information

(j) Property, plant and equipment and leasehold land, depreciation and amortisation
(i) Property, plant and equipment are stated in the consolidated statement of financial position at cost
less accumulated depreciation (see note 2(j)(vi)), amortisation (see note 2(j)(v)) and impairment losses
(see note 2(l)(ii)).

(ii) Where parts of a property, plant and equipment have different useful lives, the cost of the
property, plant and equipment is allocated on a reasonable basis between the parts and each part
is depreciated separately. Subsequent expenditure to replace a component of a property, plant and
equipment that is accounted for separately, or to improve its operational performance is included in
the asset’s carrying amount or recognised as a separate asset as appropriate when it is probable that
future economic benefits in excess of the originally assessed standard of performance of the existing
asset will flow to the Group and the cost of the item can be measured reliably. All other subsequent
expenditure is recognised as an expense in the period in which it is incurred.

(iii) Gains or losses arising from the retirement or disposal of an item of property, plant and equipment
are determined as the difference between the net disposal proceeds and the carrying amount of the
item and are recognised in profit or loss on the date of retirement or disposal.

(iv) Interest in leasehold land held for own use where the Group is the registered owner of the property
interest are stated in the consolidated statement of financial position at cost less accumulated
amortisation (see note 2(j)(v)) and impairment losses (see note 2(l)(ii)).

(v) The cost of acquiring leasehold land is amortised on a straight-line basis over the period of the
unexpired lease term.

(vi) Depreciation is calculated to write off the cost of property, plant and equipment less their estimated
residual value, if any, using the straight-line method over their estimated useful lives as follows:

Years

Interests in buildings situated on leasehold land 60


Furniture and fixtures, sundry plant and equipment 10
Computers 5 to 10
Motor vehicles 5 to 6
Workshop tools and office equipment 5
Properties leased for own use Shorter of the
unexpired term
of lease and the
properties’ estimated
useful life

Immovable assets are amortised on a straight-line basis over the unexpired lease terms of the land on
which the immovable assets are situated if the unexpired lease terms of the land are shorter than the
estimated useful lives of the immovable assets.

Both the useful life of an asset and its residual value, if any, are reviewed annually.

Annual Report 2021 79


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

2. Significant accounting policies (Continued)


(k) Leased assets
At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of
time in exchange for consideration. Control is conveyed where the customer has both the right to direct
the use of the identified asset and to obtain substantially all of the economic benefits from that use.

At the lease commencement date, the Group recognises a right-of-use asset and a lease liability, except
for short-term leases that have a lease term of 12 months or less and leases of low-value assets. When the
Group enters into a lease in respect of a low-value asset, the Group decides whether to capitalise the lease
on a lease-by-lease basis. The lease payments associated with those leases which are not capitalised are
recognised as an expense on a systematic basis over the lease term.

Where the lease is capitalised, the lease liability is initially recognised at the present value of the lease
payments payable over the lease term, discounted using the interest rate implicit in the lease or, if that rate
cannot be readily determined, using a relevant incremental borrowing rate. After initial recognition, the
lease liability is measured at amortised cost and interest expense is calculated using the effective interest
method.

The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which comprises
the initial amount of the lease liability plus any lease payments made at or before the commencement
date, and any initial direct costs incurred. Where applicable, the cost of the right-of-use assets also includes
an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the
site on which it is located, discounted to their present value, less any lease incentives received. The right-
of-use asset is subsequently stated at cost less accumulated depreciation (see note 2(j)(vi)), amortisation (see
note 2(j)(v)) and impairment losses (see note 2(l)(ii)).

The lease liability is remeasured when there is a change in future lease payments arising from a change in
an index or rate, or there is a change in the Group’s estimate of the amount expected to be payable under
a residual value guarantee, or there is a change arising from the reassessment of whether the Group will
be reasonably certain to exercise a purchase, extension or termination option. When the lease liability is
remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use
asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to
zero.

The lease liability is also remeasured when there is a change in the scope of a lease or the consideration for
a lease that is not originally provided for in the lease contract (“lease modification”) that is not accounted
for as a separate lease. In this case the lease liability is remeasured based on the revised lease payments
and lease term using a revised discount rate at the effective date of the modification. The only exceptions
are rent concessions that occurred as a direct consequence of the COVID-19 pandemic and met the
conditions set out in paragraph 46B of HKFRS 16, Leases . In such cases, the Group has advantage of the
practical expedient not to assess whether the rent concessions are lease modifications and recognised the
change in consideration as negative variable lease payments in profit or loss in the period in which the
event taken or condition that triggers the rent concessions occurred.

In the Group’s consolidated statement of financial position, right-of-use asset has been included in
property, plant and equipment and leasehold land and lease liabilities have been included in bank loans
and other interest-bearing borrowings. The current portion of long-term lease liabilities is determined as
the present value of contractual payments that are due to be settled within twelve months after reporting
period.

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Business Review Corporate Governance Financial Statements Other Information

(l) Credit losses and impairment of assets


(i) Credit losses from financial instruments
The Group recognises a loss allowance for expected credit losses (“ECLs”) on the financial assets
measured at amortised cost.

Other financial assets measured at fair value, including equity securities and other financial assets
measured at FVPL and derivative financial assets, are not subject to the ECL assessment.

Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present
value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in
accordance with the contract and the cash flows that the Group expects to receive).

The maximum period considered when estimating ECLs is the maximum contractual period over
which the Group is exposed to credit risk.

In measuring ECLs, the Group takes into account reasonable and supportable information that
is available without undue cost or effort. This includes information about past events, current
conditions and forecasts of future economic conditions.

ECLs are measured on either of the following bases:

– 12-month ECLs: these are losses that are expected to result from possible default events within
the 12 months after the reporting date; and

– lifetime ECLs: these are losses that are expected to result from all possible default events over
the expected lives of the items to which the ECL model applies.

Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs. ECLs
on these financial assets are estimated using a provision matrix based on the Group’s historical credit
loss experience, adjusted for factors that are specific to the debtors and an assessment of both the
current and forecast general economic conditions at the reporting date.

For all other financial instruments, the Group recognises a loss allowance equal to 12-month ECLs
unless there has been a significant increase in credit risk of the financial instrument since initial
recognition, in which case the loss allowance is measured at an amount equal to lifetime ECLs.

Significant increases in credit risk


In assessing whether the credit risk of a financial instrument has increased significantly since initial
recognition, the Group compares the risk of default occurring on the financial instrument assessed at
the reporting date with that assessed at the date of initial recognition. In making this reassessment,
the Group considers that a default event occurs when (i) the borrower is unlikely to pay its credit
obligations to the Group in full, without recourse by the Group to actions such as realising security
(if any is held); or (ii) the financial asset is 90 days past due. The Group considers both quantitative
and qualitative information that is reasonable and supportable, including historical experience and
forward-looking information that is available without undue cost or effort.

Annual Report 2021 81


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

2. Significant accounting policies (Continued)


(l) Credit losses and impairment of assets (Continued)
(i) Credit losses from financial instruments (Continued)
Significant increases in credit risk (Continued)
In particular, the following information is taken into account when assessing whether credit risk has
increased significantly since initial recognition:

– failure to make payments of principal or interest on their contractually due dates;

– an actual or expected significant deterioration in a financial instrument’s external or internal


credit rating (if available);

– an actual or expected significant deterioration in the operating results of the debtor; and

– existing or forecast changes in the technological, market, economic or legal environment that
have a significant adverse effect on the debtor’s ability to meet its obligation to the Group.

Depending on the nature of the financial instruments, the assessment of a significant increase in
credit risk is performed on either an individual basis or a collective basis. When the assessment is
performed on a collective basis, the financial instruments are grouped based on shared credit risk
characteristics, such as past due status and credit risk ratings.

ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s credit risk
since initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss
in profit or loss. The Group recognises an impairment gain or loss for all financial instruments with
a corresponding adjustment to their carrying amount through a loss allowance account, except for
investments in debt securities that are measured at FVOCI (with subsequent reclassification to profit
or loss), for which the loss allowance is recognised in other comprehensive income and accumulated
in the fair value reserve (with subsequent reclassification to profit or loss).

Basis of calculation of interest income


Interest income recognised is calculated based on the gross carrying amount of the financial asset
unless the financial asset is credit-impaired, in which case interest income is calculated based on the
amortised cost (i.e. the gross carrying amount less loss allowance) of the financial asset.

At each reporting date, the Group assesses whether a financial asset is credit-impaired. A financial
asset is credit-impaired when one or more events that have a detrimental impact on the estimated
future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable events:

– significant financial difficulties of the debtor;

– a breach of contract, such as a default or delinquency in interest or principal payments;

– it becoming probable that the borrower will enter into bankruptcy or other financial
reorganisation;

82 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

– significant changes in the technological, market, economic or legal environment that have an
adverse effect on the debtor; or

– the disappearance of an active market for a security because of financial difficulties of the
issuer.

Write-off policy
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent
that there is no realistic prospect of recovery. This is generally the case when the Group determines
that the debtor does not have assets or sources of income that could generate sufficient cash flows
to repay the amounts subject to the write-off.

Subsequent recoveries of an asset that was previously written off are recognised as a reversal of
impairment in profit or loss in the period in which the recovery occurs.

(ii) Impairment of other non-current assets


Internal and external sources of information are reviewed at the end of each reporting period to
identify indications that the following assets may be impaired or, except in the case of goodwill, an
impairment loss previously recognised no longer exists or may have decreased:

– property, plant and equipment;

– goodwill; and

– investments in subsidiaries, joint ventures and associates in the Company’s statement of


financial position.

If any such indication exists, the asset’s recoverable amount is estimated. In addition, for goodwill,
the recoverable amount is estimated annually whether or not there is any indication of impairment.

– Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs of disposal and
value in use. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. Where an asset does not generate
cash inflows largely independent of those from other assets, the recoverable amount is
determined for the smallest group of assets that generates cash inflows independently (i.e. a
cash-generating unit). A portion of the carrying amount of a corporate asset is allocated to an
individual cash-generating unit if the allocation can be done on a reasonable and consistent
basis, or to the smallest group of cash-generating units if otherwise.

– Recognition of impairment losses

An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the
cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses
recognised in respect of cash-generating units are allocated first to reduce the carrying amount
of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce
the carrying amount of the other assets in the unit (or group of units) on a pro rata basis,
except that the carrying value of an asset will not be reduced below its individual fair value less
costs of disposal (if measurable) or value in use (if determinable).

Annual Report 2021 83


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

2. Significant accounting policies (Continued)


(l) Credit losses and impairment of assets (Continued)
(ii) Impairment of other non-current assets (Continued)
– Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a
favourable change in the estimates used to determine the recoverable amount. An impairment
loss in respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been
determined had no impairment loss been recognised in prior years. Reversals of impairment
losses are credited to profit or loss in the year in which the reversals are recognised.

(iii) Interim financial reporting and impairment


Under the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited,
the Group is required to prepare an interim financial report in compliance with HKAS 34, Interim
financial reporting , in respect of the first six months of the financial year. At the end of the interim
period, the Group applies the same impairment testing, recognition, and reversal criteria as it would
at the end of the financial year (see notes 2(l)(i) and 2(l)(ii)).

Impairment losses recognised in an interim period in respect of goodwill are not reversed in a
subsequent period. This is the case even if no loss, or a smaller loss, would have been recognised
had the impairment been assessed only at the end of the financial year to which the interim period
relates.

(m) Trade and other receivables


A receivable is recognised when the Group has an unconditional right to receive consideration. A right
to receive consideration is unconditional if only the passage of time is required before payment of that
consideration is due.

Receivables are stated at amortised cost using the effective interest method and including allowance for
credit losses (see note 2(l)(i)).

(n) Interest-bearing borrowings


Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs.
Subsequent to initial recognition, with the exception of fixed interest borrowings that are designated as
hedged items in fair value hedges (see note 2(i)(i)), interest-bearing borrowings are stated at amortised
cost with any difference between the amount initially recognised and redemption value being recognised
in profit or loss over the period of the borrowings, together with any interest and fees payable, using the
effective interest method.

For interest-bearing borrowings that are designated as hedged items in fair value hedges, subsequent to
initial recognition, the interest-bearing borrowings are stated at fair value with the fair value changes that
are attributable to the hedged risk recognised in profit or loss (see note 2(i)(i)).

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(o) Trade and other payables


Trade and other payables are initially recognised at fair value. Subsequent to initial recognition, trade and
other payables are stated at amortised cost unless the effect of discounting would be immaterial, in which
case they are stated at invoice amounts.

(p) Cash and cash equivalents


Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other
financial institutions, and short-term, highly liquid investments that are readily convertible into known
amounts of cash and which are subject to an insignificant risk of changes in value, having been within
three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are also included as a component of cash and cash
equivalents for the purpose of the consolidated cash flow statement.

(q) Employee benefits


(i) Short-term employee benefits
Salaries, annual bonuses, paid annual leave and the cost of non-monetary benefits are accrued in the
year in which the associated services are rendered by employees. Where payment or settlement is
deferred and the effect would be material, these amounts are stated at their present values.

(ii) Defined benefit retirement scheme obligations


The Group’s net obligation in respect of defined benefit retirement schemes is calculated separately
for each scheme by estimating the amount of future benefit that employees have earned in return
for their service in the current and prior periods; that benefit is discounted to determine the present
value and the fair value of any scheme assets is deducted. The discount rate is the yield at the end
of the reporting period on Hong Kong Special Administrative Region Government Exchange Fund
Notes that have maturity dates approximating the terms of the Group’s obligations. The calculation
is performed by a qualified actuary using the “Projected Unit Credit Method”.

Where the calculation of the Group’s net obligation results in a negative amount, the asset
recognised is limited to the present value of any future refunds from or reductions in future
contributions to the defined benefit retirement scheme.

Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling
(if applicable) and the return on plan assets (excluding interest), is reflected immediately in the
statement of financial position with a charge or credit recognised in other comprehensive income
in the period in which they occur. Remeasurement recognised in other comprehensive income is
reflected immediately in the revenue reserve and will not be reclassified to profit or loss.

The Group determines the net interest expense or income for the period on the net defined benefit
liability or asset by applying the discount rate used to measure the defined benefit obligation at the
beginning of the annual period to the net defined benefit liability or asset, taking into account any
changes in the net defined liabilities or assets during the year as a result of contributions and benefit
payments.

(iii) Contributions to defined contribution retirement schemes


Obligations for contributions to defined contribution retirement schemes, including contributions
payable under the Hong Kong Mandatory Provident Fund Schemes Ordinance, are recognised as an
expense in profit or loss as incurred.

Annual Report 2021 85


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

2. Significant accounting policies (Continued)


(r) Income tax
Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current
tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent
that they relate to items recognised in other comprehensive income, in which case the relevant amounts
of tax are recognised in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of
previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively,
being the differences between the carrying amounts of assets and liabilities for financial reporting
purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

All deferred tax liabilities and all deferred tax assets, to the extent that it is probable that future taxable
profits will be available against which the asset can be utilised, are recognised.

The amount of deferred tax recognised is measured based on the expected manner of realisation or
settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively
enacted at the end of the reporting period. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced
to the extent that it is no longer probable that sufficient taxable profits will be available to allow the
related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable
that sufficient taxable profits will be available.

Current tax balances and deferred tax balances, and movements therein, are presented separately from
each other and are not offset.

(s) Provisions and contingent liabilities


Provisions are recognised for other liabilities of uncertain timing or amount when the Group or the
Company has a legal or constructive obligation arising as a result of a past event, it is probable that an
outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made.
Where the time value of money is material, provisions are stated at the present value of the expenditure
expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot
be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow
of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the
occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities
unless the probability of outflow of economic benefits is remote.

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(t) Revenue recognition


Dividend income from unlisted investments is recognised when the shareholders’ right to receive payment
is established.

Interest income is recognised as it accrues using the effective interest method. For financial assets
measured at amortised cost that are not credit-impaired, the effective interest rate is applied to the gross
carrying amount of the asset. For credit-impaired financial assets, the effective interest rate is applied to
the amortised cost (i.e. gross carrying amount net of loss allowance) of the asset (see note 2(l)(i)).

(u) Translation of foreign currencies


Foreign currency transactions during the year are translated into Hong Kong dollars at the foreign
exchange rates ruling at the transaction dates, or at contract rates if foreign currencies are hedged by
forward foreign exchange contracts. Monetary assets and liabilities denominated in foreign currencies are
translated into Hong Kong dollars at the foreign exchange rates ruling at the end of the reporting period.

Exchange gains and losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are
translated using the foreign exchange rates ruling at the transaction dates. The transaction date is the date
on which the Group initially recognises such non-monetary assets or liabilities. Non-monetary assets and
liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign
exchange rates ruling at the dates the fair value was determined.

The results of operations outside Hong Kong are translated into Hong Kong dollars at the average
exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Statement
of financial position items are translated into Hong Kong dollars at the closing foreign exchange rates at
the end of the reporting period. The resulting exchange differences are recognised in other comprehensive
income and accumulated separately in equity in the exchange reserve.

On disposal of an operation outside Hong Kong, the cumulative amount of the exchange differences
relating to that operation is reclassified from equity to profit or loss when the profit or loss on disposal is
recognised.

(v) Borrowing costs


Borrowing costs that are directly attributable to the acquisition, construction or production of an asset
which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised
as part of the cost of that asset. Other borrowing costs are expensed in the period in which they are
incurred.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when
expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are
necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs
is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its
intended use or sale are interrupted or complete.

Annual Report 2021 87


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

2. Significant accounting policies (Continued)


(w) Related parties
(i) A person or a close member of that person’s family is related to the Group if that person:

(a) has control or joint control over the Group;

(b) has significant influence over the Group; or

(c) is a member of the key management personnel of the Group.

(ii) An entity is related to the Group if any of the following conditions apply:

(a) The entity and the Group are members of the same group (which means that each parent,
subsidiary and fellow subsidiary is related to the others).

(b) One entity is a joint venture or an associate of the other entity (or a joint venture or an
associate of a member of a group of which the other entity is a member).

(c) Both entities are joint ventures of the same third party.

(d) One entity is a joint venture of a third entity and the other entity is an associate of the third
entity.

(e) The entity is a post-employment benefit plan for the benefit of employees of either the Group
or an entity related to the Group.

(f) The entity is controlled or jointly controlled by a person identified in note 2(w)(i).

(g) A person identified in note 2(w)(i)(a) has significant influence over the entity or is a member of
the key management personnel of the entity (or of a parent of the entity).

(h) The entity, or any member of a group of which it is a part, provides key management personnel
services to the Group.

Close members of the family of a person are those family members who may be expected to influence, or
be influenced by, that person in their dealings with the entity.

(x) Segment reporting


Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker of the Group for the purposes of resource allocation and performance
assessment. Accordingly, the Group’s aggregated operating segments are based on their principal activities
and geographical regions to present the reportable segments.

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3. Changes in accounting policies


The HKICPA has issued several amendments to HKFRSs that are first effective for the current accounting period
of the Group. Of these, the following developments are relevant to the Group’s financial statements:

• Amendments to HKFRS 9, HKAS 39, HKFRS 7 and HKFRS 16, Interest rate benchmark reform – phase 2
• Amendments to HKFRS 16, COVID-19-related rent concessions beyond 30 June 2021

None of these developments have had a material effect on how the Group’s results and financial position for
the current or prior periods have been prepared or presented.

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting
period.

4. Revenue
The principal activity of the Group is investment in energy and utility-related businesses. Group revenue
represents interest income from loans granted to joint ventures and associates, dividends from other financial
assets and engineering and consulting services fees.

2021 2020
$ million $ million

Interest income 1,224 1,217


Dividend income 52 53
1,276 1,270

Share of revenue of joint ventures 18,322 16,528

5. Other net income


2021 2020
$ million $ million

Interest income on financial assets measured at amortised cost 12 56


Net exchange gain/(loss) 3 (190)
Sundry income 353 193
368 59

Annual Report 2021 89


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

6. Segment information
The Group has aggregated operating segments with similar characteristics to present the following reportable
segments.

– Investment in HKEI: this segment invests in generation and supply of electricity business in Hong Kong.

– Investments: this segment invests in energy and utility-related businesses and is segregated further into
three reportable segments (United Kingdom, Australia and Others) on a geographical basis.

– All other activities: this segment represents other activities carried out by the Group.

The basis of accounting for the Group’s segment information is the same as that for the Group’s financial
statements. The financial information about the Group’s segments is set out in Appendix 1 on pages 128 to
129.

7. Other operating costs


2021 2020
$ million $ million

Staff costs 29 30
Depreciation 3 4
Cost of services and investment related expenses 111 120
143 154

8. Finance costs
2021 2020
$ million $ million

Interest on borrowings and other finance costs 125 86

9. Profit before taxation


2021 2020
$ million $ million

Profit before taxation is arrived at after charging:


Auditors’ remuneration
– audit and audit related work
– KPMG 3 3
– other auditors 1 1
– non-audit work
– KPMG 2 1
– other auditors 1 4

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10. Income tax in the consolidated statement of profit or loss


(a) Taxation in the consolidated statement of profit or loss represents:
2021 2020
$ million $ million

Current tax – operations outside Hong Kong


Provision for the year 54 12
Deferred tax (see note 23(b))
Origination and reversal of temporary differences 78 56
132 68

No provision for Hong Kong Profits Tax has been made in the financial statements as the Group did not
have any assessable profits during the current and preceding years in Hong Kong.

Taxation for operations outside Hong Kong is charged at the appropriate current rates of taxation ruling in
the relevant countries.

(b) Reconciliation between tax expense and accounting profit at applicable tax rates:
2021 2020
$ million $ million

Profit before taxation 6,272 6,200


Less: Share of profits less losses of joint ventures (3,374) (3,782)
Share of profits less losses of associates (1,522) (1,329)
1,376 1,089

Notional tax on profit before taxation, calculated at the rates


applicable to profits in the tax jurisdictions concerned 207 111
Tax effect of non-deductible expenses 10 45
Tax effect of non-taxable income (94) (98)
Tax effect of unused tax losses not recognised 9 10
Actual tax expense 132 68

Annual Report 2021 91


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

11. Directors’ emoluments and senior management remuneration


Directors’ emoluments comprise payments to Directors by the Company and its subsidiaries in connection with
the management of the affairs of the Company and its subsidiaries. The emoluments of each of the Directors of
the Company are as follows:

Salaries,
allowances Retirement 2021 2020
and other scheme Total Total
Fees benefits (18)
contributions Bonuses emoluments emoluments
Name of Directors $ million $ million $ million $ million $ million $ million

Executive Directors
Fok Kin Ning, Canning (3) (12)
Chairman 0.12 – – – 0.12 0.12
Tsai Chao Chung, Charles (5) (13)
Chief Executive Officer 0.09 3.52 0.51 0.85 4.97 4.90
Chan Loi Shun (5) (14) (17) 0.09 5.50 – – 5.59 5.57
Andrew John Hunter 0.07 0.10 – – 0.17 0.18
Neil Douglas McGee 0.07 – – – 0.07 0.07
Wan Chi Tin (15) 0.07 – – – 0.07 0.07
Non-executive Directors
Victor T K Li (4) (16) 0.09 – – – 0.09 0.07
Ip Yuk-keung, Albert (1) (2) (4) (5) 0.18 – – – 0.18 0.14
Koh Poh Wah (1) (2) (11) 0.09 – – – 0.09 –
Leung Hong Shun, Alexander (10) 0.04 – – – 0.04 –
Lui Wai Yu, Albert (1) (3) (7) (9) 0.09 – – – 0.09 0.07
Ralph Raymond Shea (1) (2) (3) (4) 0.18 – – – 0.18 0.16
Wong Chung Hin (1) (2) (3) (6) – – – – – 0.03
Wu Ting Yuk, Anthony (1) (2) (8) 0.14 – – – 0.14 0.13
Total for the year 2021 1.32 9.12 0.51 0.85 11.80

Total for the year 2020 1.07 9.10 0.51 0.83 11.51

Notes:

(1) Independent Non-executive Director

(2) Member of the Audit Committee

(3) Member of the Remuneration Committee

(4) Member of the Nomination Committee (appointed with effect from 1 December 2020)

(5) Member of the Sustainability Committee (appointed with effect from 1 December 2020)

(6) Resigned as an Independent Non-executive Director and ceased to be a member of the Audit Committee and the
Remuneration Committee with effect from 19 March 2020.

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(7) Appointed as an Independent Non-executive Director with effect from 19 March 2020.

(8) Appointed as a member of the Audit Committee with effect from 19 March 2020.

(9) Appointed as a member of the Remuneration Committee with effect from 19 March 2020.

(10) Appointed as a Non-executive Director with effect from 13 May 2021.

(11) Appointed as an independent Non-executive Director and a member of the Audit Committee with effect from 13 May 2021.

(12) During the year, Mr. Fok Kin Ning, Canning received director’s emoluments of $120,000 from HK Electric Investments Limited,
which is an associate of the Group. The director’s emoluments received were paid back to the Company.

(13) During the year, Mr. Tsai Chao Chung, Charles received director’s emoluments of THB434,945 from Ratchaburi Power
Company Limited, which is an associate of the Group. The director’s emoluments received were paid back to the Company.

(14) During the year, Mr. Chan Loi Shun received director’s emoluments of THB434,945 from Ratchaburi Power Company Limited
and $3,378,100 from HK Electric Investments Limited, which are associates of the Group. The director’s emoluments received
were paid back to the Company.

(15) During the year, Mr. Wan Chi Tin received director’s emoluments of $90,000 from HK Electric Investments Limited, which is an
associate of the Group. The director’s emoluments received were paid back to the Company.

(16) During the year, Mr. Victor T K Li received director’s emoluments of $90,000 from HK Electric Investments Limited, which is an
associate of the Group. The director’s emoluments received were paid back to the Company.

(17) During the year, Mr. Chan Loi Shun received director’s emoluments of $5,592,100 from the Company. The director’s
emoluments received were paid back to CK Infrastructure Holdings Limited, a substantial shareholder of the Company.

(18) For Directors who are employees of the Group, other benefits also include insurance and medical benefits entitled by the
employees of the Group.

Annual Report 2021 93


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

11. Directors’ emoluments and senior management remuneration


(Continued)
The five highest paid individuals of the Group included two directors (2020: two) whose total emoluments are
shown above. The remuneration of the other three individuals (2020: three) who comprises the five highest paid
individuals of the Group is set out below:

2021 2020
$ million $ million

Salary and other benefits 9.7 9.3


Retirement scheme contributions 0.4 0.4
10.1 9.7

The total remuneration of senior management, excluding directors, is within the following bands:

2021 2020
Number Number

$1,500,001 – $2,000,000 2 3
$2,000,001 – $2,500,000 1 –
$3,500,001 – $4,000,000 1 2
$4,000,001 – $4,500,000 1 –

The remuneration of directors and senior management is as follows:

2021 2020
$ million $ million

Short-term employee benefits 24 23


Post-employment benefits 1 1
25 24

At 31 December 2021 and 2020, there was no amount due from directors and senior management.

12. Earnings per share


The calculation of earnings per share is based on the profit attributable to ordinary equity shareholders of the
Company of $6,140 million (2020: $6,132 million) and 2,134,261,654 ordinary shares (2020: 2,134,261,654
ordinary shares) in issue throughout the year.

There were no dilutive potential ordinary shares in existence during the years ended 31 December 2021 and
2020.

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13. Property, plant and equipment and leasehold land


Ownership Ownership
interests in Plant, interests in Other
buildings machinery leasehold properties
held for and land held leased for
$ million own use equipment Sub-total for own use own use Total
Cost:
At 1 January 2020 1 4 5 13 7 25
Additions – 2 2 – – 2
At 31 December 2020 and
1 January 2021 1 6 7 13 7 27
Additions – – – – 6 6
Disposal – – – – (7) (7)
At 31 December 2021 1 6 7 13 6 26
Accumulated amortisation and
depreciation:
At 1 January 2020 – 3 3 1 2 6
Charge for the year – 1 1 – 3 4
At 31 December 2020 and
1 January 2021 – 4 4 1 5 10
Written back on disposal – – – – (7) (7)
Charge for the year – – – – 3 3
At 31 December 2021 – 4 4 1 1 6
Net book value:
At 31 December 2021 1 2 3 12 5 20
At 31 December 2020 1 2 3 12 2 17

14. Interest in joint ventures


2021 2020
$ million $ million
Share of net assets of unlisted joint ventures 47,811 46,531
Loans to unlisted joint ventures (see note below) 12,184 12,329
Amounts due from unlisted joint ventures (see note below) 239 287
60,234 59,147

Share of total assets of unlisted joint ventures 141,144 141,570

The loans to unlisted joint ventures are unsecured, interest bearing at rates ranging from 2.8% per annum to
11.0% per annum (2020: 3.1% per annum to 11.0% per annum) and have no fixed repayment terms.

Included in the loans to unlisted joint ventures are subordinated loans totalling $8,707 million (2020: $8,814
million). The rights in respect of these loans are subordinated to the rights of any other lenders to the joint
ventures.

The amounts due from unlisted joint ventures are unsecured, interest free and have no fixed repayment terms.

All the Group’s joint ventures are unlisted corporate entities for which a quoted market price is not available.

Details of the Group’s material joint ventures at the end of the reporting period are set out in Appendix 3 on
pages 132 to 133.

Annual Report 2021 95


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

14. Interest in joint ventures (Continued)


(a) Summarised financial information of material joint ventures
Summarised financial information in respect of the Group’s material joint ventures is set out below.
The summarised financial information below represents amounts shown in the joint ventures’ financial
statements prepared in accordance with HKFRSs adjusted by the Group for equity accounting purposes
and before adjustments for the Group’s effective share.

UK Power Australian Gas Husky Northern Gas Wales & West Gas
Networks CK William Networks Midstream L.P. Networks Networks
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
$ million $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million

Current assets 4,945 6,915 4,563 4,419 627 336 945 658 3,594 4,733 3,101 5,704
Non-current assets 147,303 142,725 92,637 96,895 34,485 35,366 18,835 18,726 34,039 33,208 41,392 40,995
Current liabilities (9,508) (15,874) (15,175) (5,214) (1,749) (3,651) (409) (183) (4,670) (7,040) (1,352) (2,412)
Non-current liabilities (81,947) (75,651) (59,711) (74,576) (19,895) (18,475) (7,339) (7,157) (23,913) (21,099) (39,573) (42,539)

The above amounts of assets and liabilities include the following:

UK Power Australian Gas Husky Northern Gas Wales & West Gas
Networks CK William Networks Midstream L.P. Networks Networks
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
$ million $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million

Cash and cash equivalents 1,831 3,081 1,616 1,828 34 42 398 182 142 220 2,419 4,676
Current financial liabilities
(excluding trade and other
payables and provisions) (986) (8,310) (10,955) (1,890) (1,504) (2,552) – – (208) (998) – –
Non-current financial liabilities
(excluding trade and other
payables and provisions) (61,835) (56,522) (51,328) (65,729) (16,878) (15,666) (6,866) (6,619) (18,526) (16,892) (37,308) (37,064)

UK Power Australian Gas Husky Northern Gas Wales & West Gas
Networks CK William Networks Midstream L.P. Networks Networks
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
$ million $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million

Revenue 17,848 16,118 10,490 10,783 3,789 3,461 2,355 1,831 4,937 4,462 4,833 4,529

Profit/(loss) from continuing


operations 3,492 4,129 1,042 947 1,086 955 1,099 974 (138) 662 2,325 (461)
Other comprehensive income
for the year 1,405 (2,872) 1,004 (378) 613 (253) 89 (114) 320 (735) (340) (763)
Total comprehensive income
for the year 4,897 1,257 2,046 569 1,699 702 1,188 860 182 (73) 1,985 (1,224)

Dividends received from the


joint ventures during
the year 615 969 97 27 299 303 815 734 350 320 – –

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The above profit or loss for the year includes the following:

UK Power Australian Gas Husky Northern Gas Wales & West Gas
Networks CK William Networks Midstream L.P. Networks Networks
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
$ million $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million

Depreciation and amortisation (3,188) (2,849) (2,772) (2,851) (338) (631) (817) (616) (929) (855) (797) (753)
Interest income 274 268 9 18 1 1 5 6 – – 8 29
Interest expense (2,868) (2,446) (2,092) (2,261) (663) (679) (372) (289) (692) (622) (1,750) (1,882)
Income tax (expense)/credit (3,146) (2,250) (528) (575) (550) (483) – 1 (1,444) (630) 2,102 (538)

Reconciliation of the above summarised financial information to the carrying amount of the interest in the
joint ventures recognised in the consolidated financial statements:

UK Power Australian Gas Husky Northern Gas Wales & West Gas
Networks CK William Networks Midstream L.P. Networks Networks
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
$ million $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million

Net assets of the joint ventures 60,793 58,115 22,314 21,524 13,468 13,576 12,032 12,044 9,050 9,802 3,568 1,748
Group’s effective interest 40.0% 40.0% 20.0% 20.0% 27.51% 27.51% 48.75% 48.75% 41.29% 41.29% 36.0% 36.0%
Group’s share of net assets of
the joint ventures 24,317 23,246 4,463 4,305 3,706 3,735 5,866 5,871 3,737 4,047 1,284 629
Consolidation adjustments 68 67 290 343 – – 294 246 – – 256 259
Carrying amount of the
Group’s interest in the
joint ventures 24,385 23,313 4,753 4,648 3,706 3,735 6,160 6,117 3,737 4,047 1,540 888

(b) Aggregate information of joint ventures that are not individually material

2021 2020
$ million $ million

The Group’s share of net assets 3,530 3,783

The Group’s share of profit from continuing operations 128 1,057


The Group’s share of other comprehensive income 6 (270)
The Group’s share of total comprehensive income 134 787

Annual Report 2021 97


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

15. Interest in associates


2021 2020
$ million $ million

Share of net assets


– Listed associate 16,376 16,160
– Unlisted associates 7,016 6,508
23,392 22,668
Loans to unlisted associates (see note below) 3,456 3,642
Amounts due from associates (see note below) 53 95
26,901 26,405

The market value (level 1 fair value measurement (see note 25(f))) of above listed associate, HKEI, at
31 December 2021 is $22,560 million (2020: $22,501 million). All the Group’s other associates are unlisted
corporate entities for which a quoted market price is not available.

The loans to unlisted associates are unsecured, interest bearing at rates ranging from 10.9% per annum to
11.2% per annum (2020: 10.9% per annum to 11.2% per annum) and have no fixed repayment terms.

The loans to unlisted associates are subordinated loans. The rights in respect of these loans are subordinated to
the rights of any other lenders to the associates.

The amounts due from associates are unsecured, interest free and have no fixed repayment terms.

Details of each of the Group’s material associates at the end of the reporting period are set out in Appendix 4
on page 134.

(a) Summarised financial information of material associates


Summarised financial information in respect of each of the Group’s material associates is set out below.
The summarised financial information below represents amounts shown in each associate’s financial
statements prepared in accordance with HKFRSs adjusted by the Group for equity accounting purposes
and before adjustments for Group’s effective share.

SA Power Victoria Power


HKEI Networks Networks
2021 2020 2021 2020 2021 2020
$ million $ million $ million $ million $ million $ million

Current assets 2,347 1,729 2,684 1,785 2,327 2,871


Non-current assets 112,481 109,838 41,632 43,397 54,495 54,940
Current liabilities (5,817) (8,341) (7,953) (5,298) (6,515) (11,263)
Non-current liabilities (60,618) (55,483) (32,232) (36,958) (40,726) (37,520)

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SA Power Victoria Power


HKEI Networks Networks
2021 2020 2021 2020 2021 2020
$ million $ million $ million $ million $ million $ million

Revenue 11,344 10,389 6,918 6,367 8,311 8,182

Profit from continuing


operations 2,933 2,732 362 491 1,318 1,529
Other comprehensive
income for the year 546 (671) 1,253 (380) 1,296 (587)
Total comprehensive
income for the year 3,479 2,061 1,615 111 2,614 942

Dividends received from


the associates during
the year 945 945 55 58 458 284

Reconciliation of the above summarised financial information to the carrying amount of the interest in the
associates recognised in the consolidated financial statements:

SA Power Victoria Power


HKEI Networks Networks
2021 2020 2021 2020 2021 2020
$ million $ million $ million $ million $ million $ million

Net assets of the associates 48,393 47,743 4,131 2,926 9,581 9,028

Group’s effective interest 33.37% 33.37% 27.93% 27.93% 27.93% 27.93%


Group’s share of net assets
of the associates 16,150 15,934 1,154 817 2,675 2,520
Consolidation adjustments 226 226 – – – –
Carrying amount of the
Group’s interest in the
associates 16,376 16,160 1,154 817 2,675 2,520

(b) Aggregate information of associates that are not individually material


2021 2020
$ million $ million

The Group’s share of net assets 3,187 3,171

The Group’s share of profit/(loss) from continuing operations 74 (147)


The Group’s share of other comprehensive income 103 (78)
The Group’s share of total comprehensive income 177 (225)

Annual Report 2021 99


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

16. Other non-current financial assets


2021 2020
$ million $ million

Financial assets measured at FVPL


– unlisted equity securities 303 303
– other investments 797 797
1,100 1,100

17. Trade and other receivables


2021 2020
$ million $ million

Interest and other receivables 128 406


Derivative financial instruments (see note 21) 223 226
Deposits and prepayments 2 3
353 635

Trade with customers is carried out on credit and invoices are normally due within one month after issued. All
of the trade and other receivables are expected to be recovered within one year. Further details on the Group’s
credit policy and credit risk arising from trade debtors are set out in note 25(a).

18. Bank deposits and cash and other cash flow information
(a) Bank deposits and cash comprise:
2021 2020
$ million $ million

Deposits with banks and other financial institutions with


3 months or less to maturity when placed 4,179 3,332
Cash at bank and on hand 62 56
Cash and cash equivalents in the consolidated cash flow
statement 4,241 3,388
Deposits with banks and other financial institutions with
more than 3 months to maturity when placed 369 2,039
Bank deposits and cash in the consolidated statement of
financial position 4,610 5,427

100 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

(b) Reconciliation of profit before taxation to cash used in operations:


2021 2020
Note $ million $ million

Profit before taxation 6,272 6,200


Adjustments for:
Share of profits less losses of joint ventures (3,374) (3,782)
Share of profits less losses of associates (1,522) (1,329)
Interest income 4,5 (1,236) (1,273)
Dividend income from unlisted equity securities 4 (52) (53)
Finance costs 8 125 86
Depreciation 7 3 4
Exchange (gain)/loss (99) 160
Changes in working capital:
(Increase)/decrease in trade and other receivables (53) 13
Decrease in trade and other payables (220) (46)
Decrease/(increase) in amounts due from joint ventures/
associates 43 (16)
Increase in net employee retirement benefit liabilities 1 3
Cash used in operations (112) (33)

(c) Funds from Operations


Funds from operations represent net cash from operating activities and dividends received from joint
ventures, associates and equity securities.

2021 2020
$ million $ million

Net cash generated from operating activities 939 962


Dividends received from joint ventures 2,501 3,073
Dividends received from associates 1,808 1,445
Dividends received from equity securities 52 53
5,300 5,533

Annual Report 2021 101


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

18. Bank deposits and cash and other cash flow information
(Continued)
(d) Reconciliation of liabilities arising from financing activities:
The table below details changes in the Group’s liabilities from financing activities, including both cash and
non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or
future cash flows will be, classified in the Group’s consolidated cash flow statement as cash flows from
financing activities.

Interest rate
swaps held
to hedge
Lease borrowings –
$ million Bank loans liabilities liabilities Total

At 1 January 2020 3,319 5 254 3,578


Changes from financing cash flows:
Capital element of lease rentals paid – (3) – (3)
Exchange adjustments 321 – – 321
Change in fair values – – 115 115
At 31 December 2020 and
1 January 2021 3,640 2 369 4,011
Changes from financing cash flows:
Repayment of bank loans (3,679) – – (3,679)
Proceeds from bank loans 3,685 – – 3,685
Capital element of lease rentals paid – (3) – (3)
Exchange adjustments (191) – – (191)
Change in fair values – – (219) (219)
Other changes:
Increase in lease liabilities – 6 – 6
Others (22) – – (22)
At 31 December 2021 3,433 5 150 3,588

102 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

19. Trade and other payables


2021 2020
$ million $ million

Creditors measured at amortised cost (see note below) 3,384 3,397


Lease liabilities 2 –
Derivative financial instruments (see note 21) 31 206
3,417 3,603

All of the trade and other payables are expected to be settled within one year.

Creditors’ ageing is analysed as follows:

2021 2020
$ million $ million

Due within 1 month or on demand 101 64


Due after 1 month but within 3 months 5 5
Due after 3 months but within 12 months 3,278 3,328
3,384 3,397

20. Bank loans and other interest-bearing borrowings


2021 2020
$ million $ million

Bank loans and others 3,433 3,642


Current portion – (3,642)
Non-current portion 3,433 –

Some banking facilities of the Group are subject to the fulfilment of covenants relating to certain of the Group’s
statement of financial position ratios, as are commonly found in lending arrangements with financial institutions.
If the Group was to breach the covenants, the drawn down facilities would become payable on demand and
any undrawn amount will be cancelled. The Group regularly monitors its compliance with these covenants.
Further details of the Group’s management of liquidity risk are set out in note 25(b). As at 31 December 2021
and 2020, none of the covenants relating to drawn down facilities had been breached.

None of the non-current interest-bearing borrowings is expected to be settled within one year. All the above
borrowings are unsecured.

The non-current borrowings are repayable as follows:

2021 2020
$ million $ million

Within 2 years to 5 years 3,433 –

Annual Report 2021 103


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

21. Derivative financial instruments


2021 2020
Assets Liabilities Assets Liabilities
$ million $ million $ million $ million

Derivative financial instruments used for


hedging:
Cash flow hedges
Interest rate swaps – (150) – (369)
Forward foreign exchange contracts – (3) – (10)
Net investment hedges
Cross currency swaps 457 – 195 (549)
Forward foreign exchange contracts 800 (145) 735 (459)
1,257 (298) 930 (1,387)

Analysed as:
Current 223 (31) 226 (206)
Non-current 1,034 (267) 704 (1,181)
1,257 (298) 930 (1,387)

22. Employee retirement benefits


The Group offers three retirement schemes which together cover all permanent staff.

One of the schemes (“the Pension Scheme”) provides pension benefits based on the employee’s final basic
salary and length of service. This scheme is accounted for as a defined benefit retirement scheme.

Another scheme is defined contribution in nature and offers its members choices to invest in various investment
funds. One of the investment funds provides a guaranteed return; the scheme is accounted for as a defined
benefit retirement scheme in respect of this investment fund (“the Guaranteed Return Scheme”). In respect
of other investment funds which do not offer a guaranteed return, the scheme is accounted for as a defined
contribution retirement scheme (see note 22(b)).

Both these schemes are established under trust and are registered under the Hong Kong Occupational
Retirement Schemes Ordinance. The assets of the schemes are held independently of the Group’s assets in
separate trustee administered funds.

The Group also participates in a master trust Mandatory Provident Fund Scheme (“MPF Scheme”) operated by
an independent service provider under the Hong Kong Mandatory Provident Fund Schemes Ordinance. The MPF
Scheme is a defined contribution retirement scheme with the employer and its employees each contributing
to the scheme in accordance with the relevant scheme rules. The MPF Scheme rules provide for voluntary
contributions to be made by the employer calculated as a percentage of the employees’ basic salaries.

104 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

(a) Defined benefit retirement schemes (“the Schemes”)


The funding policy in respect of the Pension Scheme is based on valuations prepared periodically by
independent professionally qualified actuaries at Willis Towers Watson Hong Kong Limited. The policy
for employer’s contributions is to fund the scheme in accordance with the actuary’s recommendations
on an on-going basis. The principal actuarial assumptions used include discount rate and future pension
increase rate which are disclosed in note 22(a)(viii) together with appropriate provisions for mortality rates.
The most recent actuarial valuation of the Pension Scheme was carried out by the appointed actuary,
represented by Ms. Wing Lui, FSA, as at 1 January 2021. The valuation revealed that the assets of the
Pension Scheme were sufficient to cover the aggregate vested liabilities as at the valuation date.

Both defined retirement schemes expose the Group to investment risk and interest rate risk while the
Pension Scheme also exposes the Group to risks of longevity and inflation.

The retirement scheme expense/income recognised in profit or loss for the year ended 31 December 2021
was determined in accordance with HKAS 19 (2011), Employee benefits .

(i) The amounts recognised in the statements of financial position are as follows:

2021 2020
$ million $ million

Present value of defined benefit obligations (355) (357)


Fair value of assets of the Schemes 216 221
(139) (136)

Represented by:
Employee retirement benefit assets 7 6
Employee retirement benefit liabilities (146) (142)
(139) (136)

The assets of the Schemes did not include ordinary shares issued by the Company for the years
ended 31 December 2021 and 2020.

A portion of the above asset/liability is expected to be realised/settled after more than one year.
However, it is not practicable to segregate this amount from the amounts payable in the next 12
months, as future contributions will also relate to future changes in actuarial assumptions and
market conditions.

Annual Report 2021 105


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

22. Employee retirement benefits (Continued)


(a) Defined benefit retirement schemes (“the Schemes”) (Continued)
(ii) Movements in the present value of defined benefit obligations of the Schemes are as follows:

2021 2020
$ million $ million

At 1 January 357 353


Current service cost – –
Interest cost 3 6
Actuarial loss/(gain) due to:
– changes in liability experience 8 (1)
– changes in financial assumptions (6) 14
– changes in demographic assumptions 7 5
Benefits paid (21) (24)
Transfer in 7 4
At 31 December 355 357

(iii) Movements in fair value of plan assets of the Schemes are as follows:

2021 2020
$ million $ million

At 1 January 221 223


Interest income on the Schemes’ assets 2 3
Return on the Schemes’ assets, excluding interest
income 7 15
Benefits paid (21) (24)
Transfer in 7 4
At 31 December 216 221

The Group expects to contribute below $1 million to the Schemes in 2022.

(iv) The expenses recognised in the consolidated statement of profit or loss are as follows:

2021 2020
$ million $ million

Net interest on net defined benefit asset/liability 1 3

(v) The expenses are recognised in the following line items in the consolidated statement of profit or
loss:

2021 2020
$ million $ million

Other operating costs 1 3

106 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

(vi) The cumulative amount of actuarial losses recognised in the consolidated statement of
comprehensive income is as follows:

2021 2020
$ million $ million

At 1 January 162 159


Remeasurement of net defined benefit asset/liability
recognised in the consolidated statement of
comprehensive income during the year 2 3
At 31 December 164 162

(vii) The major categories of assets of the Schemes are as follows:

2021 2020
$ million $ million

Hong Kong equities 34 37


European equities 14 15
North American equities 48 47
Asia Pacific and other equities 16 18
Global bonds 104 103
Deposits, cash and others – 1
216 221

Strategic investment decisions are taken with respect to the risk and return profiles. There has been
no change in the process used by the Group to manage its risks from prior periods.

(viii) The principal actuarial assumptions used as at 31 December (expressed as a weighted average) are as
follows:

2021 2020

Discount rate
– The Pension Scheme 1.0% 1.0%
– The Guaranteed Return Scheme 0.4% 0.4%
Long-term salary increase rate Not applicable Not applicable
Future pension increase rate 2.0% 2.0%

Annual Report 2021 107


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

22. Employee retirement benefits (Continued)


(a) Defined benefit retirement schemes (“the Schemes”) (Continued)
(ix) Sensitivity analysis
(a) The Pension Scheme
Increase/(decrease) in
defined benefit obligations
2021 2020
$ million $ million

Actuarial assumptions
Discount rate
– increase by 0.25% (8) (8)
– decrease by 0.25% 8 8
Pension increase rate
– increase by 0.25% 7 8
– decrease by 0.25% (7) (8)
Mortality rate applied to specific age
– set forward 1 year (14) (15)
– set backward 1 year 14 15

(b) The Guaranteed Return Scheme


Increase/(decrease) in
defined benefit obligations
2021 2020
$ million $ million

Actuarial assumptions
Discount rate
– increase by 0.25% (1) (1)
– decrease by 0.25% 1 1
Interest to be credited
– increase by 0.25% 1 1

The above sensitivity analyses are based on a change in an assumption while holding all other
assumptions constant. In practice, changes in some of the assumptions may be correlated.
When calculating the sensitivity of the defined benefit obligations to significant actuarial
assumptions the same method (present value of the defined benefit obligations calculated
with the projected unit credit method at the end of the reporting period) has been applied as
when calculating the defined benefit liability recognised within the consolidated statement of
financial position.

108 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

(x) The following table sets out the weighted average durations of the defined benefit obligations of the
Schemes:

2021 2020
No. of years No. of years
The Pension Scheme 10.2 10.5
The Guaranteed Return Scheme 5.2 6.8

(b) Defined contribution retirement scheme


2021 2020
$ million $ million
Expenses recognised in profit or loss 2 2

No forfeited contributions have been received during the year (2020: $Nil).

23. Income tax in the consolidated statement of financial position


(a) Current taxation in the consolidated statement of financial position
2021 2020
$ million $ million
Tax provision for the year 54 12
Provisional tax paid (91) (43)
Tax provision relating to prior years 174 192
Current tax payable 137 161

(b) Deferred tax (liabilities)/assets


The components of deferred tax (liabilities)/assets recognised in the consolidated statement of financial
position and the movements during the year are as follows:

Cash flow Future benefits


$ million hedges of tax losses Total
At 1 January 2020 76 1 77
Charged to profit or loss – (56) (56)
Credited/(charged) to other
comprehensive income 35 (2) 33
At 31 December 2020 and
1 January 2021 111 (57) 54
Charged to profit or loss – (78) (78)
(Charged)/credited to other
comprehensive income (66) 1 (65)
At 31 December 2021 45 (134) (89)

The Group had no material unrecognised deferred tax assets or liabilities as at 31 December 2021 and
2020.

Annual Report 2021 109


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

24. Capital, reserves and dividends


(a) Movements in components of equity
The reconciliation between the opening and closing balances of each component of the Group’s
consolidated equity is set out in the consolidated statement of changes in equity.

(b) Dividends
(i) Dividends payable to equity shareholders of the Company attributable to the year:

2021 2020
$ million $ million

Interim dividend declared and paid of $0.78 per


ordinary share (2020: $0.77 per ordinary share) 1,665 1,643
Final dividend proposed after the end of the reporting
period of $2.04 per ordinary share (2020: $2.04 per
ordinary share) 4,354 4,354
6,019 5,997

The final dividend proposed after the end of the reporting period is based on 2,134,261,654 ordinary
shares (2020: 2,134,261,654 ordinary shares), being the total number of issued shares at the year
end. The final dividend proposed after the end of the reporting period has not been recognised as a
liability at the end of the reporting period.

(ii) Dividends payable to equity shareholders of the Company attributable to the previous financial year
paid during the year:

2021 2020
$ million $ million

Final dividend in respect of the previous financial year,


approved and paid during the year, of $2.04 per
ordinary share (2020: $2.03 per ordinary share) 4,354 4,333

(c) Share capital


2021 2020
Number of shares $ million $ million

Issued and fully paid:


Voting ordinary shares 2,134,261,654 6,610 6,610

In accordance with section 135 of the Hong Kong Companies Ordinance, the ordinary shares of the
Company do not have a par value.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to
the Company’s residual assets.

110 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

(d) Nature and purpose of reserves


(i) Exchange reserve
The exchange reserve comprises all foreign exchange differences arising from the translation of the
financial statements of operations outside Hong Kong, the effective portion of any foreign exchange
differences arising from hedges of the net investment in these operations outside Hong Kong and
the cost of hedging reserve. Under HKFRS 9, if the Group excludes the forward element of forward
contracts and the foreign currency basis spread of financial instruments (the “excluded elements”)
from the designation of the hedging instruments, then the excluded elements may be separately
accounted for as cost of hedging. The fair value changes of the excluded elements are recognised in
a separate component of equity as cost of hedging reserve to the extent that it relates to the hedged
items. The reserve is dealt with in accordance with the accounting policies set out in notes 2(i)(iii) and
2(u).

The following table provides a reconciliation of the exchange reserve in respect of cost of hedging,
net investment hedges and translation on investment outside Hong Kong:

Translation
on
Net investment
Cost of investment outside
$ million hedging hedges Hong Kong Total

Balance at 1 January 2020 (91) 2,959 (8,986) (6,118)


Exchange differences on translating operations
outside Hong Kong, including joint ventures and
associates – – 3,120 3,120
Effective portion of changes in fair value of hedging
instruments recognised in other comprehensive
income (see note 25(d)(i)) – (1,229) – (1,229)
Cost of hedging – changes in fair value recognised
in other comprehensive income 73 – – 73
73 (1,229) 3,120 1,964
Balance at 31 December 2020 and
1 January 2021 (18) 1,730 (5,866) (4,154)
Exchange differences on translating operations
outside Hong Kong, including joint ventures and
associates – – (1,414) (1,414)
Effective portion of changes in fair value of hedging
instruments recognised in other comprehensive
income (see note 25(d)(i)) – 1,108 – 1,108
Cost of hedging – changes in fair value recognised
in other comprehensive income 47 – – 47
47 1,108 (1,414) (259)
Balance at 31 December 2021 29 2,838 (7,280) (4,413)

Annual Report 2021 111


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

24. Capital, reserves and dividends (Continued)


(d) Nature and purpose of reserves (Continued)
(ii) Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of
hedging instruments used in cash flow hedges (net of any deferred tax effect) pending subsequent
recognition of the hedged cash flow in accordance with the accounting policy adopted for cash flow
hedges in note 2(i)(ii).

2021 2020
$ million $ million

Balance at 1 January (3,459) (2,114)


Effective portion of the cash flow hedge recognised in
other comprehensive income 1,162 (1,827)
Amounts reclassified to profit or loss (see note below) 97 81
Related tax (373) 401
Balance at 31 December (see note below) (2,573) (3,459)

Amount reclassified to profit or loss are recognised in the “Finance costs” line item in the
consolidated statement of profit or loss (see note 8). The entire balance at 31 December 2021 and
2020 in the hedging reserve relates to continuing hedges.

(iii) Revenue reserve


The revenue reserve comprises the accumulated profits retained by the Company and its subsidiaries
and includes the Group’s share of the retained profits of its joint ventures and associates.

(e) Capital management


The Group’s primary objectives when managing capital are:

– to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide
returns for shareholders and benefits for other stakeholders;

– to provide returns to shareholders by securing access to finance at a reasonable cost;

– to support the Group’s stability and future growth; and

– to provide capital for the purpose of strengthening the Group’s risk management capability.

The Group actively and regularly reviews and manages its capital structure, taking into consideration the
future capital requirements of the Group and capital efficiency, forecast profitability, forecast operating
cash flows, forecast capital expenditure and projected investment opportunities.

The Group monitors its capital structure on the basis of a net debt-to-net total capital ratio. For this
purpose, the Group defines net debt as interest-bearing borrowings (excluding lease liabilities) less bank
deposits and cash. Net total capital includes net debt and equity which comprises all components of equity
(as shown in the consolidated statement of financial position).

112 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

During 2021, the Group’s strategy, which was unchanged from 2020, was to control its level of debt in
order to secure access to finance at a reasonable cost. In order to maintain or adjust the level of debt,
the Group may adjust the amount of dividends paid to shareholders, issue new shares, return capital to
shareholders, raise new debt financing or sell assets to reduce debt.

As at 31 December 2021, the net cash position of the Group amounted to $1,177 million (2020: $1,787
million).

During the current year, the Company acted as the guarantor in respect of certain loan facilities granted to
its subsidiaries and joint ventures and fully complied with the capital requirements under the loan facility
agreements.

25. Financial risk management


The Group is exposed to credit, liquidity, interest rate and currency risks in the normal course of its businesses.
The Group is also exposed to equity price risk arising from its equity investments in other entities. In accordance
with the Group’s treasury policy, derivative financial instruments are only used to hedge its exposure to foreign
exchange and interest rate risks arising from operational, financing and investment activities. The Group does
not hold or issue derivative financial instruments for trading or speculative purposes.

(a) Credit risk


The Group’s credit risk is primarily attributable to trade and other receivables relating to bank deposits
and over-the-counter derivative financial instruments entered into for hedging purposes. The Group has a
credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.

The Group has defined minimum credit rating requirements and transaction limits for counterparties when
dealing in financial derivatives or placing deposits to minimise credit exposure. The Group does not expect
any counterparty to fail to meet its obligations.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset,
including derivative financial instruments, in the statement of financial position. Except for the financial
guarantees given by the Group as set out in note 27, the Group has not provided any other guarantee
which would expose the Group to credit risk. The maximum exposure to credit risk in respect of these
financial guarantees at the end of the reporting period is disclosed in note 27.

The Group has no significant concentration of credit risk arising from trade and other receivables, with
exposure spread over a number of counterparties.

The Group measures loss allowances for trade and other receivables at an amount equal to lifetime ECLs (see
note 2(l)(i)). No loss allowances are recognised as at 31 December 2021 (2020: $Nil) based on historical
actual loss experience.

Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade and
other receivables are set out in note 17.

Offsetting financial assets and financial liabilities


The Group’s derivative transactions are executed with financial institutions and governed by either
International Swaps and Derivatives Association Master Agreements or the general terms and conditions of
these financial institutions, with a conditional right of set off under certain circumstances that would result
in all outstanding transactions being terminated and net settled.

Annual Report 2021 113


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

25. Financial risk management (Continued)


(a) Credit risk (Continued)
Offsetting financial assets and financial liabilities (Continued)
As these financial institutions currently have no legal enforceable right to set off the recognised amounts
and the Group does not intend to settle on a net basis or to realise the assets and settle the liabilities
simultaneously, all such financial instruments are recorded on gross basis at the end of the reporting
period.

The following table presents the recognised financial instruments that are subject to enforceable netting
arrangements but not offset as at the end of the reporting period:

2021 2020
Gross Gross
amounts amounts
of financial of financial
instruments instruments
in the Related in the Related
consolidated financial consolidated financial
statement instruments statement instruments
of financial that are Net of financial that are Net
$ million Note position not offset amount position not offset amount
Financial assets 21
Cross currency swaps 457 – 457 195 – 195
Forward foreign exchange
contracts 800 (3) 797 735 (226) 509
Total 1,257 (3) 1,254 930 (226) 704
Financial liabilities 21
Cross currency swaps – – – 549 – 549
Interest rate swaps 150 – 150 369 – 369
Forward foreign exchange
contracts 148 (3) 145 469 (226) 243
Total 298 (3) 295 1,387 (226) 1,161

(b) Liquidity risk


The Group operates a central cash management system for all its subsidiaries in order to achieve a better
control of risk and minimise the costs of funds. The Group’s policy is to regularly monitor current and
expected liquidity requirements and its compliance with loan covenants, to ensure that it maintains
sufficient reserves of cash and adequate committed lines of funding to meet its liquidity requirements in
the short and longer term. The Group had bank deposits and cash $4,610 million (2020: $5,427 million)
and no undrawn committed bank facilities at 31 December 2021 (2020: $Nil).

114 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

The following tables show the remaining contractual maturities at the end of the reporting period of
the Group’s non-derivative financial liabilities and derivative financial instruments, which are based on
contractual undiscounted cash flows (including interest payments computed using contractual rates or, if
floating, based on rates current at the end of the reporting period) and the earliest date the Group can be
required to pay:

2021
Contractual undiscounted cash outflow/(inflow)
More than More than
Within 1 year but 2 years but
1 year or less than less than More than
$ million on demand 2 years 5 years 5 years Total
Non-derivative financial
liabilities
Bank loans and interest accruals 29 31 3,522 – 3,582
Trade and other payables 3,380 – – – 3,380
Derivative financial instruments
Net settled
Interest rate swaps 88 93 108 – 289
Gross settled
Forward foreign exchange contracts:
– outflow 6,803 – 7,221 1,559 15,583
– inflow (6,985) – (7,851) (1,715) (16,551)
Cross currency swaps and related
interest accruals:
– outflow 2,956 5,683 507 5,686 14,832
– inflow (3,135) (5,912) (379) (5,927) (15,353)
3,136 (105) 3,128 (397) 5,762

2020
Contractual undiscounted cash outflow/(inflow)
More than More than
Within 1 year but 2 years but
1 year or less than less than More than
$ million on demand 2 years 5 years 5 years Total
Non-derivative financial
liabilities
Bank loans and interest accruals 3,643 – – – 3,643
Trade and other payables 3,390 – – – 3,390
Derivative financial instruments
Net settled
Interest rate swaps 97 98 211 – 406
Gross settled
Forward foreign exchange contracts:
– outflow 9,004 – 4,235 3,150 16,389
– inflow (9,118) – (4,368) (3,482) (16,968)
Cross currency swaps and related
interest accruals:
– outflow 304 3,114 6,162 6,166 15,746
– inflow (332) (3,133) (6,166) (6,054) (15,685)
6,988 79 74 (220) 6,921

Annual Report 2021 115


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

25. Financial risk management (Continued)


(c) Interest rate risk
The Group is exposed to cash flow interest rate risk on its interest-bearing assets and liabilities. Cash flow
interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of
changes in market interest rates.

(i) Hedging
The Group’s policy is to maintain a balanced combination of fixed and variable rate debt to
reduce its interest rate exposure. The Group also uses interest rate swaps to manage the exposure
in accordance with its treasury policy. The Group seeks to hedge the benchmark interest rate
component only. The existence of an economic relationship between the interest rate swaps and
the variable rate borrowings is determined by matching their critical contract terms, including the
reference interest rates, tenors, interest repricing dates, maturity dates, interest payment and/or
receipt dates, the notional amounts of the swaps and the outstanding principal amounts of the
loans. The main source of hedge ineffectiveness in these hedging relationships is the effect of the
counterparty and the Group’s own credit risk on the fair value of the swaps which is not reflected in
the fair value of the hedged cash flows attributable to the change in interest rates.

The following table provides information on the interest rate swaps which have been designated as
cash flow hedges of the interest rate risk inherent in the Group’s variable rate bank borrowings at
the end of the reporting period:

2021 2020
Notional amount ($ million) 3,453 3,638
Maturity date 2025 2025
Weighted average fixed swap rates 2.70% 2.70%

The carrying amount of interest rate swaps at 31 December 2021 was a liability of $150 million (2020:
$369 million).

116 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

(ii) Interest rate profile


The following table details the interest rate profile of the Group’s net interest-bearing assets and
liabilities at the end of the reporting period, after taking into account the effect of interest rate
swaps designated as cash flow hedging instruments (see (i) above):

2021 2020
Weighted Weighted
average average
interest interest
rate % $ million rate % $ million
Net fixed rate assets/
(liabilities)
Loans to unlisted joint ventures/
associates 10.0 9,149 10.1 9,219
Deposits with banks and other
financial institutions 0.4 4,548 0.5 5,371
Cross currency swaps N/A 457 N/A (354)
Bank loans 3.7 (3,433) 3.6 (3,640)
Lease liabilities 1.8 (5) 2.9 (2)
10,716 10,594
Net variable rate assets/
(liabilities)
Loans to unlisted joint ventures/
associates 4.1 6,491 4.5 6,752
Other receivable – – 0.1 336
Cash at bank and on hand – 62 – 56
Other payable 0.1 (404) 0.1 (156)
6,149 6,988

(iii) Sensitivity analysis


At 31 December 2021, it is estimated that a general increase/decrease of 100 basis points in
interest rates, with all other variables held constant, would have increased/decreased the Group’s
profit for the year and revenue reserve by approximately $58 million (2020: increased/decreased
by approximately $64 million). Other components of consolidated equity would have decreased/
increased by approximately $75 million (2020: decreased/increased by approximately $108 million) in
response to the general increase/decrease in interest rates.

The sensitivity analysis above has been determined assuming that the change in interest rates had
occurred at the end of the reporting period and had been applied to the exposure to interest rate
risk for both derivative and non-derivative financial instruments in existence at that date. The analysis
has been performed on the same basis as for 2020.

Annual Report 2021 117


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

25. Financial risk management (Continued)


(d) Currency risk
The Group is exposed to currency risk primarily arising from investments outside Hong Kong. The Group
is also exposed to foreign currency risk arising from foreign currency transactions which give rise to
receivables, payable and cash balances that are denominated in a currency other than the functional
currency of the operations to which the transactions relate. The Group manages this risk as follows:

(i) Investments outside Hong Kong


Currency exposure arising from investments outside Hong Kong is mitigated in part either by funding
a portion of the investment through external borrowings in the same currency as the underlying
investment or by hedging with forward foreign exchange contracts and cross currency swaps. The
Group designates the spot element of forward foreign exchange contracts and cross currency swaps
to hedge the Group’s currency risk. The forward elements of forward foreign exchange contracts
and the foreign currency basis spread are excluded from the designation of the hedging instrument
and are separately accounted for as a cost of hedging, which is recognised in equity in a cost of
hedging reserve.

The following table provides information on the forward foreign exchange contracts and cross
currency swaps which have been designated as hedges of the currency risk inherent in the Group’s
investments outside Hong Kong at the end of the reporting period:

2021 2020
Forward foreign exchange contracts:
Notional amount ($ million) 16,111 15,953
Maturity date Ranging from Ranging from
2022 to 2031 2021 to 2026
Weighted average contract rate:
GBP:USD 1.5105 1.5322
AUD:USD 0.7134 0.6910
USD:CAD 1.2592 1.3007
Cross currency swaps:
Notional amount ($ million) 14,404 14,404
Maturity date Ranging from Ranging from
2022 to 2027 2022 to 2027
Weighted average contract rate:
EUR:USD 1.1728 1.1728
GBP:USD 1.3848 1.3848
AUD:USD 0.7518 0.7518

The carrying amount of forward foreign exchange contracts at 31 December 2021 includes an asset
of $800 million and a liability of $145 million (2020: an asset of $735 million and a liability of $459
million). The carrying amount of cross currency swaps at 31 December 2021 includes an asset of
$457 million and a liability of $Nil (2020: an asset of $195 million and a liability of $549 million).
The change in fair value of the forward foreign exchange contracts and cross currency swaps during
2021 was a gain of $1,108 million (2020: a loss of $1,229 million) which were the effective portion
of the hedge on investments outside Hong Kong recognised in other comprehensive income (see
note 24(d)(i)).

118 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

(ii) Recognised assets and liabilities


The Group uses forward foreign exchange contracts and cross currency swaps to manage its foreign
currency risk arising from foreign currency transactions. The following table details the Group’s
exposure at the end of the reporting period to currency risk arising from recognised assets or
liabilities denominated in a currency other than the functional currency of the entity to which they
relate:

2021
Exposure to foreign currencies
’million USD GBP AUD CAD
Trade and other receivables 16 14 3 1
Bank deposits and cash 419 1 61 –
Trade and other payables (52) – (6) –
Gross exposure arising from
recognised assets and
liabilities 383 15 58 1
Notional amounts of
forward foreign exchange
contracts used as
economic hedges 57 (9) (60) –
Overall exposure 440 6 (2) 1

2020
Exposure to foreign currencies
’million USD GBP AUD CAD
Trade and other receivables 52 19 4 1
Bank deposits and cash 476 27 – 66
Trade and other payables (20) – (6) –
Gross exposure arising from
recognised assets and
liabilities 508 46 (2) 67
Notional amounts of
forward foreign exchange
contracts used as
economic hedges 87 (27) – (66)
Overall exposure 595 19 (2) 1

(iii) Sensitivity analysis


The following table indicates that a 10% strengthening in the following currencies against Hong
Kong dollars at the end of the reporting period would have increased/(decreased) the Group’s profit
for the year and revenue reserve:

2021 2020
Effect on profit Effect on profit
for the year and for the year and
revenue reserve revenue reserve
$ million increase/(decrease) increase/(decrease)
Pounds Sterling 6 19
Australian dollars (1) (1)
Canadian dollars 1 –

Annual Report 2021 119


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

25. Financial risk management (Continued)


(d) Currency risk (Continued)
(iii) Sensitivity analysis (Continued)
A 10% weakening in the above currencies against Hong Kong dollars at the end of the reporting
period would have had an equal but opposite effect on the Group’s profit for the year and revenue
reserve.

This sensitivity analysis assumes that the change in foreign exchange rates had been applied to
re-measure those financial instruments held by the Group which expose the Group to currency risk
at the end of the reporting period, and that all other variables, in particular interest rates, remain
constant. In this respect, it is assumed that the pegged rate between the Hong Kong dollar and the
United States dollar would be materially unaffected by any changes in movement in value of the
United States dollar against other currencies. Results of the analysis as presented in the above table
represent an aggregation of the effects on each of the Group entities’ profit for the year and other
components of equity measured in their respective functional currencies, translated into Hong Kong
dollars at the exchange rate ruling at the end of the reporting period for presentation purposes. The
analysis excludes differences that would result from the translation of the financial statements of
foreign operations into the Group’s presentation currency. The analysis has been performed on the
same basis as for 2020.

(e) Equity price risk


The Group is exposed to equity price changes arising from unlisted equity securities which are held for
strategic purposes (see note 16).

All of the Group’s unlisted investments are held for long-term strategic purposes. Their performance is
reviewed regularly based on information available to the Group.

These unlisted investments do not have a quoted market price in an active market and are recognised as
FVPL.

(f) Fair value measurement


(i) Financial assets and liabilities measured at fair value
(a) Fair value hierarchy
The following table presents the carrying value of financial instruments measured at fair
value at the end of the reporting period across the three levels of the fair value hierarchy
defined in HKFRS 13, Fair value measurement , with the fair value of each financial instrument
categorised in its entirety based on the lowest level of input that is significant to that fair value
measurement. The levels are defined as follows:

– Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active
markets for identical financial instruments;

– Level 2: fair values measured using quoted prices in active markets for similar financial
instruments, or using valuation techniques in which all significant inputs are directly or
indirectly based on observable market data;

– Level 3 (lowest level): fair values measured using valuation techniques in which any
significant input is not based on observable market data.

120 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Recurring fair value measurements


Fair value measurement at
31 December 2021
categorised into
$ million Level 2 Level 3 Total

Financial assets
Other non-current financial assets – 1,100 1,100
Derivative financial instruments:
– Cross currency swaps 457 – 457
– Forward foreign exchange contracts 800 – 800
1,257 1,100 2,357

Financial liabilities
Derivative financial instruments:
– Interest rate swaps (150) – (150)
– Forward foreign exchange contracts (148) – (148)
(298) – (298)

Fair value measurement at


31 December 2020
categorised into
$ million Level 2 Level 3 Total

Financial assets
Other non-current financial assets – 1,100 1,100
Derivative financial instruments:
– Cross currency swaps 195 – 195
– Forward foreign exchange contracts 735 – 735
930 1,100 2,030

Financial liabilities
Derivative financial instruments:
– Interest rate swaps (369) – (369)
– Cross currency swaps (549) – (549)
– Forward foreign exchange contracts (469) – (469)
(1,387) – (1,387)

Annual Report 2021 121


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

25. Financial risk management (Continued)


(f) Fair value measurement (Continued)
(i) Financial assets and liabilities measured at fair value (Continued)
(b) Valuation techniques and inputs in fair value measurements
Level 2: The fair value of forward foreign exchange contracts is measured using forward
exchange market rates at the end of the reporting period. The fair values of
interest rate swaps and cross currency swaps are measured by discounting the
future cash flows of the contracts at the current market interest rates.

Level 3: Other non-current financial assets consist of investments in unlisted equity


securities and other investments.

The unlisted equity securities are not traded in an active market. Their fair
values have been determined using dividend discounted model. The significant
unobservable inputs include cost of equity of 13.65% and growth rate of 2.5%.
It is estimated that a 0.5% increase/decrease in cost of equity, with other variable
held constant, would have decreased/increased the Group’s profit for the year
and revenue reserve by approximately $13 million/$14 million (2020: decreased/
increased by $13 million/$14 million). A 0.5% increase/decrease in growth rate,
with other variable held constant, would have increased/decreased the Group’s
profit for the year and revenue reserve by approximately $14 million/$13 million
(2020: increased/decreased by $14 million/$13 million).

Other investments were measured at fair value based on value inputs that are
not observable market data but change of these inputs to reasonable alternative
assumptions would not have material effect on the Group’s results and financial
position.

(ii) Fair values of financial assets and liabilities carried at other than fair value
Amounts due from joint ventures and associates, trade and other receivables, trade and other
payables and external borrowings are carried at cost or amortised cost which are not materially
different from their fair values as at 31 December 2021 and 2020.

26. Capital commitments


The Group’s capital commitments outstanding at 31 December and not provided for in the financial statements
were as follows:

2021 2020
$ million $ million

Contracted for:
Investment in a joint venture – 36

Authorised but not contracted for:


Capital expenditure for property, plant and equipment 1 –

122 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

27. Contingent liabilities


2021 2020
$ million $ million

Guarantees given in respect of a joint venture 363 438

28. Material related party transactions


The Group had the following material transactions with related parties during the year:

(a) Shareholder
Outram Limited (“Outram”), a subsidiary of the Company, reimbursed a wholly-owned subsidiary of CK
Infrastructure Holdings Limited (“CKI”) $19 million (2020: $20 million) being the actual costs incurred
for providing the operation and management services to Outram and its subsidiaries for the year. The
transactions constitute continuing connected transactions under the Listing Rules. The Company has
complied with the applicable disclosure requirements for the transactions made in respect of the period up
to 1 April 2021 and ceased to be subject to such requirements from 2 April 2021 onwards.

(b) Joint ventures


Interest income received/receivable from joint ventures in respect of the loans to joint ventures amounted
to $827 million (2020: $851 million) for the year. The outstanding balances with joint ventures are
disclosed in note 14.

(c) Associates
(i) Interest income received/receivable from associates in respect of the loans to associates amounted
to $397 million (2020: $366 million) for the year. The outstanding balances with associates are
disclosed in note 15.

(ii) Other operating costs included support service charge recovered by an associate amounted to $42
million (2020: $41 million) for the total costs incurred in the provision or procurement of the general
office administration and other support services and office facilities. The outstanding balance at 31
December 2021 with the associate was $4 million (2020: $4 million).

(d) Key management personnel remuneration


The emoluments of key management are disclosed in note 11.

Unless otherwise stated the above material related party transactions during the year did not constitute
discloseable connected transactions or continuing connected transaction for the Company under the Listing
Rules.

29. Substantial shareholder of the Company


The Company is a Hong Kong listed company and its shares are widely held by the public. CKI holds
approximately 35.96% of the issued share capital of the Company and is a substantial shareholder of the
Company.

Annual Report 2021 123


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

30. Critical accounting judgements and estimates


The methods, estimates and judgements the Directors used in applying the Group’s accounting policies have
a significant impact on the Group’s financial position and operating results. Some of the accounting policies
require the Group to apply estimates and judgements on matters that are inherently uncertain. In addition to
notes 22 and 25 which contain information about the assumptions and their risk factors relating to valuation
of defined benefit retirement scheme assets and liabilities and financial instruments, certain critical accounting
judgements in applying the Group’s accounting policies are described below.

(a) Impairment
In considering the impairment losses that may be required for the Group’s assets, the recoverable amounts
of the assets need to be determined. The recoverable amount is the greater of the fair value less costs
of disposal and the value in use. It is difficult to precisely estimate the fair value less costs to disposal
because quoted market prices for these assets may not be readily available. In determining the value in
use, expected cash flows generated by the assets are discounted to their present value, which requires
significant judgement. The Group uses all readily available information in determining an amount that is a
reasonable approximation of the recoverable amount.

Any increase or decrease in impairment losses, recognised as set out above, would affect the net profit in
future years.

(b) Associates
(i) CKI Spark Holdings No. One Limited holds a 51% attributable interest in Victoria Power Networks
Pty Limited. Victoria Power Networks Pty Limited is the holding company of Powercor and CitiPower.
Powercor operates and manages an electricity distribution business in western Victoria, Australia.
CitiPower distributes electricity to the Melbourne Central business district. The Group holds 54.76%
of CKI Spark Holdings No. One Limited but the Group does not have control or joint control over it
and, therefore, it has been accounted for as an associate.

(ii) CKI Spark Holdings No. Two Limited holds a 51% attributable interest in SA Power Networks
Partnership. SA Power Networks Partnership is the sole electricity distributor in South Australia. The
Group holds 54.76% of CKI Spark Holdings No. Two Limited but the Group does not have control
or joint control over it and, therefore, it has been accounted for as an associate.

(c) COVID-19 Pandemic


The COVID-19 pandemic has significantly impacted the global economy in 2021. As the Group’s core
energy and utility-related businesses are mostly regulated or secured by long-term contracts, despite
worldwide disruptions of business operations, impact of the pandemic to the Group is modest.

No material impacts of the pandemic have been identified on the operating results and financial positions
of the Group during the reporting period and at the date on which the Consolidated Financial Statements
were authorised for issue. This assessment was based on assumptions and estimates for current and
expected future conditions that the Group considers are relevant and reasonable. However, the severity,
duration and economic consequences of the COVID-19 pandemic are still uncertain. The accounting
estimates and assumptions involved in the assessment above may change over time in response to how
market conditions develop. Actual results may differ significantly from those assumptions and estimates.

124 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

31. Company-level Statement of Financial Position


2021 2020
Note $ million $ million

Non-current assets
Property, plant and equipment 6 4
Investments in subsidiaries 31(a) 30,306 30,103
30,312 30,107
Current assets
Amounts due from subsidiaries 31(b) 21,043 23,032
Trade and other receivables 2 3
Bank deposits and cash 368 988
21,413 24,023
Current liabilities
Amounts due to subsidiaries 31(b) (1,420) (1,637)
Trade and other payables (347) (362)
Derivative financial instruments (3) (10)
(1,770) (2,009)
Net current assets 19,643 22,014
Total assets less current liabilities 49,955 52,121
Non-current liabilities
Lease liabilities (3) –
Employee retirement benefit liabilities (146) (142)
(149) (142)
Net assets 49,806 51,979

Capital and reserves


Share capital 24(c) 6,610 6,610
Reserves 43,196 45,369
Total equity attributable to equity shareholders
of the Company 31(c) 49,806 51,979

Approved and authorised for issue by the Board of Directors on 16 March 2022.

Tsai Chao Chung, Charles Chan Loi Shun


Director Director

Annual Report 2021 125


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

31. Company-level Statement of Financial Position (Continued)


(a) Investments in subsidiaries
Particulars of the principal subsidiaries at the end of the reporting period are set out in Appendix 2 on
pages 130 to 131.

(b) Amounts due from/to subsidiaries


Amounts due from/to subsidiaries are unsecured, interest free and recoverable/repayable on demand.

(c) Total equity attributable to equity shareholders of the Company


Details of the changes in the Company’s individual components of equity between the beginning and the
end of the year are set out below:

Proposed/
Revenue declared
Share capital reserve dividend Total
$ million (note 24(c)) (note 24(d)(iii)) (note 24(b))

Balance at 1 January 2020 6,610 46,793 4,333 57,736


Changes in equity for 2020:
Profit for the year – 223 – 223
Other comprehensive income – (4) – (4)
Total comprehensive income – 219 – 219
Final dividend in respect of the previous year
approved and paid (see note 24(b)(ii)) – – (4,333) (4,333)
Interim dividend paid (see note 24(b)(i)) – (1,643) – (1,643)
Proposed final dividend (see note 24(b)(i)) – (4,354) 4,354 –
Balance at 31 December 2020 and
1 January 2021 6,610 41,015 4,354 51,979
Changes in equity for 2021:
Profit for the year – 3,849 – 3,849
Other comprehensive income – (3) – (3)
Total comprehensive income – 3,846 – 3,846
Final dividend in respect of the previous year
approved and paid (see note 24(b)(ii)) – – (4,354) (4,354)
Interim dividend paid (see note 24(b)(i)) – (1,665) – (1,665)
Proposed final dividend (see note 24(b)(i)) – (4,354) 4,354 –
Balance at 31 December 2021 6,610 38,842 4,354 49,806

The net profit for the year of the Company is $3,849 million (2020: $223 million) and is included in
determining the consolidated profit attributable to equity shareholders of the Company in the financial
statements.

All of the Company’s revenue reserve is available for distribution to equity shareholders. After the end of
the reporting period, the Directors proposed a final dividend of $2.04 per ordinary share, amounting to
$4,354 million (2020: a final dividend of $2.04 per ordinary share, amounting to $4,354 million).

126 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

32. Possible impact of amendments, new standards and


interpretations issued but not yet effective for the year ended
31 December 2021
Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments and a
new standard, HKFRS 17, Insurance contracts, which are not yet effective for the year ended 31 December 2021
and which have not been adopted in these financial statements. These developments include the following
which may be relevant to the Group:

Effective for
accounting
periods beginning
on or after

• Amendments to HKFRS 3, Reference to the conceptual framework 1 January 2022


• Amendments to HKAS 16, Property, plant and equipment: Proceeds before
intended use 1 January 2022
• Amendments to HKAS 37, Onerous contracts – Cost of fulfilling a contract 1 January 2022
• Annual Improvements to HKFRSs 2018-2020 Cycle 1 January 2022
• Amendments to HKAS 1, Classification of liabilities as current or non-current 1 January 2023
• Amendments to HKAS 1 and HKFRS Practice Statement 2, Disclosure of
accounting policies 1 January 2023
• Amendments to HKAS 8, Definition of accounting estimates 1 January 2023
• Amendments to HKAS 12, Deferred tax related to assets and liabilities arising
from a single transaction 1 January 2023
• Amendments to HKFRS 10 and HKAS 28, Sale or contribution of assets
between an investor and its associate or joint venture To be determined

The Group is in the process of making an assessment of what the impact of these developments is expected
to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a
significant impact on the Group’s results of operations and financial position.

Annual Report 2021 127


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

Appendix 1
Segment information
2021
Investments
Investment United All other
$ million in HKEI Kingdom Australia Others Sub-total activities Total

For the year ended 31 December


Revenue
Revenue – 583 540 153 1,276 – 1,276
Other net income – – – 5 5 351 356
Reportable segment revenue – 583 540 158 1,281 351 1,632

Result
Segment earnings – 583 540 144 1,267 225 1,492
Depreciation and amortisation – – – – – (3) (3)
Bank deposit interest income – – – – – 12 12
Operating profit – 583 540 144 1,267 234 1,501
Finance costs – 71 (222) 26 (125) – (125)
Share of profits less losses of joint ventures
and associates (Note) 979 2,164 989 761 3,914 3 4,896
Profit before taxation 979 2,818 1,307 931 5,056 237 6,272
Income tax – 1 (24) (109) (132) – (132)
Reportable segment profit 979 2,819 1,283 822 4,924 237 6,140

At 31 December
Assets
Property, plant and equipment and
leasehold land – – – – – 20 20
Other assets – 914 358 400 1,672 867 2,539
Interest in joint ventures and associates 16,376 39,304 20,452 10,995 70,751 8 87,135
Bank deposits and cash – – – – – 4,610 4,610
Reportable segment assets 16,376 40,218 20,810 11,395 72,423 5,505 94,304

Liabilities
Segment liabilities – (332) (656) (35) (1,023) (2,810) (3,833)
Current and deferred taxation – – (3) (268) (271) – (271)
Interest-bearing borrowings – – (3,433) – (3,433) – (3,433)
Reportable segment liabilities – (332) (4,092) (303) (4,727) (2,810) (7,537)

Note: Included net amount of share of deferred tax charges on change in corporate tax rate of the United Kingdom and share of tax credit
in respect of deferred tax liabilities on intangible assets amounting to $551 million (2020: $780 million).

128 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

2020
Investments
Investment United All other
$ million in HKEI Kingdom Australia Others Sub-total activities Total

For the year ended 31 December


Revenue
Revenue – 548 511 211 1,270 – 1,270
Other net income – – – 6 6 (3) 3
Reportable segment revenue – 548 511 217 1,276 (3) 1,273

Result
Segment earnings – 548 511 205 1,264 (141) 1,123
Depreciation and amortisation – – – – – (4) (4)
Bank deposit interest income – – – – – 56 56
Operating profit – 548 511 205 1,264 (89) 1,175
Finance costs – 74 (186) 26 (86) – (86)
Share of profits less losses of joint ventures
and associates (Note) 912 1,785 1,029 1,381 4,195 4 5,111
Profit before taxation 912 2,407 1,354 1,612 5,373 (85) 6,200
Income tax – 53 (25) (96) (68) – (68)
Reportable segment profit 912 2,460 1,329 1,516 5,305 (85) 6,132

At 31 December
Assets
Property, plant and equipment and
leasehold land – – – – – 17 17
Other assets – 966 473 308 1,747 809 2,556
Interest in joint ventures and associates 16,160 38,171 20,330 10,882 69,383 9 85,552
Bank deposits and cash – – – – – 5,427 5,427
Reportable segment assets 16,160 39,137 20,803 11,190 71,130 6,262 93,552

Liabilities
Segment liabilities – (232) (1,446) (124) (1,802) (3,124) (4,926)
Current and deferred taxation – – (7) (211) (218) – (218)
Interest-bearing borrowings – – (3,640) – (3,640) (2) (3,642)
Reportable segment liabilities – (232) (5,093) (335) (5,660) (3,126) (8,786)

Annual Report 2021 129


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

Appendix 2
Principal subsidiaries
The following list contains only the particulars of subsidiaries as at 31 December 2021 which principally affected the
results, assets or liabilities of the Group. The class of shares held is ordinary unless otherwise stated.

Percentage of Place of
Issued equity held by incorporation/
Name of company share capital the Company operation Principal activity

Aber Keen Limited (Formerly known as US$2 100* British Virgin Islands Property holding
Ace Keen Limited)
Associated Technical Services Limited HK$1,000,000 100 Hong Kong Consulting
Beta Central Profits Limited GBP277,303,283 100* United Kingdom Investment holding
Champion Race Limited US$2 100* British Virgin Islands/ Property holding
Hong Kong
Cheer Venture Enterprises Limited HK$4,602,240,001 100* Hong Kong Investing
Clear Eminent Limited US$1 100 British Virgin Islands Investment holding
Constant Wealth Limited US$1 100 British Virgin Islands Investing
Devin International Limited US$2 100* British Virgin Islands Investment holding
Ellanby Green Limited US$2 100* British Virgin Islands Investing
Goldteam Resources Limited US$1 and 100* British Virgin Islands Investment holding
NZ$203,250,000
HEI Leting Limited HK$94,785,185 100* Hong Kong Investment holding
HK Electric Investments Manager Limited HK$1 100* Hong Kong Trust administration
Hon King Development Limited HK$5,238,963,067 100 Hong Kong Investment holding
Hong Kong Electric International Finance A$45,952,603 100* Australia Investing
(Australia) Pty Ltd
Hongkong Electric (Natural Gas) Limited US$2 100 British Virgin Islands Investment holding
Hongkong Electric Yunnan Dali Wind HK$75,485,352 100* Hong Kong Investment holding
Power Company Limited
Jewel Star Investment Limited HK$1,283,443,709 100* Hong Kong Investing
Kentson Limited US$2 100* British Virgin Islands Investing
Kind Eagle Investment Limited HK$1,073,553,298 100 Hong Kong Investment holding

* Indirectly held

130 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Percentage of Place of
Issued equity held by incorporation/
Name of company share capital the Company operation Principal activity

Mauve Blossom Limited US$1 100* British Virgin Islands Investment holding
Ocean Dawn Investments Limited US$1 100 British Virgin Islands Holding deposits
Optimal Glory Limited US$102 100* British Virgin Islands/ Investment holding
Hong Kong
Outram Limited US$1 100* British Virgin Islands Investment holding
PAH Canadian Midstream Assets Inc. C$866,276 100* Canada Investment holding
PAH Canadian Midstream Assets C$350,653,501 100* Canada Investment holding
Holdings Inc.
PAH Gas Infrastructure Limited GBP330,830,581 100* United Kingdom Investment holding
PAI Investment Holdings Limited HK$2 100* Hong Kong Provision of
management services
PAI International Power (Mauritius) Limited US$2 100* Mauritius Investment holding
Popular Sky Investment Limited HK$1 and 100* Hong Kong Investment holding
GBP193,500,000
Power Assets Investments Limited US$50,901 100 British Virgin Islands Investment holding
Precious Glory Limited HK$11,012,527,147 100* Hong Kong Investment holding
Quick Reach International Limited US$1 100* British Virgin Islands Obtaining external
funding
Quickview Limited US$2 100 British Virgin Islands Investment holding
Sigerson Business Corp. US$101 100* British Virgin Islands Investment holding
Smarter Corporate Limited US$2 100* British Virgin Islands Property holding
Sparkle Gain Investment Limited HK$5,238,963,067 100* Hong Kong Investment holding
Superb Year Limited US$2 100* British Virgin Islands Investment holding
Vanora Holdings Limited US$1 100* British Virgin Islands Investing
Well Joint Investment Limited HK$2,457,616,097 100* Hong Kong Investment holding

* Indirectly held

Annual Report 2021 131


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

Appendix 3
Principal joint ventures
The following list contains only the particulars of joint ventures as at 31 December 2021 which principally affected the
results or assets of the Group:

Percentage of
the Group’s Place of
Issued or registered effective incorporation/ Measurement
Name of joint venture share capital interest operation Principal activity method

Australian Gas Networks Limited (note (a)) A$879,082,753 27.51% Australia Gas distribution Equity
AVR-Afvalverwerking B.V. (note (b)) EUR1 27% The Netherlands Producing energy Equity
from waste
Canadian Power Holdings Inc. (note (c)) C$206,645,761 50% Canada Electricity generation Equity
Ordinary shares
CK William UK Holdings Limited (notes (d) & (e)) GBP2,049,000,000 20% United Kingdom Investment holding Equity
Electricity First Limited (note (f)) GBP1,004 50% United Kingdom Electricity generation Equity
Husky Midstream Limited Partnership (note (g)) C$1,153,845,000 48.75% Canada Oil pipelines, storage Equity
Class A units facilities and ancillary
C$621,301,154 assets operation
Class B units
C$1,776,923
General Partnership
Interest
Northern Gas Networks Holdings Limited GBP71,670,980 41.29% United Kingdom Gas distribution Equity
(note (h))
Transmission Operations (Australia) Pty Limited A$20,979,450 50% Australia Electricity transmission Equity
(note (i))
Transmission Operations (Australia) 2 Pty A$10,382,100 50% Australia Electricity transmission Equity
Limited (note (i))
UK Power Networks Holdings Limited GBP610,000,000 40% United Kingdom Electricity distribution Equity
(note (j)) Ordinary shares
Wales & West Gas Networks (Holdings) GBP29,027 36% United Kingdom Gas distribution Equity
Limited (note (k))
Wellington Electricity Distribution Network NZ$406,500,100 50% New Zealand Electricity distribution Equity
Limited (note (l))

132 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Notes:

(a) Australian Gas Networks Limited owns strategic gas distribution networks and transmission pipelines that operate in South Australia,
Victoria, Queensland, New South Wales and the Northern Territory.

(b) AVR-Afvalverwerking B.V. is owned by Dutch Enviro Energy Holdings B.V., which is principally engaged in the business of waste
processing and production and supply of renewable energy from the incineration of waste.

(c) Canadian Power Holdings Inc. holds 49.99% partnership interest in TransAlta Cogeneration L.P. which owns interest in four power
plants in Alberta and Ontario, Canada. Canadian Power Holdings Inc. also holds 100% interest in the Meridian gas-fired combined
cycle cogeneration plant in Saskatchewan, Canada and 100% interest in Okanagan Wind projects in British Columbia, Canada since
2021.

(d) CK William UK Holdings Limited owns 100% interest in the following companies:

Energy Developments Pty Limited


Multinet Group Holdings Pty Limited
DBNGP Holdings Pty Limited

Energy Developments Pty Limited owns and operates an energy generation business mainly in Australia. Multinet Group Holdings Pty
Limited and DBNGP Holdings Pty Limited operate natural gas distribution businesses in Australia.

(e) CK William UK Holdings Limited owns 66% interest in United Energy Distribution Holdings Pty Limited, which operates an energy
distribution business in Australia.

(f) Electricity First Limited holds 50% stake in Seabank Power Limited, an electricity-generating company located near Bristol in the
United Kingdom.

(g) Husky Midstream Limited Partnership assumes ownership of midstream pipeline and terminal assets in the Lloydminster region of
Alberta and Saskatchewan, Canada. Its asset portfolio includes oil pipeline, storage facilities and other ancillary assets.

(h) Northern Gas Networks Holdings Limited operates a gas distribution network in the North and North East of England.

(i) Australian Energy Operations Pty Ltd is the holding company of Transmission Operations (Australia) Pty Limited and Transmission
Operations (Australia) 2 Pty Limited, which businesses include the design, build, own and operate transmission lines and associate
terminal stations to transport the electricity generated from the Mt. Mercer, Ararat, Moorabool and Elaine Wind Farms in Victoria,
Australia to the main power grid.

(j) UK Power Networks Holdings Limited owns and operates three regulated electricity distribution networks in the United Kingdom that
cover London, South East England and East England. The power networks also include certain non-regulated electricity distribution
businesses, which consist predominantly of commercial contracts to distribute electricity to a number of privately owned sites.

(k) Wales & West Gas Networks (Holdings) Limited is engaged in gas distribution in Wales and the South West of England.

(l) Wellington Electricity Distribution Network Limited supplies electricity to Wellington, Porirua and Hutt Valley regions of New Zealand.

Annual Report 2021 133


Notes to the Financial Statements
(Expressed in Hong Kong dollars unless otherwise indicated)

Appendix 4
Principal associates
The following list contains only the particulars of associates as at 31 December 2021 which principally affected the
results or assets of the Group:

Percentage of
the Group’s Place of
Issued effective incorporation/ Measurement
Name of associate share capital interest operation Principal activity method

HK Electric Investments and HK Electric 8,836,200,000 33.37% Cayman Islands/ Investment holding Equity
Investments Limited (note (a)) share stapled Hong Kong
units being the
combination of
8,836,200,000 Units,
HK$4,418,100
Ordinary shares and
HK$4,418,100
Preference shares
SA Power Networks Partnership (note (b)) N/A 27.93% Australia Electricity distribution Equity
Victoria Power Networks Pty Limited (note (c)) A$315,498,640 27.93% Australia Electricity distribution Equity

Notes:

(a) HK Electric Investments and HK Electric Investments Limited collectively (“HKEI”) holds 100% of The Hongkong Electric Company,
Limited (“HK Electric”). HK Electric is responsible for the generation, transmission, distribution and supply of electricity to Hong Kong
and Lamma Islands.

(b) SA Power Networks Partnership operates and manages the electricity distribution business in the state of South Australia in Australia.

(c) Victoria Power Networks Pty Limited is the holding company of Powercor Australia Limited (“Powercor”) and The CitiPower Trust
Limited (“CitiPower”). Powercor operates and manages an electricity distribution business in western Victoria, Australia. CitiPower
distributes electricity to the Melbourne Central business district in Australia.

134 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Five-Year Group Profit Summary and


Group Statement of Financial Position
Five-Year Group Profit Summary
HK$ million 2021 2020 2019 2018 2017

Revenue 1,276 1,270 1,348 1,555 1,420

Operating profit 1,501 1,175 1,760 1,528 2,557


Finance costs (125) (86) (96) (194) (295)
Share of profits less losses of joint ventures
and associates 4,896 5,111 5,510 6,356 6,154
Profit before taxation 6,272 6,200 7,174 7,690 8,416
Income tax (132) (68) (43) (54) (97)
Profit attributable to equity shareholders
of the Company 6,140 6,132 7,131 7,636 8,319

Five-Year Group Statement of Financial Position


HK$ million 2021 2020 2019 2018 2017

Property, plant and equipment and


leasehold land 20 17 19 14 14
Interest in joint ventures and associates 87,135 85,552 86,142 79,422 81,004
Other non-current financial assets 1,100 1,100 1,100 5,100 67
Other non-current assets 1,086 821 1,295 1,426 342
Net current assets/(liabilities) 1,409 (1,344) 691 1,403 18,742
Total assets less current liabilities 90,750 86,146 89,247 87,365 100,169
Non-current liabilities (3,983) (1,380) (3,755) (3,808) (4,589)
Net assets 86,767 84,766 85,492 83,557 95,580

Share capital 6,610 6,610 6,610 6,610 6,610


Reserves 80,157 78,156 78,882 76,947 88,970
Capital and reserves 86,767 84,766 85,492 83,557 95,580

Annual Report 2021 135


Corporate Information

Board of Directors Auditor


Executive Directors KPMG
FOK Kin Ning, Canning (Chairman)
TSAI Chao Chung, Charles (Chief Executive Officer) Website
CHAN Loi Shun
Andrew John HUNTER www.powerassets.com
Neil Douglas MCGEE
WAN Chi Tin Registered Office
Unit 2005, 20th Floor, Cheung Kong Center,
Non-executive Directors
2 Queen’s Road Central, Hong Kong
LEUNG Hong Shun, Alexander
Telephone: (852) 2122 9122
LI Tzar Kuoi, Victor
Facsimile: (852) 2180 9708
Independent Non-executive Directors Email: [email protected]

IP Yuk-keung, Albert
KOH Poh Wah Share Registrar
LUI Wai Yu, Albert Computershare Hong Kong Investor
Ralph Raymond SHEA Services Limited
WU Ting Yuk, Anthony
Shops 1712–1716,
Audit Committee 17th Floor, Hopewell Centre,
183 Queen’s Road East,
IP Yuk-keung, Albert (Chairman) Wanchai, Hong Kong
KOH Poh Wah Website: www.computershare.com/hk/contact
Ralph Raymond SHEA
WU Ting Yuk, Anthony
ADR (Level 1 Programme)
Remuneration Committee Depositary
Ralph Raymond SHEA (Chairman) Citibank, N.A.
FOK Kin Ning, Canning Shareholder Services
LUI Wai Yu, Albert P.O. Box 43077, Providence,
Rhode Island 02940-3077, U.S.A.
Nomination Committee Website: www.citi.com/dr
IP Yuk-keung, Albert (Chairman) Email: [email protected]
LI Tzar Kuoi, Victor
Ralph Raymond SHEA Investor Relations
Sustainability Committee For institutional investors, please contact:
CHAN Loi Shun (Executive Director) or
TSAI Chao Chung, Charles (Chairman)
Ivan CHAN (Chief Financial Officer)
CHAN Loi Shun
IP Yuk-keung, Albert
For other investors, please contact:
Company Secretary Alex NG (Company Secretary)

Alex NG
Email: [email protected]
Principal Bankers Telephone: (852) 2122 9122
Facsimile: (852) 2180 9708
Bank of China (Hong Kong) Limited
Postal Address: G.P.O. Box 338, Hong Kong
Hang Seng Bank Limited
Address: Unit 2005, 20th Floor, Cheung Kong Center,
The Hongkong and Shanghai Banking Corporation Limited
2 Queen’s Road Central, Hong Kong
MUFG Bank, Ltd.

136 Power Assets Holdings Limited


Business Review Corporate Governance Financial Statements Other Information

Financial Calendar and Share Information

Financial Calendar
Interim Results Announcement 4 August 2021

Annual Results Announcement 16 March 2022

Closure of Register of Members 13 May 2022 to 18 May 2022


– Annual General Meeting (both days inclusive)

Annual General Meeting 18 May 2022

Ex-dividend Date 23 May 2022

Record Date for Final Dividend 24 May 2022

Dividend per Share

Interim : HK$0.78 14 September 2021

Final : HK$2.04 7 June 2022

Share Information
Board Lot 500 shares

Market Capitalisation as at 31 December 2021 HK$103,725 million

Ordinary Share to ADR ratio 1:1

Stock Codes
The Stock Exchange of Hong Kong Limited 6

Bloomberg 6 HK

Refinitiv 0006.HK

ADR Ticker Symbol HGKGY

CUSIP Number 739197200

This Annual Report has been printed in both the English and Chinese languages. If shareholders who have
received an English copy of this Annual Report wish to obtain a Chinese copy, or vice versa, they may request for
it by writing to the share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell
Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

This Annual Report has been posted in both the English and Chinese languages on the Company’s website at
www.powerassets.com. If, for any reason, shareholders who have chosen (or are deemed to have consented) to
receive corporate communications through the Company’s website have difficulty in gaining access to the Annual
Report, they may request that a printed copy of this Annual Report be sent to them free of charge by mail.

Shareholders may at any time change their choice of language of all future corporate communications, or choose
to receive all future corporate communications either in printed form or through the Company ’s website, by
writing to the Company at Unit 2005, 20th Floor, Cheung Kong Center, 2 Queen’s Road Central, Hong Kong or
to the share registrar, Computershare Hong Kong Investor Services Limited at the address above-mentioned or by
emailing to the Company’s email address at [email protected].

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