Good afternoon, everybody, welcome to 2022 annual results for CLP Holdings. My name is Marissa Wong, Director of Investor Relations, and I'm joined by Chief Executive Officer, Mr. Richard Lancaster, and Chief Financial Officer, Mr. Nicolas Tissot, who will both be delivering the briefing today. We will follow our usual practice and hear from Richard on CLP's 2022 overview, as well as strategic outlook, and then Nicolas on our financial results. This will be followed by a Q&A session. For Zoom participants, please use your raise hand icon to ask a live question. For you joining webcast, please submit your questions through the Q&A box at the bottom right-hand of your screen. Some housekeeping matters before we begin. We lodged our 2022 annual results announcement with the Hong Kong Exchange around midday today.
The announcement, this briefing, and the presentation will be available online later. Please remember to read the disclaimer on slide one. With that, I will now hand over to Richard to begin the briefing. Thank you, Richard.
Good afternoon, ladies and gentlemen, welcome to our 2022 annual results presentation. 2022 was a year of challenges and shocks. The events we experienced were unprecedented, they fundamentally saw the energy sector change and the world playing catch up to this change. The Russia-Ukraine conflict impacted all of us. Energy costs increased as countries climbed to secure energy. We saw inflation and rising interest rates putting pressure on the cost of living and the acceleration of the energy transition as the world looked for ways to address climate change. All of these were against the backdrop of a lingering pandemic and the uncertainty of international politics. It certainly was one of the most challenging times in recent years. It also demonstrated that to be a critical energy supplier has its opportunities and also deep responsibilities.
Our response is to continue to address all three elements of the Energy Trilemma, that is, to provide reliable, affordable and cleaner energy. We've taken action to smooth energy costs in support of customers by freezing the basic tariff in Hong Kong and providing support packages to vulnerable customers. We're investing in infrastructure and strengthening partnerships that are needed for an orderly transition. We've taken steps to phase out coal plants responsibly so as to reduce our emissions. We've adapted to the volatility, and we've got things done that were in our control with care for people, customers, community and the environment, and always with performance at the center. Now, turning to CLP's 2022 financial year performance. We delivered steady growth in earnings in our core markets, Hong Kong and Mainland China, while maintaining a strong financial profile and investing for the future.
The performance in Hong Kong was again dependable as we complete the infrastructure foundations needed for the transition to cleaner energy. In Mainland China, our diversified portfolio delivered strong results, and we stepped up the pace of our investments in renewable energy. Our business in Australia saw the impact on earnings of low baseload generation and reflected a very volatile and complex market. We continued our ongoing capital management discipline with a constant eye to returning reliable dividends to our shareholders and pursuing growth opportunities in the energy transition. Finally, with a clear path to net zero embedded in our business, we're well-positioned to decarbonize our business, invest in clean energy infrastructure and services, and capture opportunities in the age of electrification. Turning to CLP's highlights for 2022.
Our core markets of Hong Kong and Mainland China achieved a strong performance with earnings of HKD 10.9 billion, which was 8% higher than 2021. The group's performance was affected by EnergyAustralia's operating loss and the unrealized accounting fair value movements. Before factoring in the impact of the fair value loss, CLP reported a reduction in operating earnings of 23% to HKD 7.6 billion. With the unrealized fair value loss, operating earnings were at HKD 4.6 billion, which were reduced by 51% compared to 2021. The board remains confident in the group's prospects and has approved a fourth interim dividend at HKD 1.21 per share. This brings the total dividend for 2022 to HKD 3.10 per share, the same as 2021.
Based on the year-end closing share price, this provides a yield to investors of 5.4%. Turning to our operating performance, I want to acknowledge our people who've stayed focused on operating our assets safely and ensuring our customers were provided with their energy needs. A cable bridge fire in June led to a loss of supply to some of our customers in the New Territories West region. This impacted our unplanned customer minutes lost, which is our main reliability metric. We've conducted a detailed fire risk assessment of all of our facilities and the necessary follow-up steps to safeguard against any repeat of this unfortunate incident. On other operational matters, our customer accounts in Hong Kong and Australia grew, and our greenhouse gas emissions in intensity continued to reduce.
We continued to invest in the transition to clean energy, adding solar and battery projects in China, wind projects in India, and storage in Australia. I'll now hand over to Nicolas to take you through our financial results in more detail.
Thank you, Richard, and good afternoon. Coming back to operating earnings for the group, it is important to highlight that our businesses in our core markets, Hong Kong and Mainland China, delivered very robust results, with combined earnings increasing by HKD 0.8 billion to HKD 10.9 billion.
The results of our Australia business reflected the challenging environment that Richard spoke about, entirely explains why the group's operating earnings before and after EnergyAustralia fair value movements were down 23% and 51% respectively. Throughout 2022, we flagged that earnings in Australia would be weak. The lower against forward sold generation of our coal-fired power plants in a period of high wholesale prices led to a loss of HKD 2.3 billion before negative fair value movements. Including the fair value losses of - HKD 3 billion after tax, which improved from HKD 8 billion at the half year, again reflecting the volatility, we reported operating earnings of HKD 4.6 billion, 51% lower than 2021. To a far lesser extent, lower capacity tariffs at Jhajjar in India and high coal prices at Heping in Taiwan impacted contributions from those regions.
Adjusted for some negative items affecting comparability, which mainly represent the accounting impact of the sell-down of Apraava Energy, total earnings for 2022 were HKD 924 million. All in all, these accounts bear the mark of the global energy crisis impact on our Australia business, while our core earnings base here in Hong Kong and Mainland China have proved very robust and resilient. This slide reconciles our group operating earnings with the metric we use to discuss segment underlying operating performance in more detail, namely, the adjusted current operating income, or ACOI. As a note to our investors, after careful consideration, we will be moving away from ACOI and adopting more straightforward metrics of EBITDA and adjusted operating earnings to better reflect the evolution of the group.
Our strategy is now focused on our integrated development in Hong Kong and Mainland China, while we manage our overseas businesses as self-funded entities, in some cases, in partnership, if it better supports our development, like in India. Reporting a commonly used consolidated EBITDA, which can help compare CLP with other companies in our industry, and then studying specifically each business unit performance on an adjusted operating earnings basis makes a lot of sense. You will see ACOI for the last time today, as we will start reporting with these new metrics for our 2023 interims. Of course, we will continue to provide ACOI as a reference throughout the year. Back to the reconciliation. In summary, we recorded a pre-tax unfavorable fair value movement, which is primarily related to EnergyAustralia's forward energy contracts.
Financing costs were higher to meet EnergyAustralia's liquidity requirements and other operational needs in the group. Tax expenses were lower, mainly as a result of reduced taxable base driven by the loss in Australia. In 2022, we report a consolidated ACOI of HKD 11.9 billion, or a 22% decrease compared with the prior year, before adjusting for foreign exchange movements. Moving now to a discussion of ACOI. After adjusting for year-on-year foreign exchange movements, the reduction was 20%. The negative foreign exchange impact aggregating to HKD 293 million reflects a strong Hong Kong dollar against renminbi, Australian dollar, and rupee. Illustrated clearly in this chart, the reduced contributions mainly came from Australia. I will now address each of the business units in turn. From here, all variances will exclude foreign exchange.
Looking at the performance of Hong Kong, the slightly higher ACOI reflected the ongoing investment in electricity infrastructure to ensure a reliable and cleaner supply to our customers. On an accrual basis, we invested HKD 12.6 billion of CapEx, which was 12% higher than in 2021. This was made up of HKD 6 billion in transmission, distribution, and smart meters, and another HKD 6.6 billion in low carbon-emitting generation facilities. 2022 was a busy year in Hong Kong, where we did our best to minimize the impact of fuel costs on customers. We worked to keep the basic tariff at HKD 0.937 per unit of electricity for 2022, the same level as it was in 2021.
Although inevitably, there was an increase in the fuel component of the tariff at the start of the year to reflect higher fuel costs, it is worth noting that the scale did not reach the magnitude seen in many other parts of the world. We acknowledge that this is a challenging time for customers, particularly with the rising cost of living, so we have allocated $200 million to support families in need, and have again committed to freeze the basic tariff at HKD 0.937 for 2023. Despite disruptions to global supply chain, we are delivering on our key infrastructure projects. The offshore LNG regasification terminal will go into service this year, and the second state-of-the-art combined cycle gas turbine at Black Point is scheduled for full operation in early 2024. Demand for energy efficiency and emission reduction solutions continue to grow.
Our wholly owned subsidiary, CLPe, is scaling up to deliver urban and industrial solutions across power, heating, cooling, transportation, and data centers. Looking ahead, we are working closely with the Hong Kong government to finalize the next five-year development plan, which will start in 2024 and continue to invest in low carbon energy systems to deliver secure and affordable electricity. Over now to our second home market, Mainland China, where our diversified portfolio performed well and recorded an ACOI of HKD 2.8 billion, 38% higher than the low point of 2021, which was strongly impacted by high coal prices. Earnings from nuclear continued to be high, with Yangjiang achieving record electricity generation. Output from our renewable energy portfolio rose because of higher hydro resources and the early commercial operation of our 100 MW Qian'an III wind farm.
Altogether, contribution from the non-carbon emitting portfolio now account for most of our earnings in China. The positive variance in thermal earnings was due to a negative one-off adjustment in 2021 for the Shandong joint venture assets that was not repeated in 2022, together with high contributions from coal-fired projects, thanks to higher tariffs. In line with our commitment to phase out coal from our portfolio by 2040 and focus on zero carbon projects, we sold our 70% stake in Fangchenggang. The proceeds will indeed allow us to release resources to invest in energy transition in Mainland China. With the support of the central government, there was an increase in the collection of delayed national subsidies in 2022, allowing for a stabilization of the associated receivables position in renminbi.
Thanks to the stronger HKD against renminbi, the subsidy receivables stood at HKD 2.1 billion at the end of December 2022 versus HKD 2.3 billion at the end of 2021. We remain positive about our long-term prospects in Mainland China with a healthy grid parity renewables pipeline and the expansion of our integrated energy services to the Greater Bay Area. Turning to Energy Australia's financial results, it was a tough year, where tight market supply led to extremely high wholesale prices and subsequently the unprecedented suspension of the National Electricity Market in June. The profitability of our baseload plants, Mount Piper and Yallourn, were severely impacted for not being able to generate the volumes sold forward during a high wholesale price environment. Consequently, we faced short positions in a high pool price environment.
This was the major driver behind ACOI going to -HKD 3.1 billion. Mount Piper's utilization was low at 49% in 2022 due to scarcity of coal in New South Wales. Yallourn's availability was at 67%, lower than planned due to outages caused by latent and age-related degradation of this nearly 50-year-old plant due to close in 2028. While our baseload coal generators had a challenging year, our gas assets were reliable and responded well to system demands. Despite continuous intense competition, the customer segment resisted well, thanks to the hard work put in over the recent years, with both earnings and customer numbers growing and a churn rate below market average. Turning to outlook, we know that our generation assets are now even more critical in an uncertain and sometimes disorderly transition.
Our priorities are to announce the reliability of Yallourn by making the investments required and improve the coal supply of Mount Piper. The main coal supply contract has been renegotiated to include a backup mine. Our remaining legacy forward contracts that we entered into before the surge in wholesale prices will have largely rolled off by the end of 2023. We have also reviewed our forward contracting to match the expected availability post the disruptive experience of 2022 and in readiness for the Australian winter of 2023 and the Australian summer of 2023, 2024. We are also strategically adding a base of flexible and firming capacity to balance a system with more and more intermittent renewables. This provides a powerful platform to support Australia's energy transition. Regarding our customer segment, we will continue to responsibly grow and support our customer base while managing margins.
Taking a quick, closer look at market conditions, you can see here that there has been downward pressure on both spot and forward prices since the spike following the war in Ukraine. In particular, quarter two 2023 forward prices have come down and settled at around AUD 135 per MWh in New South Wales and around AUD 86 in Victoria. However, 2024 forward prices continue to be well above 2020 and 2021 prices. As we work to introduce generation supply to the system and examine the impact of the recent government price caps, we therefore see signs of recovery of margins and earnings in the Australian business coming progressively in 2023 and then in 2024.
Moving to Apraava Energy, we delivered good performance where we recorded an ACOI of HKD 864 million, 1.4% higher than 2021. Slightly higher ACOI was mainly thanks to full year earnings impact from KMTL transmission project. This was partly offset by the lower wind resources due to an average monsoon season and lower capacity tariff at Jhajjar as per its PPA. A new scheme to ensure better payment discipline was introduced by the Ministry of Power in June. Outstanding receivables decreased to HKD 564 million by the end of December, to be compared with HKD 883 million a year earlier. We completed the sale of an additional 10% stake to our partner, CDPQ. Therefore, this will be the last time we report India as a subsidiary.
After we closed the transaction in December 2022, it was deconsolidated from our accounts and is now equity accounted as a 50/50 joint venture. With a new board, a strong management team, and a new capital structure, Apraava Energy is well-positioned to expand its non-carbon portfolio and play its role in India's energy transition. Turning to cash generation, free cash flow was lower at HKD 11.1 billion compared to HKD 16.8 billion in 2021 due to the combination of lower funds from operations, mainly in Australia and to a lesser extent in Hong Kong, and unfavorable working capital movements in those two geographies. In Australia, negative cash flow from operations of HKD 2.9 billion is largely attributable to lower earnings from the energy segment.
There was a high working capital outflow during 2022 for margin deposits of future contracts, although our position significantly improved in the second half with futures contracts rolling off and forward prices declining in the last weeks of 2022. In Hong Kong, a COVID impacted first half and a significant improvement in the second half led to lower funds from operations by around HKD 0.5 billion for the year. There was working capital outflow to help alleviate tariff pressure coming from surging fuel costs, resulting in higher Fuel Clause Account. Special rebate provided to customers also impacted cash generation. The group increased its capital investment to HKD 16 billion on a cash basis, comprising of HKD 10.8 billion paid for infrastructure investments in Hong Kong and the remainder in accelerated investments in renewables projects and flexible assets in China, in India, and in Australia.
In view of a more challenging year, due to non-recurrent reasons, the board decided to maintain dividend payments for the year exactly at the same level as last year at HKD 7.8 billion. Group financial situation remained healthy, although net debt increased by HKD 5 billion to HKD 54.9 billion. Our net debt to total capital ratio increased also to 32%. This is driven by the temporary cash deposits required in Australia and accelerated CapEx across the group. These increases were partially offset by the deconsolidation of Apraava's Energy HKD 5.2 billion net debt. We were able to raise funds swiftly in July, both at Australia and group levels, to maintain strong liquidity throughout the year with undrawn bank facilities of HKD 31.6 billion and cash balances of HKD 4.3 billion at the end of the year.
In anticipation of the interest rate rises, we have actively reduced our exposure in 2021 and early 2022 by securing competitive fixed rate fundings. As a result, our blended average interest rate for the group in 2022 is only marginally higher than that of 2021. With our extended debt maturity profile, a majority of fixed rate debt and our diversified sources of funding. We are well-placed in the current higher interest rate environment. Both S&P and Moody's have maintained the same credit ratings for our Hong Kong entities in 2022. In particular, A by Standard & Poor's, A2 by Moody's long-term rating with stable outlook for CLP Holdings. Our credit ratings will be reviewed in the second quarter as usual. Worth mentioning, Moody's recently assigned a Baa2 rating to EnergyAustralia with a stable outlook, noting its solid contribution to the National Electricity Market.
We are in a good position to address our commitments to shareholders and bondholders, face our liquidity requirements, and continue to fund our investment plans. With that, I'll turn it over to Richard.
Thank you, Nicolas. Our strategy for growth and value creation is underpinned by the fact that energy systems are undergoing transition and change. These three priorities will guide our activities through the energy transition. First, we'll continue to invest in a diverse mix of carbon-free assets, including renewables, energy storage, and nuclear power with capital and cost discipline, and capture the growth opportunities in an increasingly electrified world. Second, we'll decarbonize our operations while continuing to run a reliable, affordable, and safe energy system. Lastly, driving our organization that's engineering a low-carbon future. We'll continue to invest in our people and our systems to ensure that we have the necessary capabilities to support our next generation of growth. It starts with our home market, where we provide about 80% of Hong Kong's electricity.
The policy address by the new administration late last year made a clear commitment to economic growth. Key developments in the government's five-year blueprint include expanding Hong Kong's economic base to the Northern Metropolis in the new territories, adding around 15 new railway lines and over 40 stations, creating new land and public housing to address the city's housing shortage, and facilitating Hong Kong as the super connector between the West and the East. That's just to mention a few. It's a bold plan and a potential game changer for the city. The electricity demand expected and the infrastructure required for these kinds of large-scale developments will be capital intensive, and they need careful planning, investment, and coordination with the government.
We stand ready to work closely with the government to support Hong Kong's future growth and ensure that CLP continues to deliver reliable and cost-effective power to our customers at a faster pace. There's still the work of an orderly transition, and that is how to reduce carbon intensity while still providing affordable and reliable energy. This is something many are grappling with, as highlighted by the volatility we're now seeing in the global energy markets. We're fortunate in Hong Kong that we have a Scheme of Control Agreement. It's a regime that recognizes the long-term nature of the electricity industry. The Scheme of Control has worked for over half a century now, and it continues to provide the regulatory and economic certainty needed to plan and invest in electricity infrastructure, which has allowed us to deliver one of the best electricity systems in the world.
It'll also be what underpins our support of Hong Kong's development and to deliver on the government's net zero ambition by 2050, which will be a win-win for all parties. We've been busy executing the plan for an orderly transition, and it's why we recently invested in additional capacity at the Black Point Power Station and the offshore LNG terminal, so that we can replace an entire coal-fired power station at our Castle Peak site. It's why we're strengthening our interconnectors and upgrading our grid so that we can import more nuclear and renewable energy. It's also why we're expanding our capability to transition from natural gas to green hydrogen over time, and working with the government to electrify the transport sector.
I believe we have the right approach in Hong Kong, which enables the delivery of secure and affordable energy today, at the same time accelerate to a clean economy. Over now to our second home market, Mainland China, where a recent International Energy Agency report predicted that 1/3 of the world's electricity will come from this region by 2025. That's more than the EU, the United States, and India combined. We pioneered investments in China several decades ago with the Daya Bay Nuclear Power Plant in Guangdong. Today, we're the largest external investor in the energy sector on the Mainland, having expanded our renewables portfolio into 11 provinces, municipalities, and autonomous regions. Our clean energy portfolio now accounts for the majority of our earnings in China.
The scale of opportunity in power generation is huge, starting with the Chinese government's commitment to carbon neutrality by 2060 and the transformation of the region at our doorstep, the Greater Bay Area, into an international business hub within the next decade. We're also seeing increasing demand from corporate clients for green products such as corporate power purchase agreements, green energy certificates, and carbon offsets. This all plays to our wheelhouse of expertise, proximity, and our energy experience. As China and the Greater Bay Area go through large-scale decarbonization and digitalization. As regional cooperation between the Hong Kong government and the Chinese government strengthen, we're well-placed to capture growth opportunities and ultimately to create sustainable long-term value for our shareholders. We talk about big scale infrastructure projects, but we also need to think about the energy transition for customers, businesses, and industries.
This is a growing part of our business, and at the heart of it's about directly connecting with customers to provide them with a range of energy solutions for their decarbonization goals. We're scaling up and offering solutions to evolving energy needs and establishing relationships at the same time to create a platform for future growth as customers mature on their decarbonization journey. In 2022, we saw a number of these relationships take shape, including providing carbon management for large corporate customers, entering into partnerships for electrification of fleets, and the development of sustainable data and logistics centers. We look forward to continuing to support customers with our unique portfolio of supply, demand, and flexibility products. Finally, another critical part of our strategy is our Climate Vision 2050, the blueprint of the group's transition to net zero.
I'm pleased to report that we remain not only on track, but since we last updated our targets just over a year ago, we're ahead in our progress as a result of phasing out of coal assets in China and India. While our carbon intensity target in 2022 is in line with the decarbonization trajectory, our early exit from Fangchenggang Power Station in Mainland China and the change in equity in Apraava Energy will contribute around a 10% reduction in CLP Scope 1 emissions based on 2022 levels. There will be short-term challenges, especially in addressing those assets that play a critical role in energy security and affordability. We're nevertheless committed to taking a planned and orderly approach and ensuring a just transition. Our engagement with the Yallourn community and the development of a transition support package for the workers is just one example of this.
A review of our current Climate Vision 2050 is underway. We maintain our commitment to work towards a 1.5 degree aligned target. In closing, I want to thank our team for their hard work and dedication. As we move forward, we're excited about the opportunities ahead, and we remain focused on our mission to responsibly contribute to the success of the energy transition and to deliver long-term value for our shareholders. Thank you for your time, and I'll now pass back to Marissa.
Thank you, Richard. Thank you, Nicolas. We will now commence the Q&A session. Just a reminder again for Zoom analyst participants, please use the raise hand icon to ask a live question. For webcast participants, please submit your questions through the Q&A box at the bottom right-hand of your screen. We'll open up the lines. While we wait for someone to ask a live question, we do have one from Evan Li, HSBC. How should we anticipate the upcoming development plan in Hong Kong? Details on how CLP would benefit from a potential offshore wind farm, development of Northern Metropolis, et cetera, would be appreciated. Richard.
Well, as I reported, we have started discussions with government on our 2024- 2028 development plan. That will be a five-year plan. Clearly in government's framework and in their thinking, the development of the Northern Metropolis and expanding the transport infrastructure in Hong Kong is factored into their plans as well, along with the target to decarbonize. All of this will need to be discussed with government during the course of this year. Ultimately, the projects that will be approved by government will then form our CapEx plan for the next five years. It's a little bit early to be discussing details of that at the moment.
Thank you, Richard. We have a question from Pierre Lau from Citibank. Pierre, please go ahead. Can you hear us, Pierre? Again, while we wait for Pierre to come online, and we hope to hear from you soon, Pierre.
Hi. Hello.
Here we go.
There he is.
Hi, Pierre.
Hi. I'm sorry about that. Okay. Good afternoon, everyone. Thanks for Richard for the presentations. I have three questions. The first one is on page 16 of your presentations. You show that EnergyAustralia had around HKD 4 billion negative free cash flow for last year. Do you expect negative free cash flow from EnergyAustralia to persist in 2023, or you expect it turn into positive number? Second question is also about Australia. I recorded a years ago, you said that you aims to sell part of your estate in EnergyAustralia, so that it could be self-funded. What is the update on this issue? The third question is also about Australia.
If you could not get any acceptable offer to reduce your estate in EnergyAustralia, what other alternative would you consider to empower your equity base in Australia as well as for renewable development there? Thank you.
Thank you, Pierre, for those questions. I'll start with question two and three, perhaps ask Nicolas to address your first question on the negative cash flow and the outlook for that. I'm sure he will give you the answer that we don't give guidance, but he may be able to perhaps explain the cash flow position there. In terms of partnership, I think your questions two and three were related. I'll just talk generally about how we would like to take our EnergyAustralia business forward. There is a need to transition the business. Clearly, we need to replace coal capacity.
We need to invest in replacement capacity, whether that is in storage or in fast start gas capability, or in renewable energy. We need to build that portfolio before we can close down coal-fired assets. Energy Australia will require investment. We have calls on capital right across our group. In a similar way to what we've done in Apraava Energy with our partnership with CDPQ, if we can work in partnership, then, it can see that business grow with new capital. We are able to just recycle that capital and the equity that we have, and that allows the business to grow. We are actively looking for partnerships.
One option that we have, which has worked successfully in Apraava Energy is to find a partnership at the corporate level. Equally, we are open and looking for partnerships at project level as well. If your second question is a rather gloomy prospect that if we cannot find partnerships, the simple answer is that we do need in order to take forward the investments that we need, we will need to find partnerships. If not, then it does constrain our ability to invest in the Australia business, and it will slow down the transition, which is not what we would like to see. Nicolas-
Yeah, sure.
... address the question on cash flow.
Sure. Sure. Anyway, I will not disappoint you by confirming that we are not providing guidance on specifically on earnings of a certain subsidiary and same goes for free cash flow. But I can try to shed some light on the direction of travel for EnergyAustralia. You referred to the numbers which are mentioned in the slide 16 of the presentation with quite a significant level of cash burning in EnergyAustralia coming from basically two elements. One is the movement on EnergyAustralia margin deposits, and the other one coming from operations.
On the margin deposits, the reality is that we are going to have to see our positions coming from the period when we hedged at a low price roll-off progressively, and this is going to happen mostly during 2023 first half and part of second half. Mechanically, because of the roll-off, you should expect an improvement of our position in that respect. Now on the second component coming from operations, I think basically, two factors, two main factors will be at play. The level of reliability of our base load power plants in Australia.
You heard probably that we have plans to improve reliability over time, both at Yallourn by investing selectively in improving the reliability and go through some significant overhaul of some parts of the power plant. We also have a specific effort for Mount Piper, which is not a technical reliability issue, but a matter of securing long-term coal supply at competitive price. We are also in with a perspective of improving on that front. Last but not least, we had a more severe hit on cash flow last year because of the level of hedging.
We faced a very unprecedented market and the confluence of factor which led us to have to cover our short positions with purchases at high spot prices. We have adapted our hedging approach in order to avoid being exposed to that kind of negative situation in the future. Basically, direction of travel is towards a significant improvement, but some of the components, as I just explained, will be over a period of time.
Thank you, Nicolas. We have a question from James Nevin from BlackRock. Nice to hear from you, James, it's about Australia again. Will the actions to bring forward outages at Yallourn and renew contracts at Mount Piper allow the Australian business to return to its historical financial performance? Will hedging policies allow EnergyAustralia to benefit from the recent higher electricity prices in future years?
Perhaps I'll cover that. I think we may have touched on a number of parts to that question. Essentially, if you look at 2022, we saw a sudden and dramatic increase in energy futures and the spot price. We had already sold forward at a lower level. Now combining that with the performance of our plant and the shortage of coal at Mount Piper, we had a heavy exposure to those spot prices. Even though we were selling at a lower price, we still had to replace that energy in the current spot market at a high price. We have done a number of things. We've adjusted our portfolio of forward contracts to reflect the higher prices.
That does take time for that portfolio to adjust over time. We have looked at diversifying, and we have managed to diversify our coal sources for Mount Piper, so we now have alternative sources to the Centennial mine. The third thing that we have done is looked very hard at the availability issues at Yallourn. It is a plant which is 50 years old. It is reaching the end of its life. However, we have now a very clear technical solution to the availability issues which were plaguing us in 2022. We will need to implement that plan at Yallourn. We cannot do that at times when prices are high, and we have that exposure.
As soon as we are able to do that, we have the outages planned, and that, we believe, will address the reliability issues at Yallourn. If you then put all of that together, we will have a new and revised portfolio of forward contracts which will be at higher prices. We will have a better coal supply at Mount Piper. If our plant at Yallourn, once the investment has been made, is performing more reliably, we have all the makings for a much more profitable business.
Thanks, Richard. Lorraine Tan, from Morningstar has a live question. Go ahead, Lorraine.
Yeah. Hi, good evening. Thank you for the presentation. My question's on China, actually. I noticed that, obviously with the sale of the coal-fired plants in late last year, you do have other coal-fired plants in China. I was wondering, what are the plans for those? Would those be, I guess you know, the, I guess, the timing of the sales or the expectations of those in the future and how you plan to replace those investments? Thank you.
Thank you for the question, Lorraine. Yes, Fangchenggang was a plant that we sold. We had a 70% stake in that plant. We have two other legacy joint ventures in a portfolio of coal plants where we are a minority investor in those plants. They are approaching the end of their life, and we are working with our joint venture partners on the closure of those plants. That will happen progressively between now and 2030. We do have a clear timetable for basically closing down those joint ventures. The replacement will be the investments that we're making in renewable energy, in nuclear power in China, which will shift our portfolio completely to a clean energy carbon-free portfolio.
Thanks, Richard. A question from Stephen Tsui, J.P. Morgan, three-part question. Number one, we have maintained flattish dividends per share for three consecutive years. At what circumstances would we consider a DPS hike again? Number two, you mentioned EnergyAustralia has lowered the target level of forward contracting for Yallourn. Can you please let us know the hedging ratio this year compared to 2022? The last question is, could you please give us an update about the renegotiation of the coal supply contract for Mount Piper? Do we have any targeted utilization for Mount Piper for 2023?
Perhaps Nicolas may want to comment on the dividend. The board considers our financial position and looking forward, and agreed at our board meeting today to maintain a flat dividend. We don't give guidance on dividends, but our policy is that we, where we have the resources, we aim for a flat or growing dividend. I'll perhaps ask Nicolas to supplement that. With our level of forward contracting for Yallourn, we have made adjustments based on our assessment of the reliability of the plant.
We won't go into any details about our hedging positions or our hedging ratio, but it is one of the adjustments that we've made to our forward selling is to match it to the target availability and considering that we have planned outages, all of that comes into our considerations with our forward contracts. Your third question, Stephen, was around the coal supply contract for Mount Piper. We have worked with our existing supplier to fix some of the reliability issues that they faced last year. We have also negotiated an alternative supply of coal, which does give us access to more coal at Mount Piper.
Again, because Mount Piper is not in a position to run as a baseload plant, it does run as part of our overall portfolio in New South Wales, and we aim to use it as much as our coal supply will allow. Is there anything you would like to supplement on the dividend?
Yes. Just a word on dividend. It's obviously the privilege of the Board to make any dividend distribution decision. Just to try to give you a little bit of context, I think the three successive flattish dividends really reflect a trade-off between the consistency of our distribution dividend distribution policy over a very long period of time. We basically never reduced dividend over as far as I can remember and I can observe. We want to maintain a long-term consistency with our dividend distribution. At the same time, we also take into account the shorter-term level of performance and notably cash flow generation into account.
We have considered that with the volatility and uncertainty we faced, in particular in Australia in the recent years, it was reasonable to make a pause in the growth, if I may put it that way. I think, resuming DPS growth again would be dependent on how the recovery in Australia, its pace and magnitude will be I guess, a key consideration for the Board.
Thanks, Nicolas. Evan Li, HSBC is on the line. Go ahead, please, Evan.
Hi, it's Evan here. Can you hear me?
Yes, we can. Thanks, Evan.
Great. I have a few questions. Further to the questions on Australia, I have an additional one. Wanted to ask, in the event of the coal supplier not able to deliver the coal supply to Mount Piper, is there any penalty, you know, that, you know, CLP or EnergyAustralia could charge back to the supplier to compensate of the losses of, you know, not able to meet that, you know, coal supply? That'd be my first question. Second question, for Apraava Energy in India, do you think the 50% stake in this JV is a comfortable ownership stake over the long term? Is there any long-term plans that CLP does intend to, you know, divest further, you know, going forward?
My last question will be on your debt portfolio. It seems like float and fixed debt arrangement is about 50/50. 48% float, 52% fixed. At this current rate environment, you know, what would you think will be the more ideal ratio between fixed and float? Thank you.
Thanks for those questions, Evan. I'll ask Nicolas to address the fixed floating debt proportion, but just quickly to cover your first two points. The coal supply to Mount Piper was affected by a number of things last year, not the least, there was very heavy rainfall on the East Coast of Australia, which disrupted supply chains, railway lines, and so on. In many contracts, you will find that there are force majeure events that come into play. The short answer is no. There is no mechanism for us to charge the losses that we suffered as a result of the lack of coal supply. Second question on Apraava.
Yes, we're very comfortable with 50/50 joint venture. We believe our partnership with CDPQ is going well. This is to us the right balance that we strike. It brings both partners and the strengths of both partners into play. We believe that this would be a good platform for us to take forward the growth that we think is available in the Indian market. Nicolas, on the debt?
Yeah. On fixed rate debt. The consolidated proportion of fixed debt in, at the end of 2022 is 52%, so majority of fixed debt. However, this consolidated number does not reflect really the detail of the approach because on a lot of the short-term debt, and in particular working capital facilities, we are by construction with floating rates. In reality, that's a, that's a high level of... That's a high consolidated number and, and, a large majority of our long-term debt is currently fixed debt.
Having clarified that, I think it's important to mention that whether you talk about foreign exchange risk or interest rate risk, the policy of the company is to never be very directional, either towards a floating rate or towards fixed rates. We have modified our, we've geared a little bit our split of between fixed and floating towards more fixed as we were seeing higher interest rates coming. But we are never pushing such an approach beyond a certain level. We are, in the current environment, really happy with the ratio.
This ratio is reviewed in-depth with our team. We are really good with our ratio right now as we speak.
Thanks, Nicolas. One, on Hong Kong from Ken Liu, UBS. Can you explain why net fixed assets for 2022 grew almost 10% year- on- year driven by strong CapEx of HKD 12 billion, but operating earnings from Hong Kong only grew 3%? I would have assumed committed return of 8% implies assets growth should be in line with operating earnings growth in Hong Kong.
That sounds like a question for the CFO, but-
Yeah.
... perhaps depreciation hasn't been.
I'm not. I think 10% is not the growth of net assets. I would expect it to gross assets. I think the level of growth of net fixed assets is very consistent with the level of earnings evolution. I think it's because you are looking at gross assets evolution at 10%.
You need to...
So.
You need to deduct the depreciation.
Yeah, you need to deduct the depreciation, absolutely. You're gonna be between 3% and 4% growth, very consistent with the level of operating earnings evolution.
I think we're hitting to time, so we might just take this as the last question from Rob Koh, Morgan Stanley. Nice to have you with us, Rob. With reference to slide 45, which is the EnergyAustralia summary financials, corporate expense is down AUD 20 million in second half... half on half, and down AUD 50 million versus PCP. What's driving these improvements? Is a second half run rate a good way to think about future?
I think that's very much a CFO question, Nicolas. I think the completion of some of the IT projects that we saw, as well as a continual focus on cost reduction.
Yeah. I think EnergyAustralia went through a transversal cost review and optimized its organization towards a leaner organization, revised the various categories of cost. Facing a difficult year, I believe the team in Australia wanted to really do its best not to add additional cost and optimize the level of cost, and that includes indeed IT costs.
We've had a request for one more question from Simon Lee, Morgan Stanley. Just reading the text. If you just bear with us for a minute. Yes. Reasons for LNG terminal delay, and how would the commissioning relieve fuel cost pressure in Hong Kong, if any?
Thanks for the question, Simon. Essentially getting any major capital project done during COVID was very challenging, in particular with an offshore LNG project that involved supply, equipment supply from Europe, manufacturing in China, and then assembly in Hong Kong. That was the reason it's a little bit delayed. One of the benefits that the offshore LNG terminal brings is the ability to further diversify our natural gas supplies, which in the current environment is a really good thing. If you look at the capital cost of the terminal, it's a fraction of what we spend each year just in purchasing gas.
Having a relatively inexpensive infrastructure that enables us to source gas from anywhere in the world, can only be a good thing for us in helping relieve the cost pressures that we're facing here.
Thank you, Richard. We have come to time, so if there are any other follow-up questions, my team and I will be available to take further questions after this briefing. An archive of this briefing will be available online. Thank you, Richard and Nicolas for the briefing and you all for your attendance. I will now close the briefing. Thank you and goodbye.