Hongkong Electric Holdings Limited

香港電燈集團有限公司
(Incorporated in Hong Kong with limited liability)

2002 INTERIM RESULTS

CHAIRMAN’S STATEMENT

Half Year Results

The unaudited consolidated profit of the Group, after tax and Scheme of Control transfers, for the first
six months of 2002 amounted to HK$2,418 million, a reduction of 1.8% compared to the same period last
year. The profits from the Group’s local activities increased from $2,026 million to $2,252 million
mainly due to a significant reduction in interest charges compared to the same period last year. However,
this increase was more than offset by a decrease in profits from overseas activities from $437 million to
$166 million. While the Group’s businesses in Australia continue to perform well and exceed expectations,
the profit reduction is due to the recording of an exceptional one-off gain arising from the sale of the
retail division of Powercor Australia Limited in the first half of 2001.

Interim Dividend

The Directors have today declared an interim dividend of 58 cents (2001: 56 cents) per share payable to
shareholders whose names appear in the Company’s Register of Members on 26th September 2002.

The Register of Members will be closed from 19th September 2002 to 26th September 2002 both days
inclusive. To qualify for the interim dividend, transfers should be lodged with the Registrars by 4:00 p.m.
on 18th September 2002.

Operations

Electricity unit sales for the six months to 30th June 2002 increased by 1.4% over the same period last
year, with growth in domestic consumption of 3.2% being recorded. However, unit sales to the commercial
sector grew by only 1.4% having been affected by the continuing sluggish economic conditions, as were
unit sales to the industrial sector which declined by 5.2%.

Good progress has been made on the site formation work for the extension of the Lamma Power Station
with construction of the seawall being almost complete. Piling work for the first 300 MW power unit has
started, and superstructure work is scheduled to commence in December. Overall progress of the Lamma
project continues to achieve its tight schedule.

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HONGKONG ELECTRIC – ANNOUNCEMENT
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The conversion of two existing gas turbines into a combined cycle unit was completed on 1st June,
generating an additional 115 MW of power with the same fuel input by recovering waste heat energy.
This improvement in fuel efficiency will benefit our consumers.

Both Powercor Australia Limited and ETSA Utilities, owned equally with Cheung Kong Infrastructure
Holdings Limited (CKI), continue to perform well. The regulated framework within which these businesses
operate provides a high degree of certainty as regards cash flow and profits.

In keeping with the Group’s strategy to invest in electricity related businesses offering acceptable risk
levels and steady margins, the Group, jointly with CKI, reached agreement to acquire CitiPower I Pty
Ltd. (CitiPower) on 19th July 2002 for A$1,418 million (approximately HK$6.2 billion). CitiPower is the
regulated monopoly electricity distribution business which serves the central business district of Melbourne
and its densely populated inner suburbs. This acquisition, due for completion by 31st August 2002,
consolidates the Group’s position as an equal partner in the largest electricity distribution business in
Australia with more than 1.65 million customers.

Outlook

While the slowdown in the completion of some major new buildings and property projects has hampered
electricity sales growth to the commercial sector resulting in only 1.4% growth during the first half, the
3.2% increase in domestic consumption confirms our experience that demand for electricity in Hong
Kong will continue to rise in line with our long term projections.

We will continue to invest in improving and expanding our transmission and distribution system to ensure
that we maintain our high reliability of supply of 99.999% which Hong Kong requires as a world class
city and a leading financial and commercial centre; while at the same time continuing to improve our
operating efficiencies and productivity.

The recently announced acquisition of CitiPower in Melbourne, Australia is a further positive step in our
overseas expansion plans. The Group will continue to examine other electricity related business
opportunities in countries and in segments of the market which offer attractive returns at acceptable
levels of risk.

George C. Magnus
Chairman

Hong Kong, 8th August 2002

FINANCIAL REVIEW

Capital Expenditure, Liquidity, Financial Resources and Gearing Ratio

Capital expenditure during the period amounted to HK$1,596 million, which was primarily funded by
cash from operations and bank loans. As at 30th June 2002, total external borrowings were HK$15,659
million (at 31st December 2001: HK$14,338 million), comprising unsecured bank loans, unsecured
deferred creditors and debt securities in issue. In addition, undrawn committed credit facilities available
to the Group totalled HK$4,253 million (at 31st December 2001: HK$5,744 million). Gearing ratio (net

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debt/shareholders’ funds) at 30th June 2002 was 46% (at 31st December 2001: 41%).

Treasury Policies and Capital Structure

The Group continues to ensure that its businesses are financed from a variety of competitive sources and
that committed facilities are available for future development. In addition, currency and interest risks are
actively managed on a conservative basis.

As at 30th June 2002, external borrowings of the Group amounted to HK$15,659 million with the
following profile:

(1) 70% was either denominated or effectively hedged into Hong Kong dollars and 29% was denominated
in Australian dollars;

(2) 65% was bank loans, 27% was capital market instruments and 8% was suppliers’ credits;

(3) 82% was repayable between 2 to 5 years and 9% was repayable beyond 5 years;

(4) 77% was fixed or capped rate based.

It is the Group’s treasury policy not to engage in speculative transactions. Foreign currency transaction
exposure, other than US dollars, is managed in accordance with treasury guidelines, utilising forward
contracts and interest and currency swaps. As at 30th June 2002, over 99% of the Group’s transaction
exposure was either hedged or denominated in Hong Kong or US dollars. Currency exposure arising from
overseas investments is hedged by arranging comparable level of borrowings in the same currency as the
underlying investments. Interest rate risk is managed by maintaining a substantial portion of the Group’s
debt portfolio in fixed rate. This is achieved either directly by means of fixed rate debt issues or by the
use of interest rate swaps and caps. The contractual notional amounts of derivative instruments outstanding
at 30th June 2002 amounted to HK$14,244 million (at 31st December 2001: HK$14,034 million) equivalent.

Contingent Liabilities

At 30th June 2002, the Company has issued performance guarantees and letters of awareness to banks in
respect of banking facilities available to associates amounting to HK$42 million (at 31st December 2001:
HK$40 million).

At 30th June 2002, the Company has given guarantees and counter indemnities in respect of bank and
other borrowing facilities available to subsidiaries and financial commitments of subsidiaries totalling
HK$9,924 million (at 31st December 2001: HK$8,587 million) equivalent. Out of this amount HK$9,075
million, while being a contingent liability of the Company, is reflected in the Consolidated Balance Sheet
of the Group.

Employees

The Group continues its policy of pay by performance and market pay rates are monitored constantly to
ensure competitiveness is maintained. The Group’s total remuneration costs for the six months ended
30th June 2002, excluding directors’ emoluments, amounted to HK$534 million (2001: HK$542 million).

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As at 30th June 2002, the Group employed 2,286 (2001: 2,342) permanent staff. No share option scheme
is in operation.

Apart from well-established training schemes for university graduates, trainee technicians and apprentices,
the Group also provides training for staff in language, computer knowledge, the latest technology as well
as numerous job-related courses to enhance the skills and knowledge of our employees.

UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the six months ended 30th June 2002
Six months ended 30th June
2002 2001
Note (HK$ million) (HK$ million)

Turnover 2 5,156 4,909

Direct costs (1,798) (1,750)
3,358 3,159

Other revenue and net income 342 308

Other operating costs (270) (227)
Finance costs (261) (393)

Operating profit 3 3,169 2,847

Share of results of associates 99 346

Profit before taxation 3,268 3,193

Taxation: 4
The Company and its subsidiaries
- Hong Kong (405) (305)
Associates - overseas (25) —

Profit after taxation 2,838 2,888

Scheme of Control transfers to: 5

Development Fund (417) (417)
Rate Reduction Reserve (3) (8)

(420) (425)

Profit attributable to shareholders

Local activities 2,252 2,026
Overseas activities 166 437

Total 2,418 2,463

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HONGKONG ELECTRIC – ANNOUNCEMENT
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Proposed interim dividend 1,238 1,195

Earnings per share 6 113 cents 115 cents

Proposed interim dividend per share 58 cents 56 cents

Notes:

1. The interim financial report is unaudited, but has been reviewed by the Audit Committee.

2. The analysis of the principal activities and geographical locations of the operations of the Group during the
financial period are as follows:

Turnover Operating profit

Six months ended 30th June Six months ended 30th June
2002 2001 2002 2001
(HK$ million) (HK$ million) (HK$ million) (HK$ million)
Principal activities
Sales of electricity and
its related income 5,127 4,871 3,104 2,948
Technical service fees 29 38 11 14
Unallocated & other items — — 70 —

5,156 4,909 3,185 2,962

Interest income 259 291

Finance costs (261) (393)
Unallocated group expenses (14) (13)

Operating profit 3,169 2,847

Geographical locations of operations

Turnover
Six months ended 30th June
2002 2001
(HK$ million) (HK$ million)

Hong Kong 5,144 4,894

Rest of Asia, Middle East and Australia 12 15

5,156 4,909

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HONGKONG ELECTRIC – ANNOUNCEMENT
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3. Operating Profit

Operating profit is shown after charging/(crediting):

Six months ended 30th June

2002 2001
(HK$ million) (HK$ million)

Depreciation 815 765

Net realised gain on disposal of listed securities (54) —

4. Hong Kong profits tax has been provided for at the rate of 16% (2001: 16%) based on the estimated
assessable profits for the period. Overseas taxation has been provided for at the applicable rate on the
estimated assessable profit.

5. The Scheme of Control transfers are a mid year notional transfer. The actual Scheme of Control transfers
can only be determined in accordance with the Scheme of Control at the year end.

6. The calculation of earnings per share is based on the profit attributable to shareholders of HK$2,418 million
(2001: HK$2,463 million) and on 2,134,261,654 shares (2001: 2,134,261,654 shares) in issue during the
period.

7. Certain comparative figures have been reclassified to conform to the current financial period’s presentation.

8. A detailed results announcement containing all the information required by paragraphs 46(1) to 46(6) of
Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited (the “Exchange”) will be published on both the Company’s website (www.hec.com.hk) and the
Exchange’s website (www.hkex.com.hk) in due course.

Please also refer to the published version of this announcement in the South China Morning Post.

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HONGKONG ELECTRIC – ANNOUNCEMENT
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