In Hong Kong, we build a global business empire

Chapter 1011 Lin Haoran's Open Scheme: Pulling China Electric Power into the Water!

"Mr. Lin, Director Luo, now that the letter of intent has been signed, I won't stay any longer. I still have many matters to attend to in Hong Kong, so I'll head back now." After signing the letter of intent, Lawrence Kadoorie stood up and bid farewell to Lin Haoran and the mainland leaders.

“Mr. Roland, if you’re not in a hurry, how about we discuss other matters?” Lin Haoran said with a smile.

Although the Daya Bay nuclear power plant project has been finalized, it will take at least seven or eight years for the plant to be completed and operational.

In other words, even if the project starts this year, three years ahead of schedule, it will not be officially operational until at least 1990.

A distant source of water cannot quench a nearby fire.

The power shortage problem in the Pearl River Delta cannot wait until the Daya Bay Nuclear Power Plant is completed before it can be solved.

Lin Haoran has invested so much in the mainland, with factories springing up everywhere. This involves his interests, so naturally he also wants to find a way to help the mainland solve the power shortage problem.

This is helping the mainland, and also helping himself.

Now that Hong Kong's two major power giants are both here, isn't this the perfect time to solve the problem?

Upon hearing this, Laurence Kadoorie stopped and sat down again, looking at Lin Haoran with a puzzled expression, and asked, "Mr. Lin, is there anything else?"

"Director Luo, last year you purchased 3 million kilowatt-hours of electricity from CLP Power, right?" Lin Haoran turned to Director Luo and asked.

Upon hearing this, Director Luo sighed and said, "Yes, Mr. Lin, last year we purchased nearly 3 million kilowatt-hours of electricity from China Power Company. Although this solved part of the power supply problem, it is far from enough!"

Lin Haoran nodded, then looked at Roland Kadoorie again and said, "Mr. Roland, as far as I know, the second 350 MW unit of your CLP Power Company's A-plant in Qingshan will be put into operation next month, with a large surplus of electricity. How about this, CLP Power supplies 10 billion kWh of electricity to Shenzhen this year?"

In addition, Hong Kong Electric Group can also sell 5 million kilowatt-hours of electricity to the mainland through connection with CLP Power's grid, which will greatly alleviate Shenzhen's power shortage.

What is Mr. Rowland's opinion on this matter?

In recent years, with the successive commissioning of CLP Power's Castle Peak Power Station and HK Electric's Lamma Power Station, the power shortage problem no longer exists, and Hong Kong's power self-sufficiency rate has long reached 100%.

Moreover, companies like CLP Power even have surplus electricity that they sell to the mainland.

This is another reason why the Kadoorie family has not been in a hurry to push forward the Daya Bay nuclear power plant project in the past two years.

Upon hearing this, Lawrence Kadoorie sighed and said, "Mr. Lin, it's not that I don't want to supply more electricity to the mainland. In fact, once the Castle Peak A plant goes into operation next month and generates electricity at full capacity, our CLP Power will have a surplus of up to 36% of its electricity."

However, there are too many reasons involved. The biggest problem is that the main grid structure of the Shenzhen power grid is extremely weak and cannot withstand a larger power injection, otherwise it would lead to grid collapse.

Furthermore, the price of electricity we sell to the mainland is too low. In Hong Kong, our local industrial electricity price is about HK$0.35/kWh, while the price of electricity sold to the mainland is only HK$0.08/kWh.

Lin Sheng may not understand, but Chen Sheng should know that improving power transmission is not impossible, but we need to purchase a large amount of imported fuel and equipment, which will require settlement in US dollars.

In mainland China, settlements can only be made in RMB or in kind, such as coal and fuel oil, which has resulted in significant losses for us in terms of exchange rates.

At a price of HK$0.08 per kilowatt-hour, after deducting fuel costs, transportation costs, and equipment depreciation, it's practically a loss-making sale.

It's not that we don't want to sell more, but the more we sell, the more we lose. CLP Power is a listed company and has a responsibility to its shareholders; we can't do too many unprofitable deals.

As Laurence Kadoorie finished speaking, he picked up his teacup, took a sip, and spoke with a hint of helplessness in his voice.

It's not that he doesn't want to make money, but when you calculate the costs and benefits, it's simply not worth it.

The 3 million kilowatt-hours of electricity sold to the mainland last year were because there was excess power generated, and it would be a waste not to sell it, so it was disposed of at a low price.

After the second unit of the Castle Peak A plant goes into operation next month, if we generate electricity at full capacity, the surplus power will increase significantly. If we continue to sell it at HK$0.08/kWh, we will lose too much money. Therefore, we cannot operate at full capacity to generate electricity.

The industrial electricity price in Hong Kong is HK$0.35/kWh, while the purchase price in mainland China is only HK$0.08/kWh, which is less than a quarter of the Hong Kong electricity price.

Selling one kilowatt-hour of electricity to the mainland results in a loss of the equivalent of one kilowatt-hour.

No one would want to do more of this kind of business.

Upon hearing this, Lin Haoran looked at Chen Shulin.

Chen Shulin nodded and said to Lin Haoran, "Boss, that's true. The electricity that CLP Power sells to the mainland is less than a quarter of the price in Hong Kong. After deducting fuel costs, transportation costs, and equipment depreciation, it's basically losing money."

This is why CLP Power has been unwilling to expand its electricity sales to the mainland.

Although our Hong Kong Electric Group does not sell electricity to the mainland due to geographical distance, I am aware of the situation. The mainland's main power grid is indeed weak, and large-scale power injection does pose risks. However, this problem is not difficult to solve, but the price offered by the mainland is indeed too low.

Upon hearing this, Lin Haoran frowned.

He originally wanted to take advantage of Laurence Kadoorie's presence to resolve the power supply issues in the Pearl River Delta, but now it seems rather complicated.

He looked at Director Luo and asked, "The main network structure issue is easy to resolve, but could Director Luo adjust the price? And what about the foreign exchange issue?"

"Mr. Lin, it's not that we don't want to make adjustments, but we simply can't come up with any more foreign exchange. The price of HK$0.08 per kilowatt-hour is already the highest price we can offer given the current foreign exchange shortage."

As you know, the reform and opening up of the mainland requires foreign exchange everywhere, and our province's foreign exchange reserves are also very tight. Being able to squeeze out this little bit of foreign exchange to buy electricity is already the best we can do.

"Actually, I have an idea that can solve the problem for all three parties," Lin Haoran said with a smile.

Laurence Kadoorie and Director Roosevelt immediately looked at Lin Haoran.

Director Luo said, "Mr. Lin, please tell us what you think we can do. If it is feasible, we will study and determine it as soon as possible. The development of the Pearl River Delta is related to the overall situation of the economic reform and opening up of the mainland. If the power problem is not solved, foreign investment will not dare to come in, factories will not be able to start production, and economic development will be hindered."

You are also one of the largest foreign investors in mainland China, and your factory needs electricity. Helping us solve our power problem is also helping yourself.

Lin Haoran nodded, picked up his teacup, took a sip, and then put it down. He said slowly, "My solution is actually very simple. Why don't the three of us jointly establish a new power company? This power company will focus on some large industrial parks, such as the Shekou Industrial Park."

The companies in these large industrial parks are mostly foreign-invested enterprises. We can use foreign currencies such as Hong Kong dollars, US dollars, and British pounds to collect electricity fees. As for electricity prices, we can refer to the prices in Hong Kong. Prices have indeed increased, but it's still better than operating three days a week and stopping four days a week.

"For people investing in inland areas, low electricity prices are only a small part of the reason. Lower land prices and lower labor costs are the main factors. If there is sufficient power supply, I think these factory owners would be willing to accept it."

Director Luo's eyes lit up after hearing this, but he quickly frowned again.

"Mr. Lin, let's not even talk about whether the central government will agree to this plan. We have no precedent for opening up the mainland to foreign-invested power companies, but we can apply to the higher authorities."

Your proposal is indeed innovative. Centralized power supply and market-based electricity pricing can solve the power supply problem and prevent CLP Power and HK Electric from incurring losses.

However, there is a big problem here. Although these foreign-funded factories consume a lot of electricity, they are scattered in various parts of the Pearl River Delta. It would be too costly to build a separate power grid for them.

If we use the provincial power grid, the electricity price can't be set too high, otherwise other factories in the province will object.

Lin Haoran smiled, picked up his teacup and took a sip, and said slowly, "Director Luo, I've also thought about the problem you mentioned. My solution is not to build an independent power grid, nor to borrow the provincial power grid. Instead, the three of us will jointly fund the construction of a dedicated substation and distribution lines within the large industrial park."

These substations and distribution lines only serve foreign-invested factories within the industrial park and are not connected to the provincial public power grid. As a result, electricity prices can be set according to market prices and are not subject to provincial electricity price policies.

I know that many foreign investors are hesitant to invest in mainland China due to power shortages, and are currently observing the situation. Once power supply is no longer an issue, there will be a surge of foreign investment into the mainland.

Director Luo paused for a moment, then slowly nodded.

"Mr. Lin, this plan is technically feasible, but the investment is considerable. The substation and power distribution lines for a large industrial park will cost at least tens of millions. If there are ten or eight such parks, the total investment will be several hundred million. Who will pay for this?"

Lin Haoran looked at Lawrence Kadoorie and smiled, "Sir Kadoorie, is CLP Power willing to participate? If not, I can cover all the funding, as long as CLP Power cooperates with the power transmission!"

Upon hearing this, Laurence Kadoorie was about to refuse, but was stopped by Michael Kadoorie who was standing to the side.

“Father, there are some things I would like to discuss with you privately,” Michael Kadoorie said.

Laurence Kadoorie glanced at his son, saw his solemn expression, nodded, and said to Lin Haoran and Director Luo, "Mr. Lin, Director Luo, excuse me for a moment."

The father and son walked out of the conference room and came to the end of the corridor.

“Father, this is a great opportunity for us to enter the mainland market. In the past, we were not interested in expanding into the mainland market because electricity prices were cheap and we could only accept RMB. But if, as Mr. Lin said, electricity prices are calculated according to Hong Kong prices and settled in Hong Kong dollars, pounds sterling, or US dollars, then the profits will be very considerable.”

Father, think about it. After the reform and opening up, the mainland attracted a large number of foreign investors, including those from Hong Kong, Japan, the United States, and Europe, to come and investigate investment opportunities because of the low wages and land prices. The mainland is vast and rich in resources, far surpassing Kowloon. Even in the Pearl River Delta, once industrial parks spring up everywhere, the future power supply market will be larger than that of Hong Kong.

"If we miss this opportunity, we may never have another chance to get in." Michael Kadoorie's voice wasn't loud, but it sounded very excited. "Father, think about it, why did Lin Haoran want to involve us?"

It's not that he lacks money or ability. He has so many factories in mainland China, and Hong Kong Electric Group is not lacking in technology. Building his own substations and power distribution lines is not a problem at all for him.

He could have easily shunned us and gone it alone, but he chose to involve us. What does that mean? It means he doesn't want to have a falling out with us; it means he's willing to give us a chance. Father, we must seize this opportunity!

Upon hearing this, Laurence Kadoorie did not rush to answer, but instead pondered whether what his son said made sense.

Before his father could answer, Michael continued, "Although CLP Power is one of the two major power groups in Hong Kong and has an extremely stable market, it also has a major drawback: the market is too stable."

Although electricity sales have grown every year along with Hong Kong's development, the growth rate is quite limited and far less promising than the mainland market.

In just a few years since the reform and opening up in mainland China, electricity consumption has increased many times over. This kind of growth rate is not seen in Hong Kong.

If CLP Power can seize this opportunity to enter the mainland market, even if it's just to get a small share, its future growth potential will be much greater than if it stayed in Hong Kong.

Moreover, this is also a good opportunity for our Kadoorie family to further cooperate with Lin Haoran. In this way, we will become one of our closest partners, and we won't have to worry about him launching another business war against us. We can't win, Father!

Michael Kadoorie's words struck a chord with Laurence Kadoorie.

He was well aware of the potential of the mainland market.

The prices offered by mainland companies in the past were too low, and the settlement methods were too complicated, so I really couldn't muster any interest.

But now Lin Haoran has proposed a new model: building dedicated substations and distribution lines in large industrial parks, charging electricity at market prices, and settling accounts in foreign exchange.

This model not only solved the problem of losses, but also opened the door to the mainland market.

“Michael, you’re right.” Laurence Kadoorie nodded slowly. “We can’t miss this opportunity.”

"So what does Father mean..."

"Say yes."

Laurence Kadoorie turned around, patted Michael on the shoulder, and continued, "But we need to fight for more shares, preferably the same as Hong Kong Electric Group."

As you just heard, Lin Haoran said that if we are unwilling, he can take over all the funds, which shows that he doesn't care whether we participate or not.

Establishing a power joint venture in mainland China is different from the Daya Bay nuclear power plant project. The Daya Bay nuclear power plant project is too risky, we cannot see its future for the time being, and the investment amount is too huge.

The power joint venture requires little investment and has a promising future. We really shouldn't miss this opportunity, Michael. Thank goodness you reminded me, otherwise we would have missed a great investment.

It seems I can now confidently hand over the reins of the family to you!

Laurence Kadoorie looked at his son with eyes full of satisfaction.

He had witnessed Michael's growth over the years.

From a young man who would only nod and follow his father around to a successor who can think independently and dares to offer suggestions at crucial moments, Michael has already acquired the ability to lead the Kadoorie family.

“Father, you flatter me.” Michael Kadoorie bowed slightly, his tone respectful. “I just feel that although Lin Haoran has caused us some losses, his business acumen is indeed worth learning from.”

The fact that he dares to invest so much money in the mainland shows that he is optimistic about its future. Following his lead shouldn't be a mistake.

Laurence Kadoorie nodded, said nothing more, and turned to walk back into the conference room.

Lin Haoran and Director Luo were drinking tea and chatting when they saw Laurence Kadoorie and his son return, and they both put down their teacups.

"Sir Kadoorie, have you reached an agreement?" Lin Haoran asked with a smile.

Laurence Kadoorie sat back down, took a sip of his tea, and then put it down. He said in a calm tone, "Mr. Lin, CLP Power is willing to participate in your proposal. I propose that our joint venture each hold 30% of the shares, and Guangdong Power holds 40%. What do you think?"

He said this to preemptively strike and prevent Lin Haoran from having the opportunity to reduce his shareholding.

Lin Haoran paused for a moment, then smiled.

He said with a smile, "If Director Luo has no objections, then of course I have no objections!"

Director Luo nodded and said, "I need to apply to my superiors for this matter and cannot give an answer on the spot, but I personally think that 40% of the shares is acceptable to the province."

The power company's controlling stake is still held by the province. Although 40% of the shares is less than 50%, the province remains the largest shareholder.

Hong Kong Electric and CLP each hold 30%, totaling 60%. Although they are foreign-controlled, both companies are Hong Kong's power giants with good reputations and reliable technology.

The central government should support this plan.

Lin Haoran nodded and said with a smile, "Then I'll trouble Director Luo to go back and report to the leadership. If the central government and the province agree to this plan, we can then discuss the specific investment amount and construction plan."

The power shortage can no longer be delayed; otherwise, it will only hinder the progress of reform and opening up in the mainland. Director Luo, I don't know if you're worried, but even I, an outsider, am anxious for you!

Upon hearing this, Director Luo gave a wry smile.

"Mr. Lin, I know all of this. If the power shortage problem isn't solved, not only will foreign investment be hesitant to come in, but even our existing factories won't be able to operate at full capacity. The provincial leaders are even more anxious than you are, but being anxious won't solve the problem. Without foreign exchange, without technology, and without equipment, what's the use of just being anxious?"

He paused, his gaze shifting back and forth between Lin Haoran and Roland Kadoorie, his tone becoming more earnest.

"Mr. Lin, Sir Kadoorie, I am grateful on behalf of the province for your presence here today and your willingness to help the province solve the power supply problem. I will report the proposal for the power joint venture to the leaders of the central and provincial governments as soon as possible and strive for early approval."

Lin Haoran nodded and said, "Alright, then I'll trouble Director Luo to take care of it. It's getting late, so we won't disturb you any longer."

Laurence Kadoorie also stood up, shook hands with Lin Haoran, Chen Shulin, Director Luo and others, said goodbye and then hurriedly left the conference room with Michael Kadoorie.

Clearly, they wanted to get back to Hong Kong as quickly as possible before it got dark.

Lin Haoran and Chen Shulin walked out of the Pengcheng government compound and returned to their car.

"Boss, your proposed cooperation plan is simply brilliant. It not only solves the short-term power shortage problem in the mainland, but also allows our Hong Kong Electric Group to officially enter the mainland market."

Although we have built six power plants in Guangdong Province in recent years, the electricity generated by these power plants is actually connected to the Guangdong power grid. Due to the low electricity price, we don't make much money and can only rely on subsidies from the mainland. This cooperation is different now, and the future profits will definitely be considerable.

"However, CLP Power wants to take the same shares as us. Are you really not concerned?" Chen Shulin sat next to Lin Haoran, looking at his boss with a hint of doubt in his voice.

After all, this is a sure-fire investment, so the more shares you own, the better.

Lin Haoran leaned back in his chair and smiled, "Chairman Chen, why should I mind? CLP Power has the power grid, the technology, and the experience. Without them, it would be very difficult for us to succeed on our own."

Most importantly, if our HK Electric Group wants to sell electricity to the mainland, it still has to go through CLP Power's grid, so their 30% stake is well-deserved.

Moreover, this project isn't just my business; it's a three-way collaboration. Collaboration should be a win-win situation; I can't keep all the benefits for myself.

"Boss, I can't match your vision," Chen Shulin remarked.

In fact, Lin Haoran had something else he didn't say.

He knew that due to future power shortages, although the mainland would eventually open up to foreign power companies on a large scale, the government would gradually take back controlling stakes in these foreign power companies, or even acquire them directly, as the mainland's power supply became saturated.

This is an inevitable trend; no country will allow foreign capital to control its energy lifeline for an extended period.

Lin Haoran's proposal to jointly establish this power company is more about ensuring sufficient security for his factory in the Pearl River Delta. He is not particularly concerned about how much money the joint venture will make or how long it will operate.

As long as there is a stable supply of electricity when his factory needs it, that's enough.

Therefore, his goal was never these profits, and the mainland would not allow this joint venture power company to become too large.

Since that's the case, why not do a favor and let CLP Power get a share of the profits, so that CLP Power will put more effort into this matter?

Moreover, with the cooperation of three parties, this joint venture plan might be easier for the mainland's top officials to approve.

When he proposed this plan, he had already decided to drag CLP Power into it. It was an open conspiracy, an open conspiracy that the Kadoorie family could not refuse.

As for the share distribution, Lin Haoran didn't care.

What he cares about is whether this joint venture can get up and running as soon as possible and whether it can solve the power shortage problem in the Pearl River Delta.

As long as the factory keeps running and the production line keeps turning, profits will continue to be generated.

How much money the joint venture itself can make is secondary. (End of Chapter)