CLP: Powering Asia

Richard Lancaster, taking over from Andrew Brandler, was the Chief Executive Officer (CEO) of CLP Holdings Ltd., one of the leading power companies in Asia, with operations in China, Southeast Asia, Taiwan, Australia, and India, and an energy portfolio spanning coal, gas, nuclear and renewables. The Kadoorie family—the company’s controlling shareholder—had always valued being a responsible company. As such, CLP had pursued an active strategy towards de-carbonization. In 2007, Brandler and CLP took the bold step of setting and publishing sustainability targets: 20% of its portfolio would consist of non-carbon emitting sources by 2020; and the generating portfolio would see a 75% reduction in carbon intensity by 2050. Lancaster and CLP had achieved interim sustainability targets, but faced challenges in Australia and India. The Australian government had recently imposed a national carbon tax, which led CLP to take an impairment on a coal-fired power plant. India was facing a national coal shortage, which left many coal-fired plants underutilized. All the while, costs of producing renewable energy were decreasing rapidly. The events occurred as Lancaster attempted to navigate the long-term dilemma of achieving business growth while balancing operations in regions where coal was still the fuel of choice and executing on the company’s public carbon reduction targets. One example of this difficult balancing act was weighing environmental and economic objectives occurring in India as described in the case. The CLP board of directors voted to include Flue Gas Desulphurization (FGD) equipment on a new coal-fired power station despite Indian law not requiring such technology. The choice to include FGD resulted in the sacrifice of a significant portion of the economic returns of the project in India but firmly established CLP’s commitment to its values signaling the authenticity of its efforts towards environmental impact and tackling climate change. The case closes with Lancaster wrestling with the future path of CLP. Should CLP accelerate its path to de-carbonization? Was CLP adopting technologies fast enough? Or was it getting too far ahead of the rest of the industry?