Powerco Announces Half Year Profit Of $ 17.6 Mn

For Immediate Release
Thursday 18 October 2001

Powerco Announces Half Year Profit Of $ 17.6 Million

Powerco Chairman Barry Upson, today announced a net profit after tax of $17.6 million for the six months ended 30 September 2001, from revenue of $77.8 million. He added that in view of the increased profitability for the current year, the full year forecast has also been revised upwards to $33.4 million from an original forecast of $31.6 million.

An interim dividend of 5.9 cents per share, fully imputed, will be payable on Friday 14 December 2001 pro-rata to all shareholders on the Register as at the close of business on Friday 30 November 2001. The Directors anticipate a final fully imputed dividend of 7.2 cents per share payable in June 2002 making a total of 13.1 cents per share for the March 2002 year. The payment of the final dividend in June 2002 will exhaust the Company’s imputation credit account.

Powerco’s positive results are due to the continued benefits of previous mergers, strong cost-containment by all members of the Powerco team and to the recent acquisition of Hutt Valley and Porirua gas networks from Australian Gas Light (AGL).

Powerco continued to operate within its credit and financial covenants, maintaining it’s A- long term rating with Standard & Poors.

Powerco’s total financial position is strong with total net assets of $842 million. “Powerco continues to deliver on its promises to shareholders, demonstrating ongoing growth and performance during the period. The purchase of gas networks in Hutt Valley and Porirua for $118 million in July has provided another springboard for growth said Powerco Chief Executive Steven Boulton. “This acquisition adds an urban base to our large provincial network, with further potential for increasing the penetration and ultimate scale of our business. We have around 10% of New Zealand’s electricity connections, and have around 25% of the nation’s gas connections,“ said Mr. Boulton.

Another significant achievement this period is the announcement of a revised electricity line pricing structure (to take effect from November 1, 2001). “Powerco has met, and in fact exceeded the government policy statement of reducing fixed charges to no more than 10%. Powerco has implemented a price (to electricity retailers), which has no fixed component for residential electricity users,” said Mr Boulton. This revised pricing structure should be revenue neutral to Powerco but will reduce the line charge for consumers with low electricity consumption whilst encouraging conservation from consumers with high consumption. Residential line charges have been held since 1997 providing a benefit to consumers in real dollar terms.

Directors continue to be positive about the outlook for the second half of the financial year.

“We will continue to build on our strengths in the asset management and field services areas to deliver greater value for shareholders,” said Mr Boulton. We have recently signed a contract to purchase a field services contracting business in southeast Queensland, Australia,” he said. “This area of Australia has experienced significant growth and has a consumer base roughly equivalent to the whole of New Zealand within a one and half hours of Brisbane,” Mr Boulton said. This investment of less than $NZ2 million provides an initial entry into a larger contracting marketplace.

“Powerco management are actively involved with a number of changes occurring within the industry from discussion on the regulatory framework, through to industry governance requirements and asset valuation determination. All of these changes require a strong input from industry participants to ensure a robust outcome suited to the needs of New Zealand taking into account the size of the market, the geography of the country, and the requirement to maintain a strong investment attraction. New Zealand enjoys average electricity prices in the lowest quartile in the world and all participants in the industry must work hard to maintain that status” said Mr. Boulton.

Mr Upson said, “We recently advised the market that negotiations with Eastern Bay Energy Trust regarding ownership options of Horizon Energy Distribution Limited are currently in progress. Further comment on these negotiations should be available before the end of October”.

The Board also announced today the appointment of Mr. James Ogden as a director of Powerco. Mr. Ogden has had an extensive career as a senior executive in a number of industries and is a director of New Zealand Post Ltd and Macquarie New Zealand Ltd. The Board has appointed Mr. Ogden as Chairman of its newly established Finance Committee.

Since listing on the New Zealand Stock Exchange on 4 December 2000, Powerco has received strong support from retail shareholders. This support has seen its share price rise from $1.20 per share at listing to over $2.00 in recent days and outstripping the NZSE40 index since 1 April 2001 by over 40%.

Powerco is New Zealand’s third largest electricity and gas utility with around 205,000 consumers connected to networks in Taranaki, Wanganui, Manawatu, Wairarapa and Wellington. The Company shareholder number has increased to more than 16700.

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