TrustPower Limited First Quarter Result
Thursday, 27 July 2006
TrustPower Limited First Quarter Result for the Three Months Ending 30 June 2006
TrustPower's unaudited after tax surplus for the three months to 30 June 2006 was $25.2 million, compared with $24.4 million for the same period last year. Although the result for the quarter is only 3% higher than last year, it should be noted that the prior period result included approximately $3.7 million (before tax) relating to favourable settlements with other retailers from reconciliation of energy volumes traded under the old electricity market and as such should be considered as one-off in nature. Earnings before Interest, Tax, Deprecation and Amortisation ("EBITDA") were $53.4 million versus $52.1 million for the prior period.
The first quarter trading environment was characterised by strong hydro inflow during April and volatile electricity spot prices particularly during daily peaks in demand in June caused by colder weather across the country. The Company has experienced unusually favourable trading conditions during the first quarter of the last two years. It is unusual to get very good hydro inflows as well as above average wholesale spot prices for a prolonged period.
TrustPower's own generation assets produced 520 GWh for the quarter versus 496 GWh in the prior period (an increase of 5 per cent). TrustPower's hydro generation storage catchments remain at satisfactory levels which together with purchase contracts the Company has in place, leaves it well positioned to meet customer demand over the remainder of winter.
Customer numbers have remained steady at around 220,000. Total electricity sold to customers in the quarter totalled 1,196 GWh compared with 1,201 GWh sold in the prior period.
The Company's balance sheet remains strong. The ratio of debt to debt plus equity was 30 per cent as at 30 June 2006 up slightly from 28 per cent at the same time the previous year.
The 93MW expansion of the Tararua Wind Farm is progressing to plan with civil works well advanced with the turbine foundations now under construction. Tararua Stage III is expected to produce 350 GWh per annum and to cost around $180 million. The first turbines are targeted for commissioning in February 2007 and final completion scheduled for July 2007.
During the quarter the Board approved a 5 MW enhancement to the Waipori hydro scheme. This cost effective enhancement is expected to cost around $20 million and produce 22 GWh per annum. Target completion is October 2007.
A resource consent hearing for the proposed 72 MW Wairau hydro generation scheme, in Marlborough, has been running since mid June and has required a high level of management resource. Given the length of the hearing to date, a result is now not expected until late 2006.
A resource consent application for a hydro generation scheme of up to 46 MW at Arnold, on the West Coast, was lodged at the end of March. The Company is currently responding to information requests relating to the application and a hearing is expected towards the end of 2006.
At the end of June the Company also lodged resource consent applications with Dunedin City and Clutha District Councils for a wind farm at Lake Mahinerangi of up to 300 MW. The proposed wind farm will be located on 3,260 hectares of land near Lake Mahinerangi and the Waipori hydro electric scheme. At this stage a hearing is expected to be scheduled for early 2007.
In Australia, TrustPower is close to finalising the extension of landowner option agreements in relation to its Myponga and Snowtown wind farm sites. The Government of South Australia has recently announced a draft climate change and Greenhouse Emissions Reduction Bill. The draft bill sets out an ambitious target to reduce the State's emissions by 60 per cent of 1990 levels by 2050 and to increase the State's use of renewable electricity so that it comprises 20 per cent of total electricity consumption by 2014. This is encouraging news for prospective renewable projects in South Australia and if the draft bill is passed into legislation then it should provide a more positive framework for developing wind farm projects in the State.
The result for the first quarter to 30 June 2006 is pleasing. While at this early stage of the financial year it is not possible to predict year end results the Directors are confident that the business fundamentals are sound, which augurs well for a satisfactory annual result..