Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Vector 1H result up 10.8 percent in flat economy

Vector 1H result up 10.8 percent in flat economy

By Pattrick Smellie

Feb. 21 (BusinessDesk) – Vector, the Auckland-based electricity, gas and telecommunications network operator, turned in a 10.8 percent improvement in tax-paid profit for the six months to Dec. 31, earning $118 million, but expects a tougher second half as mandated price cuts take effect.

Vector chairman Michael Stiassny cast the result as evidence that Vector is capable of improved performance despite a flat economy, reduced load growth on its Auckland networks owing to warm weather and cost-conscious consumers, and its ongoing battles with the government over regulation in the monopoly parts of its business.

"This result demonstrates how we have continued to grow, in spite of the new economic environment," he said. "It also shows our success at optimising the group's portfolio of businesses, lowering our risk profile in response to the new environment and containing costs."

Vector shares were up 0.7 percent in trading on the NZX this morning to $2.85.

Total revenue for the half was up 5 percent to $669.4 million, earnings before interest, tax, depreciation and amortisation rose 3.9 percent to $336.3 million, and the company raised its interim dividend by 0.25 cents to 7.25 cents a share.

Balance sheet gearing remained "strong", said Stiassny, with a net debt to net debt plus equity ratio of
51 percent.

While it was challenging identifying new value-creating investments, Vector has been "working with local and central government as well as private sector organisations to explore opportunities to manage and invest in critical national infrastructure and adjacent services," he said.

Vector's technology segment continued to show the strongest growth, with revenue up 9.8 percent to $52.8 million compared with the same period a year earlier and ebitda of $36.7 million, up 6.1 percent.

The company is two-thirds of the way into installing 617,000 smart meters into customers' premises, is also purchasing Contact Energy's metering business and is moving into installation of solar power units and batteries.

While electricity revenues rose 8.5 percent to $334.8 million, that reflected mandated increases in regulated network charges, which will be somewhat unwound in the second half following a Commerce Commission determination requiring cuts in line charges.

While Vector continues to challenge the methodology used to determine the price cuts, it does not expect outcomes from the High Court "merits review" process before the middle of the year. Hearings on the review finished in Wellington last week.

"We note that these reductions are based on different assumptions in respect of operating and capital expenditure requirements over the next five years than those that the business relies on," said chief executive Simon Mackenzie.

"The regulator's mandated price reductions on our electricity networks from April 1 will weigh on second half revenues," he said, while the soft economic conditions were likely to continue, despite signs of a pick-up in residential construction in Auckland.

He reaffirmed earlier guidance to expect ebitda in line with last year's.

In its gas business, Vector reported a rise in gas transportation revenues of 3.6 percent to $114.4 million and ebitda of $88.7 million, an 8.7 percent improvement. Its wholesale gas business continued to benefit from access to lower priced "legacy" gas from the Kapuni field, although that is starting to reduce. The wholesale business revenues were flat at $195.6 million and ebitda fell 6.6 percent to $36.7 million.

Like Contact Energy earlier this week, Vector reported an improved performance from its LPG business as demand picks up on the reticulated LPG network in Christchurch, where sales fell dramatically after the 2010 and 2011 earthquakes.

Vector also echoed comments by Mighty River Power in its half-year result, also released this morning, expressing concern at the Electricity Authority's plans for redistributing the costs of the national grid.

"This is the third review by the authority, and its predecessor the Electricity Commission, in recent years" and all had sought to shift some of the transmission costs borne by South Island consumers to the North Island.

"We are challenging the proposed methodology as it is likely to result in higher prices for Auckland consumers."

MRP's chief executive Doug Heffernan criticised the proposed new approach as "extremely complex" and "retrospective".

Research commissioned from the international Consulting Engineers Group had concluded the proposals were "inconsistent with international practice", and would create "disputations, reduced wholesale market efficiency and systemic risk through the supply chain."

It also risked increasing costs for consumers and of having a negative impact on electricity retail market competition.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Keep Digging: Seabed Ironsands Miner TransTasman Tries Again

The first company to attempt to gain a resource consent to mine ironsands from the ocean floor in New Zealand's Exclusive Economic Zone has lodged a new application containing fresh scientific and other evidence it hopes will persuade regulators after their initial application was turned down in 2014. More>>

Wool Pulled: Duvets Sold As ‘Premium Alpaca’ Mostly Sheep’s Wool

Rotorua business Budge Collection Limited (Budge) and sole director, Sun Dong Kim, were convicted and fined a total of $71,250 in Auckland District Court after each pleading guilty to four charges of misrepresenting how much alpaca fibre was in their duvets. More>>

Reserve Bank: Labour Calls For Monetary Policy To Expand Goals

Labour's comments follow a speech today by RBNZ governor Graeme Wheeler in which Wheeler sought to answer critics who variously say he should stop lowering interest rates, lower them faster, or that inflation-targeting should no longer be the primary goal of the central bank's activities. More>>

ALSO:

BSA Extension And Sunday Morning Ads: Digital Convergence Bill Captures Online Content

Broadcasting Minister Amy Adams has today announced the Government’s plans to update the Broadcasting Act to better reflect today’s converged market... The Government considered four areas as part of its review into content regulation: classification requirements, advertising restrictions, election programming and contestable funding. More>>

ALSO:

March 2017: Commerce Commission Delays Decision On Fairfax-NZME

The Commerce Commission has delayed its decision on the proposed merger between NZME and Fairfax Media's New Zealand assets, saying the deal is complex and it needs more time to assess the impact on both news content and the advertising market. More>>

ALSO:

Plan Plan: Permanent Independent Hearings Panel Proposed For Planning

The Productivity Commission recommends creating a permanent independent hearings panel like the one that cut through local politics to settle Auckland’s Unitary Plan, for the whole country. More>>

ALSO:

Statistics: NZ Jobless Rate Falls To 5.1% Under New Methodology

New Zealand's unemployment rate fell more than expected in the second quarter as Statistics New Zealand adopted a new way of measuring the labour market to bring the country in line with international practices, and while a growing economy continued to support jobs growth. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news