Transpower says regulatory changes to hit future earnings

Transpower says regulatory changes to hit future revenue, profits

By Tina Morrison

Nov. 14 (BusinessDesk) - Transpower, the state-owned operator of the national electricity grid, cut its expectations for profit in the coming six years after it reduced its revenue forecasts following regulatory decisions.

Revenue for the fourth quarter of the company's 2015 financial year is expected to be $19 million below that implied in its 2014/15 Statement of Corporate Intent, and be at least $75 million a year below expectations in subsequent years, the Wellington-based company said in a statement. The company didn't detail its revenue or profit forecasts for its June 30 financial years.

"These reductions will significantly reduce profit in FY2015 and in the following five-year period," the company said. "Transpower is currently working through these new forecasts and identifying opportunities to help mitigate the impact."

Transpower said revenue would be crimped after the Commerce Commission reduced its allowable rate of return from its cost of capital, changed its model for the amount of revenue required to meet costs and made a final decision on Transpower's operating expenditure allowance. Revenue was also affected by changes in the market cost of capital benchmark rates, the company said.

The changes also affect revenue forecasts the company provided to the Commerce Commission in July for the year ending March 31, it said. Revenues in those estimates would be $8.9 million lower for the fourth quarter of the 2015 year and at least $36 million a year less in future years, the company said.

(BusinessDesk)

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