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Trustpower lifts 2018 guidance, sees earnings rising

Trustpower lifts 2018 guidance, sees earnings rising as much as 12%

By Jonathan Underhill

July 25 (BusinessDesk) - Trustpower raised is earnings guidance for the second time in as many weeks, citing favourable trading conditions and anticipated customer growth.

The Tauranga-based company said earnings before interest, tax, depreciation, amortisation and fair value adjustments will be in a range of $225 million to $245 million in the year ending March 31, 2018. On July 14 Trustpower had said earnings would be at the top end of a $215 million-to-$235 million range it gave with the release of its 2017 results in May.

The upgrade "has been driven by the favourable trading conditions in the year to date" and assumed that long run average generation volumes are maintained for the remainder of the year, New Zealand wholesale price averages remain in line with current ASX pricing, average temperatures and average electricity consumption are unchanged and total customers increase to between 255,000 and 260,000 including 90,000 to 95,000 telco customers.

In the first quarter ended June 30, Trustpower's earnings were bolstered by a 38 percent increase in generation volumes to 595 gigawatt-hours, largely due to strong North Island hydrology flows that saw North Island generation climb to 330 GWh from 203 GWh a year earlier. The average wholesale price rose to $81 per megawatt hour from $60/MWh a year earlier, it said on June 14.

The new forecast was delivered to shareholders at their annual meeting today. Trustpower spun out its wind and solar generation facilities into separately listed Tilt Renewables and chairman Paul Ridley-Smith said today that the split had contributed to a 16 percent gain in Trustpower's share price since then and left the company with a strong focus on its core New Zealand retail business.

He said the board's key areas of focus was the company's generation business, which accounts for 75 percent of earnings. He noted that electricity markets "are volatile" and Trustpower’s approach "is to be biased towards a net seller position that reduces the downside risk in such periods."

Chief executive Vince Hawksworth noted that the continued decline of South Island storage levels "has increased wholesale prices in the first quarter". Storage in the North Island was 119 percent of average while in the South Island it was just 51 percent of average.

That follows comment from the managers of the southern catchments - Meridian Energy, Contact Energy and Genesis Energy - that the deluge that caused recent flooding in parts of the South Island had added little or no water to hydro lakes. Separately, national grid operator Transpower said lake levels now sit at 62 percent of the national average level for this time of year, compared with 58 percent before the weekend.

Trustpower's shares were unchanged at $5.75 in early trading today.


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