CK Hutchison remains among biggest creditors of Wellington Electricity as loans refinanced
By Jonathan Underhill
April 9 (BusinessDesk) - CK Hutchison remained the second-largest creditor of Wellington Electricity Distribution Network after the power utility in New Zealand's capital refinanced $230 million of bank loans, its 2017 accounts show.
Wellington Electricity's loan from related party International Infrastructure Services Co was unchanged at about $235 million. It pays 8.75 percent interest on the loan that comes due in 2023, amounting to $22.7 million in interest in calendar 2017. That's above the average interest rate of 5.39 percent for its $309 million of bank loans and $170 million of US senior notes. Its total interest cost was $50.2 million on debt of $722 million, down from $733 million in 2016.
Rival distributor Trustpower pays between 3.1 percent and 4.9 percent interest on its unsecured bank loans.
International Infrastructure also received a management services fee of $10.6 million from $10.3 million the previous year. CK Hutchison, which up until last month was chaired by billionaire Li Ka-Shing, has maintained a low-profile as an investor in New Zealand infrastructure, having acquired Vector's Wellington electricity assets in 2008 for $785 million.
It later bought Envirowaste Services for $492 million in 2013, gaining the country's second-biggest waste management business. The Hong-Kong-based company, which took $25 million of dividends from Enviro (NZ) in 2016, hasn't posted its 2017 annual report. At the same time, the Li Ka Shing Foundation announced $5 million of donations to the University of Auckland's Campaign For All Our Futures which was announced as a $300 million research fundraising in 2016.
Wellington Electricity sales rose 7.3 percent to $193 million in calendar 2017 and at an operating level the company is profitable, with earnings before interest, tax, depreciation and amortisation rising to about $84 million from $77 million a year earlier. But interest costs and tax kept the bottom line as a modest loss of $849,000 from a loss in 2016 of $1.9 million.
The utility operates in a regulated market, with prices and their components monitored by the regulator. Last month it gained Commerce Commission approval to spend an additional $31 million on earthquake improvements. The clearance came after an urgent application in December 2017 to increase prices to fund earthquake strengthening of its substations, and purchasing emergency equipment and critical spares.
International Infrastructure Services, also owned by CK Hutchison, earned $34 million in interest on loans to related companies in its latest published accounts, for 2016. Management fees were about $15 million.