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Trustpower well-positioned in more volatile power market

Trustpower says well-positioned in more volatile power market

By Gavin Evans

May 13 (BusinessDesk) - Trustpower says a “material” volume of new generation will be required to meet demand during the next three years and wholesale prices are likely to be volatile as more intermittent wind is added to the mix.

But the country’s fifth-largest power retailer says the overall impact on pricing is harder to pick given cheaper renewable generation may be offset by greater cost to maintain security of supply.

Short periods of over- and under-build are likely and in that environment wholesale risk management will be “critical” in the retail market. The period of low spot prices driven by oversupply is over and retailers will need to hedge that risk and price their offers accordingly.

“Increased demand and higher wholesale prices will give gentailers more choice about where they place their load,” the Tauranga-based generator and retailer said in a presentation to investors.

“The electricity industry is poised for growth, particularly in renewable energy and our national network of power stations generates more than 99 percent of its electricity from renewable resources,” chief executive Vince Hawksworth said in a statement.

“Our long history of partnering with other industry players, particularly smaller companies, positions us well for the future.”

Trustpower, which also offers gas, broadband and phone services, earlier reported a net profit of $92.7 million for the year ended March 31, down from $114 million a year earlier, excluding the Australian hydro business sold that year.

Underlying earnings fell 24 percent to $103 million, reflecting the very strong generation inflows and pricing the firm enjoyed a year earlier.

Earnings before interest, tax, depreciation, amortisation and changes in financial instruments fell 9 percent to $222 million. The firm had signalled an earnings range of $220-226 million in April.

The company will pay a 17 cent final dividend, unchanged from a year earlier, on June 14. It will also pay an unimputed special dividend of 15 cents the same date. It has paid out 40 cents a share in special dividends since the sale of Green State Power in New South Wales to Meridian Energy last year.

Hawksworth noted the 1,994 gigawatt-hours of power the firm generated were above the long-run average, but still 11 percent less than the year before. That saw generation earnings fall 13 percent to $172 million.

Retail earnings rose 8 percent to $64 million. Total utility accounts rose 1 percent to 402,000, with increased gas and telecommunication customers more than offsetting a decline in power accounts. The number of customers taking more than one service increased by 7 percent to 107,000.

The company, which will this year start offering mobile and wireless broadband services, said its retail gross margin climbed to $156 million from $148 million the year before.

“This rise is well in excess of the increase in utility accounts, validating Trustpower’s view that the new category of bundled energy/telco is more profitable than either energy or telco alone,” Hawksworth said.

“We now have 107,000 customers using two or more products. Customer retention levels in our bundled customers continue to remain higher than established energy retailers and is greater than levels reported by major telcos.”

Assuming average hydrology, the company is expecting ebitdaf of $205-225 million for the current financial year.



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