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Transpower well positioned for future investment

13 October 2005

Transpower well positioned for future investment needs

The owner and operator of the national electricity grid, Transpower New Zealand Ltd, has reported a net surplus after tax for 2004/05 of $141.5 million.

The comparable figure in the previous year was $64.7 million.

Transpower Chairman David Gascoigne said the strong financial performance was achieved by a combination of increased transmission revenue and recognition in the accounts of a $34.6 million one-off gain from the cross-border lease transaction entered into in 2003.

“Transpower achieved this excellent financial result while continuing to provide its customers and electricity consumers with a reliable National Grid that met the demands placed upon it. This strong financial performance has bolstered the company’s balance sheet as it embarks upon the capital investment programme required to maintain grid reliability standards into the future.

“Transpower will pay the Crown a dividend of $10 million. In determining the level of dividend payment, Directors have been mindful of the need to retain sufficient earnings to help fund the proposed levels of capital expenditure on major grid projects,” Mr Gascoigne said.

Overall, Transpower’s operational performance in 2004/05 was again strong, with HVAC availability meeting the target set out in the Statement of Corporate Intent, while unplanned supply interruptions were well within target.

HVDC availability was, however, significantly below target for the first time in over ten years. This result followed a failure of one of the three Cook Strait power cables in early October 2004, reducing the capacity of the inter-island link. This did not result in adverse market or security of supply impacts and by March 2005 the cable repair had been completed successfully, at a final cost of $11.3 million.

Mr Gascoigne said to ensure future security of electricity supply Transpower has taken a four-pronged approach to grid investment.

“First, Transpower has invested $83 million during the financial year on maintenance of existing grid assets. Second, Transpower has submitted to the Electricity Commission a list of thirty planned regional upgrades, totalling $158 million in expenditure. While regulatory approval is still to be fully achieved, good progress has been made in implementing many of these investments.

“Third, Transpower is working closely with local distribution companies on customer specific enhancements. For example, just prior to the end of the financial year the new Te Kowhai substation near Hamilton was commissioned.

“Fourth, Transpower has developed a national plan for major grid investment to ensure that the National Grid can readily meet New Zealand’s needs not just for the next ten years but for the next forty years.”

Mr Gascoigne said a significant feature of the past financial year was the public reaction to the first of these major grid investment projects, the North Island 400kV transmission line proposal.

“The resulting controversy has been a catalyst for a growing national discussion on the future shape of our country’s electricity supply. This involves finding a balance between the requirements of key national infrastructure projects on the one hand, and the private property rights and interests of communities on the other.”

Mr Gascoigne said regulatory issues were another key focus for Transpower during the year.

“Achieving a sound regulatory environment is critical to ensuring timely and essential investment in the National Grid. Transpower does have significant concerns that the regulatory approach that is developing in New Zealand is in contrast to the way things are done in comparable jurisdictions overseas. The reason for a recent downgrading of Transpower’s credit rating from AA to AA- is the uncertain regulatory regime in which Transpower now finds itself. Transpower will continue to engage with stakeholders to advocate for an internationally orthodox approach to transmission regulation.”

Mr Gascoigne said much had been achieved by Transpower during the last year – with much still to be done.

“The national discussion of New Zealand’s energy future, and of the role of new transmission infrastructure, is now underway. Transpower looks forward to further participating in this discussion and to making substantive progress on its new investment proposals during the year ahead.”

Financial Performance

2004/05 2003/04
Transmission Revenue/Total Revenue $509.4 million/$636.1 million $455.4 million/$534.1 million
Net surplus after tax and before revaluation $141.5 million $64.7 million
Net surplus after tax and after revaluation $141.5 million $59.2 million
Total Dividend $10.0 million $40.0 million

System Reliability Measures Actual 2004/05 Target 2004/05
High Voltage alternating current (HVAC) availability 98.9% 98.9%
High Voltage direct current

(HVDC) availability - overall/1/Pole 2 89.5%/82.0%/97.7% 94.0%/92.5%/95.6%
Unplanned Supply Interruptions 3.3 system minutes <9.0 system minutes

ENDS

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