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2020 A Challenging Year For Marlborough Electric Power Trust

This past financial year has been a challenging one for the Marlborough Electric Power Trust, chairman Ian Martella says.

The trust held its annual public meeting last night, to report back to power consumers in Marlborough on the year ending 30 June 2020. The trust owns 100 per cent of the shares in electricity lines company Marlborough Lines, on behalf of the power consumers of Marlborough.

Ian says the year was marked by uncertainty and stress for everyone, and this has adversely affected the Marlborough Lines Group’s performance.

MLL was not immune to the impacts and trading restrictions of COVID-19, with a reduction to some income lines, and an increase to operating costs, he says.

“MLL continues to operate effectively in a operationally sound manner, despite the lack of capital works undertaken this year because of COVID-19 restrictions.”

The impact of COVID-19 has carried through to YWG, Ian says, which has suffered in the international market, particularly with a reduction to higher-margin on-premise wine sales. YWG has also been subject to operational matters outside COVID-19, such as low harvest volumes and high capital expenditure, that have also negatively impacted YWG’s financial performance, resulting in no dividend being paid from YWG to MLL.

“YWG carried debt of $130.5 million at year end. The Trust views the debt balance of YWG as high, and not in proportion to the level of earnings it achieves. The Trust is supportive of the active steps that YWG is taking to reduce its debt balance and improve its liquidity position, including some recently completed vineyard sales.”

Because of the low cash returns received from MLL’s investments, the Trust requested only a $0.5m dividend from MLL. This is enough to fund the Trust’s running costs, Ian says, but will not enable the Trust to pay a distribution to beneficiaries in 2021.

“It is with regret that a distribution will not be available. MLL will however, continue to provide discounts directly to our beneficiary consumers, with a discount payment brought forward and paid in August 2020.

“MEPT is not happy with the cash return on investment achieved during the year. We are aware of issues and continue to seek advice, and to monitor the situation.”

He noted that in the case of YWG, the investment continues to grow from its original acquisition value of $122 million in 2015, to a net book value of $205 million in 2020.

From a shareholder’s perspective, the asset backing per share of MLL has increased from $1.51 per share in 1999, to $15.95 as at 30 June 2020. The value of net assets of the company attributable to the Trust has increased to $446.6 million, a small increase on last year’s value.

In the past weeks, YWG has sold four vineyards to the New Zealand Super Fund for $34m. The sale includes a long-term grape supply back to YWG.

On a personal note, Ian marked the passing of trustee Malcolm Aitken in July.

“Malcolm was a well-respected personality within the Marlborough community with a passion for all things Marlborough and doing the right thing. This extended to Malcolm’s duties as a trustee. His memory and the legacy of his contributions continue on and he has been sorely missed.”

He also acknowledged MLL board chair David Dew, who will retire on 31 March 2021.

“David has been with the Board for 19 years; it has been a remarkable tenure. During David’s time at MLL, the net asset backing per share has risen from $2.34 to today’s value of $15.95, this equates to an increase in the equity value of the company of $381m.

“The trust wishes to extend publicly its acknowledgement of David’s commitment and service to MLL and its subsidiaries and associates over the years.”

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