HomeInfratil News2008Extreme low hydro inflows reduces TrustPower’s profit outlook

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Extreme low hydro inflows reduces TrustPower’s profit outlook

17 Jun 2008

The New Zealand major hydro storage lakes have been as low as 49% and are currently 55% of average for this time of the year and the electricity industry has commenced a nationwide power savings campaign.

TrustPower’s hydro generation portfolio has been impacted by this year’s nationwide drought. Wind generation has been variable. In May the output from the Tararua Wind Farm was half of average but so far during June that output has returned to the long-term average.

Overall production from both the hydro and wind assets for April, May and, as forecast for the remainder of June, is nearly 25% (140 GWh) below long term average for the quarter.

TrustPower anticipates that from time to time in extreme dry conditions it will be required to make purchases from the spot market at times when the spot market is high. By the end of the first quarter TrustPower expects to have purchased approximately 30-40 GWh from the spot market. This outcome is within the range of expectation during a period of very low hydrology.

Looking ahead beyond the first quarter, TrustPower expects to be reasonably balanced. An improvement to more typical hydro inflows across the hydro generation portfolio would offer some opportunity for net sales to the spot market and potentially some recovery of the current lower earnings.

The financial impact on TrustPower of the 2008 drought is uncertain but it could see Earnings Before Interest Tax Depreciation, Amortisation and Fair Value Movement of Financial Instruments (“EBITDAF”) fall below the Company’s mean year expectation by between $15 and 20 million.

TrustPower considers the industry campaign to encourage prudent electricity usage as an appropriate national response to the recent period of exceptionally low rainfall to the critical large South Island storage reservoirs. Spot prices in the market are providing good coordinating signals to market participants and to industry and TrustPower considers it important that spot prices reflect market conditions. The industry campaign allows fixed priced residential and small business customers to also contribute to sustaining the reliability of New Zealand’s electricity system at the lowest possible cost to the economy.

NZX Release 

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