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TrustPower Half Year Operating Results

31 Oct 2011

TrustPower's consolidated underlying surplus after tax was $75.6 million for the 6 months ended 30September 2011 (an increase of 18 per cent) compared with $63.8 million for the same period last year. Underlying surplus after tax excludes fair value movements on financial instruments and one-off adjustments impacting on the prior period such as the change of company tax rate and the removal of depreciation deductibility for long life buildings both of which took effect from 1 April 2011.

Earnings before interest, tax, depreciation, amortisation and fair value movements on financial instruments (“EBITDAF”) increased by 9 per cent to $161.6 million from $147.7 million in the previous year. The primary drivers of increased EBITDAF compared with prior period were higher revenue from the Snowtown wind farm, higher NZ generation production and firmer wholesale electricity prices.

Profit after tax attributable to the shareholders of the Company was $68.8 million for the half year compared with $59.7 million for the prior period, an increase of 15 per cent. This includes the impact of fair value movements on financial instruments and the one-off adjustments due to changes to the company tax rate and deductibility of depreciation on buildings as noted above. Unrealised losses on fair value movements on financial instruments amounted to $9.5 million versus a $3.2 million gain in the prior period. This was primarily driven by negative revaluations on New Zealand and Australian interest rate hedges following significant decreases in long term interest rates in both countries during the last quarter.

Operating revenue of $426.6 million was up 6 per cent on the prior period. Total electricity volume sold by the Company in New Zealand was 2,137 GWh compared with 2,142 GWh in the prior year. Electricity customer numbers decreased to 218,000 as at 30 September 2011 from 221,000 as at 31 March 2011. Mass market sales were down 7 per cent versus prior period reflecting lower customer consumption due to a mild winter, while time of use sales were up 6 per cent as the company successfully placed more product into this market. Retail competition remained intense during the period with customer switching at historically high levels.

 The Company's total New Zealand generation production of 1,414 GWh for the first six months was up 185 GWh (15 per cent) due to higher hydro and wind production and a 56 GWh contribution from the Mahinerangi Wind Farm which was commissioned during the period. Average wholesale prices were firmer than the prior period as South Island hydro storage levels fell below long term average in the second quarter.The Snowtown Wind Farm in South Australia produced 177 GWh which was 17 per cent up on prior period but 6 per cent below expected long term average production.

Group operating cash flow was $131.8 million for the half year compared with $108.5 million in the prior period.

Progress continues be made on a range of growth options in New Zealand and Australia. Good progress is being made on the detailed design studies and contract tendering for the 3.8 MW Esk Hydro project in Hawkes Bay and the 2.6 MW residual flow project at the existing Arnold Hydro scheme on the West Coast. Both these projects are expected to proceed in the 2012 calendar year subject to confirmation of satisfactory project contracts and economics. The combined capital expenditure of the two projects is expected to be around $28 million.

The Minister for the Environment has confirmed that the proposed amendment of the Rakaia River Water Conservation Order will be heard by a panel appointed by Environment Canterbury. Submissions will close 21 November 2011. The Water Conservation Order amendment is an important step to enable TrustPower to provide greater reliable irrigation supply to landowners in the region. TrustPower continues to progress negotiations with preferred turbine suppliers and offtake counterparties in relation to the development of Stage 2 of the Snowtown Wind Farm in South Australia. Negotiations are taking longer than expected but TrustPower remains confident that a positive outcome can be achieved on this development opportunity which is likely to be between 215 MW and 270 MW depending on final turbine selection.

The project to replace the Company's customer information systems with Gentrack's Velocity (GTV) solution remains on track for installation in the 2012 calendar year.

The Directors are pleased to announce an interim dividend of 20 cents per share, partially imputed to 16 cents per share, payable 9 December 2011 (record date of 25 November 2011).

The Company remains well positioned to meet its customers' needs and to pursue further development of renewable generation opportunities when it is economically justifiable.
BJ Harker

TrustPower Unaudited Financial Results for the six months ended 30 September 2011

TrustPower Investor Briefing released 11 November 2011.

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