28 Jul 2005
The Directors are pleased to announce an unaudited after tax surplus for the three months to 30 June 2005 of $24.4 million, compared with $15.7 million for the same period last year.
It is important to note that this result includes approximately $3.7 million (before tax) relating to favourable settlements with other retailers that have occurred in the quarter from reconciliation of energy volumes traded under the old electricity market which has now been wound up. This amount is "one-off" in nature.
Earnings before Interest, Tax, Deprecation and Amortisation
("EBITDA") were $52.1 million versus $39.8 million for the same period last year.
The first quarter trading environment was very different to the first quarter last year, in particular, lake storage
levels and inflows have been below average and spot electricity prices accordingly have been significantly higher compared with the prior year when spot prices were low due to higher hydro storage levels. (Load weighted average price for the quarter was $75 per MWh versus $43 per MWh in the first quarter 2004.)
TrustPower's own generation assets produced 496 GWh during the first quarter versus 480 GWh in the first quarter of the prior period, an increase of three per cent.
TrustPower's hydro generation storage catchments remain at satisfactory levels leaving the Company adequately positioned to meet customer demand over the remainder of the winter prior to spring inflows.
Customer numbers remained steady at around 224,000 as at end of June 2005.
The Company's balance sheet remains strong with relatively minor movement from the 2005 financial year end position. Debt to debt plus equity was 28.0 per cent as at 30 June 2005 compared with 32.1 per cent at the same time last year.
TrustPower continues to make progress on key generation development opportunities.
Earlier in the month the Company received resource consent approval for 31 turbines for Tararua Stage III.
While the approval was for 31 turbines versus the 40 requested in the resource consent application, the company has reassessed the project economics with a 31 turbine (93MW)configuration and has confirmed that the expected return, inclusive of carbon credits under the Government renewable assistance programme, remains at a satisfactory level.
The period for appeals has now lapsed and formal confirmation of any appeals is awaited. The Company is now busy finalising turbine supply and construction contracts as well as transmission arrangements. Assuming there are no appeals the Board expects to consider a final project proposal once these material costs are confirmed.
If the project meets the Company's required rate of return and construction time is approximately thirteen months it is possible that the Stage 3 expansion could be commissioned by the end of calendar year 2006.
TrustPower has been working on the feasibility of the Wairau Valley hydro project for over two years. Project development has now reached a key milestone with a resource
consent being lodged earlier this month.
It is difficult to predict a timeframe for the Resource Management Act process however, the Board is pleased with the progress made and the level of community support for the project.
TrustPower's Australian wind farm projects remain under review. The Essential Services Commission of South Australia ("ESCOSA") released a report in June 2005 titled
"Wind Farm Licensing Draft Statement of Principles".
This report proposes a series of local license conditions that should be included with the issue of new wind generation licenses. Effectively, these are a series of proposed technical standards that new wind generators, including TrustPower's Snowtown and Myponga projects, would
need to meet in order to obtain a generation license.
TrustPower, along with other wind generation developers, is currently assessing the impact that the proposed local license conditions are likely to have on the technical and economic viability of its projects.
Submissions on the ESCOSA report are due 1 August 2005 and following a review period it is expected, ESCOSA will release an approved framework for granting further generation licenses which will provide clarity on this important issue.
The delays caused by this process may result in additional cost for the projects which the Board will consider when it makes it final evaluation.
At this early stage of the financial year it is difficult to predict year end results, however, the first quarter result is pleasing and reflects TrustPower's ability to manage wholesale market risks in both high and low price periods. At this stage the Directors are confident that another good result for the full year is achievable.
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