6 Nov 2013
Trustpower's consolidated profit after tax was $77.2 million for the period, representing an increase of 11% compared with $69.8 million for the same period last year.
Good progress is being made in implementing the Group’s growth agenda and construction of the 270MW Snowtown Stage 2 Wind Farm in South Australia is progressing ahead of plan.
Underlying earnings1 after tax excluding fair value movements on financial instruments and one-off impairment charges were $69.9 million compared with $76.2 million in the prior period, a decrease of 8%. Fair value gains on financial instruments were $10.1 million for the period (prior period was a loss of $8.9 million) primarily due to increases in long term interest rates having a positive impact on the Group’s portfolio of interest rate hedges.
Earnings before interest, tax, depreciation, amortisation, fair value movements of financial instruments and asset impairments (EBITDAF)2 were $153.2 million, compared with $166.1 million achieved in the prior period representing a decrease of 8%.
The Group operating performance was considered satisfactory given lower New Zealand generation production and a challenging retail environment, where pressure on margins and lower customer demand was experienced. During the period the Group committed to a number of growth initiatives including the purchase of several wind development options in Australia, refresh of its retail brand, and feasibility expenditure with respect to considering an opportunity to invest in the Ruataniwha Water Storage Scheme in the Hawkes Bay. Consequently the Group's other operating expenditure was higher than the prior period.
Total electricity volume sold by the Company in New Zealand through mass market retailing and time of use sales was 1,831GWh, compared with 1,986GWh in the prior period, a decrease of 8%.
Following the acquisition of Energy Direct New Zealand ("EDNZ") total energy accounts increased to an overall total of 228,000, including 10,000 gas accounts. While the retail energy market remained highly competitive throughout the year, Trustpower continued to experience lower levels of customer churn than the market overall. Trustpower is pleased with the EDNZ acquisition transition process.
Telecommunications growth continued with internet and phone services reaching 48,000. The company is now positioned to provide ultrafast broadband services in a number of key regions.
The Group's New Zealand generation production of 1,218GWh was down 74GWh (6%) on the previous year and 8% below the expected long term average. North Island hydro production was significantly impacted by low inflows and was down 28% on prior period. This production shortfall was partially offset by a 14% increase in New Zealand wind production over prior period demonstrating the diversity of Trustpower’s renewable generation portfolio.
The Snowtown Wind Farm in South Australia produced 193GWh during the period which was 7GWh (4%) higher than the prior period and slightly better than expected long term average.
Group operating cash flow was $118.9 million for the reporting period versus $102.6 million in the prior period.
Net debt3 (including subordinated bonds) to Net debt plus equity increased to 40% from 35% at 31 March 2013, as a result of increased borrowing levels to finance the development of the Snowtown Stage 2 wind farm.
Trustpower continues to maintain conservative levels of committed credit facilities. As at 31 September 2013 Group net debt3 was $1,053 million. The Group has close to NZD equivalent 1.5 billion of committed debt facilities of which approximately NZD equivalent 370 million remains undrawn.
Trustpower has established a position as NZ’s leading multi-utility retailer, broadening its product suite to include power, ultrafast broadband and phone services, natural gas and bottled LPG. In support of Trustpower's multi-product market position, its brand strategy and look and feel have been re-designed, and the company’s web presence has been fully revamped.
Construction of the 270MW Snowtown Stage 2 Wind Farm in South Australia is progressing well and is on budget and ahead of schedule. The transmission line and substations have been completed. Civil works are nearing completion, 23 of 90 3MW turbines have been erected and 14 turbines are now generating and connected to the transmission system.
Trustpower is actively progressing other wind development options in Australia with the aim of developing further wind projects to help meet the Australian Mandatory Large Renewable Energy Target over the course of the next five years. Development approval applications for close to 1,000MW for 3 wind projects in each of Victoria, New South Wales and South Australia are being progressed on the basis that the Australian regulatory environment will continue to support further renewable investment.
In New Zealand commissioning of the 3.8MW Esk Valley Hydro project in Hawkes Bay has recently been completed 4 months behind schedule at a cost of $13.5 million (excluding capitalised interest). Completion of this project was hampered by challenging weather conditions during the reporting period. Esk Valley Hydro is expected to add around 15GWh of hydro production to Trustpower's generation portfolio.
Trustpower has been selected along with Ngai Tahu Holdings Corporation Limited as preferred investors in the Ruataniwha Water Storage Scheme (RWSS) in the Hawkes Bay. The proposed RWSS will involve the construction of a storage dam and water distribution system capable of providing reliable irrigation for up to 30,000 hectares of land. The project has a targeted Financial Investment Decision date of 30 April 2014 and if Trustpower participates in the investment it is expected to invest $50-60 million out of a total capital cost of the project of $265 million.
Following the conclusion of long term water storage and release agreements with Barhill Chertsey Irrigation Limited and Central Plains Water Limited, Trustpower is working with a range of interested parties to develop an optimised long term irrigation infrastructure solution for mid Canterbury. While it is expected that the initial storage and release agreements should result in an additional irrigation supply area in mid Canterbury of around 40,000 hectares, there is potential to increase the supply area by up to a further 80,000 hectares via a well-designed distribution infrastructure from Lake Coleridge.
The Directors are pleased to announce an interim dividend of 20 cents per share, partially imputed to 16 cents per share, payable 13 December 2013 (record date of 29 November 2013). Despite the current challenging New Zealand electricity environment which includes intense retail competition, an oversupplied generation market and regulatory uncertainty, the Board is confident that Trustpower is well placed to regain earnings momentum once the Snowtown Stage 2 Wind Farm is completed and other quality renewable generation and irrigation development opportunities are able to be progressed.
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