Powerco delivers positive outcome

Thursday, 18 July, 2002

Powerco delivers positive outcome and continues strong focus on growth

Powerco’s commitment to sustainable operational performance and strong focus on growth in 2002 and beyond, was reconfirmed today by Chairman, Mr Barry Upson at the company’s annual meeting.

“Our management team and staff will continue their ongoing improvements in cost control and network reliability while maintaining our historical growth through asset acquisitions wherever possible,” he said.

“Powerco has delivered another positive outcome for all stakeholders during the year,” said Mr Upson.

Net Profit after tax increased 10% to $33.0 million for the year ending 31 March 2002, and total revenue was up almost 15% to $163.1 million. This revenue was derived from an increased asset base of $867.6 million (up 17% on last year). The 2002 result reflects the company’s improved financial performance and the additional revenues achieved from acquisitions made during the year. A fully imputed final dividend of 7.2 cents per share, and interim dividend of 5.9 cents per share, for the year to 31 March 2002, were paid in June 2002 and December 2001 respectively. This equates to a full year dividend of 13.1 cents per share and has exhausted the company’s imputation credit account. This outcome is an improvement of 4.8% compared with the previous year’s dividend of 12.5 cents per share.

Mr Upson said the result represented another solid performance by the company and was in line with the revised forecasts issued in late 2001.

Another key highlight was the issue of $100 million Capital Bonds in May 2002. The money raised from the issue was used to refinance the short-term debt arranged to purchase the Hutt Valley and Porirua gas assets. “The priority allocation to shareholders and existing bondholders was oversubscribed by around 140% and required scaling to achieve wide distribution amongst the applicants. This is a positive reflection on Powerco’s recent financial results and the company’s history of growth through mergers and acquisitions over recent years,” he said.

“Our position in Australia has been consolidated with the purchase of three field services operations in Queensland in June of this year. These operations provide construction and maintenance services to electricity network owners, property developers and large businesses. The acquisitions will strengthen our sound financial results, and are expected to generate gross revenues of around $25 million per annum. There are substantial opportunities for further growth in this fast growing part of Australia.

“The focus on growth of our core business - the ownership of electricity and gas networks - will also continue. Powerco has accounted for over 90% of the mergers and acquisitions in the New Zealand energy distribution sector in the last 10 years, and the purchase of Hutt Valley and Porirua gas assets in July 2001 has cemented our strong position in the New Zealand market place,” Mr Upson said.

“We will also continue our focus on growing Powerco revenue through the provision of asset management and network services to the owners of other lines and pipes assets both in New Zealand and through our investment in Australia,” said Mr Upson.

Powerco Chief Executive, Mr Steven Boulton said that the company had successfully worked through a number of major developments and events this year.

“Our new pricing structure to electricity retailers, implemented in November 2001, contains no fixed daily charges for residential consumers. The government requested that lines companies provide an option which offers a 10% fixed component for residential users, and we provide a 0% fixed component for all residential consumers,” Mr Boulton said.

Network reliability indicators such as the frequency and duration of outages had risen marginally this year, due to the 1-in-30 year storm experienced in the Central Plateau in August 2001. However, Powerco’s performance continued to deliver better than average outcomes when compared to its peers.

“We are pleased our financial performance, network management and cost containment strategies are achieving the targeted results with positive trends over the past three years. Our performance demonstrates that Powerco is well positioned for the future,” said Mr Boulton.

Forthcoming regulatory issues remain a prime focus for the company. A number of the regulatory regimes currently being proposed by some industry participants would have significant cost impacts on the industry and as a consequence, increase costs to consumers. Powerco is actively involved in the discussion processes on these matters.

“We have purposely taken a more proactive and constructive role on regulatory issues over recent times, to stimulate debate and encourage an outcome that delivers value for all stakeholders,” said Mr Boulton.

“It was pleasing to see the Commerce Commission taking a balanced view on regulation with the release of a number of industry documents. However, New Zealand remains on the precipice at the moment, a change in regulatory structure to the draconian heavy-handed approach used overseas will inevitably cause an increase in prices to consumers,” he said.

“The most important fact at the present time is that New Zealanders currently enjoy the lowest delivered prices of electricity in the world – and this is delivered without the need for intrusive regulation. In Powerco’s case we have delivered a real price reduction of approximately 10% to consumers since 1999,” said Mr Boulton.

Mr Upson said the response to Powerco’s industry discussion document (the Power Plan) from a range of industry players and policy makers had been very positive. He noted that this contribution to the discussion, which has been traditionally dominated by the collective views of the major generator/retailers, has been welcomed by the key stakeholders, including political, industry and user groups, as an alternative and fresh viewpoint.

Taranaki-based Powerco is New Zealand’s third largest electricity and gas utility with around 205,000 consumers connected to networks in Taranaki, Wanganui, Rangitikei, Manawatu, Wairarapa and Wellington and has more than 16,000 shareholders. Powerco also has an operational base in Australia.

/ends

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