Orion announces $34m net surplus for 2006

Orion announces $34m net surplus for 2006

6 July 2006

Christchurch based electricity network company Orion New Zealand Limited has announced a $34m net surplus after tax for the year ended 31 March 2006, $3m above its statement of intent forecast.

The net surplus of $34m, which includes a $3.5m gain on the sale of Orion’s investment in Australian listed company Energy Developments Limited (EDL), was not directly comparable with the previous year’s net surplus of $52m. The 2005 net surplus of $52m included a $29m gain on the EDL investment.

The core electricity network net surplus for 2006 was $40m, $5m ahead of forecast. The network also performed very well during the year in terms of high reliability and low network outages.

Orion was the most reliable major electricity network in New Zealand over the five years to 31 March 2005 (the most recent period where figures are available that compare the performance of New Zealand’s 28 electricity distribution networks).

During the year Orion paid fully imputed ordinary dividends of $38m ($11m above forecast and $11m above last year) to its ultimate shareholders – Christchurch City Council (89.275%) and Selwyn District Council (10.725%). This brought total tax-free distributions to shareholders since corporatisation in 1993 to more than $800m.

“The combination of a healthy net surplus, good dividend payments to our owners, high network reliability and price reductions for our customers, after allowing for inflation, has made it another excellent year for Orion,” chairman Linda Constable said.

“Over the last five years we have reduced our network charges to domestic customers by over 11%, after adjusting for inflation, and continued to invest approximately $30m per annum on projects to connect new customers, reinforce our network and replace ageing equipment. These investments, and the innovative techniques Orion has led the industry with, are the reasons why we have managed to ‘keep the lights on’ for 99.99% of the time,” said Ms Constable.

“If we want to ensure that our community and the rest of New Zealand continues to have a reliable energy supply, ongoing infrastructure investment across the whole electricity industry is essential. The regulatory environment must not undermine incentives for this investment to occur and needs to give the industry the ability to earn reasonable financial returns on any investment.

Otherwise electricity consumers, and New Zealand as a whole, will suffer in the long term,” said Ms Constable.

Orion CEO, Roger Sutton said “We have the best reliability rate of any major electricity distribution network in New Zealand and are around three times better than the New Zealand average. Our historical 99.99% reliability rate is even more impressive, given the periodic snow and wind loading that our system must face, as witnessed by this month’s snow storm.

“The June snow storm has been the most severe snow to hit our rural network area in 30 years.

It caused widespread faults in our system and in other network areas to the south and north of us. However thanks to the incredible efforts of our staff and contractors, who worked up to 14 hours in freezing conditions, power was restored to our network in good time. Our customers who were affected by the outages were very understanding and many assisted our efforts to restore power by the clearing of snow, providing transport, etc. and on behalf of all of us at Orion I’d like to thank them for that.

“Power was cut to around 8,000 of our rural customers on Monday 12 June. By the Wednesday, this number was reduced to 2,000, and power was restored to all but 200 customers by Friday 16 June. Those 200 customers had their power restored shortly afterwards. We then sent our staff and contractors to other network companies to help them restore power to their customers."

Orion’s 100% subsidiary, Connetics, again performed above expectations during the year.

The recent strategic direction of Orion has been to sell its non-core investments at opportune times. In line with this strategy, the company sold the remainder of its investment in EDL during the year.

“The 4.25m EDL shares we retained from the previous financial year were sold for A$4.50 per share in September 2005. Overall, we made a gross profit on this investment of approximately $17m and a net surplus, after all acquisition, interest and holding costs were taken into account, of approximately $9.4m,” said Ms Constable.

The Orion statement of intent forecast is for a surplus after tax of $26.6m for the year ended 31 March 2007, which will be the first year of reporting under NZ IFRS.

Since balance date Orion has sold most of its stake in local co-generation developer, Whisper Tech Limited, to Meridian Energy. The surplus on the sale of this investment is not included in the 2007 Orion statement of intent forecast and, as a result, Orion is likely to exceed the $26.6m net surplus forecast for the year ending 31 March 2007.

Orion distributes electricity to more than 180,000 homes and businesses in Christchurch and central Canterbury. Orion charges electricity retailers for this network delivery service and retailers, in turn, charge electricity consumers.

Financial summary 2006 $m 2005 $m
Operating revenues 198.0 207.7
Operating surplus before tax 54.5 73.8
Taxation expense 20.4 21.5
Net surplus 34.1 52.3
Cashflows:
Operating activities 61.8 56.5
Investing activities (13.6) 25.5
Financing activities - dividends (38.0) (27.0)
Financing activities - other (11.9) (53.3)
(1.7) 1.7

ENDS

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