Orion announces $60.6m net profit

6 July 2007

Orion announces $60.6m net profit for 2007

Christchurch based electricity network company Orion New Zealand Limited has announced a $60.6m net profit after tax for the year ended 31 March 2007, $34m above its forecast.

This is the first year that Orion has adopted international financial reporting standards (NZ IFRS) for its financial reporting.

The overall result is not directly comparable with the previous year’s net surplus of $46.3m (restated for NZ IFRS) due to significant unique transactions in each year. The recent strategic direction of Orion has been to sell its non-core investments at opportune times. In line with this strategy, Orion sold its investment in local cogeneration developer Whisper Tech Limited for an $11m profit on sale, and its investment in Australian energy consultancy Energetics for a $4m profit on sale. After balance date, Orion sold its investment in HumanWare for a $1.1m profit on sale.

The core electricity network net profit for 2007 was $46m post tax, $9m ahead of forecast.

"A strong net profit, healthy dividend payments to our owners and below average prices for our customers have made it another excellent year for Orion," chairman Craig Boyce said.

"We have achieved these results while maintaining our ranking as one of New Zealand’s most reliable electricity distribution networks,” said Mr Boyce. “Our network has been the most reliable in the country over the last five years – we have 'kept the lights on' 99.99% of the time while keeping our prices below the New Zealand average.”

“On average our electricity distribution prices rose by 2.6% in the last year, which equates to around a 0.7% increase on a household’s electricity bill – our prices typically make up about a quarter of an electricity retailer’s bill. Our 2.6% increase complies with the Commerce Commission’s price threshold regime which sets a threshold for any price increase by Orion of no more than the consumer price index less 1% in any year.”

During the year Orion paid fully imputed ordinary dividends of $38m ($10m above forecast) to its ultimate shareholders – Christchurch City Council (89.3%) and Selwyn District Council (10.7%). This brought total distributions to shareholders since corporatisation in 1993 to more than $850m.

“Despite current regulatory uncertainty, we have continued to invest over $27m per annum on projects to connect new customers, reinforce our network and replace ageing equipment. We also continue to look for and implement innovative solutions to sustain our high levels of reliability." "We welcome the current ministerial review of the Commerce Act and are hopeful that it will provide greater certainty and address impediments to investment across the electricity industry. This investment is essential to maintain secure electricity supply. If the industry is hindered in its ability to earn reasonable financial returns on its investments, then electricity consumers, and New Zealand as a whole, will suffer in the long term”, said Mr Boyce. Orion's 100% subsidiary, Connetics, again performed above expectations during the year.

Orion’s distribution network assets together with its land and buildings were independently valued upwards by $183m at balance date, although due to the treatment of deferred tax under NZ IFRS, shareholders’ equity only increased by $125m as a result of the revaluation. Total group assets now stand at $955m and net interest bearing debt stands at $39m.

The Orion statement of intent forecast for the year ending 31 March 2008 is for a profit after tax of $39.7m and fully imputed dividends of $35m. Orion distributes electricity to more than 184,000 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 data restated consistent with NZ IFRS) 2007 $m 2006 $m Revenues 198.3 195.8 Profit from continuing operations 49.2 51.9 Profit / (loss) from discontinued operations 11.4 (5.6) Profit for the period 60.6 46.3 Cashflows: Operating activities 71.8 62.3 Investing activities (14.1) (13.9) Financing activities - dividends (38.0) (38.0) Financing activities - other (20.3) (12.1) (0.6) (1.7)

ENDS

© Scoop Media