King Country Energy Announces Annual Result

King Country Energy Announces Annual Result

King Country Energy has announced its fully audited annual result for the year ending 31 March 2010.

The Company’s consolidated profit after tax was $1.6 million for the year, compared with a $3.4 million result for the previous financial year.

Earnings before interest, tax, depreciation, amortisation, fair value movements of financial instruments and asset impairments (EBITDAF) were $6.2 million. Normalised EBITDAF (excluding a one off write-down of development expenditure) was $7.8 million, compared with $9.8 million in the previous financial year.

King Country Energy Chairman, Brian Gurney, said the year ending 31 March 2010 has been a period of consolidation.

“The past financial year has been a challenging one for King Country Energy. For our Board, it has been a year of review and consolidation. This year’s financial result is a disappointing one.

However there are many positive signals in the Company, we have a solid business with good operating cashflows and a strong platform for growth,” outlined Mr Gurney.

The Company’s operating revenue remained steady at $33 million. However, operating expenses increased 15% on the previous year, primarily driven by higher wholesale electricity costs and settlement costs associated with electricity hedge contracts.

“The New Zealand electricity market was volatile throughout the year and although King Country Energy maintains a hedge policy which largely mitigates our exposure to the market, there are times where the business is a net buyer or seller at spot rates. This market position has negatively affected the Company this year,” said Mr Gurney.

Mr Gurney noted that King Country Energy has continued its conservative financial policies throughout the year, maintains a strong balance sheet that is debt free, and enjoys strong positive operating cashflows. Following an independent valuation report, King Country Energy re-valued its generation assets to 31 March 2010.

The Group’s operating cash flow increased 19% in the year to 31 March 2010 to $7.1 million from $5.9 million. This movement was reflected in the strong year-end cash position in the Group’s balance sheet.

Mr Gurney announced the King Country Energy Board made the decision to write off a previously capitalised consent cost in the current year, which relates to its proposed Mokau hydro development.

“Although the proposed 10MW Mokau hydro development is an opportunity King Country Energy continues to explore and the Environment Court has allowed the Company to continue with the consent process, the current viability and time to completion of this project has led to a decision to write off $1.6 million of previously capitalised consent costs,” he said.

During the financial year King Country Energy’s total electricity retail volume decreased by 3% to 239 GWh, while its customer numbers remained steady at 19,000 connections.
Of the Company’s total retail volume, 120 GWh was generated through its own hydro generation scheme. This was a 5% drop from last year. The Company cited low hydrology and limited storage ability as the cause of the decrease in generation.

Mr Gurney said, in the medium term, the Company is focused on minimising exposure to the hedge market and exploring new generation developments.

“Going forward, King Country Energy will be working on strategies to reduce our exposure to the hedge market, as this represents a significant risk area for the business, including investigating generation development opportunities to reduce our electricity generation and retail sales gap,” explained Mr Gurney.

The Company announced a recommendation for a final dividend of 12 cents per share, fully imputed and payable on 6 August 2010. This, combined with the interim dividend of 12 cents per share, provides a total of 24 cents per share for the financial year ended 31 March 2010. The final dividend provides shareholders with a gross return of 8.6%, based on the share price of $4.00 at year end.
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