First published in Energy and Environment on August 29
Transpower’s annual results for 2017/18 again highlight how much the Government is one of the main beneficiaries from
profits in the electricity sector. The results show a net profit of $206 million and a dividend to the Government of
$165 million.
The result comes as the Electricity Review looks at what is behind power bills after the Government cited rising
electricity costs to consumers over the last decade as an issue which must be addressed.
The Transpower result will give fuel to the argument of those who feel it is the Government’s coffers which are one of
the greatest beneficiaries of profits in the sector. The dividend payment represents more than 15% of the state owned
enterprise’s gross revenue of $1,084 million.
There are strong public policy arguments for SOEs to earn a return on capital to ensure discipline and wise use of state
owned assets, but some may argue the dividend payments from a monopoly (even a highly regulated one) may be a
contribution to rising power bills.
Last week Energy and Environment reported there was disquiet from some parts of the electricity sector over the returns
being earned by the gentailers and in particular the state owned ones.
A study of the partially privatised gentailers by consultancy firm TDB showed by most measures the Government was
getting more in dividends from its 51% holding in the three major power companies than when it owned the SOEs outright.
TDB estimated the total annual shareholder returns for the companies since they began trading on the NZX was 26% for
Meridian, 22% for Genesis and 12% for Mercury. This compared to the 7% returned by privately owned Contact and
Trustpower.
There is a major rider to the headline findings of the study –the returns of the SOEs was not totally driven by
performance, but a reflection their float value was below the true valuation.
While the report argues the case for success of the model, critics of the gentailers say it shows to those the
Electricity Review where the profits are being made. The gentailers in turn point the finger at network providers saying
they have been the main driver in power bill increases in recent years.
Today (Wednesday) Genesis Energy reported an 8% increase in full-year operating earnings after increased demand for
Huntly’s coal-and gas-fired generation. Earnings before interest, tax, depreciation, amortisation and changes in
financial instruments rose to $360.5 million, from $332.5 million a year before. The Genesis board declared a final
dividend of 8.6 cents per share, an increase of 2%, despite net profit falling to $19.8 million, down 83% from $118.7m
the year before. This was due to higher depreciation and revaluations.
Transpower’s annual result shows revenue was up 2% on the previous year. Operating expenses were $293.9 million, 2%
higher than the $287.8 million incurred in the previous year. EBITDAIF was $790.5 million, an increase of 2% on the
previous year’s $773.3 million.
Net profit after tax, before net changes in the fair value of financial instruments, was $206.5 million, a decrease of
$1.9 million (1%) from 2016/17.