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Trustpower earnings dip on weak electricity demand, marketing costs

Friday 29th April 2016

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Weak prices for wholesale electricity in New Zealand and higher marketing costs saw Tauranga-based integrated energy and telecommunications utility Trustpower's operating earnings fall 1 percent in the year to March 31 in what is likely its last annual result before a proposed demerger.

Earnings before interest, tax, depreciation, amortisation, fair value movements, asset impairments and discounts on acquisition, the company's proxy for operating earnings, came in 1 percent lower than last year at $329 million.

Net profit after tax was down 38 percent at $90 million, partly reflecting a $25 million one-off gain in the previous year from a fair value movement in the value of its stake in the Australian generator Green State Power, as well as increased costs of $12 million over the previous year because the company's bundled offer of electricity and broadband services surpassed its targets. The product bundle, which can also include natural gas, is regarded as a main tool to encourage customer loyalty for a company that already has higher customer retention rates than the industry average and associated customer gains "expected to result in future value creation."

Total customer numbers jumped 22 percent to 370,000 over the year, with 77,000 of those taking two or more utilities, up 48 percent on the 2015 financial year.

Also booked against earnings was $4.9 million of legal fees associated with Trustpower's as yet unresolved court challenge to a tax department ruling disallowing the deduction of 'black hole' expenditure on an abandoned development project from being a deductible expense. 

Increased depreciation costs also weighed on earnings, reflecting an increase in asset values and the Green Power state gain.

However, that didn't stop a 2.4 percent increase in total annual dividend payments, with a final dividend of 21 cents per share, imputed to 17cps, declared, payable June 10 with a record date of May 27.

Commenting on the year past, directors said "nationally wholesale electricity prices were soft, particularly during winter. During the period May to October 2015 the rolling weekly price seldom rose above $60 per Megawatt hour", and the average for the year of $60 per MWh was the lowest since the year to March 2011.

The Infratil-controlled company confirmed last month it would pursue a demerger to put its Australasian wind assets and development prospects into one company, and its New Zealand retail business and hydro-generation assets in another. Details will be announced in coming months.

 

 

 

 

BusinessDesk.co.nz

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