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Trustpower boosts first-half profit 80% as it benefits from higher prices

Monday 6th November 2017

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Trustpower, New Zealand's fifth-largest electricity generator, boosted first-half profit 80 percent as its spread of generation assets allowed it to benefit from higher prices.

Net profit rose to $80.8 million, or 25.8 cents a share, in the six months ended Sept. 30, from $45 million, or 14.5 cents, a year earlier, the Tauranga-based company said in a statement. Operating revenue lifted 3.7 percent to $520.1 million, while operating expenses dropped 7.8 percent to $360.9 million.

Its shares increased 1.2 percent to $5.90 and have gained 23 percent this year.

Trustpower increased its New Zealand generation by a quarter to 1,325 gigawatt hours in the first half, compared with the same period a year earlier, largely due to strong hydrological inflows at its North Island hydro-plants that saw North Island generation climb to 732 GWh from 518 GWh a year earlier.  Meanwhile, the average spot price generated soared 62 percent to $89 per megawatt hours.

"This reflects Trustpower's geographically diverse fleet of generation stations that allowed it to take advantage of record high inflows in some parts of New Zealand while other parts were facing extremely low inflows," the company said. 

The company noted that the market had reached a balance in supply and demand, although it said considerable uncertainty exists as to the long run supply and demand balance. It said it's unlikely to invest in a significant new generation build in the near term although small-scale builds or enhancements may be possible.

Trustpower reiterated its forecast for annual earnings before interest, tax, depreciation, amortisation and fair value adjustments to be between $255 million and $270 million. First-half earnings on that measure lifted 44 percent to $159 million.

The company will pay a first-half dividend of 17 cents per share on Dec. 8, compared with 17.1 cents in the year-earlier period. Chair Paul Ridley-Smith said the company expects to be able to increase the dividend payable at the end of the year, without being specific.

Trustpower is diversifying its retail business to offer electricity, gas and telecommunications products, with its interim report today titled 'Trusted For More Than Just Power". In the latest half, its electricity connections slipped to 273,000 from 278,000 a year earlier, while its telecommunications customers increased to 80,000 from 69,000 and its gas connections lifted to 37,000 from 33,000. 

Chief executive Vince Hawksworth said that growth in customer numbers had been modest as the company put its campaigning on hold while it leveraged high wholesale electricity prices. However, he said its current marketing campaign for new bundle customers was proving "very successful" and the company is on track for a 20 percent increase in telecommunication customers this year.

The number of customers with two or more products reached 94,000 in the latest period, a 4 percent increase from 90,000 at March 31, and 80 percent of new customers now purchase more than one product, he said.

Trustpower said it is actively managing its debt level and composition and will be repaying its retail bond maturing on Dec. 15 and replacing it with bank debt.


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