Infratil highlights its success with Trustpower
Infrastructure investor Infratil Ltd is highlighting the success of TrustPower under its stewardship at a time of debate about the sale of state-owned electricity companies, and is also highlighting the role its hydro stations can play in irrigating Canterbury.
In its latest investor newsletter, Infratil says that taxpayers are getting miserable returns from state-owned electricity companies. While Infratil's 50.6 percent stake in TrustPower purchased between 1994 and 2005 for $391 million is worth $1.2 billion and $385 million of cash dividends have been received.
"Two key drivers of TrustPower's profitability, over the last 17 years and into the future, are New Zealand's electricity prices and the company's ability to find good expansion and investment opportunities," Infratil said.
While it was virtually impossible for the Crown-Ownership Monitoring Unit to get close enough or understand the industry enough to be effective.
"I think 20 percent privatisation will be transformational and a good thing for the country," Infratil's energy group head Bruce Harker said.
"It is a mistake to underestimate the difference it will make," he said.
Over the last decade wholesale electricity prices in New Zealand have risen from about four cents per kWh to about eight cents per kWh.
Over the next few years they are likely to continue to rise to about 10 cents per kWh. The average household consumes about 8000 kWh of electricity a year.
"For TrustPower the rise in prices over the last decade has added about $80m to annual earnings and the next two cents should add a further $50m," Infratil said.
Rising electricity prices reflected the rising cost of generation when an era of cheap gas and coal ended and the transition to more expensive renewable generation.
"This wasn't a conspiracy by generators, it reflects New Zealand's relative lack of cheap gas and coal and to a small extent it also reflects the pricing of emissions."
The company also highlighted the role its hydro stations play in irrigation of agricultural land, particularly in Canterbury.
TrustPower's Highbank power station near Ashburton in mid-Canterbury is part of the Rangitata Highbank generation irrigation scheme and TrustPower is investing to expand the irrigation capacity.
TrustPower's potential use of its Lake Coleridge water storage was a different type of scheme. Coleridge's storage would be used to hold water on behalf of farmers, effectively storing their water rather than TrustPower's. The water would then be released during summer when it would be of greatest value to the farmers.
The schemes have the potential to more than double the irrigated land in mid Canterbury resulting in significant additional food production as 80,000 hectares of irrigated land could produce as much as 1 million tones of wheat, sufficient food for over 500,000 people.
The Coleridge project illustrated the long-term development potential of TrustPower's 19 hydro schemes. When construction started on the Coleridge Power Station in 1911 it was unlikely that much thought was given to having its water storage linked to irrigation of mid Canterbury.
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