Transpower trims interim dividend as reduced regulated revenue eats into earnings

Thursday 25th February 2016

Transpower will pay a smaller dividend to the government because the state-owned national grid operator's earnings were eroded by lower regulated revenue for its transmission business.

The Wellington-based SOE will pay $64.8 million, or 5 cents per share, to the government on March 10, less than the $75.2 million, or 6 cents, dividend a year earlier. Underlying profit, which strips out fair value movements in the company's financial instruments, fell 8.1 percent to $99 million in the six months ended Dec. 31, on a 1.5 percent dip in revenue to $519.2 million, it said in a statement.

"With a lower allowable rate of return, challenging efficiency targets, and more comprehensive and complex incentive arrangements, it's pleasing that we are on track to at least achieve all of our statement of corporate intent financial targets at the end of the year," chairman Mark Verbiest said. "Our transformation efforts and implementation of operational efficiencies will continue, with a critical focus on delivering reliable transmission services to our customers at an appropriate price point."

Transpower has budgeted for a $162 million dividend to the government in the year ending June 30, 2016, down from $188 million in 2015 to allow for a new regulatory control period. That would be partly mitigated by plans to cut operating costs, and a reduced capital spending programme.

The SOE's net profit increased 65 percent to $122.1 million, including a $32 million increase in the valuation of Transpower's financial instruments. Operating expenses were flat at $135.3 million.

Transpower has three bonds listed on the NZX. One $200 million tranche comes due in 2019, paying annual interest of 4.65 percent, last traded at a yield of 3.37 percent, a $325 million note maturing in 2018 paying annual interest of 5.14 percent traded at a yield of 3.2 percent, and its 2022 $150 million bond paying 4.3 percent last traded at 3.83 percent.

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