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Transpower reports lower earnings


Tuesday 16th August 2011

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National grid operator Transpower is reporting an 11 percent fall to $126 million in annual earnings before net changes in the fair value of financial instruments.

Publishing the results today chairman Mark Verbiest said dividend payments to the Crown would restart in the 2011/12 financial year, a year earlier than previously planned.

Transmission revenue for the year to June 30 rose 3 percent from a year earlier to $675m, which reflected the commissioning of new investments in the grid, but was less than forecast.

A lower regulated return set by the Commerce Commission cut fourth quarter revenue by $11m, while the deferral of the planned commissioning date for the new Pole 3 of the high voltage direct current (HVDC) inter-island link reduced it by $8m.

That fall in revenue was partially offset by $9m from the recycle value of copper components of the dismantled Arapuni-Pakuranga line, and a strong trading performance by Australian subsidiary d-cypha Trade, Transpower said.

The carrying value of the North Island grid upgrade land portfolio was further impaired, by $19.7m, bringing the total impairment on the upgrade property to $49.7m.

That reflected the reduction of the value of property bought in Waikato and South Auckland, most in 2006 and 2007, to enable construction of the new line. The fall in value was due to a general fall in land values in the region, Transpower said.

Depreciation and amortisation increased by $21m, including a $9m adjustment to asset depreciation following a review of asset lives. The remainder of the increase was due to increased asset capitalisation through Transpower's build programme.

Operating costs rose $15m, including a $6m increase in planned maintenance.

Verbiest said Transpower's two largest projects -- the North Island grid upgrade and Pole 3 of the HVDC link -- were well advanced. Construction also started recently on a new underground cable through Auckland’s CBD and to the north, called the North Auckland and Northland project.

Together, those three large grid projects would cost nearly $2 billion.

They were part of an overall capital programme, expected to be around $5b over the next 10 years, that would significantly increase the capacity, performance and resilience of the grid.

Equally important was significant ongoing investment in replacing and refurbishing older equipment.

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