Trustpower boosts first-half profit 80%

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

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

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

Trustpower increased its New Zealand generation by a quarter to 1325 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 % 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 the market had reached a balance in supply and demand, although it said considerable uncertainty exists over 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% to $159 million.

The company will pay a first-half dividend of 17c a share on December 8, compared with 17.1c in the year-earlier period. Chairman 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 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% increase in telecommunication customers this year.

The number of customers with two or more products reached 94,000 in the latest period, a 4% increase from 90,000 at March 31, and 80% of new customers now buy 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 December 15 and replacing it with bank debt.

(BusinessDesk)