Trustpower reports flat first-half earnings

Tauranga-based utility Trustpower [NZX: TPW] announced flat earnings for the first half of the year on an underlying profit after tax basis, reporting a 1 percent uplift on the same period last year at $68.3 million.

The result included a $6.1 million hit from the impact of a tax department ruling on the way Trustpower treated expenditure on feasibility studies in the past. That cost could be reversed if the Infratil-controlled company succeeds in an appeal to the Supreme Court next March.

Statutory profit for the period to Sept. 30 was down 33 percent at $59.7 million, reflecting a $25 million one-off valuation gain booked at the time of its acquisition of the Green State Power hydro in New South Wales in the first half last year. A partially imputed interim dividend of 21 cents per share, 1 cent higher than for the first half of the previous financial year, will be payable on Dec. 11.

Earnings before interest, tax, depreciation, amortisation and changes in the value of financial instruments rose 6 percent to $184.2 million on a 5 percent increase in total electricity sales that was offset by the lowest average wholesale price for electricity generated that the company has seen in the first half of the financial year in the last five years, at $54 per megawatt hour. That compares with an average $63MWh in the same period a year earlier and a record in the last five years of $97MWh, achieved in the first half of the 2011/12 financial year.

Electricity generation from the completed Snowtown wind farm in South Australia was below long-term expectations at 596 gigawatt hours, while generation in New Zealand was 7 percent higher than the prior period and in line with long-term average expectations.

However, chairman Bruce Harker said Trustpower was confident there was "now a more stable policy environment for renewable energy investment in Australia", since the federal government had established its revised Renewable Energy Target.

Australian renewable energy projects representing some 900MW of installed generation capacity are being progressed in Victoria, New South Wales and South Australia, while a wind farm site in Western Australia, with development approved for 105MW of generation and potential for a 20MW grid-connected solar power project, was also secured.

The company will repay $100 million of subordinated bonds maturing in December from undrawn bank facilities.

The Supreme Court appeal is being closely watched by major players in the New Zealand infrastructure sector because the Inland Revenue Department's initial ruling on the deductibility of feasibility expenses is at odds with past practice. Trustpower maintained its treatment was correct, but had provided for the full $6.1 million of potential losses in the current half year result after losing in the Court of Appeal earlier this year.

Total electricity customer accounts rose to 252,000 from 234,000 at Sept. 30 last year, while telecommunications customers rose to 51,000 from 35,000 as Trustpower's strategy of offering bundled packages of electricity, gas and telecommunications spread through the customer base. Some 66,000 customers had two or more services with Trustpower as at Sept. 30, a 46 percent increase on the same time last year, and the company reported lower customer churn rates than the market average.

Trustpower shares gained 1.7 percent to $7.80 late, and have risen 7.6 percent this year.

(BusinessDesk)