Cobb hydro scheme purchase helps keep financial position strong

By CHRIS DANIELS energy writer

Trustpower, New Zealand's fifth biggest electricity generator-retailer, has made a full-year, after-tax profit of $47 million, compared with a $1.3 million profit the year before.

A dividend has yet to be declared, as the company is waiting for the results of a June 19 shareholders vote on the pro-rata share buyback offer.

The profit was earned from revenue of $662.9 million, with 6,500 gigawatt hours of electricity sold.

Chairman Harold Titter said the change in performance was due to a return to a "more normal trading and generation after the setbacks during the winter of 2001".

A dry and cold winter that year left Trustpower exposed to high prices on the wholesale market, meaning it had to buy expensive power generated by rivals. It finished the year with an operating loss of just over $5 million, despite revenue of $603.9 million.

Titter said Trustpower's financial position remained strong, with the purchase of the Cobb hydro scheme near Nelson for $92.5 million increasing fixed assets to $811.9 million, from $731.4 million the year before.

Directors are confident that despite a new "electricity crisis", risk management practices in the company should ensure there would be no adverse effects on profits.

The Government announcement to set up an Electricity Commission that would levy customers, to pay for dry-year capacity, was unlikely to have any significant effect on profits.

While yesterday's profit announcement shows the company has recovered from the harsh winter of 2001, Trustpower shareholders may be looking closely at their company's continued difficulties in the retail side of its business.

Customer numbers dropped from 280,000 to 274,000, and 32,000 domestic customers in Christchurch and Wellington are being asked to move their power supply to the only other power company listed on the stock exchange, Contact Energy.

Trustpower says it has stopped competing in these areas, because it cannot match the "unsustainable" prices being offered by its rivals.

Infratil, in alliance with US investor Alliant, has tightened its grip on Trustpower through the two-for-seven buyback, with Australian Gas Light selling its 20.5 per cent stake.

Infratil now owns 35.3 per cent of Trustpower, up from 27.9 per cent, while Alliant goes to 23.8 per cent from 18.9 per cent.

The other big shareholder, the Tauranga Energy Consumer Trust, which owns 28.6 per cent.

* Infratil announces its full year results today.