Electricity sector outlook is 'stable'

The 12-month outlook for the electricity sector was stable, despite moves by regulators to crack down on pricing, ratings agency Moody's Investors Service said yesterday.

"The transmission and distribution regulatory environment continues to evolve, but should not adversely impact sector companies' credit," said Moody's analyst Clement Chong.

The environment remained stable overall.

"Companies' low business risk mitigates the high debt load evident in the sector, which has constrained ratings at the A to Baa range."

On Friday, the Commerce Commission said it intended to declare control of Hawkes Bay-based power lines company Unison for overcharging consumers in Taupo and Rotorua.

The move means that - after a final submission process - it will impose price controls on the company.

Last month, the commission used similar powers to impose price controls on the gas pipeline business of energy network companies Vector and Powerco.

Meanwhile, brokerage Credit Suisse First Boston yesterday issued its first research note on newly listed power distributor Vector, rating it neutral with a price target of $3.35.

CSFB analysts said Vector had solid revenue and earnings potential in Auckland and Wellington under the present benign electricity regulatory regime.

They noted that the biggest risk to the valuation was a change in regulation.

CSFB forecast net profit for the year ended June 30, 2006, to fall 5 per cent to $38.8 million before rising to $50 million the next year.

- REUTERS