Half-year loss pressures Pulse as power prices spike

Photo / Mark Mitchell

Independent electricity retailer Pulse Utilities added a further $2.35 million to accumulated losses now totalling $25.9 million, in the six months to September 30, reflecting tight winter trading margins and fast customer growth.

NZAX-listed Pulse's net loss for the period compared with a $955,741 loss in the same half a year earlier, having gained 9,000 of its 13,000 customers at September 30 during the six months under review. The company listed in August 2007.

The fastest-growing electricity retailer now boasts around 17,000 customers and is targeting 23,000 by March 31 next year, but has been blind-sided by spiking wholesale electricity market spot prices, which have doubled in the last two weeks, and are more than five times higher than the average over recent months.

While the company recorded 300 per cent revenue growth to $7.9 million for the half-year just ended, its total operating expenses of $9.8 million drove a loss of $2 million loss on an earnings before interest, tax, depreciation, and financial instruments basis.

The company warned in an appendix to its filings to the NZAX on December 14 that high wholesale power prices during winter mean "profitability margins from electricity retail operations are therefore generally expected to be lower during the first half of the financial year."

Since December 1, however, wholesale electricity spot prices have risen to above $300 per Megawatt hours at times, almost six times the prevailing, historically low average for the last few months of around $55MWh.

The spike prompted Pulse chief executive Dene Biddlecombe to call on Monday for an Electricity Authority inquiry into the sudden spot price movement, when hydro lake storage levels are roughly average for this time of year.

With urging also from the Major Electricity Users Group, the EA is due to report the results of an informal inquiry into the spike to Energy Minister Gerry Brownlee around the middle of next week.

The price spike also looks likely to test Pulse's arrangements with the NZX, which operates the wholesale electricity market trading platform and requires "prudential" payments from participants that reflect the size of their exposure.

In the latest accounts, Pulse recorded payment for security bonds of $630,000, subsequently replaced by a $1 million letter of credit backed by the Buller Electricity network company, which took a 9 per cent stake in Pulse in payment for the service.

BusinessDesk inquiries have established that all generators are taking a cautious approach to the value of hydro water after 10 weeks of low inflows, less snow than usual to melt from mountains into the hydro catchments, stiller weather caused by La Nina weather patterns reducing availability of wind power, and the potential for gas supply constraints during a Maui gasfield maintenance shutdown next February.

"All the hydro generators are risk-averse," said TrustPower spokesman Graeme Purches, especially since power companies now have to pay customers by law if they force an electricity savings campaign by misjudging the balance of renewable and thermal generation resources.

"No one will get into that environment anymore," said Purches.

"When you think that the EA is thinking of putting a $3,000 per MWh floor for scarcity pricing, this ($300 per MWh) is nothing like $3,000. This is the market working."

The Maui field operators, Shell Todd Oil Services, confirmed the month-long shutdown for upgrades and maintenance, but noted new fields such as Pohokura, Kupe and Turangi made gas shortages unlikely. Maui provides around one-third of total national gas needs today, compared with 90 per cent in the past.