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High wholesale electricity prices and interest costs have eaten into TrustPower's profit, which fell by 4 per cent during the past year.
The company, which generates less than half it needs, posted an after-tax operating surplus of $98.1 million for the year ended March 31, down from $102.4 million a year earlier.
Chairman Bruce Harker said spot electricity prices during the first nine months remained below average but increased in the first three months of this year.
"Taking into account the significant shortfall in production from the company's own generation assets and high wholesale prices for the final quarter of the financial year, the result was satisfactory and again demonstrates that the company's trading and risk management practices are sound," he said.
Revenue rose 9 per cent to $681.5 million as a result of higher prices for its own customers paying spot market prices, and $12.7 million from telecommunication services.
Forsyth Barr analyst Andrew Harvey-Green said the result was in line with expectations. The outlook was dependent on how well the company was hedged against spot prices which were likely to remain high during the winter.
Rising interest costs had hurt TrustPower, with its debt servicing at its Australian wind farm project in Snowtown up from $27 million to $40 million, he said.
TrustPower said electricity sold fell to 4540 gigawatt hours (GWh) from 4575GWh a year earlier, while customer numbers rose to 222,000 from 219,000.
Generation production rose 4 per cent to 2018GWh. Operating expenses, including energy and line costs, rose 10 per cent, driven mainly by higher wholesale electricity costs, and operating cash flow was steady at $161 million. Hydro production was down around 220GWh, or 13 per cent on long term average.
Wind production was up 272GWh due to nearly a full year's contribution from Stage III of the Tararua wind farm, but was down 8 per cent on expected long term average because of lower wind speeds in the second half of the year, and problems with some turbines.
Harker said "while it is too early to make predictions about the 2009 financial year, it is worth noting that the company remains in a satisfactory position to meet its customers' needs this winter".
Debt has funded the past two years' capital expenditure, with debt to debt-plus-equity of 34.3 per cent at year-end against 29.5 per cent the previous year. Including subordinated bonds, TrustPower had the equivalent of $950 million of committed debt funding in place.
Harker said TrustPower remained frustrated by the lack of progress towards amendment of the pricing methodology for the interisland HVDC link which is required to provide a level playing field for new renewable generation in both North and South Islands.
"If this issue is not dealt with it is difficult to see how the Government's objective of 90 per cent renewable generation by 2025 will be achieved efficiently as many of New Zealand's best future wind and hydro sites are located in the South Island."
The board approved an on-market buyback of up to five million shares over six months, and declared a 15c per final dividend.
Shares in TrustPower, 50.5 per cent owned by Infratil, were flat at $8.20. Infratil will report its full year result on Tuesday.
- NZPA
