Infratil banks on Oz power stations

Duncan Saville was re-elected to the board at Infratil's annual meeting in Wellington yesterday. Picture / Mark Mitchell

Infratil's Australian energy retailing division has made a positive contribution to the bottom line for the first time and will become a "very profitable" and "significant operator" over the next few years, the listed company says.

The infrastructure investment company reported a first quarter net profit of $4 million yesterday compared with $6.5 million for the same period last year. However, earnings before interest, tax, depreciation and amortisation (ebitda) rose to $30.8 million from $18.8 million last year. The company also put in place $28 million of new investment over the period.

Chairman David Newman told the annual meeting in Wellington the result was "satisfactory and certainly in line with our expectations".

After the meeting, managing director Lloyd Morrison said Infratil's recent investments were made with an eye on returns at least two to three years out.

"We've taken a lot of assets that aren't contributing to the bottom line at the moment and that is something we did with our eyes open."

Nevertheless, he said the first positive contribution from Infratil Energy Australia of $2.4 million, before depreciation and interest, was a highlight of the result.

Infratil also said yesterday it had agreed to purchase a second power station in South Australia.

Last year, it bought the 40MW diesel-fired reserve plant at Angaston. Its latest purchase is a similar 20MW station at Lonsdale for about A$11 million.

"It's likely we'll continue to buy a number of those plants," he said.

Earlier, Morrison said the combination of power plants and the growing customer base at Infratil's Victoria Electricity energy retailing business was "quite exciting".

"We like Australian energy. It's an industry that historically hasn't been run for profit and hasn't been run for proper utilisation of assets.

"Over the next 10 years, there will be increasing deregulation and privatisation which will provide opportunities for us in a cherry-picking sense.

"Over a period of time that will see us as quite a significant operator on a very profitable basis."

Morrison estimated Victoria Electricity now had about 115,000 customers but as markets were deregulated in Queensland and New South Wales, that figure could rise to about 300,000 to 500,000 in five years.

"The value that we are accumulating over there is not expressed well in our balance sheet, but when you add it to our exposure to generation, you can see that we are building quite a material asset and expect to continue to do that over the next three to five years."

Across the rest of Infratil's investments, TrustPower produced, "an excellent result" contributing $9 million in earnings before interest and tax.

Public transport, including bus and ferry company Stagecoach, which Infratil bought last year for $250 million, had performed "above expectations", contributing earnings of $3.7 million.

Infratil Airports Europe incurred $100,000 in operational costs and depreciation and interest expenses of $3.4 million.

Morrison said the division's latest acquisition, Kent Airport, was likely to require ongoing investment before break even, which he believed would be achieved by 2009.

Meanwhile, freight volumes had increased during the first quarter at Glasgow Prestwick Airport.

But as for Wellington Airport, its performance was "adequate, not great".

It contributed $5.6 million in earnings, down from $6.3 million recorded for the same period last year, due to a $900,000 increase in depreciation and amortisation costs.

Cornerstone shareholder Duncan Saville was re-elected to the board and new director Humphry Rolleston had his appointment confirmed by a shareholder vote.

Infratil shares closed 7c lower at $4.30 yesterday.