Low lakes eat into TrustPower's profit

Third-quarter net profit fell 14 per cent to $18 million as low hydro lakes affected output, TrustPower said yesterday.

For the nine months to December, net profit was up 11 per cent to $68.7 million. Earnings before interest, tax, depreciation and amortisation for the nine months rose to $149.5 million from $139.8 million but, for the December quarter, fell 9 per cent to $42.2 million.

Chief financial officer Robert Farron said hydro production in the December quarter was "phenomenally high" while in 2005 it was well below average. About 80 per cent of TrustPower's power comes from a host of small hydro dams in both islands, although that proportion will fall to about 75 per cent as more of its Tararua wind farms come into production.

Chairman Harold Titter said the nine-month result was pleasing, reflecting the company's ability to manage wholesale market risks in high and low price periods.

"At this stage, the directors are confident that another good financial outcome for the full year is achievable," he said.

TrustPower's lake storage levels and inflows were well below average in the third quarter, leading to significantly higher spot prices.

During November and early December, the company experienced some of the lowest inflows on record into its South Island catchments.

TrustPower generated 15 per cent less power over the nine months than a year ago. However, so far this month, things had improved due to good rainfall. Titter said the good inflows, together with purchase contracts in place, meant TrustPower was well positioned to meet customer demand over the rest of the financial year.

Customer numbers were steady on 221,000 at year's end.

Debt gearing was higher than expected at 31 per cent due to the requirement to provide greater levels of market security than normal to wholesale market operator M-Co as a result of the sustained period of high wholesale market prices during last November and December. The company had $23.7 million of cash ready to meet M-co's market security requirement and this was funded from bank facilities.

Work on the Tararua Stage III wind farm started this month with final completion scheduled for July 2007.

- NZPA