Vector posts electrifying rise in profit

By FIONA ROTHERHAM

Auckland electricity lines company Vector has announced a net profit after tax of $94.2 million for the year ending March, a hefty increase on the previous year's $49.2 million.

Effectively, it is Vector's first full year's result as a stand-alone network business.

The result includes unspecified one-off gains from the sale of its final generation assets - a 50 per cent share of the Southdown co-generation plant and the McLachlan geothermal plant near Taupo.

Chairman Wayne Brown declined to say how much was made in either sale. Though both sales were above book value, the McLachlan plant had been written down significantly before being sold, he said.

Projected earnings in the coming year would be lower because there was no further divestment to be made.

Mr Brown said the company needed to spread its fixed costs over a larger customer base than its existing 260,000 customers in Central Auckland.

This year's increased profit from the core lines business came despite a freeze on charges agreed to by all but three lines companies last year in a trade-off to defeat former minister Max Bradford's bill for a CPI-X formula to control prices. The freeze ends in July, but Mr Brown said "left alone, we won't be touching prices."

Ministry of Commerce analysis showed Vector's residential pricing to be the lowest of the five main centres. Its return on investment of 7 per cent is still below that other comparable companies.

The outcome of the Government electricity inquiry was likely to be a cap on return on investment of around 10 per cent, Mr Brown said.

He is also quick to emphasise improved reliability of supply. .

Before last year the network never managed to record an average level of power cuts below 100 minutes a customer a year. Vector reduced that to 82 minutes last year, has dropped it to 59 minutes this year and it is targeting 45 minutes in the coming year.

The $110 million tunnel carrying two 205MW cables from Penrose to the central business district - now under construction - would never have been built if Mr Brown had been around when the decision was made.

"We're now bringing in newer interconnectivity technology instead of more cables in the ground. This will be the last tunnel."