Vector, the Auckland gas and electricity distribution company, posted a 17 per cent drop in first-half profit as a gain in sales was offset by regulated price reductions, mark-to-market losses on derivatives and increased borrowing costs.
Profit fell to $87.3 million in the six months ended December 31, from $104.6 million a year earlier, the company said in a statement. Sales rose 4.4 per cent to $687 million.
Vector kept its full-year guidance unchanged at $588 million, on an adjusted earnings before interest, tax, depreciation and amortisation basis, up 1.3 per cent from 2014, even while affirming that the Commerce Commission's decision to cut the allowable rate of return on capital for regulated network monopolies would dent earnings and force the company to review its spending plans. The company also kept its first-half dividend unchanged at 7.5 cents,
"The decision will have significant implications for investment in our regulated assets especially when the returns are compared to those available to Vector in unregulated markets," said chief executive Simon Mackenzie. "We are therefore increasingly seeking to allocate capital into our unregulated activities and we are continuing to review how we fund network growth."
Unregulated Ebitda from gas wholesaling, metering and Vector Communications, rose almost 11 per cent to $81 million in the first half, reflecting continued growth in the company's technology business, the benefit to gas wholesaling from higher Kapuni production, high LPG tolling volumes and favourable gas purchasing arrangements, Vector said.
