Vector's future a little dimmer

The recent cold snap is likely to have been a positive for Auckland-based Vector's annual result, which is due tomorrow, but the company looks set to enter a winter of discontent as the Commerce Commission flexes its muscles over pricing.

Market forecasts are for a net profit of around $45 to $47 million for the June year, up from $40.8 million last year, but the key issue for Vector will be the regulatory environment.

The Commerce Commission said on Wednesday it was looking to impose price controls on New Zealand's biggest energy distributor, alleging that it was overcharging commercial and industrial customers while undercharging residential ones.

Richard Leggat, head of research sales at UBS New Zealand, said UBS expects Vector to report a net profit of around $47 million, revenue of $1.1 billion and earnings before interest and tax of $466 million.

"But the issue for Vector is not what they are going to make or what they have just made, it's what will they be allowed to make in the future," Leggat said. "That is somewhat uncertain."

The Vector bombshell follows on from a more proactive regulatory involvement for corporates, with Telecom having been told by the Government in May to open up its networks.

Vector's circumstances may affect its credit ratings.

Moody's Investors Service on Friday affirmed Vector's Baa-1 rating but revised its outlook to "negative" from "stable", reflecting the commission's statement.

Moody's opposition, Standard and Poor's, said it had affirmed the BBB Plus long-term corporate credit rating but the rating remained on a negative outlook.

Vector listed a year ago at $3.00, a substantial premium to its $2.38 per share offer price. It closed on Friday at $2.32.