Powerco highlights regulation issues, emissions targets in profit result

Powerco manages gas and electricity networks in the central and lower North Island. Photo / Bevan Conley

One of the country's largest electricity and gas distributors says it is considering the longer-term effects of the Government's emissions reduction plan on its business after reporting a $44.55 million profit for the March year.

Powerco, which manages gas and electricity networks in the central and lower North Island, cited the discussion document Te hau mārohi ki anamata in its recent 2022 annual report as a subsequent event that remains unclear in terms of impact.

"Our initial observations are that there is no material impact to [Powerco's] net equity as at 31 March 2022. However, as the pathway to reduce reliance on fossil-fuelled gas through a gas transition plan and New Zealand's energy strategy are developed, the impact on assumptions used in our impairment models will need to be considered," Powerco said it notes to accounts."

The Government strategy for the energy sector includes a ban on low-and medium-temperature coal boilers and phasing out existing ones by 2037, while hugely scaling up industry decarbonisation and investment in the electricity network.

The Government also intends to investigate long-term electricity technology storage projects such as the proposed pumped-hydro project at Lake Onslow as mitigation against dry, calm and cloudy years.

In its November submission on the discussion document Powerco said it supported the objectives to achieve a net-zero carbon economy for New Zealand by 2050 but said regulatory frameworks will need to adjust and improve to encourage investment.

"Much of our regulatory framework is designed to ensure 'just in time' delivery of infrastructure, and our perspective is that a continuation of this approach may result in networks being a constraint on decarbonisation efforts by customers and electricity suppliers.

"We also see the potential for underfunded industry participants to struggle to meet the very material investment demands that will come with electrification."

On the specific topic of ending new fossil gas connections, Powerco said it shouldn't be looked at in isolation from the energy system as a whole.

"If it is, we think there are better policy options to decarbonise gas demand than banning connections or fuels."

One example would be applying an emissions rating approach to new dwellings over time to capture all emissions, the company said.

Powerco, which is owned by Australian fund Queensland Investment Corp and AMP, reported net profit after tax of $44.55 million for the year to March 31, up from $4.77m in 2021 when bottom line profit was hit by losses on financial instruments.

Total revenue was $475.4m, compared to $446.8m the previous year.

Powerco has significant debt issuance, including $425m of wholesale bonds and more than a billion dollars of private placement notes in New Zealand and the US.