Vector to spend $2b on network in next decade
Lines company lifts net profit 84% as it looks at solar and battery investment to cut infrastructure costs
Vector will spend $2 billion on expanding its electricity network during the next decade but says it wants to avoid over-investing in “dumb technology”.
Net profit rose 84 per cent to $274.4 million, which it attributed to increased operating earnings, lower interest costs, favourable derivative movements and the $164m gain on the sale of Vector Gas, partly offset by a $64m writedown in the value of its gas trading business. Revenue from continuing operations fell to $1.14b from $1.15b.
Chief executive Simon Mackenzie said the company’s investment in developing solar and battery technology was part of a push to reduce infrastructure costs.
Banks of batteries, capable of meeting peak load con- sumption for 500 households, would soon be trialled in Glen Innes.
These would be charged up at times during the day when power was cheaper and help meet morning and evening peaks through existing infrastructure rather than digging up roads and installing cables and building new substations.
Vector posted a 4.7 per cent gain in adjusted full-year earnings on growth in Auckland and the expansion of its smart meter fleet, while signalling earnings growth may stall in 2017.
Adjusted earnings before interest, tax, depreciation and amortisation was $473m in the 12 months ended June 30, from $451.9m a year earlier, the Auckland-based company said. It forecast earnings on that basis to be between $460m and $475m in 2017.
“We signalled in February a review of the carrying value of the gas trading business,” said chairman Michael Stiassny.
“We have now written down this value to reflect the steady decline in the output from the Kapuni field, the diminishing prospects of further field development due to ongoing disputes, and weak international hydrocarbon prices.”
The company sold Vector Gas for $952.5m and the proceeds were used to repay $610m of debt, reducing gearing to 43.7 per cent and net debt to $1.9b, from 53.4 per cent and $2.7b respectively a year earlier.
Vector said its rollout of smart meters in New Zealand will be largely complete in 2017. In the 2016 year, smart meters rose about 18 per cent to 1.1 million. It aims to target Australia for future growth of the meters. Auckland electricity connections rose 1 per cent to 550,053 and Auckland gas connections gained 2.7 per cent to 104,322.
New network connections rose 11 per cent to 11,849.
Mackenzie said electricity volumes had dropped about 12 per cent during the past eight years but the number of new connections had made up for this.
The company declared an unchanged final dividend of 8c a share, making 15.75c fully imputed for the year, up from 15.5c a year earlier.
Vector shares closed down 4c yesterday at $3.49.