Demerger costs eat into Trustpower profit

By David Porter

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Trustpower chief executive Vince Hawksworth. Photo/File
Trustpower chief executive Vince Hawksworth. Photo/File

Trustpower this week announced a demerged net profit after tax of $45 million for the six months to 30 September 2016, eight per cent below the previous corresponding six months to September 2015.

The company reported $110 million earnings before interest, tax, depreciation, amortisation and fair value adjustments (EBITDAF), $10 million lower than the previous corresponding six months.

The result reflected the demerged financial results for the company, which on 31 October 2016 implemented its split into two companies, Trustpower (formerly Bay Energy while the process was being completed), and Tilt Renewables. Tilt now holds the former Trustpower's transtasman windfarms and its wind and solar development projects, while the remaining assets, including its hydro-generation and the retail power, gas and telcom/internet network have come under the new Trustpower and retain that brand name.

Chief executive Vince Hawksworth said the $110 million demerged EBITDAF included the $8.7 million costs of the demerger and one-off costs associated with the closure of its Energy Direct brand.

"Excluding these costs, the demerged EBITDAF result is on a par with the previous year, supported by the contribution from King Country Energy," he said.

"It reflects the low wholesale price environment and the variable nature of hydro generation. The additional costs of our successful multi-product retail sales strategy are expected to add value into the future."

For the half year to 30 September 2016, Trustpower continued to operate as a single company, but from now on, Trustpower and Tilt will produce separate annual and half year reports.

Separate stand-alone accounts will be prepared for Trustpower and Tilt for the full financial year ending 31 March 2017, which will include actual performance for the individual entities for the period from 1 November 2016 to 31 March 2017, and separated results from the pre-demerger entity results for the period from 1 April 2016 to 31 October 2016.

Trustpower chair Paul Ridley-Smith said the board was pleased with the company's performance during a demanding period.

"During the six months under review, Trustpower continued to strengthen its customer base by adding an additional 7000 retail customers who buy two or more of their utility services from Trustpower," he said.

"Margins have been maintained in challenging market conditions, and underlying earnings have remained stable. Management has also ensured the company was well prepared for the demerger; a highly important strategic initiative, which was implemented just a few days ago."

The company declared an interim dividend of 16 cents per share, payable on December 9, 2016. This will be the first dividend of the new post-demerger Trustpower.

Mr Ridley-Smith said the dividend was declared in accordance with the company's policy of paying out between 70 and 90 per cent of free cash flow, subject to the board's consideration of performance in any given period, working capital needs, the risks from predicted short- and medium-term economic and hydrological conditions and potential future capital requirements.

Trustpower results - 6 months to 30 September 2016

- New Zealand hydro generation 943 GWh, 1% below 1H 20162
- Australian hydro generation 100GWh, 47% higher than 1H 2016
- Total utility accounts increase to 378,000, 2% higher than March 31, 2016
- Customers with two or more utilities increased to 84,000, 9% higher than March 31, 2016

- Bay of Plenty Times

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