King Country Energy, which is majority owned by Todd Energy, has cut its annual earnings expectations as the worst drought in the North Island for seven decades has cut its hydro-electricity output and forced it to buy electricity on the spot market.
The Taumarunui-based company expects earnings before interest, tax, depreciation, amortisation and fair value adjustments to between $12.75 million and $13.25 million in the year ending March 31, it said in a statement. That's down from a previous forecast of between $14 million and $15 million, and compares to $11.1 million a year earlier.
"The unprecedented drought conditions across the North Island over the past two months have significantly reduced the output from KCE's five hydro-electricity generation plants," chairman Brian Gurney said. "Reduced generation means we are more reliant on purchasing electricity from the spot market to meet our customer demand."
The warning comes after New Zealand Aluminium Smelters this month cut production as low lake levels in the South Island reduced electricity capacity.
KCE is unusual because although it owns the regulated local electricity network monopoly, it also serves retail electricity customers under rules that allow network owners to vertically integrate their businesses as long as they own renewable generation.
Gurney said the drought lifted wholesale electricity prices "significantly" beyond the company's expectations, and offset its hedge supply agreements to leave it as a net purchaser of electricity at "elevated wholesale spot prices."
The shares are listed on the Unlisted market, and last traded at $4.30 on March 25.
The company will announce its annual results in mid-June.