Plugging away pays off

By Rosemary Roberts


Hauling its Western Australian contracting business West Coast Energy into profit has taken Northland-owned electricity lines company Northpower "years of hard slog" but forged relationships crucial to survival, says Northpower board chairman Warren Moyes.

Northpower went into West Australia in 2007 after reaching the limit of growth potential within New Zealand, buying small contracting company West Coast Energy as a way into the WA and Melbourne markets (businesses entering the Australian market have to work through an Australian company).

The next three years were a cliff-hanger, with losses mounting before the operation moved into modest but sustained month-on-month profit from the end of 2011, with an ebitda profit of A$800,000 ($1.02 million) for the 2012 financial year.

Moyes said Northpower's stickability was well noted as it hung in as a potential contractor for the Government-owned Western Power in Perth through tough times - which included unprecedented wet weather stopping lines work for weeks at a time and the large-scale cancellation of new subdivisions, originally a key source of work for the company.

He said Northpower had always been completely open about the hold-ups and disruptions which, combined with recession and start-up costs, had challenged the parent company financially.

"We could never have predicted some of the events, and getting the business off the ground has taken far longer than we expected. The fact that we had the resilience to hang in there and do whatever work we could get until the situation turned around was definitely taken as a sign of our commitment, at a time when long-standing Australian companies were falling by the wayside," he said.

"The other good thing was that because of the intermittent workload in WA we expanded to Melbourne."

(Northpower now works for three Melbourne-based networks: work includes fitting mandatory devices on power lines to reduce fatigue from vibration which causes lines to break and can trigger fires, following the destructive fires of early 2010.)

Hanging in there had also meant WCE and Western Power gradually got the hang of each other.

"Western Power started out by being fairly inflexible. They said what was to be done and that was it. Now we have a good relationship. It's pretty essential to have this when you are working in such remote places and you need something in a hurry and can go into a Western Power depot and they are totally co-operative.

"Things are pretty open and frank now. The lift in productivity wouldn't have happened if Western Power hadn't sat down with us, took on board the challenges and worked with us on creating solutions. We deliver results and we care about doing a good job for the network as much as their people do and they respect that. We are not just there to make money and leave. We've learned from each other."

Northpower's diversity of experience meant it could confidently bid for a wide variety of contracts. WA business didn't seem to have any prejudices against a Kiwi-owned company with many Kiwi expat employees.

"WA is so far from the rest of Australia and they have such an independent attitude, they seem to think Kiwis are no worse than Australians from elsewhere."

Inquiries were now coming in from the eastern seaboard of Australia, and with financial constraints finally being eased on Western Power the power provider was expected to finally start generating an anticipated A$200 million of work for West Coast Energy over the next five years.

"They have a huge backlog of work - replacement of 400,000 poles, for a start."

WCE had replaced 3500 during the past year.

Chief executive Mark Gatland said the ebitda profit (earnings before deductions such as tax and interest) for the 2012 financial year, A$800,000, followed the ebitda loss of A$1.6 million the previous year. Revenue growth had gone from nil to a turnover of more than $40 million in five years from inception.

"That's not bad," he says, but he expects to see WCE revenue lift to something comparable to the worth of Northpower's Auckland contracting - $80 million-$100 million annually.

Consolidation was key. "We can't rush in and do everything. We are looking at some years building something really solid, balancing the need to branch out with being very careful, very measured. Potential is very high but we are taking it step by step."

- Northern Advocate

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