KEY POINTS:
The end of 2006 couldn't come soon enough, said Vector chairman Michael Stiassny at the company's first half results announcement today.
Last year saw the country's biggest electricity and gas distributor dealing with a Commerce Commission threat to take control of Vector's prices and the resignation of
three independent directors.
Stiassny used today's results briefing to deal "with a couple of issues".
He said no one should be surprised at the role majority shareholder, Auckland Electricity Consumer Trust, has in the management of the company - including board representation and a close relationship with the board chairman.
"It is a relationship that is usually managed by the chairman. I manage the trust's relationship with Vector and will continue to do so," he said.
In December, three independent directors - Tony Gibbs, John Goulter and Greg Muir - resigned amid concerns over Vector's governance and their lack of confidence in chairman Michael Stiassny.
Sources said the former directors alleged Stiassny's relationship with the trust was too close, that he acted outside strategies agreed by management and the board and that he was too confrontational. Stiassny denied the claims at the time.
Stiassny said today the appointment process for new independent directors is underway and he expects one, maybe two, appointments over the course of this month.
Stiassny also said the relationship with the Commerce Commission, which had "somewhat of a shaky past", was now in good shape.
Vector today posted a 19 per cent rise in first half profit, as a cold winter increased electricity demand and higher gas sales.
The company posted a net profit of $45.7 million in the six months to December 31.
In August, the Commerce Commission threatened to take control of Vector, saying the company was overcharging industrial and commercial customers and undercharging others, particularly Auckland residential consumers.
Then in December, the three influential independent directors abruptly resigned, citing concern with the governance of the company and expressing no confidence in the leadership of chairman Stiassny.
The company, 75 per cent controlled by an Auckland-based consumer trust, is the country's biggest electricity distributor since buying a large part of United Networks in 2002 and then NGC Holdings Ltd.
Vector raised its interim dividend to 6.5 cents per share, compared with 6 cents per share last year.
It said it expected a full year profit at the top end of the current market range of $42m to $65m.
Revenue from ordinary activities rose 27 per cent to $723m.
Mr Stiassny said interim results reflected a solid operational performance across Vector's core businesses.
Mr Stiassny said Vector exceeded all of its operating targets with operating cash flow increasing by 3.3 per cent to $230.4m.
"The results are largely attributable to the return to normal winter weather conditions following the warm 2005 winter, increased customer connections to the company's networks and significantly higher natural gas sales," he said.
Vector said the commission had agreed in principle to the company's administrative settlement offer and it was expecting a final resolution soon.
"(We) are pleased to report a much strengthened relationship with the Commission has developed over the past few months," Mr Stiassny said.
He said the board has initiated a search for new directors and was confident it would be able to appoint high calibre candidates with appropriate skills to complement those of existing directors.
Chief executive Mark Franklin said Vector's earnings before interest, tax, depreciation and amortisation (ebitda) increased by 9.6 per cent to $332.2m, despite a 47.1 per cent lift in operating expenditure reflecting additional gas purchases required to meet increased demand, electricity transmission costs and costs associated with regulatory compliance.
Mr Franklin said that in addition to ongoing generic growth within the company, natural gas sales volumes were up 72 per cent on the 2005/06 half year.
"This is a significant increase and is due to new sales contracts, and the sale of more gas to electricity generators and petrochemical producers."
Mr Franklin said in the past six months a large part of Vector's investment strategy had been deferred due to "the Commerce Commission issues".
"As we are confident of reaching a resolution soon, we are now revisiting those deferred strategies so we are in a position to move forward once we have a final agreement."
Vector shares fell 1 cent to 276 shortly after the announcement.
- NZPA