Vector earnings up 6.9pc, court battles dominate agenda

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Vector, the Auckland-based electricity, gas and telecommunications distribution network owner, posted an after-tax profit of $105.3 million for the six months to December 31, up 6.9 per cent on the same period a year earlier.

The result was achieved on revenue growth of just 0.8 per cent to $634.3 million, to produce earnings before interest, tax, depreciation and amortisation of $323.6 million, up 1.9 per cent on the prior comparable period.

The company expects EBITDA for the 12 months to be "slightly ahead of analysts' expectations," said chief executive Simon Mackenzie in a statement to the NZX. The company had performed pleasingly despite "fickle" economic conditions.

"We have seen small and steady improvements in first half gas and electricity volume over the past two years, our smart meter business has been strengthened and our gas wholesale team has signed some significant customer and supply agreements," he said.

During the period, Vector missed out on participation in the government's $1.5 billion ultra-fast broadband roll-out plan, so that its future agenda appears dominated by its traditional gas and electricity distribution businesses, smart meter installations, and its ongoing court battle with the Commerce Commission over regulated rates of return.

The company devotes two pages of today's investor presentation to a matrix of the three streams of current legal action in relation to the regulatory environment, running well into 2013, with a final decision on a default price-quality path for price-setting due to kick in October 2013.

Gas transportation revenue fell $4.4 million in the half year to $107.1 million, reflecting release of a provision for contractual indemnity in the prior period, lower capital contributions, and the Maui pipeline outage in November last year.

The outage on the pipeline, for which Vector holds the maintenance contract, had had "immaterial financial impact" and the company faced "no legal liability," said Mackenzie.

Share of associate earnings suffered a $3.9 million write down of the 25pc shareholding in Energy Intellect, an advanced metering and energy solutions developer, with the asset reclassified as held for sale based on the proposed sale of the company's operations.

Discussions are progressing on the price for Kapuni gas reserves above 1,010 PetaJoules, and the company is in arbitration over 7.3PJs of additional gas under its Kapuni legacy contract.

Vector's technology businesses would gain from signing a new smart meter contract with Contact Energy for the supply of 150,000 units, the proposed purchase of the remaining 30 per cent of metering business Stream, and a new contract for communications services with Transpower.

The wholesale gas business had new and renewed contracts to supply major customers Methanex and Carter Holt Harvey, and would source 3.5 PJs annually for three years from TAG Oil's Sidewinder field.