A Vector engineer makes repairs following a storm that hit Auckland in February. Photo / Brett Phibbs
A Vector engineer makes repairs following a storm that hit Auckland in February. Photo / Brett Phibbs
Vector reported flat full-year operating earnings for the 12 months to June 30, and net profit that fell from $194.6 million to $160.9m as it took a $40.2m non-cash impairment on its LPG business.
Shares were flat at $4.71 in early trading.
The NZX-listed lines company said earnings in itsgas trading business were hurt by Saudi Aramco's higher LPG contract pricing, higher Emissions Trading Scheme costs and the weaker Kiwi dollar.
There had been a 7.4 per cent decrease in 9kg LPG bottle swaps to 629,651.
Vector chief executive Simon Mackenzie told the Herald that Vector's heavily-regulated pricing was tied to Reserve Bank projections that had pegged inflation at between 2 and 3 per cent.
Vector would not be able to increase its pricing to account for the actual rate of inflation, around 7 per cent, until 2024. In the interim, its inability to keep up with the CPI would cost it around $16m per year, Mackenzie said.
The full-year dividend was flat at 16.75 cents per share.
Vector said it would not provide FY2023 guidance until its interim results.
Smart meter sale: 50:50 partnership possible
There was no substantial update on the strategic review of its smart metering business - which analysts see as potentially worth more than $4 billion in an action, based on Brookfield's purchase of 50 per cent of Australian smart meter Intellihub in April - other than the review was "ongoing".
But when asked if reports that Vector had put a 50 per cent stake in Vector Metering on the block were correct, Mackenzie told the Herald that while no decision had been made, "Our perspective at the moment is that a partner to help us grow would mostly likely be a 50:50 partnership model. People might propose other things. But as it currently stands, that's what we see as the most constructive way forward."
Vector CEO Simon Mackenzie. Photo / File
Mackenzie said an information memorandum would go to prospective buyers shortly, followed by a four-week process that should see preliminary bids in late September.
Vector metering's adjusted ebitda increased by 1.2 per cent to $173m, which it said was driven by its advanced meter rollout in Australia - which accounted for 93,000 of the 117,000 new smart meters installed over the year. Mackenzie saw most growth occurring across the Tasman.
According to an AFR report earlier this month, the state government-backed Queensland Investment Corporation has drafted Craigs and JPMorgan for possible due diligence on Vector Metering.
A clutch of other bidders is said to include Singapore-based infrastructure Keppel, advised by Jarden, Morrison & Co, BlackRock and Morgan Stanley Infrastructure Partners.
In April Vector revealed it hired Citi to conduct a "strategic review" of its smart metering business, which collects data on some two million customers in Australia and NZ.
Following media speculation the lines company was fielding offers for a 50 per cent stake in the business, Vector said in an August 12 market filing that the "strategic review of the metering business has progressed to the point that Vector has commenced a process inviting proposals for a potential partner to invest in the business alongside Vector."
At the time the review was first announced, Forsyth Barr analysts Andrew Harvey-Green and Mark Robertson said while Vector's smart metering business has a sum-of-parts value of $3.1 billion, the recent Intellihub deal implies a market value of around $4.2b - a significant sum that's close to the lines company's total market cap ($4.7b at Thursday's close).
While Vector had no update on the strategic review today, it did offer a couple of logistical details.
It said a rollout of 4G modem replacements was now "well underway" with about 400,000 in New Zealand completed to date.
Vector now has 1.98 million smart meters across Australia and New Zealand - with around a quarter across the Tasman.
Vector reiterated its half-year result comments on EV uptake, saying it had completed a two-year trial with EV drivers, "designed l to find out how EV drivers impact electricity demand patterns and how we can manage that while keeping costs of new infrastructure to a minimum."
