KEY POINTS:
Auckland power company Vector announced today its June year net profit rose 126 per cent to $101.7m.
The result was boosted by a $40 million one-off payment from the dropping of a deferred tax liability.
Excluding the non-recurring item, net earnings from continuing business increased 37 per cent
to $61.7m, which is at the upper end of the $58m to $63m guidance range the company disclosed in May.
Revenue from ordinary activities rose 19 per cent to $1.35 billion.
It lifted its dividend to 6.5 cents from 6 cents.
Chairman Michael Stiassny said the strong performance reflected increased earnings from all core business.
The one-off gain results from the Government's decision to cut the corporate tax rate to 30 per cent from 33 per cent. The gain did not affect cash flow nor would it affect dividend payments.
He said the board had been strengthened after the resignation of three high profile independent directors, who disagreed with the way Mr Stiassny was running the company.
He said Vector was now entering a new phase.
"Our asset portfolio is clearly desirable and I can report today that we have had a number of approaches from the market about our Wellington electricity assets."
The company had engaged merchant bank Goldman Sachs JB Were to review the strategic issues and options for these assets.
Vector, 75 per cent controlled by an Auckland-based consumer trust, became the country's largest electricity distributor after buying a large part of United Networks in 2002, then gas company NGC.
Mr Stiassny said there were a wide variety of outcomes possible.
He said the on-going importance of the Government's infrastructure objectives coupled with its energy strategy meant there was a requirement for significant investment.
"We cannot get away from the fact that for infrastructure businesses strategy, regulation and investment performance are inextricably linked.
"Large, long-life investments by Vector will continue to reflect the regulatory regime and how that, in turn, affects the investment environment, especially investment returns."
Vector welcomed the review of key sections of the Commerce Act and supported proposals aimed at fostering investment, improving regulatory transparency and including more scope for merit review of regulatory decisions.
"The Government's review of the regulatory framework provides hope of a more certain regulatory environment and, perhaps, one that will incentivise seriously needed investment in basic infrastructure, as well as new-technology infrastructure in New Zealand."
He said Vector's agreement with the Commerce Commission, after the watchdog threatened to take over the company because of disputes of pricing, was a milestone.
Mr Stiassny said Vector's initial ventures into wind generation, through a cornerstone shareholding in NZ Windfarms and a trial of micro wind turbine technology, were a natural development.
The company said the 19.4 per cent increase in operating revenue reflected volume and connection growth on Vector's infrastructure networks, higher energy use as a result of the return to more seasonable winter weather following the warmer winter of 2005, and significantly, one-off higher natural gas sales as a result of major supply contracts.
Operating expenditure also increased significantly, by 34.0 per cent to $742.9m, due largely to additional gas purchases required to meet increased demand from the major supply contracts.
Vector is considering a big sideways move into broadband.
Chief executive Simon Mackenzie noted much speculation about this but said no decision had been made.
"We need to be satisfied that robust analysis has been done and that process is now under way.
"Vector has the ability to deliver true broadband but this must be matched by the right partnerships, incentives, return on investment and regulatory environment."
Vector shares were unchanged on $2.53 today.
- NZPA
