Vector beats analysts' estimates

MATT NIPPERT
Last updated 05:00 22/02/2014

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Energy company Vector is mulling joining court action to challenge Commerce Commission regulations after mandated price-drops cut its profit by more than 11 per cent.

Vector yesterday posted a net profit after tax of $104.6 million for the half-year to December 31.

While down 11.4 per cent on this time the previous year, the result was well above analysts' estimates of $86m.

Vector's shares rose 1.72 per cent to close at $2.37 yesterday.

The results cover a period when the commission cut the price Vector could charge for gas transport and electricity lines, and also the winding down of gas at "legacy prices" from the Kapuni gas field.

The regulation changes were partly responsible for gas transportation revenues declining 8 per cent to $105m and revenue from the electricity sector sliding 2.5 per cent to $326m.

Chairman Michael Stiassny said he was disappointed over losing a High Court challenge to regulation changes last year.

Stiassny said Vector had yet to decide whether to join an appeal of that decision by the Major Electricity Users Group.

"The regulatory regime is far from optimal," Stiassny said.

"Consumers do not appear to be benefiting from the price reductions Vector has made," he added.

Given the regulatory challenges, Stiassny said the financial result was positive.

The sole area of growth for the company was the technology sector, where revenue rose 26 per cent to $67m, largely due to a rise in smart-meter installations.

Overall revenue for the company declined 2 per cent to $658m.

Vector chief executive Simon Mackenzie said: "Vector has implemented and weathered regulatory price resets.

"This, along with production constraints at the Kapuni gas field, and the end of our entitlements to Kapuni gas at legacy prices, have weighed on our financial results in the last six months."

While the regulatory changes were predictable, other factors contributed to the revenue decrease.

"We've faced much warmer than normal weather, which had led to a reduction in electricity consumption," Mackenzie said.

He said last winter had broken records for warmth and dryness.

Despite the profit drop, Vector announced an interim dividend of 7.5 cents a share, up from 7.25c last year.

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