Profit casts shadow on sale of Powerco

JOHN ANTHONY
Last updated 08:40 29/11/2012

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Powerco is posting bumper profits eight years after New Plymouth District Council sold its majority share holding in the energy utility company.

Powerco, New Zealand's second- largest gas and electricity network utility, reported an after tax profit of $40.2 million for the six months to September 30.

The profit was more than double its previous half year surplus of $15.6m.

However, the company changed its financial year to end on March 30, rather than June 30, which skewed the recent results, because it included the entire winter period, when demand for energy was much higher.

In 2004 NPDC sold its 38.16 per cent shareholding in Powerco for $259.4m.

New Plymouth authorised financial adviser Peter Hensley said the council may regret selling its majority share of Powerco.

"It is unfortunate the council elected to sell the shares it held on behalf of the citizens of New Plymouth; however at the time they probably thought they were doing the right thing," Hensley said.

"Hindsight suggests they might regret their decision."

Powerco was now jointly owned by two private equity firms, excluding the public from gaining exposure to it, he said.

New Plymouth mayor Harry Duynhoven said he was personally against the council's decision to sell its Powerco shares in 2004.

"I made my views very well known at the time," Duynhoven said.

Councillors made the decision to sell based on professional advice, he said.

"They relied on the advice they were given and not all of us have a perfectly clear crystal ball. At the time they made the best decision they could with the information they had."

Powerco operates networks in Taranaki, Wanganui, Rangitikei, Manawatu, Wairarapa and Wellington, connecting 320,000 electricity customers and 100,000 gas customers.

Peter Tennent, who was New Plymouth mayor when the decision was made, said the council took sound advice when making the call to sell up.

"There was a window of opportunity and that was taken on the advice of very good people," Tennent said.

"It was about spreading the eggs."

Headquartered in New Plymouth Powerco, was now privately owned by QIC of Brisbane and Brookfield Infrastructure Partners of Bermuda, although it had bonds which trade on the NZX debt market.

Revenue for the period of $214.6m was up from $196.1m in the six months to December 31, which chairman Rick Bettle said reflected a variance of seasonality and an increase in pass through costs, such as higher transmission charges from national grid operator Transpower and higher local body rates.

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Powerco's earnings before interest, tax, depreciation, amortisation and financial derivatives (ebitdaf) for the six months to September 30 was $123.7m, up from $110m in the six months to December 31, 2011.

"Powerco has been very active in the regulatory area and continues to work constructively with the Commerce Commission to implement the new framework for regulated electricity and gas businesses," Bettle said.

"The aim of which is to ensure an adequate balance between the needs of consumers and the needs of infrastructure providers so that we can continue to provide reliable services as well as develop our networks which underpin future growth in New Zealand's economy."

- Taranaki Daily News

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