Trustpower lifts half year performance

Tauranga-based Trustpower has delivered a strong half year result ahead of its impending sale of the mass market retail business to Mercury NZ in a $441 million deal with two of the three conditions now met and the final condition expected before the financial year is over.

The final condition of sale is the completion of the Tauranga Energy Consumer Trust (TECT) restructure, subject to a High Court hearing scheduled for November 15-17.

Assuming the retail sale goes ahead, Trustpower aims to develop under its recently announced new name Manawa Energy which focusses on developing new renewable generation capacity to help meet an expected electricity demand increase to meet New Zealand’s climate targets and transport electrification.

Net profit after tax of $115.1 million was up 243% on the previous half year, total operating earnings (EBITDAF) of $122.2 million were up 11%, operating earnings (EBITDAF) from continuing operations of $106.4 million were up 16% as its nationwide geographically dispersed portfolio of flexible generation schemes were able to take advantage of weather events, contributing to increased operating earnings and generation volumes of 1000GWh which were up 6% in spite of being impacted by extreme weather cycles.

Operating earnings (EBITDAF) from discontinued retail operations of $15.8 million were down 14% from $18.3m in the prior period, the decrease including a reduction in revenue of about $2.6m resulting from the removal of the prompt payment discount structure, a cost of $1.1m relating to the retail sale, and increased gas costs which Trustpower largely absorbed.

A fully imputed interim dividend of 17 cents is payable on December 3.

Net profit after tax climbed to $115.1 million, up from $33.6 million the previous year, largely due to a non-cash fair value gain on financial instruments.

Underlying earnings which exclude fair value gain on financial instruments were $59 million for the six months to 30 September 2021, up from $52.7 million in the prior period driven largely by higher generation volumes and wholesale prices.

The company’s results reflect a well-performing bundled retail business and sound management of its 27 generation schemes across New Zealand, enabling the business to deliver consistent returns for investors, Trustpower chair Paul Ridley-Smith says.

Chief executive David Prentice says there has been considerable effort within the company to prepare the business for sale. In spite of this, and the impact of COVID-19 lockdowns, Trustpower delivered an 11% increase in total combined (discontinued and continuing) operating earnings (EBITDAF) of $122.2 million, rising from $110.4 million in the prior period.

The company has remained focused on its customers with a rise in customer connections and continued high levels of customer service.

Trustpower’s telco customer numbers reached 114,000, up 8000 or 7% on the same time last year, including a new milestone of 10,000 mobile connections.

“Our multi-product retail business strategy bundling life’s essential utilities including power, gas, internet and phone has been a tremendous success delivering greater returns and longer customer tenure,” Prentice says.

Several changes to the Trustpower board were announced at the recent annual meeting with former chief executive of Todd Energy and energy industry expert Joanna Breare, along with business consultant, independent director and former chief executive of Counties Power Sheridan Broadbent, joining the board on September 22. These appointments follow the retirement of Susan Peterson and David Prentice as directors, with Keith Turner also resigning effective October 31.

A dedicated team has been formed to investigate options with a specific interest in wind and solar energy, with Trustpower securing two wind and two solar utility-scale generation options across the North and South Islands, among extra generation planned by 2030.

“With electricity demand set to grow by 50 to 70% over the next 30 years from electrification of transport and industry the potential for Manawa Energy is huge and the business is well poised to take advantage of the opportunities the market presents,” Ridley-Smith says.

Trustpower expects its FY22 EBITDAF to be in the range of $210-$225m.