Transpower buoyed by half-year results

Trranspower’s board is pleased with the stable first half results for the 2024 financial year both in performance and returns to shareholders.

So says Transpower chair Dr Keith Turner, noting operating revenue increased by 4% to $465 million (2022: $448 million) in financial results for the six months ending December 31, 2023.

Net profit after tax was $68 million, a 6% increase from the previous period (2022: $64 million), primarily due to lower dismantling costs.

Capital expenditure was $199 million, a 15% increase from the previous period (2022: $173 million), in line with Transpower’s approved capital programme.

Operating expenses were $186 million, a 12% increase from the previous period (2022: $166 million), primarily due to higher maintenance costs from price increases, ongoing Cyclone Gabrielle remediation work and higher resourcing costs.

“The company has maintained its financial performance despite ongoing supply chain disruptions, higher maintenance and resourcing costs, and the ongoing impacts of Cyclone Gabrielle,” says Turner, adding that in spite of challenges Transpower is on track to achieving its targets, including cable fault repairs in Auckland.

Last December, the Commerce Commission released its 2023 Input Methodology decision, confirming Transpower’s regulated asset base will be inflation indexed from its fourth regulatory control period (RCP4), Transpower’s board noting this decision will materially reduce revenue Transpower will derive over the next 10 to 15 years.

“This decision comes at a time when the board is considering the necessary funding for the level of investment required to accommodate increased electrification,” says Turner.

He says the final outcome of the submission to the Commerce Commission for funding for Transpower’s 2025 to 2030 work programme will not be known until closer to the end of 2024, but it is likely that the combination of reduced revenue and increased investment expectations from 2025 onwards will require consideration of the level of dividend that the company can sustain.

For the current year, the board has declared an interim dividend of four cents/share or $44 million, representing 40% of the expected full-year dividend forecast in line with its 2023/24 statement of corporate intent (SCI) given the stable half-year result.

Transpower submitted its RCP4 proposal to the Commerce Commission in November 2023, setting out its vision for the national grid between 2025 and 2030.

“We are forecasting capital expenditure of $2.25 billion across 2025 to 2030, up 32% from our current five-year period,” says Turner.

“We are beginning a period of intensified work on the grid over the next 10 to 15 years to replace or upgrade existing assets for better resilience as they come to end-of-life, as well as additional work to harden the grid and increase its capacity to address new generation, load, and demand.”

This work is critical to ensuring New Zealanders continue to have a safe and reliable national grid, says Turner, adding it’s also an essential foundation for future enhancements to the grid to support electrification and New Zealand’s transition to a net zero carbon future.

“As we enter a period of strong electricity demand growth, we remain on track to ensure we continue to be a modern and efficient national grid operator, focused on empowering the energy future for New Zealand.”

Meanwhile, the Commerce Commission has approved a nearly $400m investment to Transpower to strengthen the grid.

However, the commission says Transpower will need to provide assurance to its customers before it makes the $103 million investment in the Cook Strait undersea link to address residual concerns about benefits to consumers, the high voltage direct current (HVDC) link connecting the national grid between the North and South Islands.“Our approval is also based on being satisfied that consumers are going to get value for money – that the spend is justified, and the timing is right,” says commissioner Vhari McWha.

“Several submitters supported our draft decision on the Cook Strait undersea link and have sought greater clarity about the steps Transpower will undertake to ensure there is public scrutiny of its decision to invest.

“Our final decision sets out the steps we expect Transpower to undertake before investing, and we are confident that these will provide interested parties with an opportunity to provide input and ensure that electricity consumers benefit from Transpower’s investment.”  

 The commission’s final decision is on its website.