Transpower hikes 1H dividend, warns of regulatory threat to future earnings

Transpower, the state-owned operator of the national electricity grid, hiked its first-half dividend to the government as revenue gained on the completion of its major upgrade, but is warning earnings and future payouts could be hit by regulatory decisions.

The Wellington-based state-owned enterprise lifted its interim dividend to $75.2 million, which it will pay on March 20, from $60 million a year earlier, after the completion of a major investment programme helped lift revenue 6.7 percent to $526.9 million in the six months ended Dec. 31, it said in a statement. Earnings before interest, tax, depreciation, amortisation, and fair value adjustments gained 11 percent to $391.1 million.

Net profit more than halved to $73.8 million, including a $47 million loss in the fair value of financial instruments, compared to a $75 million gain a year earlier.

Chairman Mark Verbiest said the period reflected the shift to focusing on operational efficiency after several years of major investment, including the upgrade to the trans-Cook Strait cable HVDC.

In November, Transpower warned changes to its allowable rate of return by the Commerce Commission would weigh on its performance, with revenue for the fourth quarter of the company's 2015 financial year expected to be $19 million below that implied in its 2014/15 Statement of Corporate Intent, and at least $75 million a year below expectations in subsequent years.

Verbiest today said pending regulatory decisions could result in further downside to its revenue and dividend to the government, and should be resolved this year.

Transpower lifted its operational cash inflow to $246.9 million in the period from $186.5 million a year earlier, while more than halving its investment cash outflow to $146.6 million. It held cash and equivalents of $66.2 million as at Dec. 31.

The state-owned enterprise has $140 million of bonds paying annual interest of 6.75 percent listed on the NZX. The yield on the notes fell 4 basis points to 5.21 percent today.