Group Chief Executive Simon Mackenzie said that net profit after tax (NPAT) had improved significantly on the prior year’s interim result, while earnings before interest, taxation, depreciation and amortisation (EBITDA) declined 1.0%.

 

“This is a good result and Vector is in sound shape; the interim dividend is unchanged at 6.5 cents per share.”

 

Total revenue from continuing operations grew by $11 million or 1.8% on the prior comparable period to reach $621 million, and lower debt levels combined with lower interest rates reduced net borrowing costs by $19 million. Consequently NPAT was up 11.6% to $101 million, compared to $91* million for the six months to 31 December 2008, while EBITDA for the half was $310 million, down $3 million.

 

First half electricity revenue improved by 4.8% to reach $286 million and EBITDA by 3.8% to $184 million. Connections to Vector’s electricity networks grew by 2,578 (0.5%), slightly better than the prior first half, and volumes declined just 2 GWh, an improvement on the prior comparable period’s contraction of 42 GWh (-1%).

 

Gas transportation revenue (comprising the distribution and transmission networks) was up by 5.4% on December 2008, reaching $103 million and EBITDA increased by 5.3% to $86 million. Gas distribution volume and growth in connections were flat half on half, whereas transmission volumes improved by 5.3%.  

 

In Vector’s gas wholesale segment revenue reduced by 3.3% to $216 million and EBITDA decreased 24.9% to $42 million when compared to the prior year’s first half. The decline in EBITDA is principally due to margin loss from the wind down in legacy gas contracts. Natural gas volumes were up 5.1%, gas liquids volume was down 16.9% and Liquigas volumes down 15.8% on the previous half year.

 

Discussions about field reserves with the Kapuni Mining Companies (Todd, Shell) continued, and while it was too soon to predict an outcome, Vector was confident of its position, said Mr Mackenzie.

 

“We don’t agree with Todd and Shell’s assessment of field reserves at 954 PJs, and have engaged respected international petroleum reservoir experts MHA of Denver Colorado to analyse the Kapuni field information. Using the same data as the miners, our expert concludes that there is in excess of 1,150 PJs of gas that is physically recoverable from the field.

 

“Whatever the result, our access to volumes of low priced gas from legacy contracts is coming to an end, something that we have been signalling to the market.”

 

In technology, both revenue and EBITDA improved, by 10% and 24.3% respectively. Smart meter roll outs for customers Genesis and Contact Energy continued, with the numbers installed topping 79,000 compared to 20,552 at December 2008.

 

In late January, Vector purchased from joint venture partner Siemens’ the remaining 50% share of Advanced Metering Services, giving Vector control in delivering smart metering solutions. Siemens will continue to provide technical support to Vector as required.

 

The Government’s $1.5 billion fibre initiative is a significant growth opportunity for the business, said Mr Mackenzie, with a long way to go before contracts were awarded.

 

“We have engaged with the Government around the ways in which fibre could be delivered emphasising our decade-long fibre credentials and experience in open access infrastructure.

 

“If the opportunity makes commercial sense Vector can build a reliable world class fibre network bringing fibre to the door of every Auckland home and business premise three years ahead of deadline.”

 

Regulation remains a significant influence on revenue and profitability, with the company engaging with the Commerce Commission on price path input methodologies. Vector was also submitting a detailed response in respect of the electricity review. Of particular interest is the design and operation of the wholesale market, retailing, governance and transmission investment.

 

“These factors will be critical to encourage competition and new retailers to the market.”

 

Vector’s electricity network performance was tracking well and customer satisfaction had improved, due in part to enhanced customer communication including offering outage status updates via text and twitter, said Mr Mackenzie.

 

Over the next six months Vector will continue to be significantly involved in the regulatory process and the electricity review, and would also participate in the next phase of the Government’s fibre initiative.

 

Growth in connections to Vector’s gas and electricity networks was expected to remain at current levels for the second half, while volumes were heavily dependant on the weather.

 

Vector expects its full year result to be towards the upper end of analysts’ current forecasts, said Mr Mackenzie.

 

“Over the balance of the year we’ll work towards the best possible regulatory outcome, a favourable result in the Kapuni redetermination, and running our business as efficiently as we possibly can.”