Half-year loss likely for TrustPower

By Phil Boeyen, ShareChat Business News Editor

Friday 27th July 2001

Tauranga-based electricity company TrustPower (NZSE: TPW) has sounded a second earnings warning and says it is reviewing its future structure.

Last month TrustPower warned its half-year profit ended September was likely to be around $8.5 million - 50% below last year's interim figure.

However in the wake of high wholesale power prices the company is now forecasting a small loss for the period.

TrustPower says with its own generation running at 8% below average, it has had to make up the shortfall on the spot market.

"Spot prices have gone to $200/MWh with peaks of up to $1000/MWh being recorded. This compares with prices for the same period last year in the $20-40/MWh range," the company says.

" Due to structural flaws relating to excessive vertical integration of SOE generators into retail operations, the New Zealand electricity market has not to date offered workable hedge contract liquidity."

Although forward weather patterns are difficult to predict the company says it is probable that once the present cold dry winter conditions are over trading in the second half year will return to more normal profitability.

Meanwhile, it is mulling future strategy.

"Given dominant generators have in past months clearly demonstrated undue non-competitive practices, the board of TrustPower is carefully assessing a number of strategic alternatives to determine the most appropriate structure for the company to move forward to maximise the return from its valuable resources in the future."

That statement gives another strong hint the company may look to follow fellow electricity provider, Natural Gas (NZSE: NCH) in getting out of the retail market altogether.

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