NGC finishes housekeeping and looks for growth

By Nick Stride

Friday 22nd August 2003

NGC is making its first foray into Australia as it looks for growth from metering and small-scale generation projects.

After shedding its electricity retailing and generation assets, the company turned in a solid June-year profit and bumped up its dividend and capital return.

A bottom-line profit of $148 million was swelled by $78.9 million of gains from the sales of its Cobb and TCC power plants.

Profit from its continuing businesses energy transportation, energy trading and metering was $67.1 million, up from $34.5 million a year ago.

Chief executive Phil James said ebitda (earnings before interest, tax, depreciation, and amortisation) and ebit (earnings before interest and tax) had held up well despite the asset sales, and despite his prediction last year that earnings would be hard to maintain.

All three remaining businesses made higher profits.

A capital return to shareholders, scheduled for November or December, has been lifted from $475 million to $525 million. It will take the form of a three-for-seven share cancellation at a strike price of $1.58.

The annual dividend rises to 9c, from 6.5c, meaning the company will pay out all of its net earnings but imputation credits are not expected to be available until the 2004 financial year.

The asset sales have left NGC debt free and with only $6 million of goodwill remaining on its balance sheet.

Mr James said NGC now sought to be seen as a company that made good strategic choices, executed them effectively, and captured full value.

The company ranked 15th on the NZX50 index, "not high enough to attract the level of interest we'd like to maintain."

Revenue in the gas transportation transmission and distribution business rose by 4% to $114.3 million and a round of price rises has been announced.

A three-yearly revaluation of the pipeline network took the value from $458 million to $555 million. Mr James skirted the issue of further rises on the back of that, saying it was one factor the company took into account.

Distribution was the business that now had "the most potential for performance improvement."

Natural gas sales fell 11.4% to $293.4 million and LPG and gas liquids revenue was $45 million, up 23.3%.

Metering sales rose 6.1% to $39.9 million. Mr James said the aim was to build up metering and data management to the scale of the transportation and trading divisions.

The company a week ago announced the acquisition of 6740 mass market and time-of-use meters from TrustPower. It sees strong growth ahead in the time-of-use market.

Agreements with Wellington's Energy Intellect and Australia's Agility Management, a subsidiary of NGC's majority owner AGL, will take the metering business into New South Wales, Victoria, and South Australia.

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