Trustpower hints at possible capital return

By NZPA

Thursday 29th August 2002

After feeling the brunt of last winter's high power prices, electricity company Trustpower says its trading this year has been "very satisfactory" and has hinted at a possible capital return to shareholders.

Shrugging off a "disappointing" bottom line 2001 result, chairman Harold Titter stressed that the adverse trading period was restricted to a particular period during last winter, when drought sent thermally generated power prices sky high.

TrustPower finished up with an after-tax operating surplus of $1.3 million for the March year, compared with $23.5 million the year before.

However, Mr Titter said the second half of the year had been more pleasing as weather patterns and the industry returned to normal.

For the first quarter of this year, the company had generated an unaudited after tax operating surplus of nearly $10 million, ahead of budget expectations.

Mr Titter said the result had been achieved through reviewing all its procedures, particularly in the area of buying electricity, by tightening up its approaches to forecasting and hedging.

Looking ahead, TrustPower was looking at more potential customer acquisitions, and enhancing its core generation portfolio. A $150 million unsecured convertible bond programme had raised $51.9 million dollars so far, and was expected to hit $52 million as final applications were assessed. The company was also pursuing two possible new developments, a wind generation scheme in South Australia and the in-home metering and payment system being developed under a joint venture called POS Power.

The POS Power project had taken considerably longer to complete than hoped, but had been well received by a trial of 300 households in Ashburton and Blenheim. Management was now looking at the economics and strategic options of the scheme, he said.

Mr Titter said TrustPower's financial position was still strong, putting the company in good stead for future investment opportunities and the possibility of a capital return to shareholders.

TrustPower's core generation assets, with a book value of $700 million, all used renewable resources of water and wind, and were likely to increase in value along with electricity prices in the long-term.

"In fact, it has been calculated that for every 0.1 cent per kilowatt hour increase in the average long run wholesale price of electricity, the underlying value of TrustPower's generation assets can increase by $20 million," Mr Titter said.

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