Vector profit jumps on asset sales

Wednesday 18th February 2009

Vector, New Zealand's number two electricity and gas distributor, posted a four-fold increase in first-half profit on a gain in the sale of its Wellington power network.

Net income jumped to $296.4 million, or 29.7 cents a share, from $90.7 million, or 9.1 cents, a year earlier, the Auckland-based company said in a statement. Sales fell to $609 million from $610 million.

The company held its first-half dividend unchanged at 6.5 cents a share, saying New Zealand firms face a "continued uncertain business environment." Vector is "cautiously confident that full-year earnings will beat analysts' forecasts.

Vector shares were unchanged at $2.26 and have climbed 11% in the past three months. At today's price, the stock has a dividend yield of 9% and trades at about 15 times earnings.

Chief executive Simon McKenzie said Vector has strengthened its balance sheet in the first half, repaying $560 million of debt and with a further $200 million due for repayment on March 4. It has renegotiated $275 million of bank facilities and secured a further $50 million, he said.

Vector, which is 75% owned by Auckland Energy Consumer Trust, operates gas pipelines and electricity networks in the North Island and wants to leverage its infrastructure to extent services to broadband communications. The company has had discussions with the government over the plan to spend $1.5 billion of a high-speed broadband network.

McKenzie said the government "must stay on track with its bold vision to deliver a first world, high-speed broadband service to New Zealanders."

Vector sold its Wellington network to Hong Kong billionaire Li Ka-Shing's Cheung Kong Infrastructure Holdings for $785 million.

Electricity consumption in Auckland fell 1% in the first half while gas distribution declined 3%. Overall gas transmission fell 15%.

By Jonathan Underhill

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