TrustPower zapped by higher costs

By Phil Boeyen, ShareChat Business News Editor

Friday 15th June 2001

The jump in wholesale electricity prices is forcing TrustPower (NZSE: TPW) to substantially lower its first half earnings forecast.

The company says interim profit may be more than 50% down on the same period last year, although the second half should be back on target.

"Whilst it is not possible to determine when the wholesale electricity market will return to more normal price levels it is clear that the current drought conditions will have a material affect on the company's profit for the first half to 30 September 2001," TrustPower says.

"Directors are anticipating a return to more typical wholesale "spot" and contract prices in the second half. Given these conditions TrustPower would be back on its profit plan for the latter part of the year."

Current drought conditions have caught TrustPower in an energy squeeze.

Not only is its own hydro output reduced but it says the drought combined with transmission constraints has caused the spot price of electricity on the wholesale market to reach exceptionally high levels, several times the retail price.

TrustPower's profit warning follows a similar one last week by Natural Gas (NZSE: NCH) which owns the On Energy operation. NCH reported it was unlikely to report a second half profit due to the higher costs of wholesale electricity.

Despite the current difficulties TransPower's directors believe it is a temporary interruption to ongoing profitability and say the company's strong financial position will underpin its operations.

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