Powerco, showing resilience in face of recession, posts first-half profit

Thursday 25th February 2010

Powerco proved again the recession-proof qualities of utility stocks, turning to a net profit of $15.3 million in the first half.

The result compared with a $28.41 million loss on a continuing operations basis in the same period a year earlier, with the swing almost entirely attributable to the impact of a $70.666 million unrealised "mark to market" fair value accounting rule impact in the previous period. In the latest six months, theren was a negative fair value impact of $8.49 million.

Gross profit (sales minus cost of sales) was 2% ahead of the previous corresponding period, at $138.06 million, from sales of $175.32 million, compared with $170.66 million in the same period a year earlier for Powero, which has debt securities listed on the NZDX.

Chair Rick Bettle said it was a "good" result, and that recent relaxation of price regulation on monopoly networks showed a "maturing" in the New Zealand regulatory environment, which largely dictates the company's return on assets and subsequent profitability.

“Powerco’s track record of consistent results underpinned the successful refinancing of $420 million of bank debt in the latter part of 2009,” said Bettle.

Powerco’s shareholders had also committed to an equity injection of $100 million in April 2010 to repay the Company’s maturing subordinated bonds.

Notes to the accounts also reveal that Powerco is in dispute with Contact Energy, which alleged overcharging between 2002 and 2006 totalling $533,000, a claim that Powerco disputes.

Businesswire.co.nz

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