NGC posts $34.53 million profit after 2001 disaster

By NZPA

Tuesday 20th August 2002

Natural Gas Corporation has posted a net profit after tax of $34.5 million for the year ended June, down slightly on expectations of $36 million.

NGC, majority-owned by Australian Gas Light, lost $301.6 million the previous year after a disastrous winter.

NGC also announced today it intends to sell its gas retail stations and electricity generation assets as it looks to consolidate its role in the New Zealand energy market.

NGC will pay an unimputed dividend of 3.5 cents per share on September 16.

Following its exit from retail in August, sales revenue dropped to $709.08 million from $1.24 billion the previous year.

NGC chairman Greg Martin said in a statement today the improvement was based on the company's natural gas trading business, strong results from gas transportation and metering activities, and LPG trading.

"By contrast, the electricity generation and trading activities returned lower earnings for the year due to a substantial decline in wholesale electricity prices during the second half of the year," Mr Martin said.

The net earnings of $34.5 million were achieved after allowing for an after-tax abnormal loss of $22.7 million, comprising a loss of $41.5 million from electricity retailing activities in July 2001.

"This was offset by three abnormal gains, including an $8 million gas commitment fee receipt from Contact Energy."

Excluding the abnormal items, earnings increased from $9.9 million in 2001 to $57.2 million. Trading cash flows and proceeds from the electricity customer sales were used to reduce debt and debt servicing, amounting to $225.2 million.

"Due to last year's tax losses and prior year tax prepayments, NGC was unlikely to return to fully imputed dividend payments before the end of the 2004 financial year.

Chief executive Phil James said the substantial requirements for gas-fired generation during the 2001 winter's hydro shortages demonstrated the economic and energy supply importance of New Zealand's indigenous gas reserves.

"The role of gas in the energy supply mix has assumed a sharper focus with the Maui gas reserves redetermination process," Mr James said.

"I am pleased that, with the appointment of an independent expert to take the process to a conclusion, the industry should know the state of remaining reserves by the end of the year."

The Maui field is expected to run out two years earlier than previously expected, in 2007.

The decision to consolidate its businesses was the result of a six-month review of NGC's future business direction.

Mr James said that following NGC's withdrawal from electricity retailing in 2001, the company no longer had the capability to serve small customers.

"With the recently established marketing alliance with Genesis Power, NGC no longer has a direct relationship with its retail gas customers, who receive all customer support services from Genesis and are supplied with gas under the Genesis brand.

"NGC will, however, continue to directly supply its larger commercial and industrial customers, who are outside the marketing alliance, as part of an increasing focus on business relationships at the wholesale level," Mr James said.

"As we no longer have a natural hedge for our generation output, we have formed the view that these (generation) assets will be of greater value to those with a retail base.

"Our sights are now firmly on developing our position in the energy infrastructure sector, particularly in gas and LPG transportation and supply, and in energy metering," he said.

NGC owns the 360 megawatt Taranaki Combined Cycle Power Station at Stratford and the 32MW Cobb Hydro Station near Nelson.

It also has 50 percent interest in the 118MW Southdown Power Station and a 25MW cogeneration plant associated with the company's Gas Treatment Plant at Kapuni.

They have a combined total output of about 4000 gigawatt hours (GWh) of electricity, or about 12 percent of New Zealand's demand.

NGC would most likely retain its interest in the Kapuni cogeneration plant because it was so closely linked to its gas processing operations.

Mr James said NGC would announce further details of the divestment programme in the near future.

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