NGC posts $35.37m half year profit

By NZPA

Tuesday 25th February 2003

Power company NGC Holdings Ltd today posted a net after tax profit of $35.37 million for the half year to December 31.

The result, which is more than double the $16 million figure recorded for the same period a year earlier, shows the company is back on track after being crippled by a spike in wholesale electricity prices in the winter of 2001.

The company, 66 percent owned by The Australian Gas Light Co, will pay an unimputed interim dividend of 4 cents per share on March 24.

"This is a very pleasing result at a time of considerable change as NGC implements its industry repositioning strategy," NGC chairman Greg Martin said.

The company began withdrawing from the mass market energy retailing and electricity generation business in August last year, selling its gas retailing business and its interests in the Southdown cogeneration power station and in the output from the Rotokawa geothermal power station.

Conditional agreements have also been reached for the sale of its Taranaki Combined Cycle, (TCC), and Cobb Hydro stations and will be put to a shareholder vote on March 3.

The two periods are not directly comparable because of the gas retail and generation sales during the latest period, and the abnormal circumstances of the 2001 winter which flowed into the company's results for the 2001 half year.

Today's result was based on total operating revenue of $362 million, down on the $406 million recorded a year earlier.

Earning before interest and tax (ebit) from NGC's electricity generation and trading business declined to $11 million, from $43 million in the 2001 half year.

This was due largely to a big drop in wholesale electricity prices compared with the abnormally high prices of 2001.

"This illustrates the volatility of the company's electricity generation earnings," chief executive Phil James said.

"Conclusion of the TCC and Cobb generation asset sales will remove this volatility and result in more stable and predictable earnings for NGC in future."

Looking ahead, NGC's focus would be on expanding its core businesses of natural gas and LPG transportation, sales, and energy metering.

"Natural gas trading made a particularly strong contribution. Ebit from this business increased by 20.9 percent to $31.5 million on the back of a 13 percent improvement in natural gas sales, to 39.9 petajoules," Mr James said.

NGC's LPG business also achieved improved ebit, which was up 13.9 percent at $8.3 million.

However, ebit from gas transportation of $33 million, and energy metering, of $10.4 million, declined by 7.6 percent and 16.1 percent respectively.

Mr James said this reflected increased operating costs, (including higher insurance premiums, the levying of local body rates on NGC's pipelines and, in the case of the metering business, a 25 percent expansion of the electricity metering base part way through the 2001 half year), the full separation of metering from retail electricity as well as additional resourcing requirements.

"The core activities that form the foundation of NGC's future business continue to demonstrate strong cash flow and earnings generation," Mr James said.

"We have identified new opportunities in the metering business and have commenced a strategy to expand our range of services, develop technology leadership and to look at the potential of the wider Australasian metering market.

"I am confident, too, that as the gas industry accelerates its preparation for the post-Maui supply environment, there will be new opportunities for NGC to build its role and presence in the New Zealand energy industry."

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