Financial results for the half-year to 31 December 2019

Market Releases Media Releases
Steady HY20 adjusted EBITDA result in line with expectations.
Regulatory reset gives greater clarity for outlook and dividend policy.

Vector delivered a steady earnings performance for the HY 2020 period, with the adjusted EBITDA of $264.5 million in line with last year’s comparable result.

Vector Chair Dame Alison Paterson said, “While our revenues continued to benefit from strong connection growth across our networks and the further expansion of the metering business in New Zealand and Australia, these gains were partially offset by increased maintenance to improve electricity network reliability.

“Vector’s shareholders will receive a partially imputed HY dividend of 8.25 cents per share.

“When the Vector Board approved the current dividend policy in 2017 it was noted that the policy would be reviewed having regard to the impact on Vector’s revenue of the Commerce Commission’s default price-quality path regulatory reset (DPP3) for Vector’s electricity network. The DPP3 period comes into effect from 1 April 2020.

“The Board has decided to move from a progressive dividend policy of increasing dividends by 0.25 cents per annum, to a policy of maintaining the current dividend of 16.5 cents per annum with the expectation of continuing to increase dividends in the future based on projected growth in Vector’s businesses. Vector will attach imputation credits to dividends at a rate of 10.5%,” she said.  

Vector will ensure that in considering the payment of any dividend, the company will:
  • maintain its current BBB credit rating with Standard & Poor’s, or equivalent;
  • have the financial capacity to meet its medium-term investment and operating requirements, and;
  • comply with all funding covenants and the solvency test in the Companies Act.

Dividends are made only at the discretion of the Board of Vector. The payment of dividends is not guaranteed and Vector’s dividend policy may change.

Vector’s group net profit after tax was $80.5 million, down $2.8 million (or 3.4%) on the prior year’s result. This result was largely driven by higher depreciation and amortisation partially offset by higher capital contributions and lower interest cost.

Dame Alison said, “During the period we have invested significant capital expenditure to improve asset reliability, support growth in Auckland, as well as investment to support increasing deployment of advanced meters. Total capital expenditure in the first six months has been $240.0 million, an increase of $38.9 million or 19.3% on the prior period.”

Landmark decisions during the period, particularly confirmed regulatory settings and the sale of the Kapuni Gas Treatment Plant to Todd Energy, have helped further refine Vector’s outlook and direction. 

Vector Group Chief Executive, Simon Mackenzie said, “Acknowledging the challenges and opportunities ahead of us, we remain committed to our new energy future vision and are confident we have the right strategy in place to deliver for our customers. 
 
“We acknowledge that due to our recently confirmed regulatory settings, we are limited in how much we can invest in growing and maintaining our networks to keep pace with Auckland’s rapid growth, while also addressing additional pressures driven by the electrification of transport and changing customer behaviours. We remain committed to working with our stakeholders to overcome these challenges, and to targeting investment as efficiently as we can. 

“In terms of our core electricity business, Vector remains committed to meeting its regulatory compliance targets with a number of initiatives focused on improving restoration times. This included commissioning a new equipment depot in Helensville to help speed up restoration efforts in the North and West of Auckland.  

“As was reported in our most recent operational update, SAIDI minutes for the nine months ending 31 December 2019 were 13.7% lower than the comparable period, which reflects the significant investment being made to improve network resilience, as well as fewer extreme weather events,” he said.

Adjusted EBITDA for electricity and gas distribution in the six months to 31 December 2019 was down $9.5 million to $189.2 million – a 4.8% decrease compared with the prior period. During the period Vector also invested regulated capex of $156.0 million to lift network integrity and enable Auckland growth.

Adjusted EBITDA for the Metering segment was $76.1 million in the six-months to 31 December 2019, up $8.0 million or 11.7% from a year earlier. Metering capex invested in the first half-year increased by 8.9% to $65.0 million, with most of this increase reflecting the acceleration of deployment of new advanced meters in Australia. 

“Our advanced meter base grew 10.8% to 1.64 million from 1.48 million the year before. We have now deployed over 221,000 advanced meters in Australia and are on target to install between 130,000 and 140,000 meters in FY20.

“The growth and innovation opportunities for metering in both New Zealand and Australia are significant. With continued investment and focus on customer service, Vector Metering is on track to deliver another solid performance in FY20”, Simon said. 

Gas Trading business’s financial performance in the six-months to 31 December 2019 saw adjusted EBITDA flat at $20.8 million.

ENDS