Transpower to pay $165m dividend to Crown as costcutting boosts annual earnings

Chairman Tony Ryall said a major theme for the year was preparing for an uncertain future.

Transpower, the state-owned national grid operator, kept its $165 million dividend payment to the government largely unchanged after a year of cutting costs saw a small increase in underlying earnings.

The Wellington-based state-owned enterprise will pay a final dividend of $99 million on September 20 to its government shareholder, taking the annual return to $165 million, little changed from the $163 million it paid in 2016 when the return was trimmed on the expectation of smaller regulated returns. That level of dividend payments is set to remain until at least the 2020 financial year.

Earnings before interest, tax, depreciation, amortisation and fair value adjustments increased 3% to $773.3 million as a 4.4% cut in spending on grid maintenance to $103 million offset a 28% increase in the cost of investigations to $15.9 million and a flat wage bill of $100.3 million. Revenue increased 3% to $1.06 billion in a relatively new regulatory cycle limiting Transpower's allowable rate of return. Net profit rose 47% to $266 million, including an $80 million gain in the fair value of financial instruments.

"This year marked the completion of our first business-wide transformation programme, established to meet a more challenging operating environment under our second five-year regulatory control period," said chairman Tony Ryall, a former SOE minister. "We achieved an increase in network availability and substantial efficiencies and cost savings in our ongoing capital and operating expenditure."

Transpower was among the parties to raise concerns about the Electricity Authority over the proposed changes to the transmission pricing methodology. Mistakes in the underlying modelling have delayed the long-running process, which was hoped to be introduced by April 2020.

Mr Ryall said a major theme for the year was preparing for an uncertain future, where "changing societal factors, variations in energy generation and relatively flat demand growth will have implications for our business, and therefore New Zealand, principally around future investment decisions and maintenance practices on the national grid."

The SOE will shortly release a number of reports and investigations into various scenarios about how management think the next five-to-40 years will play out, including how new technology could help Transpower create more value for electricity consumers.


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