Revenue down, earnings up at King Country Energy

BUSINESSDESK: King Country Energy's profitability improved, despite falling revenues, in the year to March 31, with results released today demonstrating the significance of its recent buy-out of the Mangahao hydro power station for its future growth.

Majority-owned by Todd Energy, KCE announced a 20% lift in net profit to $5.3 million for the period, up from $4.4 million a year earlier, although total revenues at $32 million were down slightly as the company lost some commercial contracts and retail customers to competitors.

These losses were somewhat offset by the company requiring less energy from the wholesale electricity market, so that operating expenses including electricity purchases were down 11% on the year before.

"KCE, with its relative reliance on the wholesale hedge market, is exposed to retail competition," said chairman Brian Gurney, who described the result as "very good".

"In the medium term, with 100% ownership of Mangahao power station, KCE is much better positioned to compete and grow its retail business.”

KCE bought Todd's 50% share of the Mangahao station during the financial year.

The company is unusual because although it owns the regulated local electricity network monopoly, it also serves retail electricity customers under rules that allow network owners to vertically integrate their businesses as long as they own renewable generation.

Earnings before interest, tax, depreciation, amortisation, fair value movements of financial instruments and asset impairments (EBITDAF) were $11.1 million, compared to an $8.5 million result for the previous financial year.

KCE’s total electricity retail volume decreased by 11% to 202 Gigawatt hours during the year, of which 131 GWh was generated from its own hydro schemes, an 11% rise on the previous year after favourable local hydrology compared to the rest of the country.

"KCE remains focused on reducing its exposure to the hedge market, exploring opportunities to add to its generation portfolio, and growing its retail business using the additional output provided by the Mangahao acquisition," Mr Gurney said.

The company announced an unimputed final dividend of 12 cents per share, payable on August 10, for a total annual dividend of 24 cents per share.

KCE last traded on the Unlisted platform at $3.65. The company is 54.1% owned by Todd Energy, with a further 14.2% held by the King Country Electric Power Board, and the remainder held by small shareholders.