Lower borrowing costs help Vector

Infrastructure company Vector lifted half year net profit from continuing activities 11.6 percent to $101 million, helped by lower borrowing costs.

The company, which owns the Auckland electricity distribution network, said total revenue from continuing operations rose in the six months to December by $11m or 1.8 percent to $621m, compared to a year earlier.

Lower debt levels combined with lower interest rates reduced net borrowing costs by $19m, while earnings before interest, income tax, depreciation and amortisation (ebitda) slipped $3m to $310m.

First half electricity revenue improved by 4.8 percent to $286m, Vector said today.

Connections to Vector's electricity networks grew by 2578 or 0.5 percent, slightly better than the prior first half, and volumes declined just 2 gigawatt hours (GWh), an improvement on the prior comparable period's contraction of 42 GWh or 1 percent.

Gas transportation revenue rose 5.4 percent on a year earlier to reach $103m. Gas distribution volume and growth in connections were flat half-on-half, while transmission volumes improved by 5.3 percent.

Revenue fell 3.3 percent to $216m in the gas wholesale segment, with the company losing margin from a wind down in legacy gas contracts. Natural gas volumes were up 5.1 percent, gas liquids volume was down 16.9 percent and Liquigas volume down 15.8 percent.

Chief executive Simon Mackenzie said Vector's access to volumes of low priced gas from legacy contracts was coming to an end, which the company had been signalling to the market.

For the full year, Vector expected its result to be towards the upper end of analysts' forecasts, he said.

Growth in connections to Vector's gas and electricity networks was expected to remain at current levels for the second half, while volumes depended heavily on the weather.

The Government's $1.5 billion fibre initiative was a significant growth opportunity for the business, but there was a long way to go before contracts were awarded.

Vector would take part in the next phase of the fibre initiative, and would also continue to be significantly involved in the regulatory process and electricity review.

"If the opportunity makes commercial sense Vector can build a reliable world class fibre network bringing fibre to the door of every Auckland home and business premise three years ahead of deadline."

Vector, which is 75.1 percent-owned by the Auckland Energy Consumer Trust, is paying an unchanged interim dividend of 6.5c per share.


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