Vector Forecasts Year of Steady Earnings

By David Winning Features Dow Jones Newswires

New Zealand-based energy infrastructure company Vector Ltd. (VCT.NZ) said it expected a year of steady earnings, but moved to damp expectations that Auckland's booming population will be a growth engine for the company over the next few years.

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Vector, which has been investing in new technologies from smart meters to charging stations for electric vehicles, said its net profit fell by 38% to 168.9 million New Zealand dollars (US$122.0 million) in the 12 months through June. The fiscal 2016 result had been inflated by a one-off gain from the sale of Vector Gas which wasn't repeated in the just-ended period.

Adjusted earnings before interest, tax, depreciation and amortization--Vector's preferred measure of its financial performance--from continuing operations rose by 0.3% to NZ$474.4 million. Vector said it expects a similar adjusted ebitda in the 2018 fiscal year.

Vector has been increasing customer connections in its energy businesses, helping to offset the ongoing impact of falling electricity consumption per household.

The company said last month that new connections in its electricity business rose by 0.9% in the year through June, lifting its customer base to 555,100 from 550,053 a year earlier.

In its gas distribution business, new connections increased by 5.8%. That resulted in Vector having 106,670 distribution customers at the end of June.

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Vector Chairman Michael Stiassny said that while the fundamentals of the company's Auckland energy networks remain strong, population growth in New Zealand's biggest city isn't expected to translate into growth in regulated earnings for the next two to three years. That means Vector would need other revenue sources to plug this gap, he said.

"Vector is a business under pressure through a combination of consumer trends, a low interest rate environment and regulatory settings," Mr. Stiassny said. "The downward movements in our regulated networks' financial results may be small, but they are noticeable: electricity connections may be up, but throughput is down; gas volumes are up, but prices are about to be reset down."

Last month, Vector said it would return NZ$13.9 million to electricity users in Auckland by reducing the amount of revenue it recovers over two regulatory years starting in April. That will reduce electricity revenue and Ebitda by NZ$900,000 in the 2018 fiscal year.

Vector has been actively seeking new investment opportunities, including overseas, and potentially with partners. The company signed an agreement with Origin Energy Ltd. (ORG.AU) last year to roll out smart metering in Australia's New South Wales state, and installations are already underway. The company has also been working with Tesla Inc. on the possible introduction of new battery storage technology in New Zealand.

However, management has previously told shareholders that there was limited scope for major deals due to intensifying competition, especially from offshore buyers that have the advantage of lower financing costs.

Directors of the company declared a final dividend of 8 New Zealand cents a share, bringing the full-year payout to 16 cents a share. Vector said that represented the 11th consecutive year of increased dividends.

-Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

August 23, 2017 17:24 ET (21:24 GMT)