24 Aug 2012

Vector profit slips, feels hampered by regulation

10:15 am on 24 August 2012

Vector's full-year profit has dropped, and the company says it's due to subdued economic conditions and rising regulatory costs.

The energy and communications provider's profit fell 1.3% to $198.8 million in the year to June. Underlying profit rose 16.1% to $198.8 million once the deal to allow Transpower to use the tunnel from Penrose to Hobson St in Auckland was included.

Vector, which is 75% owned by a consumer trust, is expecting strong revenue growth in the areas where its business is not subject to regulation. Its metering, telecommunications and gas wholesale business is not regulated - but its electricity and gas distribution is.

Chief executive Simon Mackenzie says the regulation has placed a huge burden on the organisation, making it less productive.

The company is in a legal wrangle with the Commerce Commission over the price it can charge customers for its electricity distribution.

Smart technology for metering

Mr Mackenzie says, however, that the outlook is strong in the technological unregulated side of the business.

He says there will be a focus on rolling out smart technology for electricity metering, but potentially also for gas and water.

On the regulated side of the business, there has been a slight increase in volume and connection growth. Underlying earnings rose 6% to $627.4 million while revenue grew 0.6% to more than $1.25 million.

Retail electricity and gas customers numbers grew, but the strongest growth was in industrial and commercial customers and small-to-medium businesses.

Mr Mackenzie says Vector foresees good continued growth in gas trading in terms of attracting and maintaining customers.

The company declared a full-year dividend of 14.5c a share.