Chair & Chief Executive Report


Both our generation and retail divisions contributed to our positive result. We delivered on planned maintenance activity across our generation fleet and continue to drive our asset investment pipeline through enhancements at a number of our key schemes. We also saw an increase in our retail customers for telecommunications, due to the continued development of our retail strategy and customer offerings.

The year was not without its challenges however, including increasing regulatory uncertainty, with key upcoming changes including the proposed new Transmission Pricing Methodology (TPM) as a result of the Electricity Authority’s decision on TPM Guidelines, and the resource management and freshwater reforms.

We also engaged and submitted on the Climate Change Commission’s (CCC) draft advice to Government. We are committed to developing and implementing solutions to accelerate electrification and decarbonise New Zealand. While we highlighted a number of areas where we would like increased clarity, we support the CCC recommendation that there needs to be far greater consistency in approach across government agencies with respect to integrating policy if New Zealand is to achieve its carbon reduction targets.

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After a very challenging 2020, Trustpower recorded a positive result last year with an EBITDAF of $200.2 million up 7.3% on prior year. This was despite unprecedented dry sequences across New Zealand, Tiwai Point uncertainty, reduced gas supplies and the ongoing impacts of the Covid-19 pandemic.

Strategic Review

In January 2021, we announced a strategic review of our retail business. This review is aimed at testing market interest in the sale of our mass market retail business and examining if a potential buyer would place a higher strategic value on this than we do.

There is no doubt our retail business is a success story and we have built a high-quality and valuable bundled customer base which could represent a unique and potentially high-value proposition for a buyer. With anticipated changes in the energy and utility retailing markets such as electrification and decarbonisation, initiatives such as decentralised energy, digital trends in service provision and utilities convergence are continuing to shake up traditional operating models across the sector. As such, the Board has elected to examine the options available for our market position and this process is underway at the time of writing.

“Our retail business is a success story and we have built a high-quality and valuable bundled customer base.”

Our People, Safety and Wellbeing

We reported on our response to Covid-19 last year, noting that we’d successfully transitioned to working from home, initiated programmes to support and check-in with our vulnerable customers, rapidly completed a significant ISP investment, and established a fund for our local communities. We remain vigilant with respect to Covid-19, with systems in place to protect our staff and support our customers. We continue to encourage our people to follow Government guidance around the pandemic.

In all catchments we operate in we have placed increased focus on public safety around our schemes and associated waterways. We have been proactively deploying visible and informative signage and have engaged with local communities to convey safety messaging. At our generation sites, access to hazardous equipment and areas has seen increased restriction, especially during outages.

Across the business, we’ve made an ongoing concerted effort to normalise safety reporting and reward proactive safety actions, and we continue to see a year-on-year reduction in our Total Recordable Injury Frequency Rate (TRIFR). The result for the year ending 31 March 2021 was 0.60, down from the previous year’s result of 0.79, and notably reduced from 1.5 for the year ending 31 March 2019.

We particularly wish to note the commitment made by our people during and around the Covid-19 lockdown periods. Trustpower maintained its operations at close-to-normal levels over these periods, which required many staff going above and beyond usual duties.

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We continue to encourage our people to follow Government guidance around the pandemic.

Our Communities

Caring for people and place – Tiaki – is part of our organisational values and business aspirations, and affirms our commitment to making a difference for a sustainable future. Ongoing stakeholder engagement helps inform how we will make change to achieve New Zealand’s sustainability aspirations and see communities thriving. Tangata whenua are among our key stakeholders in the hydro catchments we operate in. Our understanding and appreciation of mātauranga Māori and te mana o te wai continues to evolve and mature, as having a positive impact in the communities in which we operate is critical to us.

We demonstrate our care for people and place through various initiatives associated with our generation assets and the local communities where our people reside – providing funding to support educational scholarships, community group sponsorships, and environmental funds or trusts. We are proud to partner with people and their communities all around New Zealand to achieve better outcomes for society.


Climate Change and New Renewable Generation

It is estimated that New Zealand will need to grow its generation capacity by as much as 70% by 2050 to enable the electrification of the economy and meet New Zealand’s Climate Change commitments.

Trustpower is a positive contributor to New Zealand’s Climate Change effort. We are proactively engaged at many levels and intend to play our part in meeting New Zealand’s climate change goals.

This year we refreshed our greenhouse gas data collection methodology, set new emissions reduction targets for ourselves, and further embedded climate change risk into our asset management programme. Although outside of the reporting period, we have also engaged and submitted on the CCC draft advice to Government which made recommendations for reducing emissions for New Zealand and policy direction to get there.

We agree with the report from the Interim Climate Change Committee, as well as the draft advice from the CCC, that pursing a 100% renewable electricity supply target will be excessively costly. Furthermore, electricity generation only produces approximately 6% of total carbon emissions, while industrial process and heat and transport produce 21% and 24% respectively so pursuing a 100% renewable energy target is the wrong focus.

The better policy target is to increase, by a substantial amount, the renewable energy supply so that industrial and transport electrification can occur faster and displace coal and liquid hydrocarbons. Better environmental outcomes will be achieved by retaining a small thermal generation capacity to provide dry year cover and help meet peak demand and deploying the capital otherwise required to eliminate the last few percent of thermal generation in industrial heat and transport electrification.

Ambitious goals require that the capital deployed is allocated as effectively as possible to achieve the greatest level of carbon reduction. The Emissions Trading Scheme is an excellent mechanism for properly identifying where and how the greatest level of carbon reduction can be achieved for the lowest cost. Equivalent cost benefit analysis should be applied to carbon reduction initiatives.

We understand the political imperative to be seen to be doing more and faster, but are disappointed that the Government is defaulting to costly ‘Think Big’ projects, like Lake Onslow. Trustpower will continue to oppose this type of policy direction and reiterate what we state above, that the solution lies in applying capital to increase the amount of renewable generation, not spending billions of dollars to simply move the renewable generation from one time period to another, and consume significant energy in the process. The Interim Climate Change Committee concluded that the marginal cost of carbon abatement by Lake Onslow is in the order of $250 per tonne, a far greater cost than many other carbon reduction measures.

In the meantime, Trustpower has increased its activity in getting new renewable projects to an investment decision and will continue to deploy some capital in growth projects. We look forward to the Government reviewing its electricity sector priorities and providing a stable environment which will encourage Trustpower and others to take sound development projects from the boardroom to the construction site to help achieve shared goals.

We also consider the opportunity to utilise and operate existing hydro dams differently would allow generation output to increase or operate more flexibly at a lower cost than some alternatives now being promoted.

In 2020, as part of the Task Force on Climate-related Financial Disclosures (TCFD) framework, the Government flagged an intent to make climate-related financial disclosures mandatory for publicly listed companies by 2023. Trustpower is proactively reporting against some of the TCFD requirements this year, and will expand our coverage in future years. In practical terms this means we publicly share more information on how our Board gains oversight of, and addresses, climate change risks. We are working hard to understand how our locationally diverse portfolio may experience both risk and opportunities.

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“Ambitious goals require that the capital deployed is allocated as effectively as possible to achieve the greatest level of carbon reduction.”

Government and Regulatory Landscape

The Government intends to reform the country’s resource management system this term. To enable widespread decarbonisation, a considerably more supportive environmental regulatory framework will be required, with clear and coherent policy direction an imperative if we are to meet New Zealand’s carbon reduction targets. Trustpower believes that the place to do this is within the proposed Natural and Built Environment Act which is expected to be released as an exposure draft in May 2021.

In June 2020, the Electricity Authority (the Authority) published the new Transmission Pricing Methodology (TPM) Guidelines. This has triggered a significant work programme by Transpower to develop a new TPM that accords with these guidelines by 30 June 2021, ready for the Authority’s regulated approval process. Trustpower remains an opponent to the proposal, holding significant concerns around the implications of the reforms. It is our view that the direction of TPM reform will not support the necessary investment across the supply chain required to meet New Zealand’s electrification requirements and broader climate change ambitions. As a result, in July 2020 Trustpower commenced a judicial review of the Authority’s decision to publish the TPM Guidelines. We expect the case to be heard in late 2021.

Our team will continue to work with industry and sector groups to help the Government understand the risks arising from their policy on energy security, affordability, and sustainability. If appropriate balance is not achieved, negative impacts may be felt by customers, the industry, and/or New Zealand depending on the nature and magnitude of the specific reforms.

Strategy and Growth

We have updated our strategic framework to provide better clarity around organisational goals by introducing new strategic aspirations and associated three-year targets. These aspirations are centred around how we drive financial performance, delivering climate action, respecting our environment, how we value and look after our people, how we serve our customers and community and collaboration with our partners and suppliers.

The introduction of the strategic aspirations and targets are intended to provide stretch goals for the organisation, as well as create constructive tension between the different levers that we can pull to achieve our purpose and vision. We intend to report on our progress towards these targets for each of the six aspirations.

As noted earlier, we have expanded our generation development capability and are actively creating both near-term and long-term options for new generation. But implementation at reasonable scale will depend on sensible and balanced regulatory settings and Government policy.

Operating Performance

Despite the challenges last year particularly around continued record-low inflows, our generation division produced a solid result with an EBITDAF contribution of $154.1 million in line with the prior year. The geographic diversity of our assets helps us to spread our generation risk and deliver reliable results by placing product to market at optimal times.

Pleasingly, in spite of Covid-19 restrictions, we improved our portfolio of hydro assets and added additional generation of 9.5GWh/yr through enhancements at the Waipori, Cobb and Kumara renewable hydroelectric power schemes. Underpinning this result, we saw improvement in the reliability and availability of our higher production volume assets, such as Highbank, Mangahao, Cobb, Coleridge, and Matahina.

Our retail performance was also very pleasing given the challenging environment the business faced in FY21. We saw a lift in retail EBITDAF of 32.9% on the prior year, with material improvements at a gross profit level across electricity and telecommunications. Further gains resulted from our continued focus on reducing costs to acquire and serve. These initiatives also delivered better customer outcomes. May 2020 saw the launch of our new mobile services, complementing our existing product set of electricity, gas, phone and broadband. As of 31 March 2021, over half of our customers were taking two or more products and we had around 6,000 mobile connections with a strong, weekly growth rate. Customer satisfaction amongst our early mobile adopters is very high.

We continue to build inclusive customer experiences, ensuring customers can choose the service channel that best suit their needs. Over 75% of our customer contacts are serviced via our digital channels and customer satisfaction continues to track at very high levels, with re-engagement rates of 80% or more. New technologies implemented have enabled our people to support our customer needs seamlessly from any work setting, and new working-from-home options has had the added benefit of increasing our people’s work satisfaction ratings. We know happy staff and great customer experiences go hand in hand, so this culture of staff and customer care remains a core focus for us.

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Financial Performance

Net profit after tax (NPAT) of $30.7 million is below last year’s NPAT of $97.6 million. Last year included a one-off gain of $16.4 million resulting from the sale of our legacy meter business. However, the primary reason for the reduction is the increase in net fair value losses. These non-cash losses will reverse in future years as the underlying generation they support is produced. Underlying profit after tax (refer to note A2 of the financial statements for a full definition) which excludes fair value losses and one-off gains was $94.2 million or 25% above last year. Earnings Before Interest, Tax, Depreciation, Amortisation and Fair Value Movements in financial Instruments (EBITDAF) was $200.2 million or 7.3% above last year’s EBITDAF of $186.5 million.

The improved financial performance occurred primarily in retail due to solid gains in electricity and telecommunications product margins, and reduced operating costs (mainly driven by Covid-19 lockdowns reducing customer acquisition activity.)

Financial Position and Capital Structure

We have a strong balance sheet with sustainable levels of gearing. The debt to EBITDAF ratio of 3.6x is slightly higher than the 3.3x last year, driven by increased prudential requirements due to high spot electricity prices. While the outcome of the current strategic review is unknown, Trustpower will continue to maintain prudent financial management whatever the outcome.


There were two Board Director changes this financial year. Sam Knowles retired from the Board in July 2020 and Geoff Swier retired in November 2020. Both were long standing directors having been on the Board for approximately 14 years. Trustpower would like to acknowledge their commitment and leadership over such a long period and for their service and contribution to creating value for all our stakeholders.

Peter Coman and David Gibson were appointed to the Board as new Directors and following these changes, the composition of the standing Board committees was reviewed and updated with details provided later in this report.


PricewaterhouseCoopers has indicated its willingness to continue in office.


Given the uncertainty around the impact from Covid-19 that existed in 2020, the final dividend declared last year was 15.5 cents per share, lower than the previous dividends of 17.0 cents per share. Following the improved results this year, the Board has decided to declare a fully imputed dividend of 17.0 cents per share as well as a one-off special dividend of 1.5 cents per share, also fully imputed. The combined dividend of 18.5 cents per share reflects the ongoing level of dividends, as well as a catch up of the previous lower payout.

Together with the interim dividend of 17 cents per share paid in December 2020, this provides a total fully imputed dividend of 35.5 cents per share for the 2021 financial year.

Looking ahead

The future for Trustpower will be dependent on the outcome of the strategic review but whatever this looks like, we believe this will be positive and value accretive for all our stakeholders.

Regardless, we will find ourselves in a new era of working, with many people regularly taking up the option of working from home – leading to an increase in energy usage nationwide, as well as our digital enhancements creating better customer experiences.

We are also likely to see more competition coming into the market. Overseas we’ve seen solar providers become grid electricity retailers, and electrification bringing changes to household purchasing behaviours. Trustpower is closely monitoring the sector changes, the shift to electric vehicles, the uptake of electric vehicles, the role of batteries and how we can best leverage opportunities to support this shift. We anticipate that increased reliance on intermittent supply sources (wind and solar) may mean greater volatility in the wholesale market in the short term, increasing the value of our storage and controllable supply assets.

We will do our bit to help New Zealand meet the stated climate change goals. Not only does this mean reducing our own carbon footprint but also, assuming balanced regulatory settings, continuing to develop new generation opportunities.

David Prentice – Chief Executive & Director


Paul Ridley-Smith – Chair

“While the outcome of the current strategic review is unknown, Trustpower will continue to maintain prudent financial management whatever the outcome.”