As at 31 March 2021, net debt was $730.3 million, up 18% from $617.2 million the year before. This increase was primarily driven by Trustpower funding electricity market security deposits. The amount required in the current year has significantly increased on the prior year as spot prices, and the ASX future prices, have increased significantly.
Trustpower uses net debt/EBITDAF as the metric to measure the company’s ability to repay debt. The current level of 3.6x is heightened due the need to fund the electricity market security deposits as described above.
Policies to Benefit all New Zealanders
Government policy settings continue to steer the economy towards increased electrification. The Climate Change Response (Zero Carbon) Amendment Act, and the associated establishment of the Climate Commission and setting of carbon reduction goals are aimed at encouraging consumers to choose clean energy over fossil fuels. We fully participate in the Government’s policy development process with a preference for market mechanisms that facilitate innovation, open access for participants and suitable social policy protections of disadvantaged communities. Trustpower is particularly focused on climate policy, pricing and telecommunications regulation.
Positioned for Growth
Over the last several years, Trustpower has sharpened our focus to be able to benefit from the expected decarbonisation and increased electrification. This has seen us divest our Australian operations to become solely New Zealand focused, and now undertake a strategic review to investigate generation investment large enough to meet expected future demand. Our Retail business has seen exponential growth, and successful investment in increasing data supply to meet ever-increasing demand means we have secured a leading ISP network infrastructure, open to further opportunities.
Trustpower has just under 313 million shares on issue on the New Zealand Stock Exchange (NZX). We have two cornerstone shareholders: Infratil Limited and Tauranga Energy Consumer Trust (TECT), plus more than 12,000 small parcel shareholders and 12,000 bond holders.
Infratil, which has been a major shareholder since Trustpower’s formation in 1994, is a specialist investor in infrastructure and utility assets. It holds 51% of voting shares.
TECT owns 26.8% of voting shares and has also held shares since Trustpower’s formation. The Trust’s beneficiaries are account holders in Tauranga and Western Bay of Plenty, who traditionally receive two distributions each year. However, in light of Trustpower’s strategic review announcement (in late January 2021) TECT are proposing to restructure and rename as TECT Consumer Trust, securing sufficient funds for beneficiary payments until 2050 with the balance being transferred to a new long-term community trust focused on grants for community projects. Even if a sale of Trustpower’s mass market retail business does not eventuate from Trustpower’s strategic review, TECT wish to proceed with this restructure.
A New Age of Reporting
Our Finance team began working from home on the 23rd of March 2020 as we entered national lockdown for the Covid-19 pandemic, eight days before balance date. Under usual circumstances, at financial end of year the team works closely with auditors PwC in the office and – while our financial systems are fully automated – the human contact is normally a key part of the audit process.
The speed at which we could adopt a new digital environment was a testament to our robust systems, proving their resilience and agility. It is also a reflection of our resilient people; the team had no notice and were able to launch into their busiest time of year and deliver. Not only were we in a lockdown situation but this was also our first year auditing out of our new financial system, Workday.
Thanks to a phenomenal effort by a sound financial team, Trustpower was one of the first, (if not the first) listed company to complete a full set of audited financial statements without anyone from our finance team or our auditors actually being on site. Chief Financial Officer Kevin Palmer says, “The key to success is not in the technology but having highly capable people who are prepared to innovate and roll their sleeves up to get the job done.”
Every year Trustpower has some bank debt or bond debt that matures, and we need to refinance. In 2020 we had $80 million of bank debt facilities that were maturing in July 2020. Due to Covid-19, and the uncertainty of the impact it would have on financial markets, we accelerated the refinancing of this debt, and were able to secure (over a month ahead of the initial timetable) $110 million of new facilities for the next few years. Trustpower is an organisation that values long-standing relationships with all our banks, meaning we were able to gain financial security during an uncertain period.
- Our rolling three-year shareholder value in the top quartile of our peers.
- Secure options to grow our generation business in line with national growth in electricity demand.
- Set profit growth targets for the business that focus on sustainable long term growth (further details to be provided once the outcome of the strategic review is known).