Explaining the financial
statements

Generation Performance

FY19 saw favourable production volumes and wholesale prices, which were not repeated to the same extent in FY20. Total production volumes were 1,759 GWh – 10% below the previous year, and 6% below our long-run average. Volumes were impacted by an unplanned outage at our Highbank scheme, low inflows in the North Island, and more storage of water due to unattractive pricing. The average price achieved for this generation was $107/MWh, compared to $125/MWh in FY19.

This was somewhat offset by an increase in the internal transfer price that Generation received for ~80% of its volume and strong irrigation revenue.

We took advantage of lower pricing (particularly in the second half of the year) and unplanned plant outages to undertake additional work at some schemes, which increased our operating costs.

A change in the allocation of corporate costs also increased the stated operational expenditure in our generation division.

The sale of our meter asset business in November 2019, the reduction of Avoided Cost of Transmission (ACoT) revenue, a revaluation of our carbon credit inventory, and late March COVID-19 impacts also impacted our divisional earnings for the year, relative to the prior period.

Retail Performance

Key strategic indicators continue to track well in retail; however, the reported financial result is disappointing on the surface. A mild winter and the loss of some high-volume, low-margin commercial customers in FY20 saw lower volumes than the prior period. Strong underlying growth in telecommunications gross profit was more than offset by a reduction in electricity gross profit, due primarily to a significant increase in the transfer price of electricity not being passed through to customers in the first year. Higher operating costs in retail were driven by:

  • Increased customer acquisitions and an increased focus on retention and cross-sell in FY20 through our high-value bundle offerings, rather than price-led campaigns (25% higher).
  • A change in allocation of corporate costs.
  • Bad debt provision increases due to COVID-19.
  • Investment in people capability and a change in remuneration structure.
  • Higher amortisation of previously capitalised customer acquisition costs due to NZ IFRS 15 methodology change adopted in FY19.

NZ IFRS 16 Implementation

Trustpower has fully adopted the new NZ IFRS 16 Leases accounting standard in FY20. This primarily affects our building and telecommunications service leases and results in an annualised ~$8.2m increase in EBITDAF*, with similar offsetting increases in depreciation and interest expenses.

Asset Revaluation

Given the uncertainty surrounding the current COVID-19 pandemic the Board considered it prudent to undertake a full revaluation of our generation assets. While there are a number of moving parts in the valuation, the overall impact was a relatively modest decline in value of $83 million or 4%.

Meter Asset Sale

On 18th November 2019, Trustpower announced the sale of our electricity meter assets to Financial Corporation Limited. The sale included meter assets at ~125,000 installations across the country. The sale represented an opportunity for Trustpower to continue its strategic evolution to a more digitally focused multi-product retailer and further support the transition of its retail customers to smart metering.

Balance Sheet/Dividend

Trustpower’s balance sheet remains strong, with sufficient debt capacity to address even a severe economic downturn. However, given the current uncertainty the  Directors have declared a fully imputed final ordinary dividend of 15.5 cents per share. This brings the total dividend for the year to 32.5 cents per share, a drop of 4% from the previous year.

Group Result

Group EBITDAF* result compared to the prior period was impacted by:

  • Continued investment in technology, capability, and customers.
  • Unfavourable hydrology and climate.
  • Sale of metering equipment.
  • Accounting standard impacts.

A more detailed explanation of the results can be found in our investor presentation at https://www.trustpower.co.nz/investor-centre/results.

 

 

 

 

Key Metrics

2020 2019 2018 2017 2016

Profit After Tax ($M)

98

93

114

94

68

Earnings Before Interest, Tax, Depreciation, Amortisation, Fair Value Movements of Financial Instruments and Asset Impairments (EBITDAF)* ($M)

186

222

243

218

208

Underlying earnings after tax ($M)

75

103

135

115

84

Basic earnings per share (cents per share)

30.4

29.0

40.9

29.6

21.7

Underlying earnings per share (cents per share)

24.1

32.8

43.1

36.6

26.8

Dividends paid during the year (cents per share)

49

59

34

33

34

Net debt to EBITDAF

3.3

2.5

1.9

3.0

3.5

Net tangible assets per share (dollars per share)

3.12

3.61

4.21

4.10

4.24

Customers, Sales and Service

 

 

 

 

 

Electricity connections (000s)

266

267

273

276

277

Telecommunication connections (000s)

104

96

87

76

62

Gas connections (000s)

41

39

37

33

31

Total utility accounts (000s)

411

402

397

385

370

Customers with two or more services (000s)

116

107

100

90

77

Mass market sales – fixed price (GWh)

1,817

1,823

1,784

1,895

1,820

Time of use sales – fixed price (GWh)

826

902

945

835

823

Time of use sales – spot price (GWh)

972

1,028

1,086

1,244

1,389

Total customer sales (GWh)

3,615

3,753

3,815

3,974

4,032

Average spot price of electricity purchased ($/MWh)

109

131

91

55

64

Gas Sales (TJ)

986

1,006

1,012

1,013

1,046

Annualised customer churn rate

17%

20%

19%

17%

16%

Annualised customer churn rate - total market

20%

22%

21%

20%

21%

Generation Production and Procurement

 

 

 

 

 

North Island generation production (GWh)

849

1,010

1,209

1,010

639

South Island generation production (GWh)

910

984

1,026

1,007

949

Total New Zealand generation production (GWh)

1,759

1,994

2,235

2,017

1,588

Average spot price of electricity generated ($/MWh)

107

125

88

52

60

Net third party fixed price volume purchased (GWh)

1,512

1,463

1,539

1,309

1,626

Other Information          

Resource consent non-compliance events

13

10

5

15

7

Staff numbers (full time equivalents)

809

818

803

786

727

*EBITDAF is a non-GAAP measure. Refer to note A2 for more information.