ANNUAL REPORT 2012 2012 Marks a Significant Milestone Achievement for Trustpower of 10 Consecutive Years % of EBITDAF Growth
Total Page:16
File Type:pdf, Size:1020Kb
ANNUAL REPORT 2012 2012 MARKS A SIGNIFICANT MILESTONE ACHIEVEMENT FOR TRUSTPOWER OF 10 CONSECUTIVE YEARS % OF EBITDAF GROWTH. COMPOUND22 GROWTH IT’S A TESTAMENT TO THE RELENTLESS ‘CAN DO’ OVER 10 YEARS ATTITUDE OF OUR STAFF AND THEIR CONTINUAL DRIVE TO INNOVATE AND ENHANCE ALL ASPECTS OF OUR BUSINESS, PROVIDING A STRONG FOUNDATION FROM WHICH WE CAN CONTINUE TO GROW. Throughout this year’s Annual Report we acknowledge some of the many achievements that have contributed to our success, and that will go a long way towards transforming TrustPower from a successful New Zealand electricity supplier to a leading provider of utilities at home and beyond our shores. TRUSTPOWER ANNUAL REPORT / 2012 01 GENERATING RESULTS 14 EMPOWERING 12 OUR RETAIL TEAMS CONTENTS 02 WHO WE ARE 17 03 HIGHLIGHTS & STRATEGIC FOCUS 04 DIRECTORS’ REPORT LEADING 07 BOARD OF DIRECTORS GROWTH 08 CHIEF EXECUTIVE’S REPORT 10 MANAGEMENT TEAM 12 GENERATING RESULTS 14 EMPOWERING OUR RETAIL TEAMS 16 DEMONSTRATING OUR COMMITMENT 17 LEADING GROWTH 18 COMMUNITY AWARDS RECOGNISE EXCELLENCE 20 IRRIGATION INITIATIVES 22 ABOUT OUR SUSTAINABILITY REPORT 23 SUSTAINABILITY OUTLOOK 24 OUR CUSTOMERS 25 OUR COMMUNITY 26 OUR PEOPLE 27 OUR VALUES 28 OUR ECONOMIC PERFORMANCE 30 OUR ENVIRONMENT 32 STAKEHOLDER INTERACTION 34 CORPORATE GOVERNANCE STATEMENT 37 FINANCIAL STATEMENTS 2012 38 AUDITORS’ REPORT 75 STATUTORY INFORMATION 78 SECURITY HOLDER INFORMATION COmmunitY 80 DIRECTORY awarDS 80 FINANCIAL CALENDAR reCOgnise 16 EXCellenCE DEMONSTRATING 18 OUR COMMITMENT irrigatiON initiatiVes 20 02 SUSTAINED GROWTH FROM WITHIN FROM WHO WE ARE _ WITHIN We own 630MW of hydro and wind generation spread throughout New Zealand as well as the 100MW Snowtown Wind Farm in South Australia. These assets produce an average of 2,790 GWh per year. Our first irrigation asset, a pumping facility using water from our Highbank hydro generation scheme, has completed its first full season of operation. We supply electricity to around 209,000 customers and provide 38,000 telecommunications services to 25,000 customers throughout New Zealand. We have 456 full time equivalent employees working throughout New Zealand and three employees in Adelaide. Around 65% of New Zealand employees are based in our Tauranga head office. TRUSTPOWER ANNUAL REPORT / 2012 03 04 SUSTAINED GROWTH FROM WITHIN DIRECTORS’ REPORT BRUCE HARKER _ CHAIRMAN FINANCIAL PERFORMANCE of the financial year TrustPower refrained Underlying return on average equity, TrustPower’s consolidated profit after tax from actively acquiring customers to ensure adjusted for fair value movements on was $131.7 million for the year ended a seamless transition for the replacement of financial instruments impairment charges 31 March 2012. This represents an increase its core customer billing and information and excluding the impact of the of 17% compared with $112.4 million for system. During this period there were also revaluation of generation assets at the same period last year. Impacting on good opportunities to place product with balance date, was 9.6% (compared to the current year result was fair value losses commercial customers and via the ASX 8.2% in the previous year). on financial instruments of $7.5 million in preference to mass market placement. Group operating cash flow was strong primarily resulting from a fall in long For the first half of the financial year at $268.3 million for the 2012 financial term interest rates over the period that wholesale electricity prices remained year versus $224.0 million in the prior year. negatively impacted the value of the subdued due to above average levels of Group’s interest rate hedging portfolio. hydro storage. However, inflows into FINANCIAL POSITION Underlying earnings after tax South Island hydro storage catchments TrustPower’s balance sheet as at excluding fair value movements on have been below average in the second 31 March 2012 remains solid, with financial instruments and one-off half which has caused national storage shareholders’ funds of $1.57 billion and impairment charges were $135.5 million levels to fall below 80% of average. This total assets of close to $2.8 billion. compared with $116.5 million in the has caused wholesale prices for electricity In accordance with its accounting previous year, an increase of 16%. to rise above average during this period. policies, TrustPower undertook an Earnings before interest, tax, TrustPower’s hydro catchments fared independent valuation of its generation depreciation, amortisation, fair value better during this period and the Group assets as at 31 March 2012. The movements of financial instruments and was able to benefit from higher prices independent valuation was undertaken by asset impairments (EBITDAF) were by selling surplus generation in the Deloitte Corporate Finance and has $300.1 million, compared with the wholesale market. resulted in an uplift in the value of $274.4 million achieved in the previous The Group’s New Zealand generation generation assets of $193.4 million. year representing an increase of 9%. production of 2,582GWh was up 295GWh Debt (including subordinated bonds) to This is the 10th consecutive year of (13%) on the previous year and 7% above debt plus equity decreased to 33.3% from earnings growth achieved by the Group the expected long term average. Total hydro 36.3% at prior year end, as a result of on this measure. production was up 197GWh (11%) on reduced borrowing levels and the impact of Operating revenue increased 5% from the previous year and 14% above the the generation asset revaluation. TrustPower $766.0 million in the previous year to expected long term average due to above continues to maintain conservative levels of $807.1 million. Operating expenses including average inflows over the course of the committed credit facilities. As at 31 March energy and line costs increased 3%. year into both North and South Island 2012 Group net debt was $762.4 million. Total electricity volume sold by the catchments. Excluding generation from TrustPower has recently accepted offers to Company in New Zealand was 3,960GWh, the newly commissioned Mahinerangi refinance $125 million of bank facilities compared with 4,033GWh in the year to Wind Farm, wind production was flat on due to mature in July 2012. These facilities 31 March 2011. Customer numbers the previous year but down 9% on the will be increased to $175 million and decreased from 221,000 as at 31 March expected long term average. extended in two tranches to July 2015 2011 to 209,000 as at 31 March 2012. Wind production from the Snowtown and July 2016. Following this refinancing While retail market remains highly Wind Farm in South Australia was the Group will have NZD equivalent competitive TrustPower continues to 376 GWh which was 48GWh (15%) 1.25 billion of committed debt facilities experience lower levels of customer churn higher than the previous year but 3% lower and over NZD equivalent 450 million of than the market. Over the last four months than the expected long term average. undrawn facilities. TRUSTPOWER ANNUAL REPORT / 2012 05 “THIS IS THE 10TH CONSECUTIVE YEAR OF EARNINGS GROWTH ACHIEVED BY THE GROUP.” CAPITAL STRUCTURE pump at its Highbank Hydro Scheme TrustPower has $108.5 million of later this year. subordinated bonds maturing in September TrustPower expects that electricity of this year. Although a final decision has prices will become more volatile over time not been made, TrustPower expects that and consequently generation capacity it will make an offer to existing holders which is able to meet peak demand will to replace the bonds at maturity combined become more valuable. Many of with a retail market offer. More detail TrustPower’s hydro generation assets will be provided in the coming months. have peaking capacity and a detailed Purchases of TrustPower’s shares have review has been undertaken to identify continued under the Company’s Share potential enhancement opportunities that Buyback Programme for which a three can increase peaking capacity in the short year extension was approved at the Annual to medium term. As a result, the Group Meeting in July 2011. The approval has set itself a target to identify generation allows the Company to purchase up to enhancement opportunities within the 5 million shares over a three year period. existing portfolio that can create further 663,257 shares have been purchased at shareholder value. an average cost of $7.05 during the year The 3.8MW Esk Hydro generation to 31 March 2012. This represents 8% of project is now under construction and is total TrustPower shares traded over the expected to be completed by June 2013 period and the average purchase price per at a cost of around $13 million. share compares to an average price of During the last year the Company has $7.19 for the total number of TrustPower undertaken detailed geotechnical and shares traded during this period. civil design studies for the Arnold Hydro Scheme. Following this work it has been GENERATION DEVELOPMENT determined that the project will not, at AND CAPITAL EXPENDITURE this stage, be progressed further due to TrustPower has recognised for some time project economics not being sufficiently the opportunity for the Coleridge Hydro attractive. However, a watching brief will Scheme to play an important part in be maintained so that remaining feasibility delivering reliable irrigation capacity work can be quickly completed should the along the Rakaia River plains in current status change. It is expected that Canterbury. TrustPower is working with a final investment decision on the smaller landowners, as well as central and local 2.6MW Arnold Residual Flow project will government, to develop solutions to be made in the coming months once final increase irrigation reliability in the region. construction costs have been confirmed. The hearing to consider a proposed TrustPower currently has consents for amendment to the Water Conservation Order around 400MW of wind farm development for the Rakaia River is in its final stages and 120MW of hydro development in and a decision is expected later this year.