vectorreview VECTOR LIMITED SHAREHOLDER REVIEW Powering ahead Find out how we prepared for the Rugby World Cup and how we cater for growth in our region. Page 10 New strengths New business models and an increasing presence in the LPG bottle swap market are the success stories for Vector’s gas businesses. Pages 12-15 DELIVERING THE ENERGY AND COMMUNICATION SERVICES THAT OUR Smart moves Read about the youngest and CUSTOMERS fastest growing segment of RELY ON TO LIVE, WORK AND PLAY the Vector group. Page 16 Contents Customer information 01 At a glance 02 Chairman’s report 04 Group CEO’s report 06 Financial performance trends 08 2011 in review Electricity 10 Gas transportation 12 Gas wholesale 14 Technology 16 Regulation 18 People, safety & community 20 Board of directors 22 Management team 24 Governance 26 Partnerships 29 Glossary 30 Directory 31 Financial review 32 CUSTOMER INFORMATION For more information, visit www.vector.co.nz Vector CUSTOMERS What proportion of my electricity bill goes to improve the consistency of our customer to Vector? Across Vector’s electricity networks service across all of our business units. Vector services more than 700,000 residential lines distribution and transmission customers, not only in Auckland, but How does Vector deal with faults? If there is charges are approximately 40% of the average around the country. Our electricity a problem with your electricity supply and you residential consumer’s bill. networks span the Auckland region live on the North Shore, Waitakere or Rodney, and we distribute natural gas to more What other services does Vector provide? call your electricity retailer and they will than 30 towns and cities in the North Our gas distribution network brings natural gas contact Vector. If you live south of the harbour Island. Our LPG business has depots to homes and businesses in the North Island. bridge, in the old Auckland City district, as far south as Queenstown and in OnGas, our LPG business delivers bottled gas Manukau or Papakura, you should call the far North. We’re striving to to customers and bottle swap locations around 0508 VECTOR (0508 832 867) and a service our customers better, New Zealand. We buy and sell natural gas on serviceperson will be sent to your property as streamlining our systems and the wholesale market, transport gas around the soon as possible. For more information visit processes. North Island to feed our distribution network www.vector.co.nz/electricity/faults-your- and service large industrial customers. We also property. For gas faults call 0800 764 764. provide advanced metering services and have Do customers talk to real people? Absolutely. a fibre optic communications network that Our customer contact centre for the electricity supports cell phone network, internet and and gas networks is based in Auckland and television companies. staffed by a team familiar with our business How is Vector looking after its customers? and the region. The call centre for OnGas is We post information about upgrades and based in Hamilton. outages on our website, and we are working AUCKLAND ENERGY The Trust was formed to make sure Vector and other income the Trust earns. Other than CONSUMER TRUST is locally owned. Every year, Vector’s profit administration costs, the rest is passed on by generates a dividend that is paid to all the AECT to its income beneficiaries. Vector is majority owned by the shareholders including the AECT. This in turn How much money has been paid to Trust Auckland Energy Consumer Trust enables the Trust to pay a dividend to its beneficiaries over the years? $998 million (AECT or Trust). The Trust, a beneficiaries. More than 308,000 household since 1993. community organisation run by and business electricity customers each elected trustees, holds Vector shares received $320 during 2010. For more How else does the AECT benefit the on behalf of its beneficiaries; information, visit www.aect.co.nz community? By ensuring stable, local electricity customers in Auckland, ownership of Vector. Manukau and parts of Papakura. Who gets the AECT dividend? The person named on the power bill. Who are the Trustees? Warren Kyd (Chairman), Michael Buczkowski, William Cairns, When is the AECT dividend paid? Usually James Carmichael, Karen Sherry. in either September or October. How many representatives does the Trust Who sets the dollar amount of the AECT have on Vector’s board? Two – James dividend? The amount is calculated by the LIMITED VECTOR Carmichael and Karen Sherry. Trust from the dividend it receives from Vector SHAREHOLDER REVIEW 01 AT A GLANCE SERVICE + DELIVERY OUR BUSINESS › Electricity networks servicing more › Liquified petroleum gas (LPG) supply › 50% owner of a professional than 532,000 customers in Auckland to more than 29,500 customers arboriculture and vegetation throughout New Zealand management company › Natural gas distribution networks servicing 155,100 customers in more › Electricity and gas metering services › 60.25% of a bulk LPG tolling, storage than 30 towns and cities in the via approximately 806,000 meters at and distribution company North Island homes and businesses throughout › 22.11% of a wind generation electricity New Zealand › Natural gas transmission system company transporting gas under high pressure › Fibre optic broadband communications › 25% of an advanced metering and throughout the North Island networks in Auckland and Wellington energy solutions company › Gas treatment and conditioning plant in Taranaki 2011 2010 OPERATIONAL ELECTRICITY STATISTICS Customers1 532,607 528,245 Volume distributed (GWh) 8,319 8,168 Networks length (km)1 17,737 17,661 SAIDI (minutes)2 Normal operations 113.8 3 66.8 Extreme events 9.4 0.0 Total 123.2 66.8 GAS Transportation Distribution customers1 155,100 152,267 Distribution volume (PJ) 20.8 21.1 Distribution mains network length (km)1 6,989 6,956 Transmission volume (PJ) 4 120.1 109.7 Transmission system length owned (km)1 2,287 2,292 Transmission system length operated/managed (km)1 1,293 1,282 GAS WHOLESALE Natural gas sales (PJ) 5 26.1 31.7 Gas liquid sales (tonnes) 6 79,015 73,436 Liquigas LPG tolling (tonnes) 7 129,893 109,969 TECHNOLOGY Electricity: smart meters1 245,477 114,272 Electricity: legacy meters1 463,812 624,535 Electricity: prepay meters1 5,991 6,384 Electricity: time of use meters1 10,853 11,132 Gas meters1 79,588 77,595 Data management service connections1 8,313 8,807 Vector’s financial and operating picture visit: www.vector.co.nz/corporate/investor-relations/financial-and-operating-picture 02 Whangaparaoa Parakai Albany Woodhill Takapuna Whenuapai Auckland City Centre Titirangi Papatoetoe Papakura Whangaparaoa Parakai Albany Woodhill Takapuna Whenuapai Auckland City Centre Titirangi Papatoetoe Papakura WHERE WE ARE KEY Electricity networks Gas networks (indicative only) Whangaparaoa Electricity and gas networks New PlymouthParakai (gas areas indicative only) Albany Woodhill Takapuna Gas transmission pipelines – Whenuapai OnGas LPG distribution centres Auckland City Centre Liquigas LPG depots Titirangi Reticulated LPG networks Kapuni Gas Papatoetoe (subdivision networks in these centres) Treatment Plant Papakura Fibre-optic communications networks (indicative only) Kapuni Gas Treatment Plant New Plymouth Kapuni Gas Treatment Plant Tawa Wellington New Plymouth 8,319 Kapuni Gas Treatment PlantELECTRICITY VOLUME Tawa DISTRIBUTED (GWh) Wellington 532,607ELECTRICITY customers 17,737 ELECTRICITY NETWORKS LENGTH (km) 155,10GAS DISTRIBUTION customers 0 21 GAS DISTRIBUTION VOLUME (PJ) Tawa 26 Wellington natural GAS SALES (PJ) 726,13ELECTRICITY METERS 3 1 As at 30 June 5 Excludes gas sold as gas liquids as these sales are included 2 Regulatory year – 12 months to 31 March within the gas liquids sales tonnages VECTOR LIMITED VECTOR 3 Include minutes incurred in September 2010 when a major 6 Total of retail and wholesale LPG production and storm occurred natural gasoline 245,477 4 Based on billable volumes 7 Includes product tolled in Taranaki and further tolled in the ELECTRICITY SMART METERS SHAREHOLDER REVIEW South Island 03 CHAIRMAN’S REPORT SOLID InvESTMENT We’re investing for future growth, taking action to achieve fairer and more balanced rules governing our regulated businesses and improving how we service our customers. ur business is strong. which is outside our dividend policy. Because of An improved operational the solid performance of our business we have performance and a strategic been able to increase this year’s dividend to deal with Transpower 14.25 cents per share, an increase of 0.25 cents underpin this year’s financial on 2010. For more information on the dividend result. Strong operating policy see opposite. cashflow means we can Is Vector’s dividend sustainable? The board increase our dividend. sets the dividend in accordance with the OYou may notice a change in this year’s dividend policy. When making its decision, shareholder review. We have changed its style the board considers both future profitability to make it more readable. Please tell us what and the requirements of shareholders for you of think of it by emailing: [email protected] a sustainable yield. This year’s payout ratio of 56% recognises the current uncertain Thanks must go to all of the people who regulatory environment and the potential for continue to make Vector the successful a price reset over the next three years. company it is today – our valued customers, our We’re now fantastic team members, our suppliers, and our dependent on What is Vector’s dividend yield and how loyal shareholders. I look forward to updating the legal process does it compare to last year? The dividend shareholders at our annual meeting in October. to provide the yield expresses the dividends that Vector pays out each year as a percentage of the share How has Vector performed this year? We’ve certainty we’ve price. This year’s dividend yield, calculated had a good year.