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The Company’s economic goal is to produce steadily growing profitability over the long term. This meets shareholder requirements for increasing returns while at the same time reducing the risks associated with rapid growth.
This is reflected in dividend growth which has been a feature of ownership of TrustPower shares. While TrustPower’s share price fell this year, consistent with a fall in the whole sharemarket, there remains a long term trend of increased shareholder wealth. The fundamental economic performance of the company remains sound.
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* Information for years prior to the Group’s transition date of 1 April 2006 to NZ IFRS have been prepared under existing NZ FRS and have not been translated to equivalent NZ IFRS amounts.
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UNDERSTANDING TRUSTPOWER’S ASSETS
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TrustPower is a generator and retailer of electricity. The generation of electricity is an asset intensive activity and, as shown below, the Company has invested heavily in hydro and wind generation assets. TrustPower revalues these generation assets to estimated market value on a three yearly cycle with the last revaluation occurring as at 31 March 2007.
Electricity retailing relies on a reliable source of electricity and the infrastructure and systems to administer large quantities of data and contracts. TrustPower’s electricity customer base values are disclosed in the financial statements at historic cost and amortised over a period of up to 20 years. The Bay of Plenty customers that TrustPower has served historically and any subsequent customers acquired by marketing efforts are not reflected in the amortised customer base values. In March 2007 TrustPower purchased a telecommunications customer base to become a full service telecommunications provider.
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UNDERSTANDING TRUSTPOWER’S EARNINGS
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TrustPower’s operating revenue predominately comes from the sale of electricity to customers. TrustPower sells more electricity than it generates with the balance coming from other generation suppliers and competitors. Operating performance can vary year to year and within reporting periods due to a number of factors both within the control and outside the control of the Company.
Key drivers to individual period profitability include weather patterns (affecting market prices and generation levels) and the Company’s trading and risk position (the degree to which it is affected by exposure to spot electricity prices).
The adjacent graph shows an Earnings Before Interest, Tax, Depreciation, Amortisation, and Fair Value Movements of Financial Instruments (EBITDAF) measure by quarter over the last five years. While on a quarter by quarter basis EBITDAF can move significantly the Company aims to produce sustainable EBITDAF growth year after year.
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Five Year Economic Summary
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MAR 04*
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MAR 05*
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MAR 06*
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MAR 07
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MAR 08
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Electricity customer numbers (000’s)
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224
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225
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220
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219
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222
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Telecommunication services (000’s)
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-
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-
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-
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16
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26
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Customer sales (GWh)
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5,656
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5,873
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4,724
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4,575
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4,540
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Weighted average spot price of electricity purchased ($/MWh)
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71
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43
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94
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63
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64
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Hydro generation production (GWh)
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1,598
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1,811
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1,523
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1,667
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1,472
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Wind generation production (GWh)
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140
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260
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268
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274
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546
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Weighted average spot price of electricity generated ($/MWh)
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70
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39
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91
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62
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63
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$M
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$M
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$M
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$M
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$M
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Operating Revenue
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632
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612
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677
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626
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681
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EBITDAF
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140
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173
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186
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196
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208
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Fair Value Gains/(Losses)
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-
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-
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-
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2
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1
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Amortisation and Depreciation
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(23)
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(28)
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(28)
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(28)
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(32)
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Interest Paid
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(29)
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(33)
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(29)
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(27)
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(40)
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Tax Expense
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(26)
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(39)
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(48)
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(41)
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(39)
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Operating Surplus
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62
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73
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81
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102
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98
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Shareholders’ Equity
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866
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883
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896
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1,217
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1,257
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Current and Other Assets
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63
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78
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133
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117
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254
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Fixed Assets
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1,273
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1,257
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1,263
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1,905
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2,057
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Intangible Assets
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45
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42
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39
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43
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40
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Total Assets
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1,381
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1,377
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1,435
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2,065
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2,351
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Current and Other Liabilities
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95
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88
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131
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132
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231
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Deferred Tax Liability
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40
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46
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48
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207
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207
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Term Debt
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380
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360
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360
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509
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656
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Total Liabilities
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515
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494
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539
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848
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1,094
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Net Assets
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866
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883
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896
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1,217
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1,257
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Earnings Per Share (cents)1
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17
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23
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26
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32
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31
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Dividends Per Share (cents)1
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202
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20
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23
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27
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30
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Return on Average Shareholders’ Funds
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7.2%
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8.3%
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9.1%
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9.7%
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7.9%
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* Information for years prior to the Group’s transition date of 1 April 2006 to NZ IFRS have been prepared under existing NZ FRS and have not been translated to equivalent NZ IFRS amounts.
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1 Adjusted for a 2:1 share split on 2 April 2004
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2 Includes 5c/share special dividend
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