While the power constraints of the cold, dry 2001 winter (and NGC's disastrous foray into electricity retailing) prevented many direct comparisons, company chairman Greg Martin said the latest figures showed the validity of NGC's repositioning strategy.
NGC's net earnings were $NZ35.4 million for last July-December, compared with $NZ16.1 million for the same 2001 period, which Martin described as "a very pleasing result at a time of considerable change as NGC implements its industry repositioning strategy.
"It has been a very productive and rewarding six months for NGC … the board has commenced the review of the future capital structure and investment requirements of the company foreshadowed at last year's annual meeting. Likewise, NGC management is turning its attention to identifying new opportunities to rebuild the balance sheet through expanding its core businesses."
Since last August NGC had made rapid and significant progress in repositioning itself and withdrawing from energy generation and retailing. It had sold its gas retailing business and its interests in the Southdown, Auckland, cogeneration power station and in the output from the Rotokawa geothermal power station. It had also reached agreement for the sale of its Taranaki Combined Cycle (TCC) gas-fired power station to Contact Energy, and of the small Cobb hydro station near Nelson. These sales should become unconditional following NGC shareholder approval next Monday.
NGC chief executive Phil James said gas trading made a particularly strong contribution to the latest results, with earnings before interest, tax and abnormals increasing by 20.9% to $NZ31.5 million on the back of a 13% improvement in natural gas sales, to 39.9 Petajoules. NGC's LPG business also achieved improved EBIT, which was up 13.9% at $NZ8.3 million.
However, EBIT (before abnormals) from gas transportation, of $NZ33 million, and energy metering, of $NZ10.4 million, declined by 7.6% and 16.1% respectively; due to increased costs associated with insurance premiums, the levying of local body rates on NGC's pipelines and a second-half 2001 expansion of NGC's electricity metering base. Full separation of metering from retail electricity, as well as additional resourcing requirements also contributed to those costs.
As expected, EBIT from electricity generation and trading declined to $NZ11 million, from $NZ43 million in the 2001 half year, with the sale of the Southdown and Rotokawa assets, but also because of significantly lower wholesale electricity prices, compared with the abnormally high prices in the 2001 period. James said NGC's future earnings should be more stable and predictable once NGC had exited the volatile electricity generation market.
He also saw potential in the Australasian-wide metering market and in New Zealand's rapidly approaching post-Maui environment. "We have identified new opportunities in the metering business and have commenced a strategy to expand our range of services and develop technology leadership.
"I am confident, too, that as the gas industry accelerates its preparation for the post-Maui supply environment, there will be new opportunities for NGC to build its role and presence in the New Zealand energy industry."
