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Vector’s financial performance for the year benefitted from continued advanced meter deployment in New Zealand and Australia. However, this was offset by the regulatory Default Price-Path 3 reset from 1 April 2020 and the impact of COVID-19 which resulted in lower electricity network volumes and therefore revenue, driven by a significant drop in commercial sector consumption as well as an impact on the wider business. We recorded adjusted EBITDA 1 of $490.0 million. This was up $4.2 million or 0.9% on last year’s result. Group net profit after tax was $97.3 million and includes a non-cash impairment of $32.0 million in respect of E-Co Products Group. COVID-19 impact With restrictions in place under COVID-19 Alert Levels 3 and 4, electricity volumes across our network decreased by approximately 10% leading to a fall in revenue for the period. Under DPP3 regulatory settings, any increase or decrease in electricity revenue relative to our maximum allowable revenue (MAR) targets set by the Commerce Commission, can be adjusted (up or down) through electricity prices from 1 April 2022. We are evaluating the ways in which we can minimise
networks after Alert Level 4 lockdown began on 25 March 2020. In FY20 we invested $317.1 million of capital expenditure to improve the safety, reliability and resilience of our network and facilitate Auckland’s growth. This represents an increase of 21.5%, or $56.2 million, on a year earlier. Gas Trading adjusted EBITDA was $33.9 million, up $2.6 million against the prior year total of $31.3 million. During the period, we sold the Kapuni Gas Treatment Plant and associated assets to Todd Energy. The effective date of this transaction was 31 March 2020. The sale resulted in a decline in adjusted EBITDA for Q4 FY20, which was largely offset by interest income on the sale consideration, reported below the line as part of net interest costs. This will continue in future. The overall impact to earnings was not material to the FY20 result. The Gas Trading result benefitted from improved Natural Gas margin and higher Liquigas throughput. The LPG business delivered a strong result, despite the COVID-19 lockdown. Residential cylinder LPG and Bottle Swap operations saw increased volumes, while commercial cylinder and bulk LPG supplies were lower, due to variable take by a large customer in the petroleum industry. The gas market is competitive, and as such, we continue to evolve our approach.
impacts on customers through price adjustments through a range of factors, including market rebates. We continue to be concerned with the regulatory settings, particularly in light of the COVID-19 environment. The FY20 performance of our unregulated E-Co Products Group and Gas Trading businesses was also impacted by the COVID-19 pandemic. Across the Vector Group, we estimate that adjusted EBITDA earnings were adversely impacted by approximately $10 million. Despite improved performance from E-Co in the first half of FY20, Level 3 and 4 restrictions and the subsequent impact on the wider economy and consumer confidence, have impacted E-Co’s growth trajectory resulting in us taking a conservative approach and impairing the carrying value of the E-Co Products Group. Segment adjusted EBITDA 1 Adjusted EBITDA for our Regulated Networks was $337.6 million, down $29.4 million (8.0%) against the prior year. The lower result was driven by: the DPP3 price reset which came into effect on 1 April 2020 and saw prices reduce by 6.9%; higher maintenance activity linked to the improvement in reliability and resilience of the network; as well as the impact of COVID-19, which saw lower volumes across our electricity and gas
1. Refer to Non-GAAP reconciliation on page 34.
JASON HOLLINGWORTH CHIEF FINANCIAL OFFICER
$ 490.0 M ADJUSTED EBITDA 1
$ 97.3 M GROUP NET PROFIT AFTER TAX
Chief Financial Officer report
THE INTERPLAY OF TODAY AND TOMORROW
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