Vector Annual Report 2023

Our portfolio of businesses spans energy, technology, and energy efficiency solutions, and is united by our Symphony strategy which puts customers at the heart of our decision-making.





Vector Annual Report 2023

We see our role as navigating the complexities of the energy transition , whether that’s by enabling the system change needed for efficient and affordable decarbonisation, or boosting resilience against a rapidly changing climate.


We know that current and future energy needs cannot

be met by systems and solutions of the past. We need to do things differently, and this year Vector has continued to go beyond the status quo. We’ve deployed a range of innovative solutions to support smarter energy use using digital technology, our strategic partnerships, and our team with a depth of skills and experience that we are immensely proud of.


Vector Annual Report 2023



In these uncertain times, we’re thinking about the future of energy , so our consumers don’t have to.




Vector Annual Report 2023


Performance snapshot


Strategic reports Chair and Group Chief Executive report Chief Financial Officer report Environmental, social & governance (ESG) People and health and safety Energy affordability and decarbonisation

10 12 18 20 21 24 27 28 32 33

Business segment reports Regulated networks Gas trading Metering

Governance report


Who we are Our Board Our Management Team Entrust

43 44 46 48 49 50 51 52 54

Other disclosures Joint ventures and investments Operating statistics Five-year financial performance Non-GAAP financial information Financials Financial statements Notes to the financial statements Independent auditor’s report Statutory information Statutory information Directory and financial calendar

55 56 62 102 107 108 120

About this report This report, dated 24 August 2023, is a review of Vector’s financial and operational performance for the year ended 30 June 2023. The financial statements have been prepared in accordance with appropriate accounting standards and have been independently audited by KPMG. The financial and operational information has been compiled in line with NZX Listing Rules and recommendations for investor reporting. The report has drawn from a wide range of information sources. This includes: our stakeholders, customers, communities, sustainability framework, value drivers, risk register, Board reports, Asset Management Plan, financial statements and our operational reports.

2023 REPORTING SUITE This annual report is published as part of a reporting suite, which also includes our Greenhouse Gas Emissions Inventory Report, and Taskforce for Climate- related Financial Disclosures Report. All three reports are available at


Performance snapshot

Financial and customer highlights


22.25 CENTS per share full year dividend, including a special dividend of 5.5 cents per share

$ 1.75 B Sale price for 50% interest in Vector Metering $ 112.6 M Group net profit from continuing operations, after tax

$ 700.4 M Capex invested across the group, from continuing and discontinued operations


1. EBITDA from continuing and discontinued operations adjusted for fair value changes, associates, third-party contributions, and significant one-off gains, losses, revenues and/ or expenses. Refer to Non-GAAP reconciliation on page 54.


4 Number of organisations receiving managed cyber security services through VTS

612,909 Number of electricity connections

589,207 Number of 9kg bottle swaps

119,631 Number of gas connections

2.09 M Advanced meters across New Zealand and Australia

25 M Individual smart meter records over a single day, creating a

customer-level view of electricity network use


Vector Annual Report 2023

Environment, social and governance highlights

Energy affordability

351,000 Number of residents, in 2022, in the Entrust district benefitting by more than $96m in dividend payments, thanks to Entrust’s shareholding in Vector $0.00 The price we charge for electricity used during off-peak periods when there is ample capacity on our network 2

2. Our residential Time of Use standard user price categories have a zero price on volume charges at all times of the day through summer, and during off-peak periods over winter. Distribution charges are only one portion of a consumer’s electricity bill, so consumers will not see this zero volume charge unless retailers pass this on to them.

Climate change 5

$ 270 M Approximate forecast over the next five years for reliability and climate change investment in our latest Asset Management Plan, with work ongoing to refine the investment needed

First smart electric bus depot established to facilitate the electrification of Auckland’s bus fleet

Continuous days during Cyclone Gabrielle where weather conditions exceeded regulated Major Event criteria

115 Number of people leaders participating in leadership development courses People and communities

1,000 + People working on electricity network recovery from Cyclone Gabrielle, across Vector, Omexom, Northpower, and other organisations



Vector Annual Report 2023


REPORTS Here we offer a strategic overview of our operating environment, strategy, performance over the year, and a future outlook into how Vector is creating a new energy future which is equitable, clean, reliable and safe.


Chair and Group Chief Executive report

We’re looking ahead, as we’ve always done Chair and Group Chief Executive report

A major highlight of the year has been the successful sale of a 50% interest in Vector Metering to investment vehicles managed and advised by QIC Private Capital Pty Limited (QIC). The transaction has resulted in the Vector group receiving net proceeds of $1.75 billion, leading to a material drop in the company’s gearing. Vector is positioned well for future investment in infrastructure required to support the decarbonisation of the economy, including electrification of transport; however, regulatory settings must be changed to enable the level of investment required.

Decarbonisation the biggest challenge and opportunity Enabling decarbonisation, and ensuring resilience against climate change, present the biggest challenge and opportunity for the Vector group. We’re responding to this through our Symphony strategy to deliver an affordable electrified future, where renewable energy is delivered efficiently, networks are optimised to reduce the need for large upgrades, and where ultimately consumers have more energy choices. Our latest capital investment plans for the electricity network show $4.3 billion is required to be spent over the next 10 years to meet transport electrification and growth needs, as well as reliability and resilience in the face of climate change. It’s clear our costs are going up. The Commerce Commission’s upcoming decisions around Input Methodologies are hugely important for Aotearoa New Zealand, and come at a crucial time for the energy sector. It’s critical we can continue to finance the investment required for the increasing demand placed on electricity networks by decarbonisation and climate resilience. As a country, we must get the settings right in recognition of the challenges we’re facing, which are the most significant the industry has had to respond to so far. We’ve long held, and acted on, our view that technology, data and

Profit Group net profit from continuing operations was $112.6 million, which was $10.1 million or 9.9% higher than the prior year. Net profit was $1,715.8 million, which includes a one off gain from sale of $1,509.9 million and Vector’s continuing and

smart analytics offer smarter ways to manage increasing demand for electricity. An example from this year is the deployment of fleet-managed charging for Auckland’s electric buses, provided by a sophisticated technology platform that issues dynamic operating envelopes to optimise charging around network demand patterns. This is strongly aligned with our strategy on how to keep the costs of transport electrification down in future years, while ensuring equitable treatment of costs. We’re making significant investments in network security and resilience, even while the long- standing issue of ineffective tree regulations continues to be a barrier to better customer outcomes. Earnings Vector’s financial performance for the year reflects a solid result with adjusted earnings before interest, tax depreciation and amortisation (adjusted EBITDA) of $523.3 million. This was up $13.3 million or 2.6% on last year’s result. On 30 June 2023, Vector concluded the deal to sell 50% of the metering operations to QIC. As a result, the metering operations have been classified as discontinued operations for the FY23 period. The adjusted EBITDA result is made up of $335.1 million from continuing operations and $188.2 million from discontinued operations (being the metering operations). 1

discontinued operations. Capital expenditure

Total capital expenditure was $700.4 million, an increase of $154.5 million or 28.3% on the prior period, with the increase

reflecting continued investment in infrastructure to support Auckland’s ongoing growth. The figure also includes $187.7 million in relation to the metering operations, which was driven by the ongoing roll-out of meters in Australia and 4G modem upgrades across the New Zealand advanced meter base. Note this rise in capital expenditure was partly funded by a $36.5 million increase in capital contributions recognised as income under the International Financial Reporting Standards (IFRS). Capital contributions grew to $188.3 million from $151.8 million a year earlier.

1. Comparatives have also been restated to show the discontinued operations separately from continuing operations.


Vector Annual Report 2023

Strategic reports

“Decarbonisation is the biggest challenge the industry has faced. We must build smarter, more affordable, efficient systems with more customer choice.”

Jonathan Mason, Chair




the long term, to increased returns from the unregulated side of Vector’s investment portfolio. We have a track record of collaborating with innovative global companies such as Amazon Web Services (AWS) and X (formerly Google X). The QIC transaction is now the latest example of Vector choosing to grow a business with a partner of high calibre. With the backing of both Vector and QIC, Vector Metering is well placed to accelerate growth opportunities and continue providing data services that enable new and innovative retail products. These will give customers large and small the ability to make smarter decisions and deliver future- ready energy solutions. $1.75b sale price for 50% interest in Vector Metering The sale, which was completed on 30 June 2023, resulted in a one-off gain of $1,509.9 million. This has allowed Vector to repay debt, with gearing falling to 33.1% from 58.2% at 30 June 2022. Standard & Poor’s (S&P) has recognised the strengthening of Vector’s balance sheet by increasing our credit rating to BBB+ with a positive outlook.

We’re also pleased to have secured an A$1.6 billion Climate Bonds Certified green loan for the Vector Metering joint venture and its ongoing smart metering expansion. Helping to place this green loan demonstrates our commitment to driving the transition to a low-carbon economy and promoting energy efficiency and emissions reductions in the energy systems through advanced metering infrastructure. We’ve retained 100% ownership of Vector Technology Solutions (VTS), and the industry-leading energy data platform called Diverge that was jointly developed under the strategic alliance between Vector and AWS. While ownership of Diverge stays with the Vector group, Vector Metering will have exclusive rights to use this platform to provide metering data services in the New Zealand and Australian markets.

Fourteen years ago when Vector signed the first smart metering business contract, it may not have been obvious to everyone how important smart meters would become. However, our forward- thinking strategy to establish and grow a highly successful metering business has proved the right call for Vector, strongly validated by the $1.75 billion received from the sale of a 50% interest in the business. The transaction is an undeniable Kiwi business success story in a global market. We are proud of what we’ve achieved and excited for future growth and innovation of the new entity, which is set to contribute, over

“The transaction is an undeniable Kiwi business success story in a global market.”

Simon Mackenzie, Group Chief Executive


Chair and Group Chief Executive report

WELCOMING A NEW CHAIR The Vector Board conducts regular succession planning to ensure continuity in a constantly changing business, environmental and social context. At the 2022 Vector Annual Meeting, our Chair Jonathan Mason indicated that he would be retiring at the 2023 Annual Meeting after 10 years on the Board serving shareholders. We then announced in May 2023 that our Board had elected Doug McKay as its new Chair when Jonathan steps down. We’re looking forward to welcoming Doug into the Chair role; he takes this position after serving as an independent non-executive director since joining the Board in 2022. We’re fortunate to have a director of Doug’s calibre ready to step into the Chair role and continue to support Vector’s Symphony strategy to deliver for our customers. We’re also very thankful to Jonathan for his guidance and strong contributions to the Board, as director since 2013, Deputy Chair since 2018 and Chair since 2020.

Dividend Shareholders will receive an

Network performance and weather impact Electricity network performance for the first half of the financial year was below regulatory SAIDI and SAIFI limits. However, following the impacts of the 1-in-a-250-year Auckland Anniversary flooding, and then Cyclone Gabrielle just two weeks later, an event even more devastating than Cyclone Bola, the SAIDI limit for the regulatory year to 31 March 2023 has been breached. Other electricity distribution businesses impacted by Cyclone Gabrielle have been similarly affected and we are in discussion with the Commerce Commission over appropriate consideration of the impacts of these extreme weather events. Our cost estimate for the Auckland flooding and Cyclone Gabrielle is around $7.4 million of operating expenditure, reducing this year’s earnings, with a further $9.2 million of capital expenditure incurred replacing damaged assets. These events showed the benefit of prior investments to improve resilience; for example, our decision in 2012 to raise the floor level at our Wairau Road zone substation proving instrumental in minimising the impact at that location, despite severe flooding in the area.

Business performance Dedicated overviews of key business units are provided in the Business Segment section (page 27), while notable highlights and commentary on other businesses not covered elsewhere are provided here. The Vector Powersmart performance can be subject to factors such as the timing of contract delivery and the year end result reflects this. Vector Fibre has had a solid year with year-on-year revenue and earnings growth. This now transformed business is being received well by the wholesale fibre market in Auckland. New Hyperscale Data Centres and Mobile Operator 5G in-fill opportunities are now being pursued. VTS is the supplier of metering platform services to the newly established Vector Metering joint venture. This business unit is continuing to take solutions to market and explore specific new opportunities in response to emerging international demand for the types of solutions it provides. These targeted investments are driving some additional costs. HRV has had a challenging year in difficult trading conditions, with pressure on household discretionary

unimputed final dividend of 14.0 cents per share, comprising an ordinary dividend of 8.5 cents and a special dividend of 5.5 cents in recognition of the gain from the sale of 50% of the metering business. The Board will review Vector’s future dividend policy following release of the Commerce Commission’s Input Methodologies Review due in December 2023. We expect to announce any changes to the dividend policy with the release of our interim results in February 2024. The final dividend will be paid to investors who are on the register at 6 September 2023 and distributed to investors on 14 September 2023. Refinancing and balance sheet The sale of a 50% interest in Vector Metering has strengthened our balance sheet. As a result of the sale, Vector’s gearing as at 30 June 2023 fell to 33.1%, down from 58.2% a year earlier. While the proceeds from the sale have been applied to debt reduction, Vector now has a stronger balance sheet to continue to support network growth in Auckland.


Vector Annual Report 2023

Strategic reports

spending. Resourcing pressure has moderated over the year, although the labour market remains tight. Corporate cost is higher than the prior year due mainly to higher computer costs driven by an increase in digital projects that are expensed rather than capitalised. In addition accounting rule changes, and higher CPI increases, also contributed to higher costs.

data to be processed and analysed quickly and securely, to unlock customer innovation, increase renewable energy deployment, and help dynamically manage more complex networks. In Auckland, we’ve taken a number of steps to further establish the foundations for a future electricity network where customer-side services and innovations play a much larger role in efficiently managing increasing demand. In addition to electric bus smart charging infrastructure discussed earlier, we’ve continued our learning from our highly successful electric vehicle (EV) smart charging trial, and refined our modelling to set a pathway for enrolling controllable load at scales sufficient to defer costly network upgrades, using technology such as smart EV charging or smart hot- water heating. We continue to engage proactively on policy and regulatory reform to better support New Zealand’s decarbonisation journey and customer outcomes. New Zealand’s urgency to decarbonise transportation and industrial emissions provides Vector with an opportunity to support, enable and drive progress in these areas. We’ve been encouraged by the external feedback we’ve received on

the maturity of our understanding and disclosure of climate risks and opportunities. According to this feedback, our Taskforce for Climate-related Financial Disclosures (TCFD) Report compares highly favourably with peer companies from New Zealand and is in the upper quartile globally. A strong contributor to this is our sector-leading work to develop a carbon abatement cost curve, which we’ve updated this year to include newly identified initiatives, reflect cost changes, highlight completed projects and challenges, and exclude Vector Metering. Our TCFD Report outlines the significant opportunities ahead of us, as well as the challenges, as we look to the future and consider a range of climate scenarios. We encourage you to read it. Funding appropriate investment to deliver the right outcomes We are in a critical decade for the energy sector, as demand for electricity grows strongly with electrification and as electricity networks are faced with increased demands for resilience in the face of climate change. The Commerce Commission’s draft Input Methodologies decision is hugely important to Aotearoa


Leading a changing energy landscape We’ve always been deliberate about thinking ahead to the future of the energy sector, and what will be needed to move us and the wider sector forward. With our joint venture of the metering business now established with QIC, it’s worth reflecting on what continues to make Vector unique: looking outside our immediate sector and establishing globally leading partnerships for innovation, and not being afraid to challenge the status quo. We’re looking forward to what’s next. We are continuing to work with our strategic alliance partner AWS, and on our industry-leading energy data platform, Diverge. The platform will help transform the energy industry by enabling vast amounts of energy


Chair and Group Chief Executive report

New Zealand. It will set the key regulatory principles that will then bind the way electricity networks can operate and invest for the next seven years and possibly even beyond that to 2035. Like any other commercial entity, investments can only be made where it is both commercially attractive and financially viable. In the period leading to the final Input Methodology (IM) decision, we will continue to strongly advocate for improved financeability, creating a sustainable investment pathway to enable decarbonisation. In these next seven years, which is the period covered by the IM decision, we will increasingly see the impacts of climate change force the need for significant and rapid action. Therefore, we must choose the path of more resilience, more decarbonisation, more customer benefit and more long-term affordability. We’re doing our part by laying the foundations for this on our own network, so that we can enable effective orchestration of load around peak times and integrate more flexible, cost-effective solutions to demand-growth challenges. Outside of our network, we’re engaging widely to share thinking and advocate smart investment, including with other electricity

distribution businesses in our region via the Northern Energy Group, and we continue to develop tools to help others on their own journey. As the country’s largest electricity distributor, Vector absolutely wants to continue to play our part in enabling electrification and doing it in the most affordable way possible for our consumers. However, alongside other electricity network companies, we can only do so within the bounds of the Commission’s strict regulatory returns and funding regime. FINAL WORDS We’ve seen strong performance across our portfolio this year, highlighted by the successful Vector Metering transaction, as we continue to follow our Symphony strategy to create a new energy future. As demand for clean energy grows and the importance of resilience against climate change is further highlighted, we continue to take a long-term view on, and chart a leading course through, the energy sector transformation, so that we can deliver a more affordable decarbonisation, and the best outcomes for our customers. We thank you for your support as a shareholder.

Jonathan Mason Chair

Simon Mackenzie Group Chief Executive

2023 REPORTING SUITE This annual report is published as part of a reporting suite, which also includes our Greenhouse Gas Emissions Inventory Report, and Taskforce for Climate-related Financial Disclosures Report. All three reports are available at


Vector Annual Report 2023

Strategic reports


Chief Financial Officer report


Chief Financial Officer report

Segment adjusted EBITDA 1 Adjusted EBITDA for Regulated Networks, for the year to 30 June 2023, was up $15.8 million (4.4%) to $371.6 million against the prior period. The increase in adjusted EBITDA was largely driven by higher electricity and gas revenue with the rise in electricity revenue due to an increase in net connections and higher pass-through and recoverable costs. Gas revenue has increased due to higher prices and higher volumes. The impact on Regulated Networks earnings from Cyclone Gabrielle and the Auckland floods was approximately $7.4 million, with additional capital expenditure of $9.2 million also incurred. This reflects the widespread and significant damage caused across the network, the challenges of repair and restoration after such devastating impact, and the extent of our response. A Vector’s financial performance for the year reflects a solid result with adjusted earnings before interest, tax depreciation and amortisation (adjusted EBITDA) of $523.3 million. This was up $13.3 million or 2.6% on last year’s result, and is made up of $335.1 million from continuing operations and $188.2 million from discontinued operations (being the metering operations). This is a pleasing result considering there is a lag in our ability to recover actual CPI increases over FY23, even while at the same time many underlying costs increase because of high inflation levels under the regulatory pricing model.

substantial challenge for us is the non-availability of insurance for our assets against these risks. We have engaged with the Commerce Commission about a catastrophic event reopener, which could allow us to recover both the operating and capital expenditure costs associated with these events in future pricing. Adjusted EBITDA for the Gas Trading business was up 22.8% at $26.9 million from $21.9 million a year earlier. The result was mainly due to improved performance from the Natural Gas business, which has benefitted from higher margins. LPG performance has improved also, driven by higher revenue partially offset by increased costs of sales due to the cost of LPG product, which remains high as this is linked to the Saudi Aramco price of LPG and higher transportation costs. The Metering business has had a positive year, with adjusted EBITDA at $188.2 million, up $14.5 million or 8.3% from a year earlier, with gains coming from the continued roll-out of advanced meters, particularly in Australia.


Vector Annual Report 2023

Strategic reports




. .









RATINGS UPGRADE On 26 April 2023, S&P Global Ratings raised its long-term issuer credit rating on Vector to ‘BBB+’, with a positive outlook, on a strengthening business mix, from ‘BBB’. They included the following commentary: – Vector’s business risk profile will strengthen with a higher proportion of revenue and cash flow derived from the regulated monopoly business following the divestment of the 50% stake in Vector Metering. – The positive outlook on Vector reflects the potential 2 for deleveraging following the Vector Metering transaction, and that S&P Global Ratings expects net proceeds from the transaction to be used to retire a proportion of outstanding debt, which they say would lead to Vector’s funds from operations (FFO)-to-debt ratio rising above 13% in fiscal 2025 and beyond, from 10% to 11% in fiscal 2024. – Their analysis incorporates the equity accounting treatment of the joint venture (JV) with QIC, with dividends added back to their S&P Global Ratings- adjusted EBITDA. This reflects the stand-alone nature of the JV with a separate management and board in addition to Vector’s non-controlling interest in the JV. Furthermore, they anticipate that any debt raised at the JV level will have no recourse back to Vector itself. – The extent of deleveraging

Entrust district will receive the credit in September with their annual Entrust dividend payment. For Vector electricity account holders outside this area, we will pass this credit on to energy retailers, who should then provide those customers with a credit on their power bill later this year. We expect this will be the last year of issuing Loss Rental Rebate payments direct to Vector customers via the Entrust dividend process. This is because the Electricity Authority has changed the payment to customers process and decided that electricity distributors such as Vector are (from 1 April 2023) required to pass on all Loss Rental Rebates to energy retailers so they can provide these to customers. Dividend Shareholders will receive an unimputed final dividend of 14.0 cents per share, comprising an ordinary dividend of 8.5 cents and a special dividend of 5.5 cents in recognition of the gain from the sale of 50% of the Metering business. The Board will review Vector’s future dividend policy following the release of the Commerce Commission’s Input Methodologies Review due in December 2023. We expect to announce any changes to the policy with the release of our interim results in February 2024. The final dividend will be paid to investors who are on the register at 6 September 2023 and distributed to investors on 14 September 2023.

Vector Metering accounting treatment

From FY24, Vector’s interest in the metering joint venture will be accounted for as an investment in an associate with revenue and costs of the operation reflected below EBITDA. Capital expenditure

Total capital expenditure was $700.4 million, an increase of $154.5 million or 28.3% on the prior period, with the increase

reflecting continued investment in infrastructure to support Auckland’s continued growth. The figure also includes $187.7 million in relation to the metering operations, which was driven by the continuing roll-out of meters in Australia and 4G modem upgrades across the New Zealand advanced meter base. Note this increase in capital expenditure was partly funded by a $36.5 million rise in capital contributions recognised as income under the IFRS. Electricity network capital expenditure continues to be at historically high levels due to investment to improve the reliability and resilience of our network as well as higher growth capital expenditure reflecting the continued increase in connections and infrastructure projects. Capital contributions grew to $188.3 million from $151.8 million the year before. Loss Rental Rebates We announced earlier this year that we would pass on an expected credit of $30 to Auckland electricity account holders, as payment of this year’s annual Loss Rental Rebate surpluses, covering the period 1 July 2022 to 31 March 2023. Vector electricity account holders in Auckland’s

will depend on several factors, including the balance sheet strength the company wishes to maintain ahead of the 2025 regulatory reset and any post- transaction revision to its dividend policy.

1. Refer to non-GAAP reconciliation on page 54. 2. Note this commentary was issued prior to the transaction completing.



Vector is committed to excellence in ESG policies and processes, and sees these as fundamental to ensuring an equitable transition to a low-carbon society. This section, together with the ESG highlights in our Performance snapshot (page 9), sets out achievements from the past year in relation to our commitments to environmental and social themes. A detailed Governance section is included on page 34.

Our actions are in alignment with the following UN Sustainable Development Goals:


Vector Annual Report 2023

Environmental, social and governance (ESG)

People and health and safety

Vector’s ‘Storm Troopers’ help answer questions and provide information to communities after major weather events like Cyclone Gabrielle and the Auckland Anniversary floods.

The last few years have seen dramatic changes in ways of working. For Vector, building a strong culture of cross-team collaboration, high performance and strong leadership continues to be our focus. We want our leaders to create an environment where teams are results driven, innovation is valued and every individual feels included and able to thrive. Our new six Green Star- rated Newmarket office and the launch of new Vector behaviours in the coming financial year are markers of the next phase for us.

Tick. These accreditations help us understand what we are doing well and where we need to improve, and we’re proud of our commitments and actions that enable these accreditations to be retained. We’re also part of an energy sector Diversity and Inclusion working group, created by energy sector CEOs. This is an early-stage group, however we are excited to be able to participate. Preparing for change, and a move The sale of a 50% interest in Vector Metering and the operational separation of this business has seen a considerable change in our workforce, with a significant number of our people exiting employment with Vector and taking up roles with the new joint-venture business. Preparing for this, and ensuring the right change processes are in place for an effective transition, has been a strong focus throughout the year. We were also busy getting ready to shift into a brand new, six Green Star-rated building, with an exciting new design and fit-out as well as the latest technology to support our collaborative ways of working both within the office and remotely. A huge amount of effort went into making this a successful move, and a catalyst for positive organisational development.

Wellbeing, diversity and inclusion

of initiatives continues to be co- developed, where representatives propose and input on initiatives as to what works best for them and their respective business units. Development of a new parental leave policy took place this year, with the new policy taking effect 1 July 2023. A significant part of the new policy is that Vector will continue employer contributions to KiwiSaver to cover the entire leave period; this will have a positive impact on reducing financial inequities at retirement age. As we do each year, we’ve conducted pay equity reviews and taken action to remediate any inequities across

Since the launch of our wellbeing strategy we’ve been following a plan designed to ensure our work environment supports our people to thrive and lead positive and fulfilling lives. Our strategy was informed by feedback and data we received through individual wellbeing assessments staff undertook this past year, and will continue to be developed by future assessments. It is being implemented using a range of prioritised initiatives such as building awareness and engagement, and the continuous development of a resilient workforce. In addition, we’ve introduced a wellbeing and diversity employee network to ensure the roll-out of our strategy and programme

gender, ethnicity and age. We’ve again renewed our

Accessibility Tick, which we were the first employer in New Zealand to be awarded, and our Rainbow


People and health and safety

Recruitment challenges The tight labour market across New Zealand has continued, and Vector has faced similar challenges to other businesses. Despite borders opening up in July 2022, strict immigration criteria remained in place impacting the ability to recruit offshore candidates. More recently, a softening of the criteria and Vector’s accredited employer status have facilitated hires from overseas into critical roles, where no suitable New Zealand-based applicants were found. Candidates are still difficult to source in technology, engineering, transport and the trades, and competition is fierce with applicants often involved in multiple recruitment processes. One of the biggest challenges has been in OnGas, where drivers are in high demand across the country. In addition to the adoption of class 1 delivery trucks to expand the pool of potential drivers, first introduced in the last financial year, we’ve responded further by working closely with employees

and the management team to understand and address attraction and retention strategies. This has culminated in pay increases to meet the market, retention payments, shifting from fortnightly to weekly pay to reduce financial pressure and the introduction of cadet schemes to create entry-level jobs for youth and career pathways. Work was also undertaken to refresh the way we advertised our roles and positioned ourselves to appeal to the target audience. The result saw applications more than double and led to record low vacancies. Health, safety and environment To track our progress against our safety goals, Vector continues to measure safety performance across the group, including Lost-Time Injury Frequency Rate (LTIFR), Total Recordable Injury Frequency Rate (TRIFR), and severity rate. In the past year, we have experienced an increase in sprains and strains within our field workforce, which has seen our LTIFR increase. Our

focus remains on injury reduction, and there has been a decrease in the severity rate of lost time injuries, indicating that the severity and average number of days required off work per incident has reduced across FY23. Our TRIFR rate remains steady. Our health and safety approach across the Vector group is centred on a culture of openness, curiosity and continuous learning to drive a safer and healthier workplace for our people. This culture encourages members, both in the office and in the field, to actively participate and input into the risk management system as opposed to taking a view of ‘arbitrary compliance’, which does not encourage engagement and continuous improvement. It is through this approach that we continue to prioritise robust and thorough incident investigations into high potential near miss events, reviews into key operational activities, and focused health, safety and environmental assurance activities with our field services partners.


Vector Annual Report 2023

Environmental, social and governance (ESG)








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Notable changes in the diversity statistics included a 1.4% decrease in female representation, from 36.3% to 34.9%, across the Vector group, a decrease in employees identifying in the 30 to 39 age bracket (-1.5%) and a decrease in the 50 to 59 age bracket (-1.4%). We also noted an increase in those identifying as Asian by 2.7%, and an increase in NZ Māori by 0.2%. A further breakdown of Vector’s gender mix can be found in the Governance section on p39. Due to Vector Metering’s separation from Vector, a portion of employees included in this year’s diversity data will no longer be accounted for in future reporting.

* Middle East, Latin America and Africa

Leadership development We’re continuing to upskill our

Ongoing talent programmes Vector’s established talent management processes continue to identify high potential staff and successors to key roles. These are reviewed by the executive team twice a year and the People and Remuneration Committee annually. As well as identifying development requirements for individuals, this process is about identifying gaps and risks. Annual performance reviews based on the achievement of individual goals are set at the start of the financial year (July and August) with regular progress conversations and half-year check-ins encouraged. The outcomes of the performance reviews are one of the factors taken into consideration when reviewing annual remuneration movements.

Our health and safety systems and processes are specific to the needs of our business units, employees and services. To further evolve them, we are currently undertaking a review of our enterprise risk and health, safety and environmental (HSE) management technology solution used across our businesses. The purpose of this review is to ensure we have the best technology available to support effective and insightful risk and HSE decision-making and incident management through an intuitive user experience and timely reporting. We remain highly focused on our critical HSE risks, our controls, and on assuring our confidence in those controls, and have retained certification in ISO45001, ISO14001 and NZS7901, being the key HSE standards for our businesses.

people managers, with a focus on lifting their capabilities to lead, support and develop their teams. We launched Manager’s Warrant of Fitness 2.0 during the year, which includes further development for our people leaders to strengthen their leadership capability, following the success of WOF 1 in FY22. WOF 2 is short and impactful, and focuses on understanding mental health and wellbeing, including how to spot signs of distress and have safe conversations around this, psychological safety in diverse teams, and how to lead a team effectively in a hybrid-working environment. In FY23, a total of 115 people leaders participated in either WOF 1 or WOF 2.


Energy affordability and decarbonisation

Energy affordability and decarbonisation

An energy transition that works for consumers Vector plays a pivotal role in enabling energy systems to meet growing demand for low-carbon electricity while delivering and advocating for equitable and affordable outcomes for consumers. Our focus is to build infrastructure as efficiently as possible to reduce consumer cost, and ensure the costs are allocated equitably, in line with the principle of cost-reflective pricing. Doing this avoids system growth costs being socialised inequitably across existing consumers. A clear example of this principle is a consumer who doesn’t own an EV and who may be experiencing energy hardship; our view is it is inequitable for them to be faced with an increased bill because of other EV-owning consumers or commercial EV-charging providers, driving the need for system growth investment. Developing solutions This year, in alignment with our Symphony strategy, we’ve further developed our Future Technology Roadmap for our electricity network that sets out a critical pathway for achieving an affordable future network investment profile. This profile is based on optimising the huge costs of traditional network reinforcement and capacity upgrades as demand grows, by using advanced data and digital technology to manage peak demand growth, while accommodating the increase in overall demand for electricity as electrification gathers pace to reduce carbon emissions (see Shaving the Peak p 31). Advocating for better outcomes We continue to work with key external partners to better understand the challenges ahead, and bring cutting-edge international insights to New Zealand to challenge sector thinking and traditional energy system regulation. Our firm belief is that the transition to zero carbon requires better and a more dedicated focus and policy alignment to truly drive the change required. For, while the energy sector is one

We’ve achieved a 14.5% reduction in carbon emissions towards our science- aligned target.


Vector Annual Report 2023

Environmental, social and governance (ESG)

of the most critical pieces of this country’s infrastructure for meeting our decarbonisation goals, it needs to be considered as a whole system, not in the silos prescribed by the original market settings of the late 1990s. Better energy and regulatory policy alignment across government is becoming increasingly urgent, and we note steps that the United Kingdom has taken in establishing the Department of Energy Security & Net Zero. Establishing an equivalent aligned policy agency would be effective in ensuring strategy development, regulation, policy, market design and oversight, and resilience are all centrally coordinated with the necessary expertise and resources. Following our emissions reduction plan We’ve committed to measuring and managing our own carbon emissions to help with New Zealand’s transition to a low-carbon economy. This includes reducing emissions to meet our science-aligned reduction target of 53.5% by 2030 based on a 2020 baseline, as well as having net -zero carbon operational emissions (scope 1 and 2 excluding electricity distribution losses) by 2030. At 30 June 2023, we have achieved a 14.5% reduction towards our science- aligned target. Emissions reduction activity this year has included the continuation of two key initiatives from the prior year to realise further reductions in our footprint. We’ve ramped up the use of transformers deployed temporarily to keep the power on during maintenance projects instead of fossil fuel generators, avoiding an estimated 1,388 tCO 2 e (scope 1 and 3 combined) over FY23, and we’re continuing our increased schedule of gas leak surveying on the gas network. Other initiatives this year have included reducing response time for gas leaks, and flaring them instead of venting, and a public awareness campaign designed to reduce third-party damages to our gas pipelines. As a result of these activities, we are maintaining a downward trajectory on these emissions.


The Auckland Anniversary Weekend flooding, together with Cyclone Gabrielle, set a new bar for extreme weather in Auckland, with Cyclone Gabrielle more devastating than Cyclone Bola in 1988. The scale of these events has prompted calls for better resilience across our country’s infrastructure. Improving electricity network resilience is a complex task, and extends far beyond simply stopping the impacts of extreme weather taking out the power for our customers. Vector’s thinking on resilience follows the International Energy Agency’s framework, which breaks down physical resilience into three stages following a disruption to normal supply:

Climate Resilience


Immediate impacts of extreme weather events

Recovery back to equilibrium

Equilibrium Long-term impacts of climate change

Outbreak of a disruption

Robustness Withstand gradual changes in climate

Resourcefulness Manage operation during a disruption

Recovery Restore system’s function


To provide better customer outcomes, our resilience strategies focus on: – preventing and withstanding damage – responding to the immediate impact from severe weather on disruptions to supply – recovering back to equilibrium once the storm has passed. The second two of these stages often involve the accuracy and availability of data, and the capability to use that data for insights to streamline operational processes, including those in the field. We will continue to refine our climate change modelling capability, while also maintaining ongoing investment in multi-year, dedicated network hardening programmes, and specific resilience measures which consider options such as asset relocation, network reinforcement, micro-grids, increased low voltage visibility, and vegetation management. This year we’ve expanded our list of community emergency generation hubs, with a new, permanent generation injection point established in Warkworth, joining previously established points in Piha and Waiheke Island. These hubs speed up the provision of emergency generation to support communities whose electricity supply has been impacted by severe weather.


Energy affordability and decarbonisation

Our Field Service Provider Omexom uses a truck-mounted gas leak detection system known to ‘smell’ minor gas leaks by simply driving down the street at normal speed, with GPS technology marking the exact location of any leaks detected. This enables us to find and fix leaks faster, reducing carbon emissions and improving the safety of the public and environment.

1,388 tCO 2 e Avoided emissions from our temporary transformer programme in FY23, following successful trials in the prior year

Our carbon footprint Vector measures and reports its emissions in accordance with The GHG Protocol Standard and The GHG Protocol Value Chain Standard annually. Our base year for emissions reporting is 1 July 2019 to 30 June 2020. Detailed information on organisational and operational boundaries, methodologies used and emissions trends over time can be found in Vector’s GHG emissions inventory report FY23. In the year to 30 June 2023, we’ve achieved a reduction of 14.7% across all scopes from our base year FY20. The most significant reduction in scope 1 emissions can be observed with gas distribution fugitive emissions, driven by the initiatives outlined on p25. Diesel use in generators has also seen a reduction, while vehicle fleet and sulphur hexafluoride (SF 6 ) emissions increased.

Scope 2 emissions have increased, despite a decrease in electricity losses across our network, due to a noticeably higher emissions factor used for this year’s calculation compared to previous years. An increase in Vector’s own electricity consumption can be attributed to a growing uptake of Vector’s free EV charging infrastructure across Auckland. Value chain emissions across

More detailed information relating to climate change and Vector’s approach to decarbonisation is available in Vector’s Greenhouse Gas Emissions Inventory Report, and Taskforce for Climate-related Financial Disclosures Report, both available at

scope 3 have increased by just over 1% compared to FY22. However, when comparing against our FY20 base year, emissions across scope 3 have decreased by 15%. Further details on our emissions by scope and category can be found in Vector’s GHG emissions inventory report for FY23, available on our website.

Emissions trend by scope in tCO 2 e

Change from FY20 baseline






22,388 17,887 21,816 19,485 -13%






Scope 3 1,843,262 1,628,207 1,539,706 1,558,026 -15% Total Scope 1, 2, 3 1,898,798 1,680,543 1,601,008 1,620,321 -14.7% Previous years’ inventories were recalculated to remove emissions from Vector Metering, include updated activity data on gas fugitive emissions in FY22, and include a newly included emission source under scope 3. For details on these recalculations, please see Vector’s GHG emissions inventory report for FY23. * Includes market-based emissions for electricity consumption.


Vector Annual Report 2023

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