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.
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Vector Annual Report 2023
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