Strategic reports
DIVIDEND DECLARED CENTS PER SHARE
GROUP CAPITAL EXPENDITURE $ MILLION
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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.
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