VECTOR ANNUAL REPORT 2021 /
Chief Financial Of ficer Report
A strong financial result
Cash flow Operating cash flow was 25.6% higher at $499.1 million. This increase was largely due to an increase in capital contributions and lower tax paid as a result of the reduction in the level
Vector’s financial performance for the year reflects a strong result with adjusted EBITDA 1 of $513.5 million. This was up $23.5 million or 4.8% on last year’s result. Group net profit after tax was $194.6 million which was $97.3 million or 100% higher than the prior year. The result was largely due to increased earnings, higher capital contributions and lower interest cost being partially offset by higher depreciation and amortisation. The prior year also included a non-cash impairment of $32.0 million.
of dividend imputation. Capital expenditure
SEGMENT ADJUSTED EBITDA 1 Adjusted EBITDA 1 for our Regulated Networks was $350.7 million, up $13.1 million or 3.9% against the prior year. Adjusted EBITDA1 includes a full-year impact of the Commerce Commission’s DPP3 price reset, which came into effect on 1 April 2020 and saw prices reduce by 6.9%, and the retention of loss rental rebates (LRRs) in order to partially mitigate future electricity distribution price increases, and to offset the impact of electricity volume reductions on revenue under the new revenue cap regulatory regime. Despite the adverse impact of the DPP3 reset and inflation forecast assumptions used to set DPP3, the Regulated Networks delivered a solid result in the period. During the year we retained a total of $22.8 million of LRRs, and we have announced our intention to pass on a credit of $20 to Auckland electricity account holders later in the year, representing a distribution of about $12 million of LRRs directly to customers. Gas Trading adjusted EBITDA 1 was $27.4 million, down $6.5 million against $ 171.6 M ADJUSTED EBITDA 1 FOR VECTOR’S METERING SEGMENT GREW 10.9% TO $171.6M
the prior year total of $33.9 million. The reduction in earnings was mainly due to the sale of the Kapuni gas treatment plant and associated assets, which took place in March 2020. After normalising for this sale, adjusted EBITDA 1 was flat due largely to improved natural gas and Ongas LPG margins offset by lower Liquigas tolling revenue. Vector continues to retain an economic interest in the performance of the Kapuni plant, with the net present value of future income recognised as a $81.7 million receivable on the balance sheet and $6.3 million of interest income included in FY21 profit. Adjusted EBITDA 1 for Vector’s metering segment grew $16.8 million or 10.9% to $171.6 million, as a result of continued growth in advanced meter deployments in New Zealand and Australia. Cloud-computing adjustments The recently announced interpretation of the International Financial Reporting Standards (IFRS) in relation to cloud- computing arrangements by the interpretations committee for the International Accounting Standards Board requires that certain project implementation costs be expensed. This has had a $2.3 million impact on adjusted EBITDA 1 for the year ended 30 June 2021. Capital contributions Capital contributions grew by 41.8% to $122.5 million during the year, resulting from a change in policy requiring 100% customer funding for electricity connections and continued connection growth. Given the challenges of keeping pace with Auckland growth, we continue to review the level of customer capital contributions.
Gross capital expenditure was $529.5 million, $40.8 million (8.3%) higher than last year. This increase reflected ongoing investment in infrastructure to support Auckland’s continued growth, and increasing deployments of advanced meters as market demand continues to accelerate in Australia. Note this increase in capital expenditure was partly funded by a $36.1 million increase in capital contributions recognised as income under IFRS. In FY21 we invested $314.7 million gross capital expenditure to facilitate Auckland’s growth, and improve the safety, reliability and resilience of our electricity and gas networks. This maintains the high level of network capital expenditure invested over recent years for replacements and upgrades, improving network quality performance within regulatory limits, and to Vector continues to maintain a strong balance sheet. Our 30 June 2021 gearing, as measured by economic net debt to economic net debt plus adjusted equity, rose to 56.5% from 55.2% at the beginning of the year. We remain an ‘investment-grade’ credit risk with a Baa1 rating from Moody’s and BBB from Standard & Poor’s. Dividend This year, shareholders will receive a final dividend of 8.50 cents per share imputed at 10.5%, taking the full-year partially imputed dividend to 16.75 cents per share. The final dividend will be paid to investors who are on the register at 9 September 2021 and distributed to investors on 16 September 2021. improve reliability. Balance sheet
1. EBITDA from continuing 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 44.
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