Group Chief executive’s REPORT
Undergrounding is not necessarily a panacea. While 55% of the electricity network is underground, the cost to underground the remaining 45% of the network with overhead lines in Auckland is enormous (we estimate over $5 billion), and we believe there is little consumer or political appetite for the large energy price increases that would be required to fund this. Gas Trading adjusted EBITDA fell 6.8% to $34.4 million from $36.9 million a year earlier. The prior year’s result included an insurance settlement of $5.3 million in relation to damage to the Liquigas facilities at Lyttelton during the 2012 earthquake. Excluding this one-off, underlying Gas Trading EBITDA was up 8.9% with strong volumes and higher production at the Kapuni Gas Treatment Plant being offset by lower natural gas margins. Adjusted EBITDA in the Technology business rose 6.5% to $130.5 million with further gains on smart metering following the Power of Choice reforms in Australia and continued meter deployment in New Zealand. That said, we are disappointed that growth in our Technology business area was not higher. This can largely be attributed to a lower than expected heat-pump business performance by E-Co Products Group, and by the investment in launching HRV Solar. The underlying E-Co Products Group business is well positioned to play a role supporting Government initiatives for energy efficient and healthy homes. Capital expenditure (capex) rose 3.8% to $381.2 million from $367.4 million in the prior period. This was driven by Auckland growth, higher network replacement capital expenditure and an increase in Australian meter deployments. This was partially offset by lower Gas Trading capex (the prior period included investment in the Bottle Swap processing plant) and a slow- down in meter deployment rates in New Zealand. Our balance sheet remains healthy, with gearing as at 30 June 2018 at 48.8%, up from 47.1% a year earlier, and 47.3% as at 31 December 2017. SOLID OPERATIONAL PROGRESS. Reflecting on the past 12 months, and indeed on the past decade, we’ve made solid progress on our mission to create a new energy future. We are continuing to take the lead on developing new energy technologies, customer-focused innovation and on the sustainability of our sector. We’ve continued to diversify into areas like metering, ‘Internet of Energy’, data analytics, solar and batteries. Central to Vector’s business is our responsibility to ensure we continue to deliver reliable energy to Auckland. Every year we spend significant amounts on vegetation management and network maintenance to pre-empt problems for customers before they occur. We invest in network upgrades to reflect the ways in which energy use is changing. The development, integration, and use of new energy technologies like solar panels, storage batteries, and electric vehicle (EV) chargers on our power network is trending upwards. Peer-to-peer capabilities are opening up multi-directional energy flows.
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