Ann: FLLYR: TPW: Trustpower results for the financial year 31 March 2015

• Release Date: 15/05/15 15:00
• Summary: FLLYR: TPW: Trustpower results for the financial year 31 March 2015
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					TPW
15/05/2015 15:00
FLLYR
PRICE SENSITIVE
REL: 1500 HRS Trustpower Limited

FLLYR: TPW: Trustpower results for the financial year 31 March 2015

NZX Announcement
15 May 2015

Trustpower results announcement for the financial year ended 31 March 2015
Trustpower has made good progress on its growth agenda over the 2015
financial year. The 270MW Snowtown Stage 2 Wind Farm in South Australia was
completed on time and under budget and has provided shareholders with
significant value uplift following commissioning in October 2014. Trustpower
has broadened its Australian renewable energy portfolio through the
acquisition, at an attractive price, of 105 MW of hydro and wind assets owned
by Green State Power from the New South Wales Government in July 2014.
Trustpower has grown its New Zealand retail customer base, particularly in
metro markets, as its multi product strategy gains momentum.

Trustpower's consolidated profit after tax was $144.0 million for the year
ended 31 March 2015, an increase of 25% compared with $115.1 million for the
same period last year. It includes a $25.0 million gain representing the
difference between purchase price and fair value of the Green State Power
assets as determined by independent valuation following the acquisition.
Underlying earnings1 were $122.9 million compared with $108.5 million in the
previous year, an increase of 13%.
Earnings before interest, tax, depreciation, amortisation, fair value
movements of financial instruments, asset impairments and discount on
acquisition (EBITDAF)2 were $330.7 million, compared with $277.4 million
achieved in the previous year representing an increase of 19%.

While earnings were well ahead of the 2014 financial year they were at the
lower end of expectation due to a number of headwinds encountered during the
period namely
o The impact of the strong NZD/AUD exchange rate on Australian earnings which
now contribute a larger proportion of group earnings following completion of
Snowtown Stage 2.
o Poor wind generation over the second half at the Snowtown and Tararua wind
farms.
o Weak North Island hydro generation as the result of low inflows due to
drought conditions experienced during the fourth quarter.

Total electricity volume sold by the Group in New Zealand through mass market
retailing and time of use sales was 3,934GWh, compared with 3,512GWh in the
prior year, an increase of 12%.  Increased sales volume was achieved in both
the mass market and commercial and industrial segments.
Total energy connections increased to 266,000 at 31 March 2015 (including
24,000 gas connections) from 238,000 as at 31 March 2014 (14,000 gas
connections).  While the retail market remained highly competitive throughout
the year, Trustpower continued to experience lower levels of customer churn
than the market overall.

Trustpower has continued to achieve strong growth in telecommunication
connections with an increase to 38,000 connections from 31,000 connections in
the prior year, an increase of 23%.

Trustpower was particularly active in North Island metro markets using a
range of sales channels.  Pleasingly, customers with two or more utility
services increased by 37% from 38,000 to 52,000 demonstrating that
Trustpower's multi product proposition is gaining strong support from
existing and new customers.  Trustpower is making good progress in
consolidating its position as New Zealand's leading multi-utility retailer
with a product suite that includes power, ultra-fast broadband and phone
services, natural gas and bottled LPG.

Trustpower has invested heavily in its retail growth strategy and will
continue to do so in the 2016 financial year.  To provide some context to the
level of investment made in the 2015 financial year, capital expenditure on
retail IT systems was around $7.5 million and foregone EBITDAF through higher
customer acquisition costs was approximately $8 million relative to a no
growth strategy.
The Group's New Zealand generation production of 2,216GWh was slightly above
the previous year but 8% below expected long term average.  Trustpower
actively used its South Island storage lakes to support lower hydro and wind
production in the North Island over the fourth quarter.  New Zealand wind
production was 23GWh (3%) lower than the previous year and 5% below expected
long term average.

The Australian wind farms produced 1,187GWh versus 536GWh in the prior year
as the Snowtown Stage 2 wind turbines were progressively brought on line
through the first half of the financial year.  However, production was
approximately 100 GWh (8%) below expectation due to weaker second half
production caused by lower available wind resource.
Australian hydro generation assets performed well producing 278GWh in line
with expectation for the period from acquisition in July 2014 through to 31
March 2015.
Group operating cash flow remained solid at $269.8 million for the 2015
financial year versus $256.8 million in the prior period.

Group generation assets were independently valued by Deloitte Corporate
Finance as at 31 March 2015 as part of a three yearly cycle required under
Trustpower's accounting policies.
As a result generation assets were revalued upwards by $399 million, equity
increased by $289 million and deferred tax liability by $111 million.  The
majority of the uplift reflected the revaluation of Snowtown Stage 2
following its commissioning which increased by AUD309 million above cost
providing further validation of the quality of this significant investment.

New Zealand hydro generation assets were revalued upwards by $95 million
driven by a lower cost of capital used to discount future cash flows. New
Zealand wind assets were revalued downwards by a net $6 million.
Trustpower believes there is an opportunity to improve yields by up to 3% at
its Snowtown Stage 1, Tararua and Mahinerangi wind farms through a range of
power performance improvements.  These include the installation of blade
aerodynamic devices and technology as well as operational improvements to
increase the power curve range.  Some of these improvements have already been
made, otherwise early stage trials are being undertaken with turbine
manufacturers to confirm economic potential and technical feasibility.

Net debt (including subordinated bonds) to net debt plus equity decreased to
40% as at 31 March 2015 from 43% at prior year end.  Trustpower continues to
maintain conservative levels of committed credit facilities.  As at 31 March
2015 Group net debt was approximately $1.2 billion.  Trustpower has recently
accepted offers to refinance AUD70 million and NZD100 million of bank
facilities due to mature in July 2015. These facilities will be extended in
two tranches to mature in July 2018 and July 2020 and will be increased by
AUD30 million.
Following the completion of these financing activities the Group will have
approximately NZD equivalent 1.5 billion of committed debt facilities and
around NZD equivalent 235 million of undrawn debt facilities which provides
the Group with good capacity to fund growth and meet ongoing operational
liquidity requirements.
Tauranga Energy Consumer Trust (TECT) announced on 23 April 2015 that it had
sold 20 million Trustpower shares in a placement to New Zealand institutions
and retail investors.  TECT remains a committed long term shareholder of
Trustpower and it retains a 26.8% shareholding.  As a result of the placement
10 new institutions and more than 1,000 new retail shareholders have joined
Trustpower's register. We expect that this will assist in improving the
market liquidity of Trustpower's shares.
Trustpower's key strategic priorities are currently to grow value in its
retail business through the roll out of its multi product proposition to a
wider customer base and to position itself in Australia to develop further
wind generation projects once the longstanding review of the Renewable Energy
Target (RET) is completed by the Australian Government.
Over the next 12 months Trustpower is targeting further customer growth as
well as increased conversion of existing customers to multiple utility
services.

In Australia, it is expected that the Renewable Energy Target for large scale
generation will be reduced from 41,000GWh to a level closer to 33,000GWh.  To
put this in perspective, around 17,000GWh of large scale renewable generation
has been built to date to meet the target so a near doubling of the existing
build will be required to meet the expected lower RET. Trustpower currently
has three wind projects in South Australia, Victoria and New South Wales at
various stages of the development approval process.  These projects represent
around 890MW of potential development. The first of these approvals is
expected at the end of 2015.

Trustpower continues to assess other renewable development opportunities in
Australia with the view to increase the scale of its development pipeline
where possible.  This includes considering the potential of grid connected
solar as both a competing and complimentary technology to wind generation.
Trustpower continues to work with Metrix (its outsourced metering service
provider) to implement the necessary end to end systems and process changes
required to prepare for advanced metering service delivery and the deployment
of advanced meters to all Trustpower's residential customers throughout NZ.
The build and testing of new computer systems at both Metrix and Trustpower
is underway and a preliminary deployment pilot has been completed. It is
intended that a further more substantial pilot will be undertaken later this
year and full service commencement and scale deployment is now planned to
commence early in 2016.

Pleasingly, structural risk for the energy industry in New Zealand appears to
have stabilised following the 2014 general election.
The Directors are pleased to announce a final dividend of 21 cents per share,
partially imputed to 14 cents per share, payable 12 June 2015 (record date of
29 May 2015). This together with an interim dividend of 20 cents per share,
provides a total pay-out of 41 cents per share for the 2015 financial year, a
2.5% increase over the prior year.

The outlook for Trustpower remains positive.  The 2016 financial year will
see the first full year of earnings contribution from Snowtown Stage 2.
Trustpower expects to grow its retail customer base at a similar rate to the
2015 financial year and continue to increase the number of multi product
customers improving retail profitability.  The ongoing high level of NZD/AUD
exchange rate is expected to continue to provide a partial negative offset to
earnings in the coming year.

BJ Harker
CHAIRMAN
End CA:00264379 For:TPW    Type:FLLYR      Time:2015-05-15 15:00:35