Vector calls for permission to spend more on network

Tuesday, 21 February 2023

Vector has put the cost of the recent floods to its business at between $5million and $10m.

Auckland lines company Vector says the Commerce Commission needs to let it spend more money to increase the resilience of its network and prepare for climate change.

That would also mean raising its charges, which are ultimately paid for by consumers and businesses.

Announcing the company’s interim results, chief executive Simon Mackenzie said current regulatory settings did not facilitate “the type of innovation or level of investment required to boost resilience and achieve an affordable decarbonisation”.

“If we want to enable the change that’s needed, we need to act now,” he said.

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Mackenzie noted that Boston Consulting Group had estimated prior to the recent floods that the country would need to spend $22 billion by the end of decade to upgrade its electricity distribution infrastructure.

“Given that scale of investment, distribution businesses must have sufficient cash flows to support that level of investment, and appropriate commercial returns for investors,” he said.

Vector’s investments in effect need to be approved by the Commerce Commission, given it is a regulated monopoly that passes on its costs to customers.

The company posted a net profit of $100 million for the six months to the end of December, down 13% on the same period last year.

Its operating profit was up 3.9% at $274m.

Mackenzie forecast the recent floods would cost the company “less than $10m”.

A spokesperson said that at this stage it expected the cost of repairs to be between $5 million and $10m, but said it should be borne in mind that some of those repairs were temporary.

“We might need to go back to make permanent repairs at a later date. This number may change.”

Broadband network company Chorus forecast on Monday that the storms would cost it less than $20m.

Majority state-owned “gentailer” Mercury also reported its annual results for the six months to the end of December on Tuesday.

It increased its dividend pay-out to shareholders by 9% to 8.7 cents per share.

Its interim net profit dropped 46% to $230m for the half year.

However, that reflected a $367m gain on the sale of its stake in Australian wind farm business, Tilt Renewables, in the previous corresponding period.

Mercury’s operating profit rose 86% to $451m, in keeping with a forecast by analyst Forsyth Barr that the country’s four big power generators would have a good half-year overall.