ICC may face reduced dividends from best-performing company

Monday, 12 November 2018

The Invercargill City Council may face reduced dividends from its most profitable company, Electricity Invercargill Limited, between 2020 and 2025, councillors have been warned.

Electricity distribution networks are regulated by the Commerce Commission which dictates the returns they are allowed to make.

Electricity Invercargill Limited chairman Tom Campbell, speaking at the Invercargill City Holdings annual meeting in Invercargill last week, said if the Commerce Commission reduced the regulated returns to the levels expected, it would result in a 15 per cent drop in revenue for EIL.

EIL, which posted a $7.3m after tax profit for the year ending March 31, is owned by the Invercargill City Council through its subsidiary company, Invercargill City Holdings.

If EIL's profits were to be reduced, it may affect the amount of dividends it returned back to the city council, Campbell said.

However, he made it clear no decisions had yet been made by the Commerce Commission and it was only what EIL thought what would happen.

EIL executive member and PowerNet chief executive Jason Franklin, speaking after the meeting, said the Commerce Commission set the return levels for electricity distribution in five year periods.

He confirmed EIL believed there was a risk the Commerce Commission would reduce what it was allowed to make between 2020 and 2025, given the calculations used by the commission in the past.

However, he did not expect to get clarity around the issue for another 12 months.

'We are just flagging it to the shareholders that we see the potential that that could occur.'

One of EILs advantages was it had a diversified asset base and one third of its business was not in electricity distribution, Franklin said. 

'We are flagging that two thirds of the assets we have could have a lower regulated return allowed by the regulator.'