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Vector improves earnings despite subdued demand

Fuseworks Media
Fuseworks Media

Wellington, Aug 27 NZPA - New Zealand's regulatory environment is not conducive to investment, Vector chief executive Simon Mackenzie says.

Network infrastructure company Vector today reported a 4.7 percent rise in underlying net profit after tax of $172.6 million despite subdued demand in the year ended June 30.

Based on continuing operations, its revenue rose 1.1 percent to $1.19 billion, but earnings before interest, tax, depreciation and amortisation (ebitda) fell 0.7 percent to $578.1m.

In a presentation on the results, Mr Mackenzie said regulation had a big part to play in improving this country's economic outlook, and must be an appropriate mix of theory and commercial reality.

A current set of regulatory proposals from the Commerce Commission was an "incomplete and inappropriate" package, he said.

"We'd like to see the regulatory environment create a situation where customers and commercial interests were better aligned.

"Regulation must provide more incentives to encourage investment in issues such as energy efficiency, delivering better customer outcomes, and providing customers with greater choice in areas such as undergrounding and other new infrastructure solutions.

"We'd like to have the option of being able to invest more in New Zealand, but the current environment is unconducive. We don't want this regulatory round to be a story of lost opportunity and more of the same old, same old."

Regulation also had to ensure that efficiency gains were shared appropriately, not removed. Vector had worked hard during the past two years to drive efficiency and reduce costs.

"It is critical that this reality is factored into the regulatory process," Mr Mackenzie said.

In the next decade, Vector was likely to invest more than $2.5b in electricity and gas businesses, relying heavily on overseas lenders for funding.

Vector would continue to be active in the regulation debate, repeating its message of the need for a complete package that encouraged investment and delivered commercially appropriate returns as well as stating its case for incentives to invest in the long term interest of customers.

Mr Mackenzie would not say how much Vector had spent on its proposal to build a fibre-to-the-door network in Auckland as part of the Government's ultra-fast broadband plan, but he insisted the cost control on the work was tight.

Vector was open to alternative models and partnerships, although the current process did not provide for that, he said.

For the 2011 financial year, Vector was comfortable with analysts' current forecasts of a net profit range between $180m and $208m.

"While we expect no major improvement in economic conditions, we do envisage steady growth from a low paced global financial crisis-base," Mr Mackenzie said.

Underlying growth in the network businesses would continue.

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