Top Energy completes successful financial year

•   Revenue increased $5m, year on year
•   EBITDAF Earnings up $1.5m to $34.1m
•   Variations to resource consents lodged for Ngawha expansion
•   Significant outages caused by incidents on Transpower’s network

A strong financial performance by Top Energy in the financial year to 31 March 2017 has enabled the Far North network company to reduce its debt while continuing to invest in its electricity infrastructure.

Earnings before Interest, Tax, Depreciation, Amortisation and Fair Value Movements (EBITDAF) increased to $34.1m from $32.6m in the previous year. Cash generated from operations increased by $7.7m and this, combined with a lower level of capital expenditure, enabled Top Energy to repay $5.8m of borrowed funds.

Top Energy Chairman Murray Bain said the organisation had performed well during the financial year against both financial and non-financial performance targets. Service levels for its customers continued to improve despite several significant weather-related outages and incidents affecting Transpower’s high voltage supply to the region.

“The electricity network and generation plant at Ngawha both had successful years. Farming income was also up, benefitting from higher realised prices. However, our Contracting division was impacted by a decline in Pacific project work,” Mr Bain said.

“Overall the business is delivering good returns, which supports our capital investment in the replacement and reinforcement of the network,” he said.

Revenue in the Network division increased $3.4m or 8% year on year. The Ngawha generator also performed well. Despite an extensive annual maintenance outage in October, it produced an annual plant availability result of 96.6%, above its target of 94.7%, and a revenue increase of $0.8m. Transpower’s charges increased by 9.5%. Employee expenses increased by 7.3%, to account for restructure costs following a review of the Contracting resources required for the future.

Net Profit After Tax (NPAT) was positively impacted by a total revenue uplift of $5m and accounting treatments related to the value of interest rate and electricity hedges. NPAT for Financial Year 2017 was $12m, up from $1.7m in the previous year.

A capital works programme in Top Energy’s electricity network over the past eight years has created a more resilient network. The Network commissioned $14.5m of new assets, in line with its asset management plan. Investments in physical and intangible assets of $20m was made, with the surplus cash reducing debt.

Major outages on the network during the financial year were largely beyond the control of Top Energy. Sabotage and scrub fires caused major outages on Transpower’s transmission line into Northland in two separate incidents and knocked out supply to all Top Energy consumers.

Glass insulators on three towers supporting the transmission line were damaged by gun shots in December 2016, cutting supply to the Top Energy network. More than 30,000 customers were without power for several hours while the damaged insulators in the remote and difficult terrain were replaced. Another network-wide outage occurred in February 2017 when a scrub fire forced a disconnection to Northland by Transpower.

Top Energy has a strategy to improve the security of supply to its Northland customers through a proposed expansion of its geothermal generation plant at Ngawha and further installation of bio-diesel and diesel-powered generators around its network.

Variations to the resource consents previously obtained for expansion of the Ngawha power plant were pursued during the Financial Year. Planning and design for well drilling and station construction are under way. While the first resource consent application was being processed, Top Energy acquired an adjacent block of land which will significantly enhance access to the geothermal reservoir, will reduce the construction cost and increase the efficiency of the facility during its lifetime. The acquisition required an amendment to the consents, which has since been received.

“Ngawha has been expanded over many years. The first concept plans were created in 1991 and we will soon have the capacity to generate 50MW of electricity, which could supply more than 80% of the power used in the Far North and contribute significantly to the profits of the Group, for the benefit of the people of the District,” Mr Bain said.

Top Energy has made good progress implementing the new health and safety legislation. Directors have been involved in reviewing, inspecting and engaging with staff to ensure the safest environment for both staff and the public. Despite efforts from the Board, management and employees, the organisation did report three lost-time injuries during the year.

It is anticipated that modest growth in EBITDAF will be achieved for 2018. No significant change is expected to Top Energy operations. However, approval from the shareholding Trust for the Ngawha generation expansion will be sought during the current year.

For more information
Philippa White
021 2418740
Philippa.white@topenergy.co.nz