Orion announces $52m net surplus for 2005

1 July 2005

Christchurch based electricity network company Orion New Zealand has announced a $52m net surplus for the financial year to 31 March 2005. The net surplus was $35m above, or three times the size of, its statement of intent forecast.

The improved result was mostly due to a $29m gain in the value of Orion's shareholding in the Australian listed company Energy Developments Limited (EDL). This gain more than reversed a write-down last year in the value of the EDL shareholding of $13m.

"Since purchase we have achieved a net $17m gain on our investment in EDL and after taking into account interest and holding costs and tax, this investment has benefited our shareholders by over $8m so far. The combination of the gain in EDL, a healthy net surplus for our core electricity network and another year of high network reliability, has made it another excellent year for Orion," Orion chairman Linda Constable said.

The core electricity network net surplus was $33.5m, $0.6m ahead of forecast. The electricity network also performed very well in terms of high reliability and low network outages.

"Our network has been the most reliable in New Zealand over the last five years. We have 'kept the lights on' for 99.989% of the time. On average our customers experience fewer than one interruption per year to their electricity supply. Our reliability figures are around three times better than the New Zealand average," said Ms Constable. "Importantly we have achieved these results while keeping our prices at below average levels.

"Over the last five years we have reduced our prices by over 15% in real terms" said Ms Constable. The recent electricity price increases seen by consumers are the result of higher prices imposed by generators and retailers.

"Our priority is the continued cost-effective improvement in the performance of our network. To this end we have continued to invest strongly in our distribution network with over $30m spent in the last year on projects to connect new customers, reinforce our network and replace ageing equipment.

"We need a regulatory environment that does not undermine incentives for infrastructure investment and the ability to earn reasonable financial returns. This is essential across the whole industry if we want to ensure that New Zealand continues to have a reliable energy supply" said Ms Constable.

During the year Orion paid fully imputed ordinary dividends of $27m ($3m above forecast) to shareholders - Christchurch City Holdings Limited (87.625%), Selwyn Council Trading Enterprises Limited (10.725%) and Banks Peninsula District Council (1.650%). This has brought total tax-free distributions to shareholders since corporatisation in 1993 to more than three-quarters of a billion dollars.

Orion's assets were independently revalued during the year. This resulted in an $82m increase in the value of electricity network fixed assets as at 1 April 2004 to approximately $686m.

Orion forecasts a surplus after tax of $26.4m for the year ended 31 March 2006.

In March 2005 Orion sold most of its EDL shares and also accepted an offer from Infratil to financially underwrite the 4.25m EDL shares it retained. The financial underwrite only applies if Orion sells these shares on or before 14 October 2005. The Infratil underwrite increases over time on a sliding scale up to A$4.18 per share by 30 September 2005. Although the financial underwrite ends around this date there are no encumbrances on these remaining shares and Orion is free to retain or sell them at any time.

Orion distributes electricity to more than 175,000 homes and businesses in Christchurch and Central Canterbury. Orion charges electricity retailers for this network delivery service, and retailers in turn charge electricity consumers.

For more information:

Linda Constable
Chairman
03-312-9111

Roger Sutton
Chief Executive Officer
03-363-9846
Mobile 027 4333 632