Orion results affected by quake damage & asset write-downs

25 August 2011

Orion network results affected by quake damage and asset write-downs

Christchurch-based electricity distribution network company Orion New Zealand Limited has announced a $28.4m net profit after tax for the year ended 31 March 2011, $11m below its statement of intent target.

Net profit was $18.4m below Orion's 2010 result, largely due to damage caused by the September 2010 and February 2011 earthquakes. As a direct result of the quakes the company spent $11m on repairs in the year to 31 March, and a further $1.5m on other business continuity costs. Most repairs were to the 11,000 volt underground cable network in the eastern suburbs of Christchurch.

Earthquake repairs will continue for at least three years and Orion estimates that its total earthquake repair bill will increase to around $70m.
Asset write-downs of $104m after tax were also made, due in around equal parts to earthquake damage and regulatory change. Of these write-downs, $6.5m were expensed within Orion's profit.

Network revenues reduced by approximately $3m, also due to the quakes. Since February, the amount of electricity used in Christchurch has dropped by 13%, mainly due to people moving out of the damaged eastern and hill suburbs and the CBD.

"While our immediate emergency quake repairs are complete, it will take three to five years to completely restore the network to its previous high levels of resiliency and reliability. In the meantime, customers may lose power occasionally, particularly if we continue to experience large aftershocks," says Orion acting chief executive officer Geoff Vazey.

"We plan to spend an average of $65m each year for the next five years to restore, strengthen and expand the electricity network and support the Christchurch rebuild. We're also upgrading our network in rural areas, which now use twice as much electricity as a decade ago."
"Our goal is to deliver a strong, safe, stable supply of electricity to the community we serve - we will continue to work hard to make this happen," Mr Vazey says.

During the trading year, but prior to the February quake, Orion paid fully imputed ordinary dividends of $37.5m to its ultimate shareholders - Christchurch City Council (89.3%) and Selwyn District Council (10.7%). This has brought total tax-free distributions to shareholders since corporatisation in 1993 to more than $1 billion - money that has been invested back into the local community.

ENDS

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