Entrust trustee assures Aucklanders their rebate is safe and Vector share sales off the agenda

Friday, 24 August 2018

Entrust, which holds 75 per cent of Auckland electricity supplier Vector has confirmed it will not be selling down shares in a move that might affect 331,000 customers' annual $350 rebate.

William Cairns, Entrust chairman, said Entrust was committed to keeping its stake in Vector, and maintaining dividends to the community, based on Vector's financial performance.

'We are not selling down. End of story,' Cairns said.

Retiring Vector chairman, Michael Stiassny had warned about the loss of the rebate if Entrust sold more shares

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Cairns said the 2018 dividend will deliver nearly $116m to people and businesses in the areas covered by Vector - Auckland, Manukau, northern parts of Papakura and eastern Franklin.

'Since 1994 dividends have increased from $115 to $350. Vector's investments in smart metering technologies, gas trading and telecommunications have strongly contributed to its diversification strategy and growth in value, which is reflected in dividend growth.

'Entrust protects Aucklanders' investment in Vector. There is strong support for Entrust across the Auckland region, with 78 per cent of all Aucklanders believing the Entrust structure should remain,' Cairns said.

Stiassny said he accepted the assurances of Cairns but elections were due to be held in October and there had been 'significant noise' around the issues of selling more shares.

Meanwhile, Stiassny alleged that Commerce Commission 'errors' were made in the way the regulatory body set price and quality controls that had reduced Vector's revenue.

He claimed Commerce Commission 'errors' had cost the company $28 million in revenue.

The annual report showed total income of $3.2 billion and a final net profit after tax and other items of $149m, down 11.3 per cent on the previous year.

'Whilst we anticipate the majority of these errors will be corrected at the next reset in April 2020, they will continue to significantly impact network returns until then,' Stiassny said.

The problem was that the reset was based on the interests rates at the time, and if they were low it would constrain Vector's income for the following five years, he said.

'Although the regulatory environment is otherwise relatively stable, balancing safety, price, service quality, and future investment is challenging for network operators and regulators alike.

'The current Commerce Commission price and quality regime may not adequately account for Auckland growth, changes to health and safety best-practice, or more extreme weather events.

'As a result, meeting quality targets will be a significant challenge for Vector and the wider industry. It is crucial that this issue is addressed no later than at the 2020 reset of regulatory parameters, Stiassny said.'

The Commerce Commission rejected Stiassny's claims.

'The Commission doesn't accept Vector's claim that 'forecast errors' have cost it $28 million and we communicated our view to Vector on this matter earlier this year,' the Commission said.

Regulations were forward-looking and revenue forecasts were based on the information lines companies provided.

'Vector is subject to regulation that sets the maximum allowable revenue it can recover from consumers as well the quality standards it must meet such as limits on outages an interruptions,' the Commission said.