Growth and resilience key themes as Orion releases annual report
Orion New Zealand Ltd. has delivered another year of solid financial performance, posting a $11.6m net profit after tax and an earning before interest and tax of $46.6m for the 2024 financial year, a $0.5m increase on the previous year.
The central Waitaha Canterbury electricity distribution business’ performance was in line with expectations, other than a one-off deferred tax expense of $5.2m, below the operating profit line, which led to a below-budget result at the net profit after tax level. This non-cash accounting adjustment arose due to the removal of tax depreciation on commercial buildings. Earnings before interest and tax is in line with the previous year’s result.
“Like most other businesses, we have not been immune to significant upwards pressure on all our costs due to external factors such as materially increasing consenting and permitting costs, tight supply chains and the current economic environment,” says The Orion Group Chief Executive Nigel Barbour.
“This upward pressure on costs combined with the Commerce Commission’s Default Price-quality Path (DPP) regulatory settings - which in the interests of customers has rules around what costs can be recovered and when they can be recovered - means that earnings are lower in the near term. This is because those costs which can be recovered, are not recovered immediately and are instead recovered in future years under the Commission’s revenue framework.”
The Commerce Commission released its draft decision on the upcoming DPP, which sets Orion’s revenue and expenditure allowances for the next five years (1 April 2025 to 31 March 2030). “We’re reviewing the draft decision to determine whether it is sufficient to enable Orion to perform our critical role in supporting growth in one of the fastest growing cities and regions in New Zealand as well and maintaining a safe, reliable and resilient network,” says Nigel.
Continuing the growth trend from the previous year, high numbers of new connections, as well as significant increases in labour and material costs for Orion’s network development programme were reflected in network capital expenditure of $134m, $24m higher than last year.
The completion of the new Norwood Grid Exit Point (GXP) in partnership with Transpower adds 25% electricity capacity to Orion’s network.
“Stats NZ’s recently released census results show Selwyn is now the fastest growing district in the country and Christchurch City has grown by over 6% in the last five years. This is precisely why we have invested in major projects like Norwood now, so we can meet the growing electricity demand in our region head on,” says Nigel.
The importance of a safe, reliable and resilient network continues to be a priority, with national and local events in the last year impacting people’s power supply.
“Our work programme to develop a 66kV underground ring circuit is well underway, with a major section of cable from Bromley Substation to Milton Substation now complete. This is about proactive investment in our infrastructure. When the project is completed, we’ll be much better placed in the case of a major seismic event,” says Nigel.
“We’re extremely grateful to our local community for their patience while we’ve carried out this essential work. We’ll be doing ongoing engagement with them through the next stages of the project to ensure they’re aware of the work programme and what impacts it may have for them.”
The Orion Group also reports Connetics grew profit to targeted levels in the last financial year.
“Connetics has continued its focus on developing new revenue streams and opportunities to utilise their expertise in the new energy environment, as well as working to increase operational efficiency.”
Orion delivered $25m in dividends to local community shareholders Christchurch City Council through Christchurch City Holdings Limited, and Selwyn District Council, $7m less than FY23.