2000 Annual Report
This page contains highlights from the 2000 Annual Report. Please contact the company if you would like to request a full copy of the report.
This is the Annual Report of WEL Energy Group Limited
Dated this 22nd day of August 2000
Signed for and on behalf of the Board of Directors
| Sir Dryden Spring | Rodger Fisher |
| Chairman | Deputy Chairman |
This Year's Highlights
- Net surplus after tax was $23.9 million.
- Net surplus after tax for continuing activities was $23.2 million.
- Revenue from continuing activities is up 4% to $62.2 million.
- Total dividends paid to all shareholders for the year of $20.2 million (or $1.12 per share), including a final dividend of $3.1 million (17.22 cents per share) to be declared at the Annual Meeting in October 2000.
- There was no increase in line prices for the fourth year in succession.
- WEL Energy Trust was successful in obtaining 100% ownership of WEL Energy Group.
- Investment of $11.5 million was made to expand capacity and maintain and increase network reliability.
- Introduction of the 24 hour "Response Plus" Call and Control Centre.
- WEL sold its subsidiary company WEL Technology Ltd. to Spectrum Resources Ltd for $2.648 million.
- The business was reconfigured with the establishment of a new growth and development team focussed on growth of the business and the region.
Chairman's Report
This has been the first complete year that WEL has operated as a stand-alone electricity lines business following the sale of its retailing business in March 1999. The year also saw the WEL Energy Trust become the sole owner of the Company as a result of its acquisition of minority shareholdings in June 2000.
Financial Highlights
The Company achieved an after tax surplus of $23.86 million for the year ended 30 June 2000 compared with $113.40 million the previous year. The 1999 profit, however, included profit of $25.6 million from the sale of investments and $70.7 million from the sale of the retail business. This year's result includes interest of $4.1 million earned during the year on the proceeds from those two sales.
Despite a reduction in line prices in March 1999, increased consumption enabled line sales revenue to increase by 3.1% over the preceding year. WEL's line prices have not increased since 1996.
The result is satisfactory given the continued uncertainty in the electricity sector caused by recent industry reforms and the current Ministerial Inquiry.
Dividend
The Directors are recommending the declaration of a final dividend of $3.1 million (17.22 cents per share) to be paid in October. This will take the total dividends paid for the year to $20.2 million ($1.12 per share), and the total dividends for the past 5 years to over $106 million.
Industry Reform
Reform in the electricity sector continues apace. The previous Government radically reformed the industry by splitting integrated supply businesses into separately owned lines and energy retailing companies. The new Labour Government initiated a Ministerial Inquiry to establish whether further measures were required to encourage competition, performance, energy efficiency and service to end users.
While the Inquiry Team reported back in June, recommending industry self regulation, the Government is still, as at the date of this report, considering its response to their recommendations. The options available to the Government are either industry self regulation or heavy handed regulation, including price control for line companies. I am concerned about the desire of some to regulate the industry. Overseas experience shows that regulation creates significant additional compliance costs and under investment. I believe that the Government should focus on challenging the industry to meet the expectations of consumers. There are significant implications for the Company should Government decide to further regulate lines companies.
WEL Energy Trust - 100% Owner
For many years, ownership of the Company has been a controversial local issue. This year saw the WEL Energy Trust finally achieve its stated goal by becoming the sole owner of the Company after 79.84% of minority shareholders who voted, supported an amendment of the Company's constitution to permit compulsory acquisition. The amendment was formally adopted by shareholders at a special general meeting on 6 June. The Trust then compulsorily acquired all minority shareholdings for $21 per share on 29 June.
Now that the Company is wholly owned by the Trust, a new relationship to establish a common strategic direction and common objectives is being developed to enable the Company to continue to operate as a successful business, and thus maximise its value to the community. I am pleased to say that the Board, Management and Trustees are working cooperatively and positively towards achieving this aim.
Sale of WEL Technology
The Company completed the sale of its wholly owned subsidiary, WEL Technology Limited, to Spectrum Resources Limited in July 2000 for $2.65 million (including $500,000 worth of Spectrum shares). The Board made the decision to sell "WEL Tech" because, despite its excellent software product, its operations fell outside the core business of operating a lines company and significant further investment was required to meet overseas opportunities, particularly in North America.
Outlook
The Board has accepted the challenge of growing the business for the benefit of its owners and the wider community. I believe that growth and added value will come primarily from finding smarter ways of carrying on our business, and from seeking opportunities that are allied to the core business in the Waikato. For example, there is likely to be an increased move towards the formation of joint management or ownership structures for lines companies to capture efficiency and cost saving synergies. Further challenges also exist in meeting the needs of consumers in coming years and in the form of new technologies, such as distributed generation. These challenges must be met head on to ensure value is retained and enhanced.
Acknowledgements
I would like to acknowledge the contributions of my fellow directors, and the management and staff of the Company during the last year, which has been a demanding time. In particular I would like to wish the "WEL Tech" team all the best in their future endeavours. I also extend my thanks and appreciation to the WEL Energy Trust trustees and staff and look forward to continuing the positive working relationship that has been developed between the Company and Trust. I also take this opportunity to thank and wish well former director John Foote who recently resigned to take up another opportunity in the industry.
Chief Executive Officer's Report
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| WEL's Executive Managment team.
From left: Neil Simmonds, Tim Whiteley, Keith Edmonds, Mike Underhill, Jacqui Thorby, Kevin Palmer, Peter Burgess, John Versluys and Brian Rayner. |
Financial Performance
Line sales revenue increased by 3.1% to $50.5 million and this was due to the 9.1% increase in energy volumes distributed over our system. This, coupled with good cost control, ensured that our Earnings Before Interest and Tax (EBIT) increased to $22.9 million.
As a lines company, our direct customers are the energy retailers who sell electricity to end users connected to our electricity network. However, our view is that WEL must also focus on the end use customer as the basis for improving performance. We believe, and customers have told us, that we must meet a three way test: Firstly, that we provide a reliable supply; Secondly, that our prices are fair; And thirdly that we give good service.
Reliability & Safety
A major part of the Company's capital programme is spent on growing the network and improving the reliability and safety of that network. We are spending significant sums on improving reliability via the installation of proven measures and the use of new technologies to minimise outage frequency and duration for customers. It is pleasing to report that in the past 12 months our reliability has improved with the annual average outage time per customer reducing from 180 minutes to 109 minutes.
Network Improvements
WEL has committed to a comprehensive network augmentation programme to enhance security of supply and also to cater for future growth in customer numbers. Our capital programme is currently costing 1.8 times our depreciation. The Waikato has continued to be a growth area. This is reflected in WEL's customer numbers increasing by 1,579 during the year from 68,948 to 70,527.
Network enhancements over the past twelve months include 11kV switchgear replacements at Avalon Drive, Civic, Whitiora and Findlay Street substations, and transformer reconditioning and replacements for Sandwich Road, Findlayson and Te Kauwhata substations. We have also continued our major cable upgrade programme which is progressively seeing the replacement of old gas filled cables. The past 12 months saw $3.54 million worth of cable installations underway or completed by WEL. These included the upgrade of the Pukete to Horotiu cable, the Avalon Drive 11kV augmentation project, the Mahoe/Bader Street cable and the Hamilton to Cobham Drive 33kV cable.
We are, and will continue, to target areas of our network and our work practices to improve our reliability into the future.
Innovation and Technology Advances
There has been much public comment about poor levels of service customers receive from call centres throughout New Zealand. Our concern has been that customers who need to contact us regarding broken power lines or other safety issues are able to do so quickly. We have extended our call centre, "Response Plus", to 24 hours, seven days a week and we have the responsibility for ensuring all customer fault calls are dealt with as soon as possible. So successful has this been that we are also managing calls for other utilities and local authorities.
Furthermore, we are also currently in the process of refining a major computerised Outage Management programme to further improve our response to customer needs during fault conditions.
Prices held
Over recent years we have adopted a policy of holding and even reducing prices and this has meant there has been no price increase since 1996. There have in fact been two price reductions in the last 4 years. The Board has committed to holding prices at their current level until at least August 2001.
Our customers
We recognise the importance of good customer communications, and we have developed a comprehensive web site, and continue to publish bimonthly newsletters designed to keep commercial customers fully informed of developments to services. We also conduct regular seminars for businesses, utilities, local authorities and contractors in the Waikato area.
Distributed Generation
In the last year Contact Energy commissioned a 45 MW generation plant at the Te Rapa Dairy Factory. This is embedded in our distribution network. We have successfully completed the operational and contractual challenges associated with having a power station of this size contained within our network.
In future we expect to see a number of other smaller scale generation stations constructed within our network area as generation companies worldwide move away from large centrally located power stations to much smaller units distributed within the local networks.
In conclusion
It has been both an interesting and challenging first year as Chief Executive and as we look ahead to further growth and development I would like to acknowledge the skill and commitment of the WEL team. It has been a pleasure to have come to a company with such innovative and dedicated staff and I am confident we are well equipped for success over the next 12 months.
Directors
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| Directors
From left, Rodger Fisher, Brookes Des Forges, Sir Dryden Spring, Shane Solomon, Brian Walsh. |
Sir Dryden Spring
(Chairman)
Sir Dryden became Chairman of WEL Energy Group in 1999, after a long and distinguished career in the dairy industry. He was Chairman of the NZ Cooperative Dairy Company Ltd. from 1982 to 1989, during which time the company's turnover more than doubled. He became Chairman of the New Zealand Dairy Board in 1989 and, during his 10 year leadership, turnover almost tripled to NZ$7.8 billion. Sir Dryden is Chairman of Goodman Fielder New Zealand and of Ericsson Communications Limited (NZ). He is Deputy Chairman of Goodman Fielder Ltd., and a director of Nufarm Ltd., the National Bank of New Zealand Ltd., Maersk New Zealand Ltd. and Fletcher Challenge Ltd., and a member of PA Consulting NZ Advisory Board. In 1994/95 he was a member of the APEC Eminent Persons Group, which drafted the APEC Vision. He was knighted in 1994 for services to New Zealand and the dairy industry.
Rodger Fisher
(Deputy Chairman)
Rodger became Deputy Chairman of WEL Energy Group Limited in 1999. He was managing director of the Owens Group Limited between 1987 to 1999. He is Chairman of the Civil Aviation Authority and of the Aviation Security Service, Deputy Chairman of The Blues Franchise Limited, and a director of Waitemata Health Limited, the Auckland Rugby Football Union, and the Eden Park Trust Board of Control. Rodger is a Fellow of the Chartered Institute of Secretaries, the Chartered Institute of Transport, the Institute of Directors and the New Zealand Institute of Management.
Brooke Des Forges
Brooke has been a dairy farmer at Whitikahu near Taupiri for 50 years. He has been a director of the Company and its predecessors since 1988 and previously served on the Central Waikato Electric Power Board. He was a Waikato County Councillor for 12 years, and then Deputy Chairman of the WDC for three years. He also served on the former Waikato Valley Authority and was chairman of the Taupiri River and Drainage Board for 14 years. Brooke is also a JP, Chairman of the Pukemokemoke Bush Trust, a life member of the New Zealand Land Drainage Association, Deputy Chairman of the Waikato Show Trust and Vice Chairman of the NZ Fieldays Society.
John Foote
John Foote has more than 21 years experience in the construction industry in New Zealand, Britain, Europe, the United States and Saudi Arabia. He also spent seven years in electric utility management at Power New Zealand Ltd, where he was chief operations manager. Previously he worked at Mainzeal Group Ltd for 10 years, where he was general manager construction. John has a BSc and BEng (civil) from Auckland University and is also a director of Watercare Services Ltd. John resigned as a director of the company in July 2000.
Shane Solomon
Shane is a senior legal adviser to the Tainui Maori Trust Board and a member of its secretariat. Since 1994, he has specialised in legal and tribal research for the Centre of Maori Studies and Research at the University of Waikato. He was part of the negotiating team responsible for settling the Waikato Raupatu Claim and helped draft the Raupatu Settlement legislation. He is currently principal researcher for the Waikato River claim. Shane has a law degree from Auckland University.
Brian Walsh
Brian is an Auckland- based financial consultant specialising in capital raisings and equity valuations. He is a former director of investment banking at Merrill Lynch (New Zealand) Ltd. Previously, he held senior management positions with Countrywide Bank and was director of itsoperating lease subsidiary, Fleetlease Limited. He holds several other directorships and has a MA (Hons.) in Economics and a law degree from Otago University. He is a member of the Institute of Chartered Accountants.
Company Directory
Registered Office
WEL Energy House
Cnr Victoria and London Streets
PO Box 925
Hamilton
New Zealand
Telephone: 64-7-838 1399
Facsimile: 64-7-858 1451
Website: www.wel.co.nz
Email:
connect@wel.co.nz
Auditors
- PricewaterhouseCoopers, Auckland
Solicitors
- Rudd Watts & Stone, Auckland
Share Registry
- Computershare Registry Services Limited, Newmarket, Auckland
Insurance Brokers
- Willis Corroon Limited, Auckland
Directors
- Sir Dryden T. Spring - Chairman
- Rodger Fisher - Deputy Chairman
- Brooke Des Forges
- John L. Foote
- Shane R. Solomon
- Brian V. Walsh
- Mike C. Underhill (Alternate)
Chief Executive
- Mike Underhill BE (elect), MCom (Hons), FIPENZ From 1/9/99
- C. Graham Coxhead BE (elect), (retired) Until 31/8/99
Executive Officers
- Tim J. Whiteley LLB (Hons) Legal/Regulatory Manager
- Kevin J. Palmer BMS, CA Financial Controller
- Peter A. G. Burgess NZCE, REA Operations Manager
- Keith A. Edmonds NZCE, Dip BS Network Manager
- Jacqui A. Thorby BMS (Hons) Marketing Manager
- John H. A. Versluys BSC (Tech), BE (Hons), MIPENZ IS Manager
- Brian J. Rayner IT Development Manager
- John O'Hara Dip Intl Marketing (Hons), MMINZ CEO WEL Technology
Financial Statements
| Statements of Financial Performance
For the year ended 30 June 2000 | |||||||
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These are available in PDF format which you can download here. | |||||||
Last updated: Thursday, 26 October 2006
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