Transpower profitability

Stuff reported:

Labour leader David Shearer quickly went on the offensive over power prices after announcing the demise of the ‘‘man-ban’’ selection policy, starting with an attack on John Key’s ‘‘desire to suck dividends out of national grid operator Transpower’’. He said it meant Kiwi households had hundreds of dollars added to their power bills. Transpower has paid more than $600m in dividends in the past two years and will pay out another $151m this year.

It means no such things, and shows some financial illiteracy. Dividends are simply the payment of surplus funds. The key figure is what has been the actual profit made each year. In other words, has Transpower in recent years been making far greater profits than in the past?

Here’s the average annual profit for the last 13 years:

• 2000 – 2002: $115m
• 2003 – 2005: $74m
• 2006 – 2008: $147m
• 2009 – 2011: $78m
• 2012: $85m

So if there has been a surplus of funds built up, then we know when it occured!

The level of profits by Transpower do not seem that large. At a minimum they need to generate a return on current capital, plus enough of a profit to allow for investment in new infrastructure.