6 Feb 2002 – A write-off amounting to $A30.2m ($15.34m) has resulted in Melbourne-based utility United Energy downgrading its annual net profit to about $A47m.
In December United Energy warned it would report a drop in net profit to between $A72m and $A74m for the 2001 calendar year, which included significant items from losses relating to its telecom offshoot Uecomm. Last year the utility reported a net profit of $A129.2m.
The company said the latest writedowns in its Pulse Energy and EdgeCap subsidiaries were related to loans and accrued interest in the affiliated companies. United Energy said charges include $A10m relating to its exposure to Pulse’s $A117m shareholder loan and $A15.2m in accrued interest due from the 25 per cent-owned energy retailer.
Other Pulse shareholders include global energy giant Shell with a 40 per cent stake, oil and gas group Woodside Petroleum with 10 per cent stake, while Energy Partnership, a private energy consortium-backed by AMP, holds the balance.
United Energy said it would also write-off a $A5m loan in EdgeCap, its part-owned energy trading company. The write-offs are forecast at $A25.6m after taxes. “United Energy now expects to record a consolidated net profit after tax for the full year ending December 31, 2001 of approximately $A47m,” the company said in a statement.
United Energy’s chief executive officer, Don Bacon, said the decision behind the Pulse Energy writedowns was due to a recent decision by the Victorian Government to effectively cap retail electricity prices from January. The state’s five residential energy retailers have been restricted to price rises of between 2.5 and 4.7 per cent, substantially less than the increases they sought from the Bracks government.
“Government intervention in what should be a competitive market has forced Pulse to absorb much of the 60 per cent increase in wholesale electricity prices over the past two years,” said Mr Bacon. “This decision to cap prices will have a very negative financial impact on retail energy companies in Victoria, Mr Bacon described the price caps as reminiscent of the recent California Energy Crisis.
A Victorian Government decision to delay the introduction of full retail gas contestability for one year to October could potentially cost Pulse more than $A30m, he added. Mr Bacon said United Energy was unable to make a final decision on the book value on its investment in Pulse until the full impact of the price caps on the business was assessed.
Meanwhile, Mr Bacon said United Energy’s core distribution businesses continue to perform well. “Distribution has delivered a solid, predictable cash flow, and has set high standards again in network reliability in 2001.” He said Utili-Mode has NPS has built on its customer bases while NPS has expanded into higher-margin businesses.”
United Energy said its dividend forecast of 17.25 cents per stapled security was not affected by today’s announcement. United Energy will present its final results on Tuesday.