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Horizon Energy first-half profit drops 58% on regulated price curbs

Horizon Energy Distribution, the Bay of Plenty lines company which exceeded its regulated price path in 2012, said first-half profit fell 58 percent as the Commerce Commission forced it to earn less.

Profit fell to $1.8 million in the six months ended Sept. 30, from $4.2 million a year earlier, the Whakatane-based distributor said in a statement. Sales rose 27 percent to $57.4 million. The company expects full-year profit to fall 40 percent to $4.3 million, saying receipts received in 2014 would not be repeated.

The antitrust regulator cut the amount Horizon Energy can earn as part of an out-of-court settlement after the lines company exceed its price path by $645,686, earning 3 percent more than its regulated pricing allows in 2012. Under the regulation, where electricity distributors operate with an effective monopoly they must provide the commission with an annual self-assessment against the price path, which is the total amount it can changed for its regulated services.

Under the settlement the Commission cut Horizon Energy's earnings by at least $727,934 to compensate for the amount it over charged in the 2012 year. Operating profit after tax for its electricity distribution unit fell 59 percent to $1.3 million, while sales rose 5.8 percent to $16.5 million.

"The after tax profit of the core regulated electricity distribution business has declined compared to the same six month period last year, due largely to the pricing changes imposed on the business and higher depreciation expenses," the company said.

Last month, Aquaheat New Zealand, a unit of Horizon Energy, bought Christchurch-based Hawkins Refrigeration for an undisclosed amount to expand its national reach. Aquaheat is one of two 'unregulated' business units. The other non-regulated business is Horizon Services, which does contract maintenance work in the Bay of Plenty across everything from security and air conditioning services to gardening.

Its heating ventilation and air conditioning unit recorded a 42 percent drop in operating profit to $286,000 as sales rose 41 percent to $35.3 million. Its electrical contracting and servicing segment's operating profit fell 83 percent to $119,000 as sales increased 5.8 percent to $10.3 million.

The board declared an interim dividend of 6 cents per share, to be paid on Dec. 12. Shares of Horizon were unchanged at $3.30 and have fallen 2.4 percent since the start of the year.