Notification of potential forecast revenue reduction

22 July 2019

Transpower New Zealand today announces a potential impact to the forecasted revenue reported in its Statement of Corporate Intent (SCI), released on 28 June 2019.

Transpower’s announcement follows a draft decision by the Commerce Commission on Friday 12 July, which affects Transpower’s Incremental Rolling Incentive Scheme (IRIS) Baseline Adjustment Term (IBAT)[1] for its third regulatory control period covering the revenue years 2020 – 2025 (RCP3).

If finalised, the Commerce Commission’s decision would result in lower revenue for Transpower of approximately $22m per annum or $110m over the five-year RCP3 period. Transpower does not anticipate any material decline in its key credit metrics as a consequence of the Commerce Commission’s draft decision. However, the Board will evaluate the impact and advise any changes to the forecast and targets set out in the SCI once the Commission releases its final decision in November.

While Transpower stated in its SCI that its credit strength and financial return metrics would be impacted by the allowable rate of return on transmission assets set by the Commerce Commission for RCP3, it did not indicate that its forecast revenue would be impacted by a material change in the IBAT. 

The Commerce Commission will deliver its final determination on Transpower’s RCP3 individual price-quality path in November this year, which will include its final decision to the IBAT.

For further information, please contact:

Laura Ackland Senior Corporate Communications Advisor on 04 590 6721 or 027 565 3783.

[1] IRIS IBAT is a technical aspect of Transpower’s opex incentive scheme that determines the treatment (during its third regulatory control period 2020 – 2025 (RCP3) of opex savings generated in its RCP2 period (2015 – 2020).