Trustpower Results In Line, All Eyes on the RET Regime in Australia

Trustpower results were broadly in line with our expectations. Underlying earnings before interest, tax, depreciation and amortisation, or EBITDA, was NZD 331 million, an increase of 19.2% during the prior period. This reflected higher contribution from the Australian division as Snowtown 2's volumes increased significantly. This will be a continuing theme in 2016 as well given that Snowtown 2 was fully commissioned in 2015. Our near- and medium-term estimates are broadly intact and, consequently, our fair value estimate of NZD 8.50 remains unchanged. Our forecasts are based on normal hydrology and wind conditions which was not the case in 2015 given drier than usual conditions. We continue to believe that Trustpower possesses a narrow economic moat based on efficient scale.