Aurora Energy Invests Strongly in Major Network Renewal – 2018 Annual Report

“Our two main priorities in 2018 were to continue the renewal of our electricity network while building the new organisation’s capacity to deliver its largest work programme ever.

“Aurora Energy is in a major phase of network renewal to provide safe and reliable power supply to Otago. Our priority over the next three years is to bring the backlog of renewal and maintenance under control.

“During 2018 we invested record levels in replacing, upgrading and maintaining our ageing network. That included taking urgent steps to address some of our worst condition poles through our Fast Track Pole Programme which achieved its primary goal of removing the risk of 2,910 priority poles. In the 18 months to June 2018, we replaced or reinforced more than 5,000 of the poles that most needed attention on the Aurora Energy network and scaled up our ongoing asset inspections programme.

“That was a start, however, the scale, age and state of the network means that several years of carefully planned and implemented renewal and maintenance are required. For example, we manage 6,700 kilometres of lines and cables, 54,000 poles, 94,000 cross arms, 7,000 distribution transformers and 40 substations.

“We still have a lot of work ahead to inspect, maintain and upgrade other equipment but we are committed to making the needed investment and to target that investment on the parts of our network that need it the most. Safety will continue to be our number one priority when making those decisions,” said Mr Fletcher.

Resilience

Aurora Energy also took steps over the past year to build ongoing resiliency into its network, as part of its renewal programme and to future-proof the network. The company advanced two major zone substation developments in the past year to future-proof and modernise critical supply.

“The $13 million Carisbrook substation project will replace Dunedin’s existing Neville Street substation, the oldest substation on our network, and improve security of electricity supply for neighbouring South Dunedin suburbs. The commissioning phase is underway and the new Carisbrook substation is expected to be operational and supplying customers by the end of 2018.

“We also made significant progress on the $9 million Wanaka upgrade project to cater to the demands of the growing local and visitor population. Once complete by the end of 2018, the new substation will provide a hub for the high voltage supply into Wanaka and surrounding areas, add capacity to the existing Wanaka substation, and be able to reroute supply in the event of a fault.”

Independent review

Mr Fletcher said given the company’s major network renewal programme, it wanted the assurance of an independent review, which it commissioned in March.

“We want our customers throughout Otago to have confidence in what we are doing and have a clear understanding of the condition of our network assets and what this means. Recognising this need, shortly after starting as the new chief executive I initiated in conjunction with the Commerce Commission a comprehensive, independent review by Australian engineering experts WSP of the current state of our network.

“The independent review will provide a baseline assessment of the state of our network that can be shared and understood by all of our stakeholders, including customers, regulators, local Councils and the wider community.

“While we continued to progress renewal work, the independent review is a prudent response to the challenges Aurora Energy faces in operating an ageing network and will be a key input into our future network investment plans for the next decade.

“The WSP review is part way through and due to be completed by the end of October and after that we will share the review findings with the public in November.”

Customers

Mr Fletcher said the company was also committed to engage openly with customers about its future plans and improve its responsiveness to customers when they interact with Aurora Energy for services such as new supply connections.

“We set up a series of ongoing Customer Voice Panels across each of our service regions to hear from customers directly about their thoughts on what we are doing and to better understand their needs and preferences as we look towards the future. The Panels, which began in August 2018, bring together a cross-section of residential and business customers and we are looking forward to continued engagement with them.”

“How we use energy is changing rapidly and a range of new technology choices is becoming available for electricity consumers. During 2018, we committed to expanding the public charging network for electric vehicles in Otago. Through our partnership with ChargeNet, we supported the installation of additional chargers at key driving locations and the switch to electric, emission-free transport.”

Financial results

The company’s financial results reflect the investment demands of major infrastructure renewal on the Aurora Energy network.

Accordingly, total assets increased to $535 million with an uplift in capital expenditure on new assets, and net profit after tax was down to $0.4 million.

As signalled in the Statement of Intent, no dividends were paid in 2018 as all earnings were reinvested in the network.

Key results

• Capital expenditure on new assets of $78.4m ($45.1m in FY17), a 74% increase
• Combined expenditure on new assets and maintenance of $93.7m ($61.0m in FY17)
• Total assets increased by $62.9m to $535.5m
• Net profit after tax $0.4m
• Total revenue $106.5m
• 1,400 GWh of electricity received into the network for delivery to customers (RY18)
• 89,199 total customer connections (increase of 1,428 from FY17)

Aurora Energy’s 2018 annual report is available here.

ENDS