Vector can withstand impact of regulator’s price ruling, says Moody’s

Price cuts imposed by the Commerce Commission are negative for Vector though the gas distribution network owner has enough of a cushion to ensure its credit rating doesn’t need to be cut, says Moody’s Investors Service.

The competition regulator yesterday confirmed Vector will have to cut its prices by 18 percent, and cut its wholesale gas transmission charges by 29.5 percent. The final determinations are in line with earlier drafts, and remain the subject of a High Court merits appeal led by Vector.

“The commission’s final decision for Vector’s gas distribution and transmission price is credit negative and reduces the cushion within the rating, but has no impact on its Baa1 rating and stable outlook,” said Moody’s analyst Mary Anne Low, in a statement.

“Vector has sufficient financial flexibility and headroom within its Baa1 rating to withstand these decisions,” she said.

At its half year result announcement last week, Vector warned earnings in the second half of the current financial year would suffer as cuts to network pricing took effect. The company achieved a 10.8 percent lift in tax-paid earnings to $118 million in the six months to Dec. 31.

Moody’s said first-half earnings were broadly in line with its expectations despite lower energy demand as a result of a softening economy and warmer weather.

Vector shares last traded at $2.90 and have gained 5.5 percent this year. It is rated ‘hold’ based on the consensus of six analysts polled by Reuters with a median price target of $2.80.


Check Also

Australia’s Blood Sport, Politics: Turnbull Ousts Abbott

As the sun set in Canberra today, another Shakespearean-worthy political plot was thickening. Prime Minister …

Leave a Reply

Your email address will not be published. Required fields are marked *