Transpower profit rises as grid investment ramps up

Transpower reported net profit after tax of NZD $176 million for FY26 and operating earnings of NZD $704 million.

The result comes as the grid operator increases investment in New Zealand's electricity network to support rising electrification demand and connect new generation projects. Operating revenue rose 17%, mainly because of a higher Weighted Average Cost of Capital under the current regulatory control period, while operating expenses increased 6%.

Transpower will reinvest higher earnings in replacing and refurbishing ageing parts of the national grid. Capital expenditure is also expected to rise under the current regulatory framework as approved projects proceed.

During the year, Transpower enabled 18 new renewable generation, battery and capacity upgrade projects to connect or be commissioned, adding 669 MW. That was more than five times the amount achieved in FY22.

By the end of June, 22 new generation connection projects had moved into the delivery phase. Together, they represent a further 3,000 MW of capacity that could be delivered by the end of 2028 if customers proceed with investment.

Transpower linked that build-out to a broader shift in electricity demand, saying New Zealand will need to develop and connect as much new generation over the next 15 years as it built over the previous 40 years.

Grid upgrades

Work on the transmission network included commissioning what Transpower described as the first digital substation at Ohangai in Taranaki. The site was delivered in record time to support Fonterra's electrification plans.

Transpower also secured Commerce Commission approval for several large projects, including the NZD $1.1 billion first stage of work to renew the High Voltage Direct Current electricity link between the North and South Islands. Approval was also granted for NZD $47 million to rebuild the Redclyffe substation and NZD $50.5 million to replace the 31km line between Ōtāhuhu and Whakamaru.

Alongside the physical upgrade programme, Transpower published a draft 10-year System Operator strategy and continued work on its Te Kanapu grid blueprint programme. It also began an operational review of the Transmission Pricing Methodology.

The company identified NZD $53 million of savings through a productivity improvement programme, to be delivered over the remaining four years of RCP4.

Transpower maintained investment-grade credit metrics and continued to access global financial markets to support funding for network investment. The board declared a final dividend of 2.5 cents per share, worth NZD $30 million, slightly above the forecast in its Statement of Corporate Intent.

Demand pressure

The investment case is being shaped by higher demand peaks across the electricity system. A recent cold snap set new records for electricity demand on consecutive days, with eight of the 10 highest peaks on record occurring within the past month.

Chair Michele Embling said the year reflected strong performance alongside continued investment in the national grid and power system operations.

"Transpower has delivered a strong year of performance while continuing to invest in the national grid and power system operations that New Zealand needs for the future. Our focus remains on keeping power flowing, maintaining disciplined cost control, and enabling the electrification that will support economic growth and resilience across Aotearoa New Zealand," Embling said.

Chief Executive Officer James Kilty said the company was balancing current system needs with longer-term structural change in the power market.

"These results demonstrate our focus on delivering for customers today, while preparing for an increasingly electrified future. We continued to strengthen critical national infrastructure, connect new generation and customers, and improve the way we plan and operate the power system. As electrification gathers pace, and the power system rapidly changes with more variable, inverter-based resources and new technologies, our job is to ensure the grid and System Operator continue to support growth while delivering reliable service at the lowest overall cost for consumers. The pace of change across the energy system is unprecedented and it is important that we, and the whole sector, stay ahead of the changes," Kilty said.

He said the scale of new generation required would demand a significant build-out across the system.

"We have a significant work programme ahead of us to support New Zealand's electrification. Over the next 15 years, New Zealand will need to develop and connect as much new generation as was built over the previous 40 years. That will require commitment from across industry, and Transpower is ready for this challenge," Kilty said.

On project development, Kilty said Transpower had been helping customers move schemes to the point of investment readiness.

"We are pleased to support customers to advance their projects to a point where they are ready to invest. Through our system operator function, we continue to report on the need for those customers to invest to ensure a secure and reliable grid as New Zealand electrifies," Kilty said.

He also linked the recent surge in peak demand to the need for additional generation and network infrastructure.

"Earlier this month we saw a cold snap set new records for electricity demand on consecutive days. Eight of the 10 highest peaks of all time were set in the last month. The strong pipeline of new investment in generation is essential to ensure that we can continue to meet those record peaks and the nation's future electricity needs. We look forward to working with the industry to deliver the infrastructure that is needed," Kilty said.

Embling thanked Transpower staff and sector partners for their work in keeping electricity flowing to homes and businesses.

"Thank you to everyone at Transpower, and to our partners across the sector, for your hard work keeping electricity flowing for New Zealand homes and businesses now and into the future," Embling said.