Vector's Record Year: Electrification Push, Strategic Review, and Conservative Payout

Utility posts 20% EBITDA growth, record network CapEx, keeps fiber, and signals a strategy pivot to core electrification.

VCT.NZ · Earnings Call · 2026-08-17

A Year of Records and a Pivot to Electrification

Vector Limited delivered a standout FY26, with revenue up 12% to $1 billion, adjusted EBITDA up 20% to $482 million, and NPAT up 55% to $240 million. The driver was the higher electricity distribution revenue allowance under the DPP4 reset, which applied for the full year. “FY '26 has been a year of strong financial performance.” — Chris Blenkiron, Group Chief Executive · 2026-08-17 The company also invested a record $512 million into the electricity network, part of a group gross CapEx of $544 million, up 16%.

Strategic Review: Core Focus and Electrification Opportunity

Vector is in the final stages of a strategic review, with an update promised at the AGM. Management emphasized a return to core operations and a big bet on electrification. “Auckland needs to electrify, the country needs to electrify” — Chris Blenkiron, Group Chief Executive · 2026-08-17 said Group Chief Executive Chris Blenkiron. The company retained its fiber business after testing the market, citing opportunities in data centers and 5G. “we've decided we're the best owner for the fiber business.” — Chris Blenkiron, Group Chief Executive · 2026-08-17 This is a notable reversal from prior cleanup of step-out activities. Chairman Doug McKay highlighted the macro opportunity:

when you lift that number from 34% to say, 60% to 65%, the opportunities for savings for our consumers and our customers are very significant.
Douglas McKay, Chair · 2026-08-17

That "number" is New Zealand's renewable share of total energy, and the shift would dramatically expand Vector's addressable market.

Conservative Capital Allocation

Despite strong results, the dividend was held at $0.26 per share, at the bottom of the 70%-100% payout policy. CFO Jason Hollingworth explained that high CapEx needs weigh on distributions. “we should expect to start seeing a level of imputation in FY '28.” — Jason Hollingworth, Chief Financial Officer · 2026-08-17 The payout ratio is likely to stay conservative. “we have a lot of growth opportunities in front of us.” — Douglas McKay, Chair · 2026-08-17 The company's credit rating is BBB+ with positive outlook, and management is open to an upgrade.

Gas Decline and Bluecurrent Growth

The Gas Distribution segment was flat, with volumes down 1.7% and ongoing uncertainty. Meanwhile, the Bluecurrent smart metering JV continues to expand, especially in Australia. Australian market deployments are driving distributions, up to $55 million. investment in Bluecurrent remains a key growth driver. The overall story is a utility positioned at the heart of energy transition, investing heavily ahead of demand, but balancing shareholder returns with the need for capital. The strategic review could reset capital allocation and dividend policy.