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Vector's Electricity EBITDA Just Jumped 28% — Thanks to the Commerce Commission

A Regulated Monopoly at an Inflection Point

Vector Limited owns the electricity distribution network that keeps Auckland's lights on, plus a smaller natural gas distribution business. It's the kind of infrastructure monopoly that most investors put in the "boring utility" bucket — predictable regulated returns, steady dividends, not much excitement.

Except Vector just posted a half-year result where electricity EBITDA jumped 28% year-on-year. That's not boring. It's a direct consequence of the Commerce Commission's DPP4 reset — a regulatory reset of allowed revenues that took effect on 1 April 2025 — and it has fundamentally changed the near-term earnings trajectory for this stock.

Shares trade around $4.88 NZD, up roughly 23% over the past year. The 52-week range runs from $3.93 to $5.20.

What DPP4 Actually Did

Every five years, the Commerce Commission resets the revenue that regulated electricity distributors like Vector are allowed to earn. The new reset — DPP4 — runs from 2025 to 2030. It allows materially higher revenue to fund network investment, and the impact has shown up immediately in the numbers:

  • •H1 FY26 electricity revenue (ex-contributions): $445 million NZD, up 20%
  • •H1 FY26 electricity EBITDA: $220 million, up 28%

Those aren't normal utility growth rates. They reflect a step-change in allowed returns that had been signalled for some time but only kicked in from April 2025. The flip side is felt on the other end of the meter: Auckland households are seeing a median line-charge increase of around $6 per month in FY26.

For investors, DPP4 is effectively a five-year tailwind on the core business.

FY25 and H1 FY26: The Numbers

Full year to 30 June 2025:

  • •Revenue (continuing, excluding capital contributions): $893.5 million (up 9%)
  • •Adjusted EBITDA (continuing): $401.1 million (up 16%)
  • •NPAT (continuing): $154.7 million — depressed by a $37 million gas network impairment
  • •Electricity EBITDA: $351.9 million (up 19%)
  • •Gas EBITDA: $46.7 million (up 4%)

Half year to 31 December 2025:

  • •Adjusted EBITDA (continuing): $240 million (up 19%)
  • •NPAT (continuing): $113 million (down 4%)
  • •Gross capex: $223 million
  • •Capital contributions from customers: $97 million
  • •Interim dividend: 12.5 cps
  • •Electricity connections: 637,247 (up 1.3%)

FY26 guidance:

  • •Adjusted EBITDA: $470–490 million
  • •Gross capex: $500–540 million
  • •Capital contributions: $180–215 million

That capex number is the one to watch. Vector is gearing up for a multi-year investment cycle to support Auckland's growth and electrification — EVs, heat pumps, data centres, and general population growth all drive demand for network capacity.

The ENTRUST Structure

Vector is unusual among NZX-listed companies because its majority shareholder is a consumer trust. ENTRUST owns 75.1% of Vector on behalf of roughly 368,000 Aucklanders whose properties are connected to the Vector network. Those consumers receive an annual ENTRUST dividend — the most recent payment was $364 per eligible Aucklander on 24 September 2025.

This structure has two implications for public investors:

  • •Stable dividend policy: ENTRUST funds its consumer dividend out of the Vector dividend it receives, so management is heavily incentivised to maintain steady, predictable payouts rather than pursue empire-building acquisitions.
  • •Low free float: With ENTRUST holding three-quarters of the shares, daily trading volumes are relatively thin and the stock can be less liquid than market cap would suggest.

Strategic Simplification Is Largely Done

Vector spent the past three years simplifying the portfolio to focus on the core regulated network:

  • •Firstgas (gas transmission) — sold 2022
  • •Vector Metering — 50% sold to QIC in 2023, now rebranded Bluecurrent (Vector retains 50%)
  • •EV charging — eight public sites sold to ChargeNet

What's left is essentially a pure-play Auckland electricity monopoly, a smaller gas distribution tail, and a 50% stake in Bluecurrent as a non-core associate. Clean story, clean capital allocation.

Key Metrics

  • •Share price: ~$4.88 NZD
  • •Market cap: ~$4.88 billion NZD
  • •52-week range: $3.93 – $5.20
  • •P/E (TTM): 19x – 24x (depending on source, reflecting the $37m FY25 gas impairment)
  • •Forward consensus EPS: ~$0.24 NZD
  • •Annual dividend: ~25 cps (yield ~5.2%, fully imputed)
  • •Interim FY26 DPS: 12.5 cps
  • •FY26 EBITDA guidance: $470–490 million
  • •FY26 capex guidance: $500–540 million
  • •Analyst consensus target: $4.95 — ~1% above current price
  • •Consensus recommendation: Hold

What to Watch

  • •FY26 result vs guidance: Hitting the top end of the $470–490 million EBITDA range would reinforce the DPP4 thesis; missing would raise questions about execution.
  • •Capex funding: $500m+ in annual capex needs funding. Watch gearing and any signals around debt capacity or equity needs. A dilutive raise would be a bear-case catalyst.
  • •Electrification volumes: The long-term story depends on Auckland's electrification pace — EV adoption, heat-pump installations, and data-centre connections. Faster adoption lifts the value of the regulated asset base.
  • •Commerce Commission follow-ups: DPP4 runs to 2030 but includes annual pricing resets and quality standards. Any adverse regulatory decision would dent confidence.
  • •Bluecurrent performance: The 50% associate stake is non-core but still contributes. Any strategic moves around the smart metering business are worth tracking.

The Bottom Line

Vector is a regulated utility that just got a five-year regulatory tailwind baked in, paired with a capex-driven rate-base growth story and a disciplined dividend framework enforced by ENTRUST's ownership. The 28% electricity EBITDA jump at the half-year is genuine — it's the DPP4 reset doing exactly what it was designed to do. At ~$4.88 against a consensus target of $4.95, though, the market has already re-rated the stock in anticipation. The ~5.2% imputed yield is the real draw for income investors; the upside case from here depends on capex execution, electrification volumes beating forecast, and no nasty surprises from the next regulatory cycle. For a long-duration infrastructure holding, the setup is attractive. For anyone expecting another leg of the 23% annual return, the easy money has likely been made.

*Disclaimer: This article is for educational and informational purposes only. It does not constitute financial advice. Stock data may not be real-time. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.*