At its investor day, Trustpower provided a strong indication it would be returning surplus to shareholders.
Forsyth Barr estimated the company had between 21c per share (cps) to 42cps it could return, and had included a 10cps special dividend a year for the next three years into its forecast, she said.
Following the sale of its Australian business in March, Trustpower forecast its net debt to operating profit ratio was about 2.2 times. That was below the long-term target gearing ratio of 2.5 times to 2.8 times, implying the business had $65 million to $131 million of surplus capital on its balance sheet.
Infratil, Trustpower's largest shareholder, would be keen to receive the cash, Ms Howe said.
Trustpower had invested in some minor network capability which had helped propel it to the top of Netflix's broadband speed leaderboard. Also, process digitisation had resulted in gross margin improvements of about $3 million a year.
The telco story continued to be Trustpower's strength, she said.
Trustpower had dramatically reduced the percentage of customer contacts dealing with humans. In the past two years, the company had managed to migrate 33% of customer contacts to an automated system. A further 12% was targeted for the 2019 financial year, taking staffed contacts to 53% of customer contacts.
Longer-term, Trustpower was hoping to reduce that to about 40%.
Although there had been a cost saving, it had been partially offset by an increase in customer service salaries, Ms Howe said.
In broad terms, Trustpower had managed an 85% increase in customer contacts, while labour costs increased by only 30%.
However, the challenges continued in electricity. Most of Trustpower's customer additions had been coming in metro markets. Customer losses were disproportionately larger in its higher-margin incumbent areas, affecting the company's margins.
Trustpower indicated it expected to get better in retail but worse in generation, she said.
''Our rating is outperform. The long-term outlook for the electricity sector is positive and we see limited down side risk.''
Trustpower shares last traded at $5.63, down 3c.
