In June the company had reached an agreement with the State Government for the recovery of costs associated with the introduction of retail contestability in the state's natural gas market.

The total payment of $54.6 million represents the recovery of about $28 million in capital expenditure incurred on the project and annual operating costs of around $5 to $6 million for the next five years.

Envestra’s managing director, Ian Little said “We have been advised by our auditors, PricewaterhouseCoopers, that Australian Accounting Standards require the entire payment of $54.6 million to be treated as revenue for the year ended 30 June 2004. However, the capital expenditure is depreciated over the next five years, commencing in 2004-05.

“This accounting treatment means that the company now expects to record an after tax profit in the order of $24 million for the year ended 30 June 2004, subject to finalisation of the accounts. We had previously advised the market that an after tax loss of $10 million was forecast.

“Under existing Austalian Accounting Standards this improvement in the current year’s result will be offset by a negative after tax impact of about $7 to $8 million per year for the next five years,” said Little.

“The directors have a strong view that this receipt would better have been matched against future operating costs and depreciation over the coming years, however, the relevant accounting standards require us to account for the receipt as current year revenue. Further details will be provided when the company announces its full-year result on 25 August.”