The Government can breathe a sigh of relief after Mighty
River Power yesterday reported financial results ahead of its
prospectus forecasts, Craigs Investment Partners broker Chris
With shares trading around 13% below listing price this week,
Mighty River Power needed a ''good solid result'' to help
lift its share price, he said.
Apart from receiving a cash dividend of $52.2 million from
its 51% holding in Mighty River Power, the Government will be
hoping its partial float of Meridian later this year will
prove attractive to investors.
The energy company, listed on the sharemarket earlier this
year, reported operating earnings, net profit, underlying
earnings and operating cash flow above the forecasts included
in the share offer investment statement and prospectus issued
Operating earnings for the year ended June were $390.5
million, down 15.4% on the previous corresponding period but
up 2.1% on forecast.
Reported profit for the year was $114.8 million, 68.5% ahead
of the pcp and 21.1% ahead of forecast, and underlying
after-tax earnings were $179.5 million, 10.3% ahead of last
year and 12.7% ahead of the forecast.
Mighty River Power chief executive Doug Heffernan said the
main differences from the previous year, as forecast in the
prospectus, were lower hydro volumes due to the drought and
one-off costs associated with taking director control of
International Geothermal interests and the sharemarket
The company's 5% growth in electricity sales to customers in
the reported period showed the success from securing a 12%
increase in commercial volumes ahead of the new Ngatamariki
geothermal station coming online. There was a small drop in
residential demand, consistent with the national picture, he
Mr Timms said the major profit contribution increase had come
from the New Zealand side of the business. The final fully
imputed dividend was 7.2c per share to take the full dividend
Forsyth Barr broker Peter Young said Mighty River Power had
reaffirmed its 2014 financial year prospectus forecast.
''The start of the 2014 year has been challenging with
continued low Waikato hydrology. However, the low wholesale
electricity prices - due to plenty of water in the South
Island - will be helping to protect Mighty River Power.''
The potential for lower operating costs should also be a
boost for 2014 and beyond, he said.
Mighty River Power made a ''somewhat cryptic comment'' that
could mean it was considering increasing the 2014 dividend
from the planned 13cps.
Forsyth Barr continued to favour other stocks in the energy
sector. Mighty River Power was trading at around $2.20
yesterday compared to Forsyth Barr's target price of $2.40.
The current recommendation of hold was under review, Mr Young
Mighty River Power chairwoman Joan Withers said the 2013
financial year was an intense one for the company as it made
the transition from a state-owned enterprise to a listed
company, grew its market share by adding value for customers
and reporting operating performance and financial results
The key measure of operating performance, energy margin, held
up despite the drought - highlighting the company's ability
to perform close to plan under low hydro inflows. That was a
key competitive strength for Mighty River Power in the New
Zealand market, she said.
''Our results highlight a distinctive competitive advantage
for Mighty River Power due to the fact that even large
reductions in Waikato hydro generation volumes are small
relative to overall national supply, with little influence on
national wholesale electricity pricing.
''This means that even though hydro volumes in the Waikato
were well below average, more than 30% of our annual
production is reliable geothermal generation and we could buy
cheaply from the market to cover our sales portfolio.''
The company planned to issue updated earnings guidance at the
annual shareholders meeting on November 7, Mrs Withers said.