Mighty River Power overcame low
hydro inflows and dry conditions to meet its early targets
and report a 4% increase in operating earnings for the six
months ended December.
The company, which was partially privatised by the Government
in May last year, reported operating earnings of $270
million, up $9.5 million, in the period, despite record-low
The company declared a dividend of 5.2c per share and
reaffirmed it was on track to achieve its full-year forecast
of $498 million in operating earnings.
Chief executive Doug Heffernan said the achievement was
challenging in light of the drought conditions that had
affected the central North Island in the past 12 months.
Hydro volumes were down 34% in the first quarter which, over
the full period, equated to a loss of more than $33 million
in potential operating income because of inflows into Lake
Taupo being the lowest since the company was formed in 1999.
That was partially offset by the additional contribution from
geothermal with the completion of the new Ngatamariki station
at the end of August, together with higher-than-expected cost
savings, he said.
Electricity sales volumes to businesses were down more than
9% in a low-margin commercial market as Mighty River Power
chose to reduce business sales to where they were a year ago.
That helped lift the average sales across the portfolio by 2%
in the six-month period.
Mighty River Power announced in December a commitment not to
increase residential energy prices at least until April 2015,
reflecting the highly competitive retail environment.
''This means the only increase on customers' electricity
bills will be where there are regulator-mandated increases
from transmission, distribution and metering charges.''
Residential sales volumes were down 5% on the previous
half-year, partly because of warm winter and spring
temperatures resulting, on average, in lower bills for
Craigs Investment Partners broker Chris Timms said the Mighty
River Power result showed the benefits of partially listing
the former state-owned energy company.
As expected, the company was open to more oversight and had
become more efficient by taking costs out of its operations.
''I've always said the companies would be more efficient when
they came out of being an SOE. The detractors said the
partial listings would result in higher power prices with no
real benefit to customers. Power prices have continued to
The contrast between Mighty River Power having battled
drought conditions and Meridian having had higher-than-normal
hydro flows showed how seasonal contrasts were dealt with by
the energy companies, he said.
Next year, Meridian might be facing dry conditions, while the
North Island could be wet.
''While storage had built up to 100% of average by the end of
December, the company indicated it is currently at just over
60% of average. Wholesale prices are well above averages at
the moment, but Mighty River appears to be restricted from
materially benefiting. However, we expect it did take
advantage of higher dam levels and high prices up to
mid-February and has made a good start to achieving its
numbers,'' he said.
Chairwoman Joan Withers said the company had lowered its
estimate for capital expenditure for the full year from
previous guidance of $125 million-$175 million to $95
million-$120 million because of lower investment domestically
as it implemented cost containment plans and in international
geothermal, where a patient approach to growth had reduced