Intense competition in the electricity sector has resulted in Mighty River Power's operating costs rising $7million in the six months to December 31.
The partially privatised company and former state-owned enterprise posted after-tax net profit of $74million, up from $8million last year, while revenue fell from $874million to $813million.
Earnings before interest, tax, depreciation, amortisation, change in fair value of financial instruments and other significant items (ebitdaf) of $257million was down $1million on the previous period.
The company has declared an interim dividend of a fully imputed 5.7c per share, up 2%.
Chief executive Fraser Whineray said pricing and competitive pressure remained intense during the period.
The large increase in after-tax net profit was attributed to lower non-cash impairments.
The company recognised an additional impairment of $18million, which included the permanent sealing of exploratory geothermal wells in Chile, along with a partial impairment reversal of $1million from the closure of Southdown.
Highlights included increasing Mercury customer satisfaction and increased output from geothermal generation, while safety performance also improved.
Another significant milestone was the closure of the Southdown gas-fired power station in Auckland in December.
The purchase of solar business What Power Crisis Ltd would add proven expertise in the growing niche of solar power, Mr Whineray said.
Full-year ebitdaf was now expected to be $480million to $500million (previous guidance: $490 million to $515 million) subject to any material adverse events, significant one-off expenses or other unforeseeable circumstances, including hydrological conditions.
That assumed average inflows through to June 30.
The full-year 2016 ordinary dividend guidance was unchanged at 14.3c a share.
Craigs Investment Partners broker Peter McIntyre said the year suffered from weak retail but that was offset by higher renewable generation.
The retail price point had fallen despite a mix change that should have seen it rise.
Craigs remained concerned about residential price erosion, particularly in Auckland where Mercury was being undercut by competitors.
Forsyth Barr broker Suzanne Kinnaird described it as a "slightly disappointing'' result overall.
