8pc yield seen for Mighty River investors

A partially privatised Mighty River Power could produce dividend yields of 8 per cent, says one analyst. Photo / Richard Robinson

State-owned Mighty River Power could produce dividend yields of around 8 per cent for investors if it is partially sold, says an analyst.

Hamilton Hindin Green client adviser James Smalley said the pre-tax yield - based on the company's dividend history and its annual result released yesterday - was typical for a utility in a strong market position.

The Auckland-based generator and retailer reported flat underlying earnings for the year to June 30, with a tax-paid profit of $162.7 million, just $500,000 above that achieved the previous year.

Its bottom line profit included the non-cash impact of changes in the value of financial instruments, and fell 46.7 per cent to $67.7 million, compared with the year before. This reflected the impact of hedging losses on the value of borrowing for geothermal power stations in the central North Island.

The company pays 75 per cent of underlying earnings as dividends and during the past year it paid the Government $119.8 million, an increase of 8.5 per cent on the previous year.

In the year to June 30 it had spent $3.8 million preparing for its proposed partial listing and has spent more since then and expects to spend $2.5 million a year on maintaining a presence on the NZX.

Chairwoman Joan Withers and chief executive Doug Heffernan would not comment on the partial listing, saying it was up to the Government, or forecast financial performance for the coming year because of pre-listing restrictions.

"We're not through the process yet. Obviously we've still got a way to go," Withers said.

The Government has said it will announce a decision next week on whether to go ahead with the sale, the first of up to five sales of minority stakes in state-owned energy companies and the national airline, Air New Zealand.

A Waitangi Tribunal report called on the Government to halt the process while a settlement is reached with Maori over claims to fresh water under the Treaty of Waitangi.

Retail sales volumes increased during the year by 5 per cent, largely due to a 14 per cent increase in sales to business customers, and a focus on high-value customer acquisition south of Auckland.

Heffernan said use of electricity by big industrial users had been declining for more than a decade.

Mighty River Power would not be affected more than any other supplier by the closure of part of Norske Skogg's Kawerau pulp and paper mill as it did not have a physical contract with the company, he said.

Smalley said the result was solid with "no nasty surprises".