Generators to report on profit flow

Meridian, which owns the Benmore Dam in Otago's Waitaki Valley, faced its most difficult year. Photo / Simon Baker

Taxpayer-owned power generators, traditional cash cows for the Government, are due to report their half-year results tomorrow amid continuing fallout from last winter and a looming report into possible anti-competitive abuse in the electricity sector.

During the past five years, the power companies - Meridian, Genesis and Mighty River Power - have returned dividends totalling more than $2 billion.

The companies comprise about 35 per cent of the state-owned enterprise portfolio and, while profits are under pressure, they also face increased ministerial scrutiny of performance as part of government-wide belt tightening.

Meridian, blessed at inception with 65 per cent of hydro storage, has been the star performer of the generators but faced its most difficult year in the 12 months to June 30 last year. In that time, its profit nearly halved to $128 million, hit hard by a near record dry early winter.

The interim period takes in the tail-end of winter when there were constraints on the high-voltage direct current (HVDC) interisland link and when the company was forced to pay high spot prices to serve its retail base.

Lakes filled rapidly in late winter and spring wholesale prices plummeted. This will have affected Meridian, which also faces scrutiny today from Parliament's commerce select committee.

Listed Contact Energy reported a 31 per cent fall in profit (to $79.9 million) in the same period, blamed largely on the same set of circumstances Meridian faced.

Mighty River Power, which has a mix of North Island hydro dams on the Waikato River, geothermal sources and the gas-fired plant at Southdown is expected to fare better.

Genesis ran its coal-fired plant at Huntly and a new gas-fired one next door flat out during the dry part of winter and lifted net profit 11 per cent to $99 million but will be hurt by the flood of relatively inexpensive South Island hydro power when lakes filled up.

The SOEs will all report using new accounting rules. Meridian and Mighty River are making their chief executives available to the media to discuss results, Genesis has said it will release a statement later in the day.

Energy Minister Gerry Brownlee has said that improved productivity, rather than continual price rises, was expected from the generators.

SOEs and power generator/retailers Contact and TrustPower are also awaiting the release of a Commerce Commission report into pricing.

The investigation, started in 2005, has focused on whether any participants breached section 36 of the Commerce Act by taking advantage of market power for an anti-competitive purpose.

Complaints and concerns about electricity prices - which for residential users increased by 28 per cent between 1999 and 2006 - company profits, a perceived lack of competition activity and allegations of anti-competitive activity sparked the probe.

The delayed report could be out next week.

GOVT PAYDAY

Percentage of profit SOE power companies aim to return to the Government:

* Meridian Energy - 65%
* Mighty River Power - 50%
* Genesis Energy - 40%