Mercury bosses defend $150m special dividend to Govt

Mighty River's new Kawarau geothermal plant.

Bosses of state-owned Mighty River Power, owner of Mercury Energy, are defending a $150 million special dividend for the Government at a time when many customers are financially squeezed by economic recession.

The special dividend is on top of the company's $79.8m ordinary dividend, which is half of the full year net profit of $159.6m announced today.

The net profit for the 12 months to the end of June is $48.7m up on the previous year, with the company benefiting from high hydro inflows, a new geothermal station and more customers.

The special dividend reflected benefits to the company from a number of one-off cash benefits, Mighty River said.

Those benefits included the completion of the Kawerau geothermal power station under budget, significant earnings from unprecedented hydro generation in winter 2008, and the sale of Marsden B oil-fired power station for $20m.

Chief executive Doug Heffernan said Mighty River had paid a "relatively low level of dividend" in the 10 years it had been in operation.

That was largely because it was rebuilding the financial strength of the company, and had significant capital spending, said Heffernan.

Meanwhile, customers would benefit from a competitive electricity market, with other companies matching Mighty River's 12-month retail price freeze, which would last through to March.

"It's going to lead to good outcomes for customers," he said.

The amount of generation plant that had come into the market in the past few years was driving much tougher competition than early this decade when the market was short of capacity.

Mighty River chairwoman Carole Durbin said she was sure the Government had important uses for the special dividend, while the company did not need it for its capital spending, which would only raise debt to planned levels.

The company said its revenues slipped to $1.12 billion in the latest year from $1.18b a year earlier, as a significant fall in wholesale prices was largely offset by increased generation volumes and sales.

Durbin said the key element in the company's operations contributing to the result was a significant rise in renewable generation, which was up by 1500 gigawatt hours (GWh), a 36 per cent increase on 2008.

The commissioning of the 100 megawatt (MW) Kawerau geothermal power station boosted the company's renewable generation capacity, said Durbin today.

The Waikato hydro system also had higher than average generation - 700GWh more than last year - driven by the highest ever inflows in a 90-day period in the first quarter of the financial year.

Those higher volumes also received significantly higher wholesale prices in the first quarter, at a time of low South Island storage levels, she said.

Another factor underpinning the result was growth in market share by the company's retail arm Mercury Energy, which attracted nearly 33,000 new customers.

There was also a 60 per cent cut in production at the Southdown co-generation station which significantly reduced fuel costs.

Geothermal power accounted for 21 per cent of Mighty River's power during the year, compared to 9 per cent a year earlier. Hydro accounted for 71 per cent in the latest year, from 69 per cent, while thermal provided 7 per cent, down from 21 per cent a year earlier.

Total renewable generation rose from 79 per cent to 92 per cent, Mighty River said.

Net profit after tax adjusted for significant one-off financial items and changes in the fair value of financial instruments were $209.9m, compared to $136.2m a year earlier.

- NZPA