Mighty result will be tough to top

High inflows into its Waikato River system allowed Mighty River to generate at high levels for high prices.

Mighty River Power says it will struggle to repeat its bumper $159 million result during the current year.

It reported a record net profit of $159.6 million for the year to June 30, boosted by high inflows into its Waikato River system at the right time of year, its new Kawerau geothermal station and having more customers.

Profit for the 12 months to the end of June was up $48.7 million on the previous year, although revenues slipped to $1.12 billion from $1.18 billion a year earlier on lower average wholesale prices.

The company will pay the Government an ordinary dividend of 50 per cent of net profit after tax of $79.8 million, plus a special dividend of $150 million.

At the start of the last financial year Mighty River benefited from near-record inflows into its hydro system and was able to generate at high levels for high prices as a result of low lake levels in the South Island and transmission constraints which hurt competitors Contact Energy and Meridian Energy.

Because of hydro generation and the addition of the Kawerau station to its portfolio, Mighty River's Southdown gas plant operated down 60 per cent on the previous year, resulting in big fuel savings.

The company bumped up its share of generation market share from 13.1 per to 15.6 per cent, largely at the expense of Contact. That was the biggest driver of the result, a record in Mighty River's 10-year history.

Renewable generation, which was up by 1500 gigawatt hours (GWh), represented a 36 per cent increase on last year.

Chief executive Doug Heffernan referred to the $230 million paid to the Government and said it was a good year for the taxpayer but a bad one for Contact shareholders.

However, this year had started fundamentally differently to 2008-09, he said.

South Island lakes were at or above long run averages suppressing wholesale prices. As well, there was aggressive competition to dispatch hydro generation.

"It's going to be a real stretch to achieve this result in this financial year."

The company's retail arm, Mercury Energy, had gained 33,000 customers through aggressive marketing in target areas - again at the expense of Contact whose brand had been damaged by the director fees price rise debacle, and to a lesser extent Genesis.

Heffernan said retail margins were thin, particularly in the main cities, but retail growth was important for extending brand profile and helping manage risk.

Within the next year the 132MW Nga Awa Purua geothermal station near Taupo would come on stream.

During the next five years the company would spend $1.8 billion on new power stations, including $700 million to $900 million on the planned Turitea wind farm near Palmerston North.

Heffernan said the timing of new renewable developments was influenced strongly by the exchange rate.

He said if the kiwi slipped to US50c some investments started to look "pretty sick".

The oil-fired Marsden B power station, a "relic" Mighty River had picked up during the SOE carve up, had been sold for $20.4 million to an Indian company which would move the plant and run it on gas.

The taxpayer-owned company surprised many in the industry with yesterday's early release of annual results.

It said the release ahead of the tabling of its annual report in Parliament next month was part of its drive to be more open with the market and was in keeping with the Government's push for greater transparency among state owned enterprises. The other SOEs, Meridian and Genesis, are not likely to produce such strong results. They said yesterday they would report them in the usual fashion in October.