Mighty River earnings up on geothermal plant

Mighty River Power's Nga Awa Purua Geothermal Power Station. Photo / Andrew Warner.

State-owned electricity generator and retailer MightyRiverPower increased underlying earnings 16 per cent to $162.2 million in the year to June 30, thanks primarily to a full year's operations from the Nga Awa Purua geothermal power station.

Total electricity produced by MRP was up 17 per cent to 6,833 Gigawatt hours, driven largely by the 140 Megawatt Nga Awa Purua station, but assisted also by higher than average hydro generation, which meant 96 per cent of MRP's energy came from renewable sources in the last financial year.

Earnings before interest, tax, depreciation, amortisation and changes in the fair value of financial instruments was in the middle of the company's earnings guidance range, at $443.1 million, 35 per cent increase on $327.8 million the year before.

Net profit after tax was up 50 per cent to $127.1 million, partly because impairments in the last financial year at $19.8 million were well down on the previous year's $31.4 million, but also distorted by volatility in the book value of electricity hedge contracts.

These tend to distort NPAT for all electricity companies, as they all have significant hedge portfolios.

MRP's retail arm, Mercury Energy, lost customers during the year, with the total falling 4.9 per cent to 392,000 as the company allowed lower quality customers depart after overshooting its customer targets in 2009 and 2010.

Competition was also fierce for small and medium-sized customers, with MRP losing market share to more sharply priced alternative offers, and contributing to a fall in total retail electricity sales of 1.8 per cent, to 4,857GWh in the year to June.

However, the company did achieve higher residential sales volumes, partly reflecting higher consuming customers following its forays into South Island markets, and recorded a 7.7 per cent increase in the average sale price of electricity to retail customers from $102 per Megawatt hour to $100 per MWh.

MRP will pay a final dividend of $45.7 million, to make total dividends for the year of $110.4 million, up $24 million on the previous financial year.

Earnings guidance will next be given at the company's annual meeting on October 6.

In the meantime, MRP was moving ahead with its $446 million investment in another geothermal power station, Nga Tamariki.

While electricity demand had stalled in the last four years, the new plant was expected to displace older, more expensive sources such as the Huntly gas and coal-fired power station, and was built with a 30 year investment horizon.

"Near term demand isn't part of the business case," said chief executive Doug Heffernan.