Mighty River profit doubles

By CHRIS DANIELS energy writer

State-owned power company Mighty River Power, until now considered the poor cousin of the big energy state owned enterprises, says it is poised for expansion after reporting an annual profit of $113.5 million.

Mighty River, which owns the Mercury Energy retail brand, the Waikato River hydro system, some geothermal generation and the Southdown power plant, had increased revenue of $646.2 million in the year to June 30.

It plans to start investing more money in power generation, particularly in the geothermal field, in partnership and joint ventures with Maori landowners in the Central North Island.

Mighty River is not paying any dividend to its Government owners this year, saying it needs to maintain a sound balance sheet in order to pay for its expansion.



Although it did pay a dividend last year, the Government has seen fit to allow Mighty River pay down debt, to get in better financial shape.

Dominating the year's result was a one-off gain of $34.2 million from getting out of a contract to buy power from the Southdown Co-gen power station in 2002. In that deal, Mighty River bought out the remaining 50 per cent of the station it did not already own from Natural Gas Corp.

Company chairman Rob Challinor said Mighty River inherited the highest debt levels of the three energy state owned enterprises created at the time, and this had now been cut to those seen elsewhere in the industry.

Mighty River's bond issues had raised $313.8 million, which had diversified its debt and shifted it more towards long-term debt.

For the first time in its four-year history, there had been nearly normal inflows into the Waikato hydro system during the first half of the year, said Challinor.

But there was a change for the second half of the year, from March to mid-May. During this time, inflows were the worst ever recorded. This led to a "sustained period of minimum production so as to arrest the rapid decline of storage levels in Lake Taupo".

Later heavy inflows had quickly eased these concerns, he said.

Mighty River was now well placed to invest in opportunities to meet growing energy demand.

A just-completed resource-consent process gave it the flexibility to make the most efficient use of Lake Taupo and the Waikato River.

The desire of directors to keep chief executive Doug Heffernan with the company was reflected in the accounts. A new "retention payment" takes his pay from between $519,001 to $520,000 last year to between $700,000 and $710,000 this year.