Mighty River profits plunge on foreign retreat

Deputy Editor - Business·NZ Herald·

23 Feb, 2015 08:30 PM2 mins to read

The Waikato hydro scheme is an important source of generation for Mighty River Power. Photo / Alan Gibson

Mighty River Power's withdrawal from its geothermal operations overseas is largely behind a 93 per cent plunge in net profit in the half year to December 31.

The power company's net profit fell from $116 million in the prior comparable period to $8 million.

Earnings before tax also fell to $258 million, down $12 million due to lower hydro generation during a dry early summer and a fall in commercial sales.

Underlying earnings were also hit. They were $90 million, down $15 million, reflecting lower earnings before earnings before interest, tax, depreciation, amortisation and financial instruments (EBITDAF) and higher interest and depreciation costs following the commissioning of Ngatamariki geothermal station.

However the company says its dividend forecast for the full year would be unchanged at 14 cents per share.

In updated guidance it says full year pre-tax earnings will be the range of $480 million to $500 million, reflecting lower-than-average rainfall in its Waikato River catchment.

The company's exit from geothermal development in Chile and Germany resulted in non-cash impairments ($83 million) along with the favourable fair value movements of $20 million recognised in the previous half year.

"As announced in December, following a rigorous review, we decided to exit international geothermal development options. The accounting implications of that is a key factor flowing through to the financial results for the period," said chairwoman Joan Withers.

Mighty River Power maintained strong cash flows through the interim period - supporting the forecast ordinary dividend of 14 cents for the full year and today declared a fully imputed interim dividend of 5.6 cents per share, to be paid on March 31.

MRP shares last traded at $3.37.

Contact Energy last week announced it was investigating overseas geothermal ventures to spend an estimated $1 billion in surplus cash over the next five years.