Profits slump at state power firms

By CHRIS DANIELS energy writer

State-owned power companies have revealed sharply reduced profits, and last year's cold, dry winter is blamed for much of the fall.

But the Government should not mind too much, as the flow of dividends is continuing. This year the SOEs will add $142 million to state coffers.

Integrated generator-retailer SOEs Meridian, Genesis and Mighty River Power all had big declines in profits, while national grid owner and manager Transpower stayed stable.

Yearly financial results announced yesterday are for the year to the end of June, which means they include some of the worst of the winter of 2001 - characterised by below-average rainfall in both the North and South Islands, coupled with cold weather.

Thermal generators such as Genesis enjoyed the dry winter, earning big money from its thermal plants, including the giant Huntly power station. But last summer, rainfall came back to normal, allowing hydro generators such as Meridian to generate cheap electricity, putting thermal generators at a disadvantage.

Genesis, which is now the largest electricity retailer in the country, earned a profit of $48.1 million from revenue of $1.09 billion. Chief executive Murray Jackson said the profit was satisfactory, given the high cost of moving new business into the company.

He said the company expected to prepare a development plan over the next year for the proven, but undeveloped Kupe gas field, of which it owns 70 per cent.

Jackson said he hoped Genesis' new, gas-fired power station at the Huntly site would be commissioned by December 2005.

Meridian, New Zealand's biggest power generator, admitted yesterday that it had failed to meet its $124 million profit target.

"While the country as a whole got through last winter with only minimal impact, it was an expensive exercise for Meridian," said chief executive Keith Turner.

The reduced profit showed speculation that Meridian was profiteering during last year's winter power crisis was incorrect.

"At times we were buying power in excess of $250 per MWh from the spot market in order to deliver on contact obligations at $50 per MWh or lower."

Mighty River Power, which generates its electricity on the Waikato river and retails power under the Mercury brand, took the opportunity of announcing a reduced annual profit to seek support for its resource consent applications for greater flexibility in the way it operates its central North Island hydro stations.

Revenue for the smallest of the power SOEs was down 8 per cent on the previous year and the amount of electricity generated was down nearly 13 per cent.

Water inflows into the Mighty River catchment area were down 17 per cent on the long-term average and 13 per cent lower than the previous year.

Mighty River chairman Rob Challinor said that given the strong relationship between catchment rainfall and operating performance, last year's results were always going to reflect the low water storage position at the beginning of the year and low rainfall.

Mighty River was still able to reduce its debt by $67.8 million to $462 million. This was due to the Government's decision to let the company skip a dividend payment the previous year.

Transpower will pay the Government a total dividend of $80.2 million - the exact amount of its profit after tax and before its annual asset revaluation.

Chairman Sir Colin Maiden said Transpower had undertaken several investment initiatives to make the grid more reliable and increase capacity for the users.

He said the focus had been on low-cost enhancements to the system, allowing an increase in capacity.