MRP chief fires parting shots

19:24, Aug 20 2014

Labour is attacking Mighty River Power over "outrageous" profits, while the company's outgoing boss, Doug Heffernan, has accused Labour of being deceptive and warned politicians against "fiddling" with the electricity market.

In the past politicians had pulled the strings in the market and it had been a "nightmare", Heffernan said.

MRP yesterday posted a $212 million profit for the year, up 84 per cent on the previous year. The previous year's profits were hit by costs and significant impairments from taking direct control of international geothermal investments.

The company said its results beat its prospectus forecasts and MRP declared an increased final dividend of a fully imputed 8.3c, up half a cent on the prospectus forecast, to be paid on September 30.

That was despite the worst North Island drought in MRP's 16-year history for its Waikato River hydro-power dams and strong competition for customers, with flat-to-falling electricity prices.

Labour energy spokesman David Shearer said "demand for electricity is flat or declining, yet the company has made enormous profits".


It was the latest company to celebrate record profits off the backs of households, Shearer said. On Monday, Meridian announced a profit of about $230m and Contact $234m.

Since the state-owned power companies were partly privatised, a few investors wanted to maximise their profits.

"I've had hundreds of people . . . telling me how they are struggling to heat their houses this winter and how their prices have rocketed," Shearer said.

But Heffernan said claims of rocketing prices were incorrect. He pointed out that while the bottom-line profit was up 84 per cent, underlying profit, excluding big one-offs last year, was up just 3 per cent.

"It's misleading, deceptive and unhelpful for our customers to have someone suggesting power prices are rocketing when the Electricity Authority, the regulator, says that the competitive energy price is up only 0.3 per cent in the past year, and 0.5 per cent in each of the past three years."

On average, household electricity prices went up about 1.7 per cent in the past year, in line with inflation, MRP said.

Government agency figures show that national average residential electricity prices have increased from 14.6c a unit in 2002, to 27.6 cents this year, a rise of about 90 per cent. General inflation rose about 34 per cent at the same time.

Heffernan also fired a parting shot against "fiddling" with the electricity market structure and, in a thinly veiled dig at the Greens, he dismissed solar power.

While not directly mentioning Labour-Greens plans to reform the electricity market with a centrally managed bulk power buyer, he said those who wanted to tinker with the market structure should think again. The "good old days" of political interference in electricity were a nightmare, he said.

Solar power did not stack up financially against much cheaper geothermal power, he said.

A Green Party election priority is a solar-homes package that will include low-cost loans to families who want to go solar. It also wants to spend $20 million installing solar panels at 500 schools.

Geothermal power could be produced for less than 10c a unit and was always there, regardless of the weather.

Geothermal power ran "24/7", Heffernan said, and made up 42 per cent of MRP's capacity, with the completion of its Ngatamariki power station. That made MRP's generation highly resilient.

Solar power cost about 25c a unit, and "depends on the Sun".

Fraser Whineray will take up the role of Mighty River Power chief executive on September 1.

MRP shares closed at $2.37.5, unchanged on the day. The shares hit a low of about $1.94 early in the year.

The Dominion Post