Mighty profit sinks in drought

One of the worst Waikato droughts on record has seen Mighty River Power's underlying profit after tax plunge to $139.6 million for the year to June 30, down $72.1m from the previous year's exceptionally high profit.

The state-owned power company's profit was well below the previous year's $211m underlying profit, which was boosted by high inflows into its Waikato hydro dams when wholesale power prices were also high.

Mighty River Power will pay the Government a final dividend of $30.3m in September, after an interim dividend of $56.2m.

On average Mighty River has put power prices up about 3 per cent in the past year for residential and smaller business customers, excluding big commercial contracts.

After the end of the financial year, it increased prices another 3.3 per cent to reflect the impact of the emissions trading scheme.

Chief executive Doug Heffernan said the company did not plan to raise prices further "at this stage".

Chairwoman Joan Withers said the 2009 profit was unlikely to be repeated. "Last year's result represented an alignment of all the stars for Mighty River Power," she said, with record inflows of water into the hydro power system.

"We were able to generate at high levels for high prices as a result of low lake levels in the South Island [last year]."

But this year, the company faced a severe drought in Waikato, reducing power production early this calendar year, just when spot power prices were peaking.

That meant the company had lower hydro production at lower average prices. Hydro power volumes were down about 14 per cent on the previous year.

"The Waikato was in the second-worst drought on record," Mr Heffernan said. "March and April were the driest ever on record for us, right when [wholesale] prices were good. It was a really bad pinch."

The weighted average price across the whole portfolio of generation was down 6 per cent in the year, to $63 a megawatt hour.

During the year Mighty River boosted customer numbers by 30,000 to reach 412,000 and market share grew to 21 per cent.

Its retail arms are Mercury Energy and Bosco Connect. Increasing the customer base cost Mighty River about $9m.

Operating expenses were driven up by higher asset maintenance costs and higher spending to gain and hold retail customers in "a highly competitive market".

But having lifted its customer base rapidly in the past two years, the company said it expected a slower rate of growth, given the intense competition for customers.

Mighty River is dominant in Auckland, and has grown in other parts of the North Island and into the South Island in the past 18 months.

"Competition has really beefed up in the past six months," Mr Heffernan said. There were sign-on bonuses being offered to gain new customers.

The 30,000 increase in customers was in line with the growth in generation from new geothermal production.

During the year Mighty River opened the 140MW Nga Awa Purua geothermal power station – a joint venture with the Tauhara North No 2 Trust.

Geothermal generation makes up 27 per cent of Mighty River Power's production, compared with 21 per cent a year earlier. Next year would see the full benefit of Nga Awa Purua production, with total geothermal generation expected to reach the high 30 per cent range.

- © Fairfax NZ News