Mighty case for power company float

JASON KRUPP
Last updated 05:00 30/01/2013

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The fourth-quarter sales report for Mighty River Power will likely bolster the investment case for the firm's sharemarket float, with sales volumes and generation up in the period.

The state-owned enterprise reported yesterday a 12 per cent rise in electricity sales volumes to 1272 gigawatt-hours in the three months ending December, compared with the same period in 2011.

That was even as total electricity consumption across the country rose by a 0.7 per cent to 10,038GWh in the same period.

The firm said the gain was largely from a 22 per cent rise in volumes from business customers to 682GWh, with end market prices largely consistent with a year ago at $110.53 per MWh.

Total retail electricity purchase costs fell 27 per cent in the period to $61.14 per MWh.

On the generation side of the business, MRP produced 1731GWh hours of power in the period, up 5 per cent on last year.

The average wholesale price dropped 23 per cent year on year to $66.25 per MWh because of a glut of power from South Island hydro-lakes. Still, wholesale sales prices exceeded retail purchase costs, which could flow through to the firm's bottom line and add momentum to its coming listing on the New Zealand sharemarket.

MRP's full-year results are due on February 21. The firm previously reported flat underlying earnings for the year ended June 2012 of $162.7 million.

Under the mixed-ownership model, the Government will sell a 49 per cent stake in the country's fourth-biggest power producer at some point between March and June. The IPO is subject to a challenge in the Supreme Court, with the Maori Council looking to overturn a High Court ruling that dismissed its bid to halt the sale of state assets.

Should the Maori challenge fail, the Government is expected also to try to float either Meridian Energy or Genesis Energy before the end of the year.

James Smalley, an adviser at Hamilton Hindin Greene, said the firm was potentially more attractive than other energy companies because its hydro-generation assets were situated on the Waikato River, a less temperamental water catchment than the hydro-lakes in the South Island.

"The thing that can kill you is not having enough product to cover demand, which forces you to buy in the spot market," he said.

But, while the quarterly sales figures bode well for the investment outlook, electricity customers may not be so lucky. An MRP spokesperson said the firm faced increased costs pressures within the business that, combined with upgrades to the national-grid infrastructure, would have to be passed on to customers.

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Operations:

New Zealand's fourth-biggest power producer 92 per cent of electricity from renewable sources

Eight hydro-lakes on the Waikato River

Four geothermal plants in the North Island

One gas-fired plant in Auckland

Earnings for year ended June 30, 2012:

Underlying profits of $162.7 million

Dividend payment to Crown of $119.8m

Float: 49 per cent of MRP to be sold

Company valued at $3.6 billion

IPO expected before July

- BusinessDay.co.nz

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