Mighty River unfazed at going it alone
Mighty River Power says years investing in overseas geothermal projects have given it the confidence to go it alone internationally at a time when Kiwi development opportunities are drying up.
The state-owned energy company yesterday announced it had reached a deal with GeoGlobal Energy (GGE) to withdraw from the GGE Fund after five years.
Mighty River is taking two Chilean development projects and a minority stake in US firm EnergySource with it, currently held by the GGE fund. In exchange, GeoGlobal will take control of the fund's interest in Germany, and other non-EnergySource related assets in the US.
Mighty River has been a big investor in the GGE Fund for more than five years, with the bulk of the US$250m committed to the venture already invested. It will also pay GGE US$24.8 million (NZ$29.1m) to exit the fund.
"The fund was a way to learn about the international market, and we learned about what works and doesn't work, and it is timely for us to move on," said MRP chief executive Doug Heffernan.
The timing of the announcement comes as Mighty River is being prepared to list on the New Zealand stock exchange, and falling wholesales electricity prices have watered down enthusiasm for geothermal development in New Zealand.
Heffernan said the plan was to apply Mighty River's existing geothermal expertise to the Chilean business, which consists of two sites and an office in Santiago.
Meanwhile, EnergySource would continue with its 49.9 megawatt "John L Featherstone" geothermal power station in Southern California, and push on with the similar-sized Hudson Ranch Power II project.
Mighty River said it would provide further details on the projects when it released its interim results next week. The financials will be scrutinised by investors, with Mighty River expected to be the first of the state-owned energy firms partially floated.
The timing of the IPOs has drawn criticism from various sectors recently because of the flat electricity demand and falling wholesale prices, which prompted Contact Energy to cut its 1100 headcount by 10 per cent.
The Government has given no concrete detail on when Genesis Energy, Meridian Energy and Solid Energy will come to market.
Potentially the addition of the US and Chilean assets would soothe some of these concerns, but Heffernan said both projects would require years of capital investment before their earnings came on stream.
"It's a decade-long journey from possible opportunities to operating business," he said.
Heffernan said a full financial projection of the capital costs would be made available to the market, possibly in the form of an investment prospectus if the float went ahead.
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