Robust underlying earnings for Mighty River

00:56, Feb 21 2013

At a low-key results briefing ahead of the company's planned float, Mighty River Power's chairman and CEO revealed a robust underlying performance while avoiding comment on future earnings.

Net profit for the six months to December was $75.5 million, up from $17.6m a year earlier.

However, last year's bottom line was affected by a large accounting adjustment for interest rate derivatives, so the company paid close attention to underlying earnings which stripped out those distortions, said chairman Joan Withers.

"We've seen a steady growth in underlying earnings this period, and we've seen steady growth over the last three years, increasing by $47m since 2010," she said.

Underlying earnings for the six months were $133m, up from $102m for the same period a year ago and $89m the year before that.

Revenue for the half year fell 3 per cent to $706.3m.

The announcement included results from Mighty River's US$250m investment in overseas geothermal projects through the GGE fund, which the company described as "mixed".

On the positive side, net profit was boosted by $57m reflecting a cash distribution from GGE in October.

On the negative side, the value of the investments were written down by $89m principally related to investments in Chile and Germany.

Last Friday Mighty River announced it had restructured its GGE investment to take direct control of its overseas projects in the US and Chile, terminating a 10-year management contract by paying US$25m to the fund's US management company.

Chief executive Doug Heffernan said Mighty River's priority in Chile was to develop a strategic plan using the experience gained from the GGE fund.

"Mighty River Power will maintain a measured and prudent approach to international development opportunities, and any related capital commitments," he said.

On the domestic front, the company said its improved results were driven by market share gains and higher hydro power generation.

"At an operational level the company's effective use of storage and flexible plant allowed it to increase its prices for generation to a level that outperformed the market," said Withers.

"We also achieved increases in customer sales as more business customers were secured ahead of the commissioning of Ngatamariki [geothermal power station], which is on track for the middle of the year."

Prices to electricity customers rose 2 per cent during the period, while electricity purchase costs fell 22 per cent.

Heffernan said high hydro power generation in the half year had been followed since year end by near drought conditions in the Waikato, leading to low storage levels in its hydro schemes.

Storage was currently 217GWh, compared to 359GWh the same time last year and the historical average (since 1999) of 377GWh.

The company announced an interim dividend to the government of $67m. The payout was down from the $75m paid out last year, but the difference was due to a change in dividend policy, said Withers.

The new policy is to pay an interim dividend amounting to 40 per cent of the forecast full year dividend.

The previous policy was to pay out 75 per cent of adjusted earnings.