Generation News
MEDIA RELEASE: 22 February 2010
Solid ‘business as usual’ first half for Mighty River Power
Mighty River Power today announced a solid half year result for the period to 31 December 2009, reflecting the continued success of the company’s diversified generation strategy and geothermal development programme.
Earnings before net interest expense, income tax, depreciation, amortisation and financial instruments (EBITDAF) were $191.2 million. This was above expectations, but down from $234.5m in the prior comparable period, highlighting the exceptional climatic and trading conditions the Company experienced in the six months to 31 December 2008.
Revenue was $521.8m compared to $581.1m for the same period in the last financial year reflecting much lower wholesale prices due to improved national hydro conditions. The company’s total generation production for the period at 2953GWh, was also down by 534GWh on the previous period due to poorer inflows into the Waikato catchment, but in line with business expectations for the half year. Overall spot prices were low over the half year compared to the prior period.
Net profit after tax (NPAT) was $43.2m favourable to the prior year, at $73.9m. The impact of adverse movements in the fair value of financial instruments in the previous year was a significant factor in this difference. In the six months to 31 December 2009 interest rates have fluctuated but have resulted in minimal movement compared to the end of the prior financial year. However, in the prior period the Company recognised a $118.8m accounting charge due to fair value movements on derivatives, largely interest rates.
Mighty River Power Chair Joan Withers says the result showed a solid performance by all Mighty River Power’s business units.
“The six months have signalled a return to business as usual after the last year’s exceptional conditions, but the Company has delivered an excellent geothermal performance and there has been encouraging growth in retail despite significantly increased competition.”
Chief Executive Doug Heffernan says that the Company’s geothermal exploration and development programme continued to grow over the period.
“We have made excellent progress on the construction of the 140MW Nga Awa Purua Geothermal Station, a joint venture with our partners, the Tauhara North No.2 Trust.
This plant is now supplying electricity to the national grid and we expect commissioning to be complete this autumn.
“We have also lodged resource consent applications for the proposed Ngatamariki Geothermal Power Station. This project is expected to cost approximately $400 million and have a nominal generating capacity of 110MW and is planned to be operational before winter 2013.
“Our success in geothermal is also being noticed internationally as we support our global geothermal partner GeoGlobal Energy (GGE) in its businesses developments in both Chile and the United States. Our efforts in geothermal development within New Zealand over the past ten years mean that we are now highly regarded as a partner offshore and we are being sought after as a preferred investor. This is providing the opportunity for us to create a globally influential, iconic Kiwi business in green energy.”
Mr Heffernan says that the company has invested more than $1 billion into capital expenditure over the past five years. Investment has been predominantly in geothermal but may broaden to include wind development, depending on the results of the Board of Inquiry process into the Turitea Wind Farm.
Hydro generation for the half year was 2,075GWh. This was down on the prior comparable period but at levels more consistent with the six months to 31 December 2007. Wholesale prices were down by 26 per cent on 2008, although the peaking aspects of the Waikato hydro and Southdown gas plants meant generation yields were 5 per cent higher than purchase costs.
The company’s use of the thermal plant at Southdown decreased by seven per cent, reflecting a rise in gas prices from the prior year and low wholesale electricity prices over the half year period to December 2009.
Mercury Energy continued to grow its market share in the electricity market, recording a net gain of 18,000 customers for the period and bringing total customers to 400,000. It has continued to focus attention on marketing in the South Island where it has seen a pleasing rate of growth in customer numbers and market share.
Mr Heffernan says geothermal will remain the company’s strategic focus in the future.
“We will achieve another major milestone in our development plans with the commissioning of Nga Awa Purua, as well as the progression of our proposed 110MW project at Ngatamariki. We also look forward to the results of our several years of geothermal exploration in Chile.
“In December 2009 we made the decision to base our geothermal operations in Rotorua. The choice of Rotorua as our new geothermal operations base is a logical one as it is near our geothermal assets and partners and in the centre of any new domestic opportunities.
“Wind will also continue to play a role in our growth plans, and our focus will stay on gaining consent for the Turitea Wind Farm, which will utilise one of the best wind resources in the world to provide electricity for up to 100,000 homes.”
Forecast
Our fortunes over the next six months will be primarily influenced by two factors – hydro production levels that are currently tracking below plan because of a very dry summer, but as we have seen in the past this can change over a short period of time. Fortunately, national (South Island) storage conditions have been very favourable, resulting in our ability to choose to buy from the wholesale market rather than use Taupo storage. Production from Nga Awa Purua is also expected to contribute to earnings in the last quarter.
While our end of year result will be down on the record in FY09, we still anticipate a solid performance and are trading slightly above plan.
ENDS