MRP 1st-half earnings flat compared to past trends

MRP first-half earnings flat against historical trends

By Pattrick Smellie

Feb. 22 (BusinessWire) - State-owned electricity generator and retailer MightyRiverPower has turned in historically flat underlying earnings of $85.5 million for the six months to Dec. 31, reflecting less favourable wholesale market conditions and increased retail and generation asset maintenance costs.

Net profit after tax more than doubled to $73.9 million ($30.7 million in the previous corresponding period), but that figure fails to reflect the negative impact in the previous period of international accounting rules on the fair value of financial instruments, which created a $118.8 million negative impact. By comparison, there was a charge of only $1.5 million from fair value changes in the six months under review, reflecting more stable interest rates.

Revenue for the six months was $521.8 million, against $581.1 in the six months a year earlier, when MRP experienced high wholesale electricity prices because of constraints on the Cook Strait cable, which prevented normal power flows from the South Island. In addition, a southern drought dropped hydro production by Contact and Meridian while leaving MRP's Waikato system unaffected, and contributing to an unusually strong $121 million underlying earnings result in the six months to December 2008.

The 2009/10 first half result is more in line with the $84.4 million and $81.9 million reported in the 2007 and 2006 first halves respectively.

The first-half result was "above expectations", said chair Joan Withers in a statement. While the company expects not to better last year's record full year result, "we still anticipate a solid performance and are trading slightly above plan".

The result suggests MRP has yet to see any significant benefit from its addition of 18,000 new customers in the period, or from production at the 90MW Kawerau geothermal plant, which it commissioned in mid-2008. Across-the-board customer tariff increases averaging 3% are being implemented, chief executive Doug Heffernan said, indicating also that the company would seek to pass through cost increases created by implementation of the emissions trading scheme in July.

Customer acquisition had been expensive by historical standards in the last year, because of intense retail competition, but MRP expected new customers to be "value-accretive within the next two years, if not sooner".

MRP updated its progress in geothermal developments in Chile and the US, saying "we are now highly regarded as a partner offshore and we are being sought after as a preferred investor" and has an opportunity to create "a globally influential, iconic kiwi business in green energy".

At this stage, offshore initiatives were all "greenfields" and were not expected to require substantial capital expenditure in the near future.

(BusinessWire)

© Scoop Media