Mighty River FY2013 financial results above IPO forecast
28 August 2013
Mighty River Power’s FY2013 financial results above IPO forecasts
• FY2013 financial results above IPO forecasts
• Net Profit and Underlying Earnings up $20 million on IPO forecasts
• Final FY2013 fully imputed dividend of 7.2 cents per share in line with forecast
Mighty River Power has reported financial results for the year to 30 June 2013, with EBITDAF, Net Profit, Underlying Earnings and Operating Cash Flow above forecasts (PFI) included in the Mighty River Power Share Offer Investment Statement and Prospectus issued in April.
Mighty River Power Chair, Joan Withers, said FY2013 was “an intensive year for our Company as we’ve made the transition from SOE to listed company, grown market share by adding value for our customers, and reported operating performance and financial results above forecasts.”
“We’ve delivered on all these fronts by achieving growth in customer sales volumes, controlling expenditure, and using the diversity and flexibility of our generation and sales portfolio to offset the impact of a Waikato drought.”
Mrs Withers said a key measure of operating performance, Energy Margin, held up despite the drought – highlighting once again the Company’s ability to perform close to plan under low hydro inflows – a key competitive strength for Mighty River Power in the New Zealand market.
“Our FY2013 results highlight a distinctive competitive advantage for Mighty River Power due to the fact that even large reductions in Waikato hydro generation volumes are small relative to overall national supply, with little influence on national wholesale electricity pricing. This means that even though hydro volumes in the Waikato were well below average, more than 30% of our annual production is reliable geothermal generation, and we could buy cheaply from the market to cover our sales portfolio,” she said.
Operating Earnings (EBITDAF) for the year were $8 million favourable to the PFI forecast of $383 million, with NPAT (up 21%) and Underlying Earnings (up 13%) both above forecasts in the Company’s Investment Statement and Prospectus. Operating Expenditure was below the IPO forecasts, reflecting a combination of deferral of expenditure into later years and a focus on cost management that lifted operating performance during the last quarter of FY2013.
EBITDAF was down $71 million on the previous year to $390 million (2012: $461 million), due primarily to one-off costs related to international geothermal and costs associated with the IPO. NPAT was up $47 million on FY2012 to $115 million and Underlying Earnings were up $17 million to $180 million.
Mrs Withers said Mighty River Power’s Board has declared a fully imputed final dividend of 7.2 cents per share (cps) in line with forecast: “We are pleased to be making our first dividend payment to our more than 100,000 shareholders as a listed company, which will be paid on 30 September to shareholders who are on our share register at 5pm on the record date of 11 September 2013,” she said. “This brings total dividends declared in FY2013 to $168 million (or 12cps), a 40% increase year-on-year.”
“We have achieved the significant and strategic milestones we set for ourselves in FY2013: a sharemarket listing of Mighty River Power; completion of a major geothermal project, below PFI budget and with a higher output than planned; and we’ve taken direct control of our geothermal interests in Chile and the US. These were all important steps forward for our business.”
Mrs Withers said the Company had also focused on improving customer satisfaction and loyalty, using the improved information now widely available from AMI technology to deliver “new innovative solutions and tools such as GEM (Good Energy Monitor) which gives Mercury Energy customers a new level of visibility so that they can take more control of their energy consumption and cost”.
Financial and business overview
Chief Executive, Doug Heffernan, said the primary differences from the previous year (as forecast in the PFI) were lower hydro volumes due to the drought, and one-off costs associated with taking direct control of International Geothermal interests and the IPO.
Dr Heffernan said the Company’s 5% growth in electricity sales to customers in FY2013 showed the success from securing a 12% increase in commercial volumes ahead of our new 82MW Ngatamariki geothermal station coming online. There was a small drop-off in residential demand – consistent with the national picture.
Mighty River Power’s total generation reduced 9% to 6,462GWh (FY2012: 7,068GWh) primarily due to the Company’s lower hydro volumes, down 350GWh (or 8%) as a result of weak inflows into the Waikato catchments which were only 80% of average for the second half of the year. Dr Heffernan said the Company achieved “another excellent level of availability from our base-load geothermal generation, of over 96%”. With the lower wholesale prices, he said Mighty River Power also reduced the use of its flexible gas-fired generation, preferring to purchase lower-cost wholesale electricity to manage its customer sales requirements.
With the completion of the new Ngatamariki station, he said the Company now had 40% of its production coming from low operating cost base-load renewable geothermal which “gives us additional strength and resilience in our core business”. The Ngatamariki station – the largest project of its type in the world – is in a four-week reliability run, and on-track to be officially handed over later this week.
Dr Heffernan said Mighty River Power would continue to invest in technology to provide improved information for customers – a key factor in driving customer satisfaction and loyalty in an intensely competitive retail market. And, with the low growth in electricity demand domestically, he said the Company was utilising its rare geothermal capability in higher-growth markets offshore – with a similar focus to that which has proven successful domestically: “We now have direct control and are applying our successful New Zealand model, involving a very patient and measured approach in line with commercial conditions.”
Outlook and priorities
Mrs Withers said the Board and Management were “pleased to deliver FY2013 results above IPO forecasts and we remain comfortable with the Company’s PFI forecasts for FY2014 showing significant growth in EBITDAF”. This forecast lift is based on the additional earnings contribution from the new Ngatamariki geothermal plant and the absence of one-off costs seen in FY2013.
Mrs Withers said the Board had forecast in the PFI an 8.3% increase in full year dividends from 12cps to 13cps for FY2014, representing 71% of Free Cash Flow. In maintaining an overview of capital management, the Board would take into account the lower debt at year end as a result of the operating out-performance and lower capital expenditure relative to PFI, as well as the lower capital expenditure now planned for FY2014, she said.
The Company plans to issue updated earnings guidance on 7 November at the time of the Annual Shareholders’ Meeting.