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Annual Results and dividend above IPO financial forecasts

Annual Results and dividend above IPO financial forecasts

• FY2014 financial results above IPO forecasts; full-year dividend increased to fully-imputed 13.5cps
• Earnings growth from new geothermal; Company benefits from choice of renewable fuels
• Positive performance from differentiated retail brands amid intense competition across all customer segments

Mighty River Power today reported FY2014 financial results above the Company’s IPO forecasts in a year marked by highly-competitive customer pricing and the worst hydro inflows into the Waikato River hydro catchment in the Company’s history.

Along with the distinct advantage of having two large low cash cost renewable fuels, Mighty River Power Chair, Joan Withers, said the Company continued to apply a laser-sharp focus on business performance to deliver the 29% growth in operating earnings (EBITDAF) to $504 million and net profit of $212 million.

Significant one-off and non-cash impacts in the prior year, largely relating to costs and significant impairments from taking direct control of international geothermal investments, saw a $97 million year-on-year lift in net profit. After adjusting for these impacts, underlying earnings were up 3% or $5 million on FY2013.

“The resilience from our low cash cost renewables provided the foundation for delivering on our IPO forecasts, but this result for FY2014 required very good decision-making from management to shape our portfolio and capture further business efficiencies, while keeping our focus on delivering for our customers.

“On top of the growth in operating earnings that we signalled for the final full year of our IPO forecast period, the Company has had to adjust and address some very real challenges in FY2014 – with our hydro inflows the lowest in Mighty River Power’s history and intense pricing pressure in the market across all customer segments,” Mrs Withers said.

Chief Executive, Doug Heffernan, said the Company’s differentiated retail electricity brands performed well as competition continued to intensify across all residential and business segments. A particular highlight for the year was increased customer loyalty for the Company’s brands – in particular Mercury Energy, which was 2% better than the market average for customer switching (churn) across the industry in FY2014.

In the highly-competitive retail market, he said value-differentiated services – including online and community channels – were becoming increasingly important to customer experience and retention of customers. Mighty River Power’s average energy price for both its business and residential customers was flat over the past year (in line with the IPO forecast).

Dr Heffernan said the additional base-load electricity generation from the new Ngatamariki station – which took geothermal production to 42% of the Company’s total – along with a conscious decision to reduce commercial customer sales commitments – provided added flexibility for the business in the use of limited hydro inflows to the Waikato Hydro System.

While hydro output and total generation for the Company (6,295GWh) was lower than forecast and below FY2013, Mighty River Power achieved an average price for generation that was joint market leading.

Mrs Withers said the performance against the IPO forecasts, along with lower capital expenditure in FY2014 – particularly relating to international geothermal – meant that the Board saw it as appropriate to declare an increased final dividend of a fully-imputed 8.3 cents (up 0.5 cents on the IPO forecast) to be paid to shareholders on 30 September 2014.

This brings the total FY2014 dividend to a fully-imputed 13.5 cents per share (4% above the IPO forecast, and 13% above FY2013).
She said the Company had today issued updated earnings guidance with FY2015 EBITDAF to be in the range of $495 million to $520 million – subject to any material adverse events, significant one-off expenses or other unforeseeable circumstances including hydrological conditions. Dividend guidance and an update on capital management initiatives for FY2015 will be given at the Annual Shareholders’ Meeting in November.

Fraser Whineray will take up the role of Chief Executive on 1 September following Doug Heffernan’s decision to step down after 16 years with the Company.


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