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Mighty River Power Limited - Financial Results


Mighty River Power Limited - Financial Results For The Year Ended 30 June 2011

Financial Results Mighty River Power's 2011 financial results released today reflect the Company's success in maintaining residential electricity sales volumes in a highly competitive market, while significantly increasing generation production from a combination of new geothermal plant and better hydro generation conditions.

Chair, Joan Withers, said with no growth in national electricity consumption during the year, Mighty River Power had increased its market share of generation significantly - displacing competitors' more expensive thermal generation with hydro and geothermal renewables.

Earnings (EBITDAF) for the year ended 30 June 2011 were $443.1 million. This compares with EBITDAF (earnings before interest, taxation, depreciation, amortisation and financial instruments) of $327.8 million the previous year, and is in line with market guidance for FY2011 of $435-450 million.

Mrs Withers said key factors in the result were record electricity generation of 6,833GWh (up 17%) driven by an outstanding first full year's production from the jointly-owned 140MW Nga Awa Purua geothermal plant and above-average hydro production, together with a strong sales portfolio performance. Underlying earnings were up 16% from $139.6 million to $162.2 million, despite significant increases in depreciation and interest charges.

"The quality of the Nga Awa Purua geothermal investment has been demonstrated by its contribution to the 35% lift in the Company's operating earnings in its first full year of operation. This investment has enabled a step-change in the Company's profitability," she said.

Net profit after tax (NPAT) was up 50% from $84.6 million to $127.1 million Core operating costs rose just 1.4% for the year, from $229.7 million to $232.8 million. Impairments for the year fell from $31.4 million to $19.8 million with the majority being attributed to a geothermal well.

The Company recognised additional asset revaluations of $412 million for the year, with more than $190 million of the uplift attributable to the geothermal stations. This revaluation, along with across-the-board improvements in financial performance, demonstrates the real value created by the Company's investment and operating strategies during recent years.

Significant debt refinancing occurred during the year with over $500 million of new facilities negotiated, including the Company's first US private placement. Standard and Poor's reaffirmed the Company's long-term credit rating as BBB+ stable outlook after lifting the negative outlook which had been in place since May 2010.

Mighty River Power has declared a final dividend of $45.7 million to be paid on 30 September, following the $64.7 million interim dividend paid in March, taking total dividends for the year to $110.4 million, up $24 million from a year earlier.

Strengthened Earnings Base Chief Executive, Doug Heffernan, said Mighty River Power's financial results in 2011 showcased a very strong operational performance during the year, together with the value of a strategic focus on strengthening and growing the Company's earnings base over the past decade.

"After a period of sustained growth and investment, this year was always going to be a good measure of the success of our geothermal growth - and particularly in the context of the subdued wholesale electricity prices which prevailed during the year, weak demand, and an intensely competitive retail market.

"What clearly shows through is the value of our decade-long commitment to investment in geothermal generation in New Zealand, balanced by a strong expansion in the scale and quality of our retail base in advance of bringing the projects to market," he said.

Dr Heffernan said the Company was benefiting from an expanded and flexible multi-unit gas-fired capacity in Auckland and an additional 2,200GWh of annual base-load geothermal generation, alongside the core hydro generation assets on the Waikato River. This had been complemented by parallel growth in retail electricity sales.

Total sales to residential and commercial (excluding very large commercial and industrial) customers in FY2011 were down 1.7% by volume from 4,857GWh to 4,776GWh, with a fall in commercial partially offset by an increase in residential sales, which were up 1.5% from 2,612GWh to 2,652GWh. After strong growth in electricity customer numbers over the past two years, ahead of additional generation coming on stream, the Company recorded a slight drop from 412,000 to 392,000 at year end. However, the focus on value in a highly competitive market resulted in higher residential sales volumes and a 7.7% improvement in the weighted average price (fixed price variable volume) for electricity sales to commercial and residential customers from $102/MWh to $110/MWh. Dr Heffernan said renewables accounted for 96% of the generation portfolio mix for the year - with hydro accounting for 64% (4,368GWh), gas 4% (273GWh) and geothermal increasing to 32% (2,192GWh). He said the growth and flexibility which had come from the sustained investment in geothermal was a 'game changer' for the business and this focus was continuing with an investment commitment made during the year for the new $466 million Ngatamariki station near Taupo.

"This is another important milestone in our domestic development pipeline and was one of our big goals for 2011. Geothermal generation now makes up a third of Mighty River Power's total portfolio and will grow to 40% once Ngatamariki is commissioned in 2013," Dr Heffernan said.

International Geothermal

Dr Heffernan said Mighty River Power had continued to advance international geothermal investments during the year through the Company's investment in the GeoGlobal Energy (GGE) Fund.

"We now have involvement across eight reservoirs in the US, Chile and Germany and our strategy is seeing substantial progress."

He said the commissioning of the 49.9MW Hudson Ranch Power 1 project in the Imperial Valley of Southern California (a project with three shareholders: Hannon Armstrong Capital LLC, Catalyst Geothermal LLC, and the GGE Fund), would be a key milestone in the first half of 2012.

During the year this project won the Project Finance North American Geothermal Deal of the Year Award from Euromoney Magazine, and more recently was awarded the Environmental Stewardship Award by the US Geothermal Energy Association.

PERFORMANCE HIGHLIGHTS:

* EBITDAF up by 35% from $327.8 million in 2010 to $443.1 million

* NPAT (net profit after tax) up from $84.6 million in the prior year to $127.1 million

* 16% improvement in underlying earnings from $139.6 million to $162.2 million, despite increases in depreciation and interest charges

* Core operating cost containment - increasing just 1.4% for the year from $229.7 million to $232.8 million

* Asset revaluation of $412.3 million, with more than $190 million from geothermal stations

* Final dividend of $45.7 million to be paid in September, following $64.7 million interim dividend paid in March, taking total dividends for the year to $110.4 million, up $24 million from the prior year

* Record total electricity generation of 6,833GWh up 17% on 2010

* 96% of generation from renewable sources - with hydro accounting for 64% (4,368GWh), gas 4% (273GWh) and geothermal increasing to 32% (2,192GWh)

* Total sales to residential and commercial (excluding very large and industrial) customers were down 1.7% by volume from 4,857GWh to 4,776GWh (with residential up 1.5% from 2,612GWh to 2,652GWh)

* Electricity customer numbers at year end down 4.9% from 412,000 to 392,000

* $110/MWh weighted average price (fixed price variable volume) for electricity sales to commercial and residential customers increased 7.7% from $102/MWh in 2010

* BBB+ credit rating from Standard & Poor's with stable outlook.

ENDS

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