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Mighty River Power lifts half-year profit 15%

Tuesday 1st March 2011

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State-owned Mighty River Power lifted half year net profit 15% to $85.2 million, as total generation rose 18% to 3504 gigawatt hours (GWh).

For the six months to the end of December earnings before interest, tax, depreciation, amortisation and financial instruments (ebitdaf) rose 22% to $233.6 million, with total revenue up to $618.2 million from $521.8 million.

Mighty River Power chairwoman Joan Withers said the result reflected investment of $1 billion in the past five years in new geothermal plant, which had broadened the company's domestic generation portfolio, with hydro now accounting for only 63% of total production.

"We've really seen the contribution from the newly-commissioned 140 megawatt (MW) Nga Awa Purua joint venture plant show through in these results - a 69% increase in our geothermal generation on the same period last year, with geothermal now over 30% of our total generation. This was the main driver of the lift in energy margin and ebitdaf," Withers said.

Based on a strong half year and positive outlook, the company was increasing its ebitdaf guidance for the 2011 financial year from $391 million to $420-435 million, subject to any unforeseen market or hydrology conditions.

Mighty River said its after-tax profit was affected by higher interest expenses, which rose $19.8 million to $34.4 million, due to lower capitalised interest and higher debt levels following last year's special dividend payment and the capital investment programme undertaken in recent years.

Depreciation charges were also $10 million higher, relating to the higher valuation of generation assets.

An interim dividend of $64.7 million, up 15% from last year, would be paid, consistent with the dividend policy targeting a 75% payout ratio.

Chairman Doug Heffernan said that along with the investment in base-load geothermal capacity, Mighty River had also optimised the gas-fired Southdown station in south Auckland.

That had cushioned the impact of weather extremes, ranging from drought to some of the highest inflows in the Waikato.

The company's retail businesses had held market share in a highly competitive environment, and lifted sales in the South Island by 49%. Customer numbers at the end of the half year were 402,000, up 2000 on a year earlier but below a peak of 412,000 last June.

Mighty River had also made good progress on its international geothermal investment programme in partnership with GeoGlobal Energy (GGE) in the US and Chile, and its extension into Germany.

GGE had a development pipeline involving eight different geothermal reservoirs reflecting good growth opportunities for international geothermal development, Heffernan said.

Mighty River's geothermal experience and New Zealand's institutional capability in geothermal were highly-regarded and globally rare in what was a niche renewable energy field with significant growth potential.

In this country, the company was working with its partners the Tauhara North No2 Trust on consented plans to build a geothermal power station on the Ngatamariki geothermal field, 17km northeast of Taupo, Heffernan said.



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