Partial-listing prospect Mighty River Power has reported a $58 million improvement in net profit but taken an $89 million hit on the value of its investment in geothermal projects in Chile and Germany.
The state-owned enterprise, being lined up to be partly sold in the first half of this year, saw its profit for the six months to December 31 increase to $75.5 million. It will pay an dividend to the Government of $67 million.
Across the company underlying earnings - a measure that excludes unusual events - increased by $32 million on the prior comparable period to $133 million.
Mighty River said its result demonstrated improved operational performance but mixed results from the company's investment in the GeoGlobal Partners fund (GGE).
The $89 million non-cash accounting impairment related to the GGE fund's investments and its management company. This stemmed from higher estimated costs than anticipated by GGE, the manager at the Tolhuaca project in southern Chile, following the worst winter in 40 years badly affecting drilling, and only one of the two wells having good production capacity. In Germany, GGE faced delays due to now resolved environment court challenges and the need for new drilling.
Mighty River's chairwoman Joan Withers said it remained committed to its geothermal projects in Chile and Germany but would continue to take a "prudent" approach to further investment which to date amounted to US$250 million for the company which has assets of $5.7 billion.
"What's happening in New Zealand is that demand is flat, we've got lots of kit coming on sot the requirement for any sort of generation is not there in the short to medium term. We believe we had expertise - and what the investment in GGE allowed us to do was assemble a portfolio that would mean we were one of the top 10 geothermal companies in the world," she said.
"It is a mixed result in terms of impact but is still a core part of what we do as part of geothermal expertise and I think it would be sad if the company didn't continue to use that expertise offshore.
The structure had been changed to give MRP more control at ground level in Chile. Its stake in the Hudson Ranch geothermal project in California had returned $140 million and contributed $57 million to after tax profit.
Withers said this improved operational performance reflected market share gains and increased hydro volumes.
The company's chief executive Doug Heffernan said the extremely dry weather in its Waikato River hydro catchment meant it was preserving water and using its more expensive Southdown gas plant to generate power during the first part of the current financial period.
He said he was constrained from making financial forecasts for the full year given the proximity of a partial float, but said the company did better when it was using its hydro stations.
During the six months to December 31 its underlying earnings increased by $6 million to $260 million.
The company said it achieved a "solid" operating performance as the company continued to achieve gains in market share in electricity sales to customers.
Its electricity price to customers increased 2 per cent to $115.32/MWh and associated volumes increased by 9 per cent as the company secured more business customers ahead of the commissioning of the 82MW Ngatamariki geothermal power station.
Total electricity purchase costs fell 22 per cent, reflecting lower wholesale prices as inflows into our competitors South Island catchments increased, and a less constrained grid.By Grant Bradley Email Grant