Mighty River ekes out 3.7 per cent earnings gain on cost-cutting measures, affirms annual guidance
Mighty River Power, the first state-owned power company partially privatised last year, increased first-half earnings 3.7 per cent as it clamped down on costs amid poor hydro conditions, while affirming its annual growth target.
Earnings before interest, tax, depreciation, amortisation, and fair value adjustments (EBITDAF) rose to $269.6 million in the six months ended Dec. 31 from $260.1 million a year earlier, and is on track to reach its annual forecast of $498 million, the Auckland-based company said in a statement. Revenue dropped 12 per cent to $840.8 million with significantly lower hydro levels sapping generation.
Net profit climbed 64 per cent to $123.7 million on lower operating costs and one-off gains in the value of financial instruments. Operating costs fell 24 per cent to $107.8 million, with permanent savings achieved in maintenance costs, professional fees and administration expenses.
"Mighty River Power has responded to the competitive dynamics in the market and is showing new levels of efficiency and performance," chair Joan Withers said. "On the cost side we have remained sharply-focused on operating expenditure and achieving company-wide gains in effectiveness and efficiencies."
The board declared an interim dividend of 5.2 cents per share, payable on March 31 with a March 12 record date, up from 4.8 cents a year earlier. The shares were unchanged at $2.04 yesterday, and dropped 18 per cent from their $2.50 offer price when the company was floated in May last year.
The company's total generation fell to 3,258 gigawatts per hour from 3,700 GWh a year earlier due to a 25 per cent slump in hydro generation, offset by a lift in geothermal. The total average price was $55.98 per megawatt hour, down from $65.74/MWh. In last year's offer document Mighty River Power forecast an average price of between $65 and $75/MWh for the 2014 financial year with generation of 7,060 GWh.
Chief executive Doug Heffernan said the company reduced its low-margin commercial sales, and was reviewing its portfolio, including the role of its Southdown power station in the face of weak demand.
Mighty River Power cut its forecast capital expenditure to between $95 million and $120 million this year from a range of $125 million to $175 million flagged at its annual meeting as it looks to contain costs and scale back its push into international geothermal growth initiatives.