Low lake levels feeding generator's central North Island hydro dams cause concern.
Mighty River Power remains on track to meet forecast full-year profit for the year but is wary of falling lake levels feeding its central North Island hydro dams.
The company - which was the first of the state-owned energy companies to be partially listed - said inflows in the first half of the current financial year were at historic lows and were also down as the company went into the second half of the year.
"As we go into autumn we're looking for a return to more normal inflows," said chief executive Doug Heffernan.
Although Mighty River can generate up to 40 per cent of its power with its geothermal stations, its Waikato hydro scheme remains an important and lower-cost source of generation.
Mighty River increased first-half earnings 3.7 per cent as it clamped down on costs in the worst hydro conditions in the past 14 years.
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.
Chairwoman Joan Withers said barring a prolonged drought or unforeseen events the company remained on target to beat net profit forecasts outlined in its initial public offer document for the full year. At its annual shareholders' meeting the company forecast net profit of around $195 million, $35 million above IPO forecasts.
It still plans to pay a full-year dividend of 13c a share after yesterday announcing that shareholders would be paid an interim dividend of 5.2c a share at the end of March.
Mighty River's share price fell 2c to close at $2.02 yesterday after hitting $2.07 soon after the result.
Asked if there was any chance of a higher full-year dividend, Withers said the company was "comfortable" with its prospectus forecasts.
She said the proportion of small retail investors had increased since 49 per cent of the company was listed last May and had a wider view of what had happened to the share price in the first nine months.
"Most people who had bought were there for the long term," she said.
Shares dropped from the offer price of $2.50 soon after listing and have dipped as low as $1.95.
Many first-time investors were among the 113,000 attracted to the offer, with 43,000 spending $2500 or less.
Withers said the shares had been hit by a "perfect storm".
The Labour-Greens policy - which would introduce a single buyer in the electricity market and affect generators' earnings - was announced about two weeks before the float.
"The market was told the bare bones of the policy but I don't think it factored all of the potential elements of that. So you've seen, even post the Meridian float, the further effect on the share price."
There was uncertainty about the impact of transmission pricing methodology and the renegotiation of the Rio Tinto Tiwai contract.
"One might have anticipated the [Tiwai] announcement would have created some certainty and been helpful [but] it made people realise there could be more change in a shorter time frame than there had been."
There had also been a change in investor focus to growth stocks from yield stocks such as utilities in the past year.
Withers said there was not much the company could do about the share price.
"What we're continuing to focus on is the IPO forecast. Barring any detrimental hydrology or one-off catastrophic events we will make that forecast - that's really as much as we can do." Heffernan will leave the company at the end of August after 15 years at the top of MRP.
His successor is expected to be announced some time before the middle of the year.
The company's total generation fell to 3258 gigawatts per hour from 3700 GWh a year earlier owing 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 7060 GWh.
- additional reporting BusinessDesk