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Jamie Gray

Jamie Gray is a business reporter for the NZ Herald and APNZ

Mighty River battles flat demand

Plant closures in the high energy use area such as pulp and paper have hit demand for power. Photo / APN
Plant closures in the high energy use area such as pulp and paper have hit demand for power. Photo / APN

Mighty River Power's next chief executive, Fraser Whineray, sees flat demand as being the biggest challenge facing the electricity generator and retailer.

New Zealand's power consumption has been static at around 38 to 39 billion kilowatt hours a year since 2008 because of several factors.

Plant closures in the high energy use area such as pulp and paper, subdued economic conditions after the global financial crisis, better insulation and more efficient electrical appliances have all weighed on demand.

"The biggest challenges in front of us right now are in the business environment," Whineray said.

"We have continued to grow for some time, despite flat demand because of our positioning in geothermal development which has displaced other generators," said Whineray, who will take over from Doug Heffernan on September 1.

Whineray, nephew of Sir Wilson Whineray, said the company had also achieved growth through innovations at the customer level, such as pay-as-you-go products and through the rollout of smart meters.

He said he was optimistic about the company's future growth, which he said would come from a variety of sources but not through the building of new power stations over the next three to five years. Electricity for transportation purposes had huge potential, he said.

"We have a deeply renewable electricity market but a totally non-renewable transport fuel market," he said. "The technology will get there at some point but it won't happen tomorrow."

Mighty River shares, which listed on the sharemarket in May last year, were issued at $2.50. They debuted strongly on the NZX at $2.73 but came under downward pressure since when the Labour and Greens released their joint plan to centralise control of the power market.

Markets have since become more relaxed as Labour has continued to fare badly in the opinion polls.

Asked about the possible change to the system under a Labour-Greens administration, Whineray said the sector was a "very long-term game".

"We have at least 30 electoral cycles in front of this company and we have had about 30 historically," he said. "I expect that we will have to adjust if that change does come to pass, and adapt to it," he said.

Whineray said a centralised model had in the past resulted in the construction of the most expensive power stations in the country, which was unlikely to occur under the present market-led system with generators exposed to the analytical rigor of the investment community.

Whineray will receive a base salary of $850,000 and will also be eligible to receive incentives.

Heffernan announced his intention to step down last year.

The company's operations include nine hydro stations on the Waikato River and five geothermal power stations in the central North Island.

Mighty River's shares traded yesterday at $2.33 and have rallied sharply since hitting $1.94 on January 30.

- APNZ

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