Dry rivers cut into earnings

By CHRIS DANIELS

The final financial impact of last winter was unveiled in Parliament yesterday, when the latest results from state-owned power companies were tabled.

Half-year results from Genesis, Meridian, Mighty River Power and national lines company Transpower show it pays to have a thermal power station when the rivers start running dry.

Interim dividends of $106.4 million will be paid into Government coffers, made up of contributions from Transpower ($67.4 million), Meridian ($31 million) and Genesis ($8 million). Mighty River Power, despite earning a $14 million profit, will not pay a dividend.

Such profits have angered some business owners, who say they show that recent big electricity price hikes are unjustified.

The results largely reflect the extent to which each company relied on hydro-electric generation during last year's dry winter.

Genesis, New Zealand's largest electricity retailer and owner of the Huntly power station, earned $42.7 million in the last six months of last year, up from $22.2 million in the same period the year before.

The lack of water in the hydro storage dams of its rivals meant Genesis could operate its Huntly thermal station at close to full capacity. The electricity it generated was then sold at top dollar on the spot market.

Meridian, the largest of the three SOE power generators, with 30 per cent of national electricity generation, made a profit of $47 million, well down from the $60 million earned in the same period the year before.

Relying entirely on hydro generation, Meridian suffered from the lack of water in its South Island lakes, meaning it had to buy power at high spot market prices to supply its customers.



A similar reliance on hydro generation also made a dent in the profits of Mighty River Power, owner of the Mercury brand. Profits dropped more than half to $14 million.

Chief executive Doug Heffernan, who has consistently defended the SOE from claims it earns excessive profit from customers, said generation was down by more than 22 per cent in July, August and September, before spring rains helped it to recover.

Mighty River does not have to pay a dividend, as it has a lot more debt than the other two SOE power companies. The Government has allowed it to reduce its debt to levels closer to those of its competitors.

Transpower is paying all its $67.4 million profit to the Government as a dividend. Chairman Sir Colin Maiden said this showed its sound financial position.

The chief executive officer of Plastics New Zealand, Alister Rowe, said a combined drop in SOE profits of 23 per cent was not bad for a year that was supposed to have the worse rainfall in 70 years.

In any other business, companies would have made massive losses. Rowe said a quick survey of 15 plastics manufacturers had found average power price rises of 50 per cent.

Combined dividends of more than $100 million going straight to the Government were no more than a tax on businesses, he said. Recent price rises demonstrated an inherently flawed electricity market that needed an urgent overhaul.