Meridian reveals 18pc profit drop

By CHRIS DANIELS AND NZPA


Meridian has revealed an 18 per cent drop in profit in the second half of last year.

The announcement comes a week after the state-owned power company cancelled Project Aqua - its plan for a huge canal-based hydro scheme on the Waitaki River.

Profit for the six months to December fell to $67 million from $82 million a year earlier.

Meridian has not yet taken the $45 million charge for work done on Project Aqua, which will be included in the second half of this financial year.

Chairman Francis Small said the half-year financial performance was solid but the company had not achieved an acceptable market-related return on capital and must continue to target such a return.

Operating performance was ahead, with generation volumes more than 4 per cent above budget.

Small described the operating environment as tough, with stiff competition among generators and retailers, a tightening of energy supply and regulatory uncertainties.

He said Meridian expected electricity prices to continue to rise.

"Prices must rise for New Zealand to ensure capital will flow to the investment required for additional generation."

News was better for Mighty River Power, the smallest of the three state-owned power companies and owner of the Mercury retail gas and electricity brand.

Its after-tax profit for the last six months of last year was $51.4 million, up 16 per cent on its normalised 2002 result.

The 2002 result was distorted by a one-off gain of $34.2 million from getting out of a contract to buy power from the Southdown Co-gen power station in 2002.


Mighty River chairman Rob Challinor said the company had now built a stable platform after its formation in 1999.

"In earlier years our focus was on strengthening our balance sheet, stabilising our retail operation and creating a good balance between generation capacity and retail sales."

Getting the enterprise's balance sheet in order, after inheriting heavy debt levels when it was established, had been rewarded with a credit rating upgrade from Standard & Poor's.

"The strength of our current balance sheet gives us the option of investing in new generation, an area we are pursuing with vigour."

No interim dividend is being paid by Mighty River, with the Government's agreement, so retained earnings can be used to help to pay for new generation.

Despite Mighty River being granted more flexibility in its 35-year rights to use water from the Waikato River, the state-owned enterprise used the release of its six-month results to join others in the power industry in criticising the Resource Management Act.

Challinor and chief executive Doug Heffernan said the act "encourages a local focus on individual projects rather than taking a view of their national significance".

That could lead to "local interests overriding projects of national importance".