Power generation plans short on fuel and policy

By CHRIS DANIELS energy writer

There's no shortage of money to invest in new power generation, says Mighty River Power chief executive Doug Heffernan, there just isn't enough fuel.

Responding to a Herald survey of 300 chiefs of major companies, which found that one of their biggest concerns was the threat to future energy supply, Heffernan said he was glad that the real reasons for concern were better understood.

"We are pleased to see that energy users are now sharing what we've been saying," he said.

"If you'd asked them two years ago what the issue was, they would have said 'the electricity market' or 'there's not enough generation capacity'.

"What people are now realising is that they were looking at the wrong thing: they were looking at symptoms not causes.

"The fact that there's no new generating capacity is because people couldn't get fuel to build plants."

Renewable energy sources, such as wind, geothermal and hydro, could account for the growth in energy demand, but could not by themselves replace Maui gas, which has accounted for one quarter of New Zealand's electricity generation.

"All the attention has gone on the market, and that's not making it easier to build more plant, which is what's required."

In other countries, a generator would be told exactly how much Government assistance or subsidy would be given for building a new "renewable" plant, said Heffernan, something that did not happen here.

He said that the issues that needed to be confronted were wider than the job of the new Electricity Commission, which has just taken over running the electricity market.

"Their mandate is the electricity market.

"What we're talking about here is energy policy, we don't actually have an energy policy that stitches all the bits together - we've got a whole lot of little pieces."

He said there was no shortage of capital available to build new power stations, whether it came from private companies or Crown-owned companies.

"We're in a position now where we can invest - we've got the balance sheet to invest in a significant amount of new capacity."

Mighty River, the smallest of the three big state-owned electricity generator/retailers, is due to deliver its six-month results next week.

Ratings agency Standard & Poor's yesterday raised its long-term rating for Mighty River to 'BBB+' from 'BBB', with a stable outlook. Its short-term rating of A-2 was confirmed.

In the last financial year, Mighty River more than doubled its after-tax profits, which rose from $47 million to $113.5 million.