Power SOE profits leap by $50 million

By CHRIS DANIELS energy writer

New Zealand's state-owned power companies have reported combined profits of $244.1 million for the year to June, up from $194.1 million the year before.

But the really interesting news - who made all the money during the recent dry winter - was lacking from all three annual reports.

Wholesale power prices were at record highs throughout winter, with the thermal-based generators - notably Genesis and NZSE-listed Contact - eventually running their power stations at full capacity to take advantage.

The nation's largest generator, Meridian, announced a profit jump to $125.1 million, up from $96.3 million the previous year.

Chairman Francis Small said despite this being $28 million ahead of budget, the SOE had not profited from the winter's tight market.

He said Meridian did not make extra profits because it did not have the water to produce more power than it had already pre-sold.

"Indeed, figures for the months of July and August show that Meridian, as a totally hydro-based generator, was badly affected by the low hydro lake inflows which lay at the heart of the winter electricity shortage," said Mr Small.

The profit increase had been achieved by April, before the effects of the dry winter, low hydro levels and high wholesale electricity prices began to have an impact.

This is used to bolster its claims that no profit had been made by the SOE from the height of the winter electricity "crisis".

Meridian, after announcing an $81.5 million dividend, is also planning to pay a special $100 million dividend to its Government shareholder.

This $100 million payout is designed to lift its debt-to-assets ratio from 21 per cent to 27 per cent.

It aims to eventually have a debt-to-assets ratio of 35 per cent.

Mighty River chief executive Doug Heffernan said the company's performance was closely bound to how much rain fell.

Had water flows into Lake Taupo been higher, it could have made a lot more money out of the winter's abnormally high wholesale electricity prices.

He said Mighty River's shareholder, the Government, had accepted that there would be no dividend for the past year and this money had been used to reduce the company's debt levels.

Mr Heffernan said Mighty River had inherited a significantly higher debt than the other SOEs created in the breakup of ECNZ. It needed to reduce this if it were to compete properly.

An improved debt-to-equity ratio also meant Mighty River would be more able to invest in new generation.

This would probably be geothermal, which matched well with Mighty River's other sustainable, hydro-electricity generation.

Genesis Power, once labelled the runt of the litter when the SOEs were spun off from ECNZ, reported an increased profit of just under $60 million for the year. It more than doubled its dividend payout from $11.4 million last year to $23.9 million this year.

Chief executive Murray Jackson downplayed the year's performance, using words such as credible, realistic and satisfactory in his announcement.

Next year's result is likely to be more interesting for Genesis.

Because it was smaller than the other power SOEs, it was allocated less debt when ECNZ was split, so is in a good position to borrow money for expansion.

On August 1, it spent $62.7 million buying all the North Island retail customers of its former rival On Energy, making it New Zealand's largest electricity retailer, with 450,000 customers.

Energy watchers will soon be blessed with even more details of moneymaking ventures in New Zealand, with the expected announcement of publicly listed Contact Energy's results next week.

US energy giant Edison Mission last week launched a $1 billion takeover bid for the 49 per cent of Contact it does not already own.

It is offering $3.85 per share to the many thousands of individual Contact shareholders.