Powerful boost to grid from new plant

Smaller inflows into the Waikato River meant Mighty River generated 15 per cent less power in the latest half-year. Photo / Sarah Ivey

Mighty River Power says its new Nga Awa Purua geothermal power station, due to be commissioned before winter, will be a welcome addition to security of power supplies.

The $430 million 132MW plant northeast of Taupo will produce about 1000 gigawatt hours of power a year.

That is more than an average year's growth in national electricity demand.

Being geothermal, it is available around the clock, unlike hydro and wind, and being in the North Island it is on the right side of occasional bottlenecks in the Cook Strait cables.

The plant, a joint venture with the Tauhara North Trust, was already supplying power to the grid and commissioning is expected to be completed this autumn, the company said yesterday.

Mighty River reported an interim net profit after tax of $73.9 million for the six months to December 31, up from $30.7 million in the same period of 2008.

Results for the earlier comparable period were thrown around by $121 million of unrealised losses on interest rate hedges.

The latest bottom-line result is in line with the $83 million net profit in the first half of the 2007/08 financial year.

Mighty River generated 15 per cent less power in the latest half-year, thanks to smaller inflows into the Waikato River.

Inflows a year earlier had been the strongest on record.

Conditions in the hydro system nationally in the latest half-year were better than they had been a year earlier, resulting in a 26 per cent drop in wholesale electricity prices.

Nevertheless, the company's retail arm, Mercury Energy, intends to raise residential prices 3 per cent on April 1 and power line companies are also planning similar increases in their charges.

Further increases can be expected following the entry of the stationary energy and transport sectors into the emissions trading scheme on July 1, which will impose a cost on fossil fuels used in electricity generation.

The extent and timing of the increase in consumer electricity prices remain uncertain, but the Reserve Bank expects the impact on power and transport fuel prices to add 0.4 percentage points to the inflation rate by June next year.

As part of the Government's response to the Layton committee's review of the electricity sector, Mighty River Power and Meridian Energy are to do a "virtual asset swap", intended to increase competition in both islands.

Meridian is to sell to Mighty River 1000GWh of South Island power a year while Mighty River sells to Meridian the same quantity in the north.

Mighty River has already gained consumers in the South Island over the past year, mainly at Contact Energy's expense, giving it a market share in the south of 5 per cent (it is 27 per cent in the North Island), chief executive Doug Heffernan said.

The latest accounts also record a rise of nearly $300 million in net debt.

Half of that is the result of a $150 million special dividend paid to the Government and the rest reflects ongoing capital expenditure.

But net debt is only 35 per cent of equity and the increase left its investment grade credit rating unaffected.