Profit to drop with lake level, warns power company chief

The level of Lake Taupo - which feeds the Waikato River - is at a point last seen early in 2008. File photo / Dean Purcell

Mighty River Power has warned drought in the Lake Taupo catchment will cut profitability during the current half year.

The taxpayer-owned company says it has severely cut generation through its Waikato River hydro system.

Chief executive Doug Heffernan said Lake Taupo - which feeds the Waikato River - was down to levels seen in early 2008.

Inflows had been running at around 80 per cent of average since last November and generation was down 10 per cent in March and down 20 per cent so far this month.

Because each of the hydro lakes has only a limited capacity to store water the Waikato hydro system is reliant on regular inflows into Lake Taupo, which holds up to 93 per cent of all water stored in the system.

Yesterday the Government declared medium-level drought conditions in the Waikato, Rodney, Papakura and Manukau districts, triggering drought relief measures for farmers.

Heffernan said April was often the driest month for the Taupo catchment and there were no signs of the short-term weather system bringing significant rain to the area.

Mighty River Power yesterday confirmed a $56.2 million dividend for the six months ending December 31, 2009, its first interim dividend.

In completing Mighty River's statement of corporate intent last year directors decided the company could pay an interim as well as a final dividend given it was nearing the end of a period of heavy capital expenditure.

The policy had also changed to now pay 75 per cent effectively of profit as dividends, up from 60 per cent.

"Expected profitability in the first half meant that the interim dividend was higher than expected.

"However, poor hydrology in the Waikato over the past few months had brought the company's profit back in line with expectations."

Net profit for the first six months was $73.9 million.

"Since November the inflows into the lake have dried off. The earnings for the past three months have been below plan. We've had some correction."

While Taupo had been hit by drought, hydro storage in the South Island was running above average, which meant there was no threat to security of supply, Heffernan said.

Generation had also been boosted by Mighty River's Nga Awa Purua geothermal station, near Taupo.

The station is part of a $430 million project and was handed over to Mighty River Power and joint venture partner the Tauhara North No.2 Trust yesterday.

It has been finished ahead of schedule and with a potential capacity of 140MW - greater than the 132MW capacity originally anticipated - will produce enough energy to power around 140,000 homes, the equivalent of every home in Taupo, Rotorua, Hamilton and Tauranga.

It was built by Sumitomo Corporation in partnership with Fuji Electric, the main suppliers, and Hawkins Construction.

As part of the growing geothermal portfolio the company plans to build another station at Ngatamariki, also near Taupo. Resource consent hearings finished last month for the 110MW plant.

It is hoped to have it in service before winter in 2013.

In 2008 Mighty River's $300 million Kawerau geothermal station was commissioned.

The 100MW station is on industrial land owned by Norske Skog Tasman.

MIGHTY RIVER
* $56.2 million dividend to the Government for the six months to December. Its first interim dividend.
* Net profit of $73.9 million, up from $30.7 million in the previous corresponding period.

- ADDITIONAL REPORTING: NZPA