Sweet spot for Mighty River

Photo / APN

Mighty River Power says a price and currency sweet spot has allowed it to go ahead with a $466 million geothermal power station near Taupo.

The station at Ngatamariki will be the most expensive single project for the state owned enterprise.

"The currency has been favourable so we've got good conditions. The broad based soft [global] economic conditions also mean it was a good time to negotiate contracts for both the plant and the drilling rig," said general manager of development Mark Trigg.

The station will initially be capable of generating 82MW. It is being built by Israeli firm Ormat, with a drill from Iceland used for boring holes 3km into the ground to tap the steam and to reinject water after it has passed through the plant.

The project, scheduled for completion in 2013, was being funded through extended debt facilities.

Credit rating agency Standard & Poor's says Mighty River will have higher debt than previously expected as it funds the construction of the Ngatamariki power station with no proposed change to the dividend payout ratio policy of 75 per cent.

S&P said the company's BBB corporate credit rating and stable outlook were not immediately affected by its commitment to fund the station.

But the company's key credit metrics would track at the low end of expectations for the rating.

Mighty River chief executive Doug Heffernan said retaining the rating was important.

"Unlike listed companies we have to source it [funding] through debt. Being able to get access to debt markets is important and Standard & Poor's credit ratings are as important to us as they are to [Finance Minister] Bill English."

S&P said Ngatamariki supported the company's business profile, but downward rating pressure could occur if the company showed a higher risk appetite by operating below threshold metrics on a sustained basis.

Heffernan said during the past 10 years the company had spent close to $70 million on studying and drilling at the steam field north of Taupo.

There is speculation that Mighty River Power will be the first state owned enterprise to be partially sold if the National Government is re-elected but it was business as usual at the company, Heffernan said.

Ngatamariki was an attractive project "so you push the button on it".

"The fact that one shareholder may determine to sell part of its shareholding in the future shouldn't impact on that thinking. There's reconfiguration of Contact's shareholder register every day but it doesn't affect how they make decisions," he said.

* S&P has affirmed BBB+ long-term corporate and senior debt ratings on Genesis Energy, revised the outlook on its long-term corporate rating from negative to stable and affirmed the BB- rating on its capital bonds, which were assigned a "high" equity content.

The revision reflects the final funding structure that Genesis Energy put in place for the purchase of the Tekapo power stations, as well as the board's commitment to a BBB+ rating through implementation of clear financial targets, S&P said.

80c PREMIUM FOR CONTACT

Contact Energy has sold the 3.8 million shares not taken up in its rights offer at an 80c a share premium to the offer price.

The shares were sold in a bookbuild process and trading in Contact shares was halted while it was carried out.

The shares were sold at $5.85 each, compared to the $5.05 the shares were offered at in the rights issue.

The sale of the shares not taken up takes the amount raised by the company to $351.2 million.

The money was raised to strengthen the balance sheet and to fund the first part of the Te Mihi power station to be constructed by mid-2013.

- NZPA