Thousands quit power company but profits leap

Doug Heffernan. Photo / Christine Cornege

Mighty River Power has lost thousands of residential customers but says it is relaxed about shedding low-value consumers as it concentrates on a higher quality retail base.

The state-owned enterprise boosted generation but the number of residential customer numbers dropped almost 5 per cent from 412,000 to 392,000 in the year to June 30.

Chief executive Doug Heffernan said the company got more revenue from fewer domestic customers, attributable to higher numbers in the South Island and tighter credit control.

Residential customer numbers had grown rapidly in the 2009-10 year as the company built up numbers ahead of bringing its own geothermal generation onstream.

"There's a bit of overshoot but we're quite comfortable in concentrating on the quality of that customer base."

Mighty River's main retail brand, Mercury Energy, had introduced the Glo-Bug pre-paid meter which had helped cut bad debts.

"From our point of view successful retailing is not just a pure numbers game, it's about having the best customer relationships and the best customer portfolio," Heffernan said.

Net profit after tax was up 50 per cent to $127.1 million for the financial year. Gross earnings of $443.1 million were up from $327.8 million in the previous year.

The company, which is tipped to be first in line to be partially privatised if National wins the November election, yesterday announced its full year dividend to the government would be $110 million for the past year, up $24 million from the previous year.

Listed Contact Energy last week said price rises were inevitable to cover the costs of new generation. Heffernan said any decision on price rises would be made around the time regulated lines companies adjusted theirs in April next year. Almost a quarter of Mercury customers were on three-year fixed price deals.

Total electricity produced by Mighty River was up 17 per cent to 6833 gigawatt hours, largely from the 140 megawatt Nga Awa Purua geothermal station and also high hydro generation from its Waikato River power stations.

Just on 96 per cent of power was generated from renewables as its Southdown gas-fired station was barely used during the year.

Chairwoman Joan Withers said although there had been no growth in national electricity consumption during the year, Mighty River had increased its market share of generation displacing competitors' more expensive thermal generation.

Market share figures for the year to June have not yet been released.

Underlying earnings were up 16 per cent from $139.6 million to $162.2 million, despite significant increases in depreciation and interest charges.

The Nga Awa Purua had contributed to a "step change" in the company's profitability, she said.

Heffernan said about $1 billion had been spent on geothermal development during the past decade.

"This year was always going to be a good measure of the success of our geothermal growth and particularly in the context of the subdued wholesale electricity prices which prevailed during the year, weak demand, and an intensely competitive retail market."

The decision to spend $466 million on the Ngatamariki geothermal station near Taupo was another important milestone. Geothermal generation now makes up a third of the company's total portfolio and this would grow to 40 per cent once Ngatamariki is commissioned in two years.

Mighty River will provide earnings guidance at the company's annual meeting on October 6.