Mighty River shutting down Southdown station

Southdown power station at Penrose, Auckland. Owner Mighty River Power is shutting down and selling off the gas fired station. Photo / Neville Marriner

Mighty River Power will shut down its gas-fired Southdown power station in Auckland at the end of the year and sell the plant on the international market.

The company said the 140MW Southdown station in Auckland had played "a very small role" in MRP's portfolio in past two years, representing just 5 per cent of its generation, and meeting less than 1 per cent of New Zealand's total electricity demand.

It means the company will generate from its renewable hydro stations in the Waikato and geothermal plants around Taupo.

Gas generation is costly compared to renewable electricity plants.

Chief executive Fraser Whineray said the Southdown station was expected to close on December 31 and will then be dismantled for sale overseas.

The company has been working closely with Southdown's 17 staff to explore future opportunities with them.

Genesis has taken part of its coal and gas-fired Huntly plant out of operation and Contact Energy is also reviewing the future of its gas stations.

Whineray said major investment in renewable electricity generation in New Zealand over the past decade has "squeezed out large volumes of gas and coal-fired generation out of New Zealand's electricity mix, because they're less economic to run."

In total there had been a reduction of more than 4,000GWh of thermal fuel commitments since 2013, representing more than 10 per cent of the total generation in New Zealand.

Mighty River owns the land and would decide on its future after the station had been sold.

The Southdown station (excluding land) had a historic cost book value of approximately $50 million and Mighty River Power will confirm any accounting impacts in its normal financial reporting process. It would not release any further financial details today.

The company had gas contracts locked in to the end of the year.

Mighty River Power said it had invested more than $1.4 billion in base-load geothermal, including the completion of three major geothermal power plants since 2008.

Geothermal now makes up over 40 per cent of the company's portfolio.

Whineray said MRP had been able to cope with prolonged periods of very dry conditions over the past two financial years, when hydro inflows have been at record low levels, by having complementary renewable fuels to draw from and the improved availability of electricity in the wholesale market.