Mighty River Power has announced $120 million in dividends in its last year of full state ownership ahead of a government decision next week on whether half the company will be offered for sale to private interests this year.

The company, whose key assets are a string of hydro dams along the Waikato River, is the first state power company to be partially privatised under the Government's "mixed ownership model".

Yesterday, it reported a $67.7 million profit, down from $127.1 million a year earlier.

Nevertheless, it announced a final dividend of $45 million, taking its total dividends for the year to $119.8 million.


Labour's state-owned assets spokesman, Clayton Cosgrove, seized on the result as evidence the company was in no fit state for sale.

"Mighty River's profits have almost halved. That will have a real impact on their share price if the Government rushes ahead with the sale. Listing a struggling company in a market like this is economics for dummies."

However, Mighty River said the halving of its net profit was because of the accounting treatment of its borrowings.

Excluding those factors, the company's underlying net profit at $163 million was little changed from the last year's $162 million, it said.

The company also disclosed it had spent $3.8 million on preparing itself for sale, a figure the Green Party said was excessive. That took total spending on the mixed ownership model to more than $16 million, Greens co-leader Russel Norman said.

"That's just the tip of the iceberg: the Government has a further $96 million budgeted to spend on the sales and there are huge unbudgeted costs such as hundreds of millions for the share giveaway."

Prime Minister John Key yesterday downplayed the movement in the profit, saying,"There are always going to be movements up and down in power companies."

He and his Government are considering the Waitangi Tribunal's interim report on Maori rights over water which recommends the sale be delayed while those rights are considered. Mr Key is still hopeful up to 49 per cent of the company's shares can be sold to private investors before the end of the year.


However financial market figures say the sale is increasingly likely to be postponed until early next year.

Tower Investments chief executive Sam Stubbs yesterday said delaying the sale until the uncertainty around the Maori rights issue and electricity market was reduced would probably increase demand for the shares.

"That may or may not be correct," Mr Key said. "We're just not in a position to assess that at the moment. The next step is to assess the Waitangi Tribunal report and give some thought about how we want to move next."

Maori Party co-leader Pita Sharples yesterday indicated a court challenge from the Maori Council, which first took the water claim to the tribunal, was inevitable if the Government pushed ahead with the float.

He had discussions yesterday with the council's co-chairman Sir Edward Durie and his lawyer wife, Donna Hall.

Asked if the council was ready to apply for an injunction next week if the Government announced it was going ahead with the part float, Dr Sharples said: "I would say that both council and the Government are all set to go, whichever way they are going to go."