Mighty River Power is on track to pay higher dividends next year but analysts say it remains in the shadow of longer-term uncertainty hanging over the industry.
The company says it is on track to lift its total dividend by more than 8 per cent to 13c a share in the 2014 financial year based on continued cost-cutting and getting the benefit from its newest geothermal power station near Taupo.
Its net profit for the 2013 financial year exceeded its prospectus forecast by 21 per cent at $114.8 million while underlying earnings were up 13 per cent to $179.5 million.
Investors initially welcomed the news with shares bouncing up 4c to $2.23, before sinking to close at $2.17, just a cent above its all-time low and still well down on the $2.50 issue price.
An analyst for Hamilton Hindin Greene, James Smalley, said the result was "very solid" but the radical electricity market changes promised by Labour and the Greens if they are elected to government next year "hung like the sword of Damocles" over MRP and the rest of the electricity sector.
While there had been some uncertainty removed from the risk of market disruption with the deal Rio Tinto had forged with Meridian, the political risk threatened MRP's share price.
"It's not just shifting the goalposts - you go from playing rugby to playing tiddlywinks," Smalley said.
Mighty River's chief executive Doug Heffernan said the firm was not being bogged down in politics.
"You can drown in that. We do read what's in the newspaper - we'll see and watch the debate unfold."
Mark Lister, head of private wealth research at Craigs Investment Partners, said if there was no change of government or delays in implementing changes under a different government, MRP at current prices "would be as cheap as chips".
Taking away political uncertainty, he said the MRP result could show potential investors in Meridian that such companies' stable returns stack up on their merits.
"It does give people looking at the electricity sector a bit of comfort as a whole," Lister said.
Mighty River's chairwoman Joan Withers said the company was operating in a low growth, highly competitive domestic market.
The company was now at the end of a $1.4 billion spend on geothermal plants, with the Ngatamariki station about to come on stream.
Capital expenditure in the 2014 year would range between $125 million to $175 million, which analysts said could provide scope to pay a higher dividend.
Withers said the company was "comfortable" with its prospectus forecasts for 2014, with operating earnings projected to increase 28 per cent from $390.5 million.
During the past year sales fell 9 per cent to $1.38 billion and the company's energy margin, which is sales excluding line and energy costs, shrank 6.3 per cent to $678.3 million.
Total generation fell 9 per cent to 6462GWh, which the firm said was mainly because of hydro volumes, which were down 8 per cent.