21 Aug 2014

No price drop for Mighty River, despite profit

8:06 am on 21 August 2014

The head of Mighty River Power says power prices will not be coming down, despite the huge profit announced by the energy company yesterday.

Mighty River Power's Whakamaru power station on the Waikato River.

Mighty River Power's Whakamaru power station on the Waikato River. Photo: MIGHTY RIVER POWER

The company unveiled an annual net profit of $212 million, up 84 percent on last year's result, reflecting the contribution of its new Ngatamariki geothermal power station. It easily beat the prospectus forecast of $160 million.

Doug Heffernan

Mighty River Power chief executive Doug Heffernan Photo: Mighty River Power

But Mighty River Power chief executive Doug Heffernan said there has been no price increase since April 2013, and prices would stay the same until April next year. Mr Heffernan said the company's prices actually reduced by four percent during the last quarter.

The Labour Party has described the 84 percent profit increase as outrageous. Labour's energy spokesperson David Shearer said power prices have skyrocketed at a time when people are struggling to heat their homes.

"I've had many, many Kiwis contact me and say their power bills have gone through the roof, and we hear that Mighty River Power has made a profit increase of 84 percent, and I just that's outrageous."

Mr Heffernan said Labour had failed to read the figures correctly.

"Anyone who actually can understand a financial statement, and I would have thought that the opposition party would have been able to understand a financial statement, would have seen that the underlying earnings are actually only three percent."

Subdued outlook

Looking ahead to this year's operating profit, Mighty River said it would be essentially flat compared to the $504 million it reported yesterday for the previous year.

Mighty River Power chair Joan Withers

Chairperson Joan Withers Photo: Mighty River Power

It said it expected operating profit for the year ending June 2015 would come in between $495 and $520 million, meaning the current year's result would be between a fall of 2 percent and an increase of 3 percent.

The power company's chairperson, Joan Withers, offered this explanation.

"What we're seeing is a significant change from what historically has been the position in New Zealand, in that we're seeing flat to declining consumption of energy. In this environment, the business has shown that it can operate with a much lower operating cost structure. So we are factoring in the fact that we won't be seeing growth in terms of more plant coming onstream, which is obviously what we've seen this year."

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