24 February 2015

Mighty River Power's financial results for HY2015 reflect low rainfall over the period and non-cash impacts from the Company's decision announced in December to exit international geothermal development options.

The Company remains on track for a full-year ordinary dividend of 14 cents per share, in addition to a 5 cent special dividend paid in December 2014.

FINANCIAL HIGHLIGHTS:
  • HY2015 EBITDAF of $258 million, down $12 million on prior comparable period (pcp) due to lower hydro generation and commercial sales
  • Net profit after tax (NPAT) of $8 million, down $116 million on pcp largely due to non-cash impact from the previously-announced decision to exit international geothermal development options
  • Underlying earnings of $90 million, down $15 million, reflecting lower EBITDAF and higher interest and depreciation costs following the commissioning of Ngatamariki geothermal station
  • FY2015 ordinary dividend forecast unchanged at 14 cents per share, up 4% on FY2014
  • Updated FY2015 EBITDAF guidance range of $480 million to $500 million, reflecting lower-than-average rainfall
FINANCIAL RESULTS

EBITDAF for the six months to 31 December 2014 was $258 million, down $12 million on pcp largely due to lower hydro generation and the continuation of the Company's approach of not renewing commercial contracts at low yields, said Mighty River Power Chair, Joan Withers.

NPAT was $8 million, with the Company's exit from geothermal development in Chile and Germany the primary driver of the $116 million lower result compared with pcp. This difference to pcp includes non-cash impairments ($83 million) along with the favourable fair value movements of $20 million recognised in the previous half year.

"As announced in December, following a rigorous review, we decided to exit international geothermal development options. The accounting implications of that is a key factor flowing through to the financial results for the period.

"We have taken some firm decisions about investment criteria and capital management over the past six months, and Mighty River Power is now clearly focused on delivering against the strategic priorities we outlined at the Annual Shareholders' Meeting in November - driving efficiencies in our core business, building on Mighty River Power's commercial strengths and developing longer-term growth opportunities."

Mrs Withers said the interim EBITDAF result underlined the strength of Mighty River Power's business and supports the deliberate decisions made to optimise the Company's electricity generation and sales mix through a period of intense competition and adverse North Island hydrology. Reliable base-load geothermal generation made up 40% of total generation, adding resilience to the Company's operating earnings through this period.

CEO, Fraser Whineray, said hydro generation was constrained by lower rainfall. "Over the interim period inflows to the Waikato River catchment were 18% below average and this has extended into the New Year, with hydrology post 31 December more than 40% below average." However, total generation was up more than 4% on pcp to 3,404 GWh - largely due to utilising committed higher cost natural gas at the Southdown power station, which offset lower hydro output.

"We have deliberately continued to reduce commercial sales renewals in a low-yield environment. This has provided the Company with greater flexibility to capture wholesale market opportunities."

Mr Whineray said it was encouraging to see thermal capacity being replaced by renewables in New Zealand's electricity market along with a lift in national demand. A more balanced supply-demand situation has contributed to the recent improvement in ASX electricity futures prices across all maturities, while strong competitive pressures remained on retail prices. These outcomes reflect a well-functioning electricity market.

DIVIDEND AND GUIDANCE 

Mighty River Power maintained strong cash flows through the interim period - supporting the forecast ordinary dividend of 14 cents for FY2015, up 4% on the previous financial year, Mrs Withers said. In line with this forecast and the Company's dividend policy, the Board today declared a fully imputed interim dividend of 5.6 cents per share, to be paid on 31 March.

The Company paid a special dividend of 5 cents per share (worth $69 million) to shareholders in December 2014, which was confirmed as part of Mighty River Power's ongoing capital management. Since listing in May 2013, Mighty River Power has paid dividends of 31.3 cents per share, and more than 95,000 eligible holders will also receive a 1-for-25 loyalty bonus share transfer from the Crown in May 2015.

With the low rainfall post balance date, Mrs Withers said the Board had issued updated earnings guidance with FY2015 EBITDAF to be in the range of $480 million to $500 million. This guidance is subject to any material adverse events, significant one-off expenses or other unforeseeable circumstances.

STRATEGIC PRIORITIES

With regard to strategic priorities, Mr Whineray said the Company was "very focused on our customers and providing offers that deliver value to them".

"Since the beginning of the New Year we have confirmed no increase in headline energy pricing for our residential customers on 1 April 2015. Further, through our hi-tech GLOBUG service, we are matching the flexibility of pre-pay electricity with the offer of market-leading pricing for nearly half a million Community Services Card holders."

The Company's metering business, Metrix, is well underway with preparation for the roll-out of 'smart' meters in partnership with Trustpower while also considering other growth opportunities.

Mr Whineray said Mighty River Power was pleased to have confirmed a 52-year agreement with Tuwharetoa Maori Trust Board in December 2014 around the storage of water in Lake Taupo. The Company was also encouraged by the support building for the widespread adoption of plug-in electric vehicles in New Zealand.

The Company had also concluded a sale of geothermal assets in Germany this month and a sale process of the assets in Chile was underway, he said.

"New Zealand's renewable electricity is a competitive advantage for the country. We believe this can be greatly leveraged over the long-term, delivering even better environmental outcomes and greater economic resilience by reducing New Zealand's reliance on imported fossil fuels that are expensive for Kiwi consumers."


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