Mighty Profit For MightyRiver
September 9th, 2009
MightyRiverPower couldn’t contain its glee both at nabbing 33,000 new customers, mainly from Contact Energy, and posting a record profit, notwithstanding the widespread public belief that power companies are a licence to print money. MRP’s net profit of $159.6m was up $48.7m on the previous year, partly because the 100MW Kawerau geothermal plant came on-stream early, but it also showed the advantages of being a North Island generator when the Cook Strait cable isn’t working.
The big South Island generators, Contact and Meridian were both caught behind grid constraints which drove wholesale spot prices in the South Island sky-high during the 2008 drought, only to be followed by torrential rain which filled the hydro lakes, which then had to spill water because not all available energy could be despatched. The combined effect of these factors knocked as much as $100 million off Contact’s net result. Meridian unveils its results some time in the next few weeks and is also expected to show a major hit to profits from these conditions.
By contrast, MRP had plenty of water in its Waikato hydro schemes, wholesale prices in the North Island stayed up when they collapsed in the South Island, and the company used Kawerau to substantially reduce output from its gas-fired co-generation plant at Southdown, thereby reducing the company’s fuel bill.
While MRP’s gloating may have seemed impolitic in one regard, its decision to promote its result as a win for the taxpayers – especially with the payment of a $150m special dividend – looks like a tilt at ensuring it’s lumped in the “good SOE’s” camp by SOE Minister Simon Power. The Govt’s intention to improve SOE performance remains clear. The announcement the Crown Company Monitoring and Advisory Unit back into the Treasury is another small part of efforts to focus on better returns on equity from all SOE’s.
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