Mighty River Power Business Update

News Release
04 June 2013

Mighty River Power Business Update

Quarterly Operational Update for the Three Months Ended 31 March 2013¹

Highlights of the quarter included a 5% increase in electricity sales volumes on the prior comparable period (pcp), driven largely by the increased volumes to business customers, reflecting contracts put in place ahead of the completion of the 82MW Ngatamariki geothermal power station. The average price received from customers was flat on the pcp at $111.22/MWh.

Total electricity generation was down 383GWh on the pcp, predominantly due to lower hydro production as a result of drought conditions in the Waikato catchment (hydro down 393GWh or 35% on pcp). Geothermal generation was down by 29GWh due to maintenance at the Company’s Kawerau station. The Company’s gas-fired generation was up by 39GWh as the Southdown plant assisted with covering the Company’s low hydro generation throughout the quarter and in response to high wholesale prices in March, which reflected the low inflows into South Island hydro catchments.

The Company saw an improvement on the pcp in the relative wholesale price it received for its generation compared with the wholesale price the Company paid for purchases from the market (LWAP/GWAP: 0.97 in Q3 FY2013 vs 1.09 in Q3 FY2012), in part reflecting daily optimisation of volumes.

These operating results were incorporated within the forecasts detailed in the Mighty River Power Investment Statement and Prospectus.

Hydro storage improving

Lake Taupo storage dropped to low levels during the drought conditions experienced in the North Island in the early part of the year.

Lake Taupo levels have recently increased consistent with normal hydrology improvements going into the winter for the Waikato catchment.  Mighty River Power’s hydro storage at the end of May was approximately 61% of average, up from 51% of average at the end of April 2013 and 33% at the end of March 2013. 

Ngatamariki geothermal development progressing

Mighty River Power is continuing the commissioning programme for its latest geothermal development; the 82MW Ngatamariki power station, located 17kms North-east of Taupo.
First power to the grid was delivered in late March 2013 and the commissioning process has so far brought two of the four generating units online. During this commissioning phase, output from the station has been up to 40MW.   The next two generating units are planned to come on-line in June.

Consistent with the Offer Document, the project is on track for completion in mid-2013 and contributing to the Company’s earnings in FY2014.

Preparing long-term options

Following a period of appeal and the resolution and withdrawal of all three appellant submissions, Mighty River Power has now been granted final resource consents for a 53 turbine, 310MW wind development on the Puketoi Range, 40km south of Dannevirke. 

Resource Consents for the project were initially awarded in June 2012, but at that time remained subject to appeal. The Company was pleased to have been able to resolve all three appeals without the need for a hearing in the Environment Court. The awarded consents have a 10-year lapse period and, when combined with the Turitea site, provide the Company with options for up to 490MW of consented wind capacity.

Mighty River Power has applied for Resource Consents to begin exploratory drilling for the Te ia a Tutea project on the Taheke geothermal field.  The site is located near Okere Falls, 20km North East of Rotorua. The application follows the agreement signed in November 2011 with the key landowners; Okere Incorporation and Ruahine-Kuharua Incorporation.  If granted, the consents would allow for an initial exploration phase to help the Company and the joint venture partners understand the size, extent and quality of the geothermal resource, and to assist in determining whether it could sustain a renewable electricity development.

Mighty River Power’s General Manager Development, Mark Trigg, said although the Company is unlikely to build a new power station in the next 3-5 years, generation projects require long lead times. The securing of consents and exploration of projects form steps in a lengthy process that position the Company to proceed as demand and economic conditions allow.
International Geothermal

Mighty River Power has confirmed it has negotiated an extension to the option to increase its ownership interest in US-based geothermal company, EnergySource from 20% to 33.33%.
Mr Trigg said the agreement with the equity partners in EnergySource originally expired in May 2013.  This option has now been extended until the first quarter of FY2014 while the Company considers whether or not it would exercise the option.

“EnergySource successfully developed John L Featherstone geothermal power station which was commissioned in 2012 and are in the pre-development stages with a similar project – the proposed Hudson Ranch II project as previously disclosed,” said Mr Trigg. 

¹ Due to Securities Act restrictions associated with its IPO, Mighty River Power was unable to provide commentary with its Quarterly Operational Update for the Three Months Ended 31 March 2013 when it was originally released on 29 April 2013: http://www.mightyriver.co.nz/Investor-Centre/Reports-and-Presentations/Operational-Information.aspx

ENDS

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