MRP exceeds prospectus forecasts as Heffernan signs off
By Pattrick Smellie
Aug. 20 (BusinessDesk) - Tight cost control and reduced sales to commercial and industrial customers at low prevailing
wholesale electricity prices were primary contributors to state-controlled electricity generator and retailer
MightyRiverPower turning in operating earnings just one percent ahead of those forecast in its prospectus prior to its
partial privatisation in May last year.
Earnings before interest, tax, depreciation, amortisation and changes in the value of financial instruments were 1
percent ahead of the prospectus forecast at $504 million in the year to June 30, and 29 percent ahead of the Ebitdaf
result for the previous financial year.
On a net profit after tax basis, MRP reported earnings of $212 million, up 84 percent on the previous year and 33
percent ahead of prospectus forecasts, with the year-on-year difference explained largely by $97 million of writedowns
on MRP's investments in geothermal operations and prospects in the US and Chile in 2012/13.
The company has upped its final dividend by 0.5 cents per share to 8.3 cps, bringing total distributions for the year to
13.5 cps, 4 percent above prospectus forecast and 13 percent ahead of the dividend declared in the last financial year.
That represents a payout ratio at 72 percent of free cash flow and 98 percent of net adjusted profit, to put the
distribution in line with the company's policy to pay dividends at rate of between 90 percent and 110 percent of net
adjusted profit.
Guidance for Ebitdaf earnings the current financial year of between $495 million and $520 million suggests earnings
growth will be hard to come by in a market characterised by flat demand and an expectation of "flat to declining
residential electricity prices", which MRP has said it won't raise before April next year.
"The resilience from our low cash cost renewables provided the foundation for delivering on our IPO forecasts, but this
result required very good decision-making from management to shape our portfolio and capture further business
efficiencies," said chair Joan Withers, in the company's statement to the NZX.
Crucial to the improved Ebitdaf result against prospectus forecast was a $20 million permanent reduction in operating
expenditure, which helped offset low wholesale electricity prices and reduced total generation as MRP coped with the
lowest inflows to its Waikato River hydro dam catchments since the company was formed in 1998.
"Additional baseload electricity generation from the new Ngatamariki (geothermal) station, which took geothermal
production to 42 percent of the company's total, along with a conscious decision to reduce commercial customer sales
commitments, provided added flexibility for the business in the use of limited hydro inflows," said founding chief
executive Doug Heffernan, presenting his last financial results before handing the reins on Sept. 1 to his internally
appointed replacement, Fraser Whineray.
The pressure on the company's operating performance caused by low hydro inflows and competitive price pressure saw gross
margin on energy sales of $692 million some $32 million lower than forecast in the prospectus, with total electricity
sales 408 Gigawatt hours lower than prospectus forecast and total generation 765GWh lower than the previous year.
Net cash provided from operating activities at $317 million was also down on the prospectus forecast of $328 million,
although within the guidance range given at last year's annual meeting.
However, net cash was $31 million higher than the previous year, thanks to the availability of power from Ngatamariki,
and lower than forecast reinvestment capital expenditure. The company also pulled back capital expenditure on
international geothermal operations, which totalled just $7 million, compared with the prospectus forecast of $96
million for the year just ended.
However, capex will be above average in the current year, at an estimated $145 million, partly because new geothermal
steam wells are needed two to three years earlier than anticipated owing to existing wells not feeding sufficient energy
to run Ngatamariki at full capacity.
The MRP share price rose 0.6 percent to $2.39 in early NZX trading this morning.
(BusinessDesk)