Mighty River Power Annual Results for the year ended 30 June 2015
28 August 2015
Strong cash flow supports special dividend, while operating earnings ease on record low hydro output
Mighty River Power Chief Executive, Fraser Whineray, said the Company’s EBITDAF of $482 million for the financial year
ended 30 June 2015 was a robust result in challenging conditions.
Operating earnings (EBITDAF) were down by 4% (or $22 million) compared with the prior year. This was driven by record
low hydro generation at 17% below average, due to reduced Waikato catchment inflows. The financial impact of lower hydro
production was $52 million compared with long-term average conditions.
Mr Whineray said the business performance relied on astute management of the Company’s electricity sales and generation
portfolio, together with operational efficiency gains and cost savings. Through the year there had also been an
increasing focus on customers.
The Company’s total electricity generation for the year was up 4% on FY2014, with base-load geothermal accounting for
42% of total production, and a year-on-year increase in high-cost gas-fired generation from 2% to 7% of the total. The
increase in gas-fired generation was largely as a result of committed output from Southdown ahead of the station’s
closure in December 2015. After this closure, Mighty River Power’s generation will be from 100% renewable resources.
Net profit after tax (NPAT) of $47 million was $165 million lower than the previous financial year, reflecting non-cash
impairments. As reported in the Company’s Interim Results in February, the primary driver of the difference was the $83
million impairment relating to international geothermal. The value of the Southdown thermal plant was also written-down
by $44 million at the full year. After adjusting for these impacts, underlying earnings were down 22% or $40 million on
FY2014, reflecting the low hydro inflows.
A focus on financial and operating discipline controlled costs across the business. Since listing in 2013, this has
delivered a reduction of about $30 million in annual operating costs.
Mighty River Power Chair, Joan Withers, said the financial results highlighted a resilient business with strong cash
flows. Mrs Withers said the Board was pleased to be returning a total of $296 million to Mighty River Power’s owners for
the year ended 30 June 2015, representing a 59% year-on-year lift in cash returns. This has been achieved through the
delivery of a forecast 4% improvement in ordinary dividend to 14 cents per share along with a special dividend of 5
cents per share paid in December (both fully imputed). The Board today declared an additional special dividend of a
fully-imputed 2.5 cents per share.
“It should be a very positive signal to our 100,000 owners about the underlying strength of Mighty River Power, when we
are able to achieve our forecast dividend increase in a year of intense market competition and the lowest-ever hydro
generation for the Company.”
Total cash returns for FY2015 were 21.5 cents per share. FY2015
FY2014
Change on FY2014
($m)Change on FY2014
(%)EBITDAF ($m)482504(22)(4)Net profit after tax ($m)47212(165)(78)Underlying earnings after tax ($m)145185(40)(22)Ordinary dividend (cents per share)
14.013.50.54
Mrs Withers said the decisive actions taken earlier in the financial year were important to provide a strong base for
the business.
“These included our decision in December to exit international geothermal development and, in March, the announcement
that the Southdown plant would be closed given its relative high cost of generation. Although these have had non-cash
accounting impacts in the reporting period, they are important in shaping our business for the future.”
Mr Whineray said the Company’s health and safety focus is on ‘zero-harm’. “This focus extends beyond the Company to
working collaboratively with others in the industry to lift our performance through the StayLive programme.” There were
no serious-harm incidents during the year involving employees, contractors or visitors on the Company’s sites. The total
number of lost-time injuries was down year-on-year from seven to five.
“Delivering value to our customers and rewarding loyalty have been key areas of focus in a highly-competitive market.”
Mr Whineray said the Company’s GLOBUG brand is currently the fastest-growing retailer, following the enhanced pricing
that allows customers on this pre-pay service to access rates that are among the lowest in the market. GLOBUG has
achieved 50% growth since December to nearly 30,000 customers.
Mr Whineray said the Company’s commitment to hold flat headline energy prices for our residential customers over the
past three years meant that the 35% of customers on fixed-price contracts had the additional benefit of Mighty River
Power absorbing the increases in regulated delivery charges from local lines and transmission companies.
Another example of customer service innovation, Mercury Energy’s free online energy management application, GEM (Good
Energy Monitor), has helped customers save a total of about $3.5 million over the past two years and has measurably
improved loyalty.
Mr Whineray said several important value drivers for the sector provide a positive outlook. “Retail innovation across
the sector continues to accelerate, substantially enabled by the roll-out of ‘smart’ meters nationally. There has also
been a reset of the forecast energy supply and demand balance. National electricity demand was up 3% year-on-year, and
was broad-based demand growth across all sectors,” he said.
DIVIDEND AND GUIDANCE
The Mighty River Power Board today declared a fully-imputed final dividend of 8.4 cents per share for the financial
year, to be paid on 30 September 2015 along with the fully-imputed special dividend of 2.5 cents per share. Mrs Withers
said the special dividend of approximately $34 million was part of the ongoing focus on capital management, while
retaining balance sheet flexibility.
She said the Board was strongly focused on capital management initiatives that support the Company’s investment grade
credit rating (BBB+), while providing sufficient headroom and flexibility for growth when these opportunities arise.
EBITDAF for the year ending 30 June 2016 is forecast to be in the range of $490 million to $515 million, subject to any
material adverse events, significant one-off expenses or other unforeseeable circumstances. The dividend guidance has
been issued at 14.3 cents per share.
ENDS