North Island geothermal and hydro power generator Mighty River Power, which sits at the top of the Government's list for partial privatisation, says its underlying earnings were steady in the year to June.
The company said that after adjusting for the effects of significant one-off items and the change in fair value financial instruments, its underlying earnings came to $163 million, up a touch from the previous year's underlying earnings of $162 million.
The company had reported a 4.2 per cent increase in its earnings before interest, tax, depreciation, amortisation and financial instruments (EBITDAF) to $461.5m - in line with its guidance.
Mighty River announced a final dividend of $45 million to the Crown, taking the total dividend declared for the year to $120m - up 9 per cent on the previous year's.
The company's net profit came to $68 million, down from $127m, mainly reflecting a significant fall in interest rates in the first half of the year, which resulted in the recognition of an adverse change in the non-cash fair value of financial instruments of $118 million.
The "marked to market" change in the value of financial instruments dates back to pre-2008 global financial crisis days, when the company sought to fund $1 billion in geothermal projects.
At the time, 10-year interest rates were at 7 per cent compared with around 4 per cent today.
Retail sales volumes increased 5 per cent on the prior comparable period.
The company benefited from above-average inflows into its Waikato River catchments during the first three quarters of the year, following above average volumes in 2011.
This pattern was in contrast to the record low inflows experienced by competitors' South Island hydro stations throughout the year.
Mighty River chief executive Doug Heffernan said the company had a strong performance in the first half of the year but due to adverse impacts in the last quarter hydro generation was down 2 per cent on the previous year.
Since 30 June 2012, inflows into competitors' South Island hydro reservoirs have improved from the lows experienced earlier in 2012. However, South Island hydro storage remains 28 per cent below the historical average.
In contrast, Mighty River has seen solid inflows into the Waikato catchment 10 per cent above the prior year's.
Mighty River said it had a contractual relationship with Norske Skog but that it would not be directly affected if the company - a major power user - went ahead with its plan cut newsprint production at its Kawerau plant by half.
Heffernan also addressed the possibility of Rio Tinto, majority owner of the ageing Tiwai Point aluminium smelter, shutting its plant down.
Tiwai, which is the subject of a strategic review by Rio, uses about 15 per cent of the country's power production.
"Clearly any impact on demand will be across the industry as a whole, whether that's from Norske, Rio or anyone else," he told a news conference.
Heffernan said declining industrial demand had been a factor in the local market, and in many other western economies, for the last 10 to 15 years.
