Mighty River Power Interim Report 31 December 2004
01 Highlights 2004 04 Board and Chief Executive Report 09 Interim Financial Statements 19 Directory
Mighty River Power Limited Interim Report 31 December 2004
Highlights 2004
$77.3 million Net surplus after taxation
3244 GWh Record total generation volumes
48% savings Gas saved at Southdown
320 MW Consents lodged for a 320MW thermal plant at Marsden Point
Top call centre Mercury Energy the best energy retailer in 2004 Customer Relationship Management Contact Centre Awards
50% increase Gas customer base passes 15,000
$45 million Capital expenditure increases by 250%
Mighty River Power Limited Interim Report 31 December 2004
1
Operating Surplus before Interest, Non-recurring Items and Taxation for 6 months to 31 December
$135.7 million
2004
$95.3 million $79.4 million
2003 2002 2001
$25.8 million $56.6 million $65.0 million
2000 1999
Total Equity/Total Assets at 31 December
61.3 percent 62.0 percent
2004 2003
55.9 percent
2002
48.3 percent 42.9 percent 44.8 percent
2001 2000 1999
Net Surplus after Taxation for 6 months to 31 December
$77.3 million
2004
$51.4 million
2003
$99.8 million
2002 2001 2000 1999
2
$14.0 million $30.4 million $37.3 million
Mighty River Power Limited Interim Report 31 December 2004
Total Operating Revenue for 6 months to 31 December
$306.8 million $305.8 million
2004 2003
$235.1 million
2002
$352.2 million $301.2 million
2001 2000
$234.3 million
1999
Operating Cashflow for 6 months to 31 December
$123.6 million
2004
$81.6 million
2003
$47.4 million
2002 2001
$20.0 million
2000 1999
$57.9 million $52.3 million
Net Debt/Net Debt + Equity at 31 December 2004 2003 2002 2001 2000 1999
32.3 percent 30.1 percent 36.5 percent 41.4 percent 45.5 percent 40.5 percent
Mighty River Power Limited Interim Report 31 December 2004
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Mokai geothermal expansion
Board and Chief Executive Report
4
Mighty River Power Limited Interim Report 31 December 2004
On behalf of the Board and Management, we are pleased
Generation: Our decision nearly two years ago to acquire full
to report on Mighty River Power’s performance for the six
control of the Southdown co-generation plant to balance our
months to 31 December, 2004.
hydro and non-hydro based generation assets is paying
Highlights: Mighty River Power has continued its recent run
dividends. We were able to reduce the use of gas at Southdown
of sound financial results with another strong performance
when wholesale electricity prices did not justify using gas.
in the first half of the 2004/05 financial year.
This lower utilisation of Southdown in wet periods
This period which is traditionally our strongest due to
has provided significant energy and cost efficiency gains,
high customer demand over winter, combined with record
whilst preser ving the ability to provide sustained firm
hydro production, to provide a net surplus after taxation of
capacity should national storage levels drop or wholesale
$77.3 million in the period to December 31, 2004. That is up
prices increase. Hydro generation volumes of 2631 GWh
50% on the comparable period last year ($51.4 million).
compared to 2058 GWh in the same period last year reflect
The much wetter than normal winter and spring in the
that good hydrology and comparable Southdown generation
Waikato/Taupo catchment meant our hydro system generated
of 459 GWh in 2003 and 224 GWh in 2004 reflect lower gas
very good volumes. High national inflow levels meant that
use. Geothermal generation also ran at record levels at
wholesale electricity prices were very subdued, allowing us
Rotokawa. Total generation volumes of 3244 GWh compare
to manage production from the Southdown co-generation
to 2839 GWh in the previous comparable period. For our business the exciting story around generation is
plant to reduce our gas costs. Retail demand also continued to grow with new
centred on our drive to expand our current portfolio, through
connections continuing at a solid pace on the back of the
a range of fuel options, to help meet the predicted growth in
strong housing market, particularly in our key Auckland
demand in New Zealand.
market. We were also able to attract new customers from
That has led to the biggest geothermal exploration
our competitors and our retail gas customer base has
programme in New Zealand in the past twenty years with
now passed 15,000. We also have 307,000 electricit y
an initial $20 million programme at Putauaki concluded
customers, 2.3% up on June.
and now under test. A $20 million programme at Rotokawa
Those successes in the retail market and the continuing
to pr ov ide additional pr oduc tion and r e -injec tion
growth in commercial demand for our financial products
capability to the existing plant, and a potential expansion,
offset the revenue loss associated with weak wholesale prices
is nearing completion. Plans for generation expansion at the
resulting in only a small gain on 2003 revenues.
Rotokawa Field, in conjunction with the Tauhara North No. 2
Operating cashflows were up approximately 50% at $123.6 million on the comparable period last year ($81.6 million) as
Trust, are progressing. Consents were also lodged for exploratory drilling in the
a result of the strong hydro production and lower gas costs. Mangakino area as we look to develop a new geothermal Dividends of $105 million relating to the year ended 30 June
site in the region. Analysis and plans for a possible geothermal
2004 were paid out during the period under review.
plant of over 50MW at Kawerau also continue. Once analysis
Operating surplus before interest, non-recurring items and taxation was $135.7 million compared to $95.3 million
is complete a decision will be made with our iwi partners about progressing this project to the consents phase.
in the same period last year. Capital expenditure increased
The 40MW geothermal expansion at Mokai by the Tuaropaki
by 250% to $45 million primarily related to geothermal
Power Company, where we have a 25% equity partnership
exploration and development activities.
with the Tuaropaki Trust, is on schedule to be on-line in late
Mighty River Power Limited Interim Report 31 December 2004
5
Total Generation Volumes for 6 months to 31 December
Hydro
Cogeneration
Geothermal*
Biomass*
2004 2003 2002 2001 2000
3500
3000
2500
2000
1500
1000
500
0
GWh
1999
* Mighty River Power does not own 100% of these assets
autumn 2005 providing a timely boost to energy supplies prior
Following the Government’s introduction of regulations requiring
to winter. This project alone will meet around 25% of the
a low fixed charge tariff we took the opportunity in October to
country’s energy demand growth this year.
restructure our pricing plans. Our customers were automatically
Consents for a 320 MW coal-fired plant at the existing Marsden Point plant near Whangarei were lodged just before Christmas and we continue to work through a thorough
we had their usage history for the past twelve months. Our excellent customer ser vice standards were
consultation process. We are confident that Marsden B offers
recognised through Mercury Energy’s call centre winning a
the best new coal fired development option in New Zealand
Gold Award in the 2004 Customer Relationship Management
and provides a prudent way to diversify New Zealand’s medium
Contact Centre Awards. We were chosen as the best customer
term energy supply risks, especially in the scenario where no
service provider in the energy retail sector and one of the
significant new domestic gas is commercially developed before
top three in all sectors. Our support of community based initiatives was enhanced
the end of the decade.
6
moved to the best plan based on their previous usage, providing
We are actively seeking access to several sites to
with the establishment of the Star Supporters Club. Our
undertake monitoring of windflows with a view to identifying
customers can automatically donate to Starship Children’s
sites for economic wind generation. A number of small hydro
Health through their bills, a facility that has already raised
development options are under consideration and round out
more than $70,000 which will be used to purchase a Mobile
our portfolio of potential generation developments.
Image Intensifier for the hospital. We also now support the
Customers: It has also been a successful first half for the
Mercur y Energy Pohutakawa Festival on the Coromandel
Mercury Energy retail business with continued strong growth
Peninsula while our suppor t for Christmas in the Park
of electricity and gas customers. Successful acquisition
(Auckland), Carols by Candlelight (Auckland) and Christmas
campaigns have complemented our innovative products which
at the Lake (Hamilton) continues along with the lighting of
continue to retain and attract customers.
prominent Auckland landmarks.
Mighty River Power Limited Interim Report 31 December 2004
Metrix: Industry leading levels continue to be the focus of our
customers the benefits of our integrated energy business
Metrix metering business with new housing and switches
model by removing price volatility.
between electricity businesses creating steady demand
None of that would have been possible without the focus and efforts our staff and we thank the teams within
for our services. Residential growth in the Auckland region has also provided a strong growth platform for new meter installations.
Mighty River Power for their ongoing support. That we are in such a good position in 2005 is also testimony
Summary: While our current focus at Mighty River Power is
to the stewardship of our founding chairman Rob Challinor
on driving our generation expansion programme, that focus
who retired from the company at the end of 2004 after six
is not possible without the ongoing support of a strongly
years at the helm. Our balance sheet was initially the weakest of the three
performing company with secure funding. Our generation business is a well balanced and efficient
new enterprises created in 1999 and much of our focus in the
unit that has performed ver y well to take advantage of
early years was on strengthening it by ensuring we were a
good hydro conditions in the past six months. Our different
very efficient operator with excellent capital management.
fuel sources have been used in an efficient manner to meet market demand and contribute to supply security. Our retail business is thriving on a mix of innovative
Under Rob’s leadership we have evolved into a business that is generating sound cash flow, is growing and is in a financial position to suppor t an extensive generation
products that attract customers from other competitors, development programme. The company and the current Board and ensures we capture a good share of the new business
are indebited to Rob for his major contribution to the success
generated by residential growth. Our commercial sales
of Mighty River Power. We look to the future with confidence
have also experienced superior grow th from offering
that this success will be continually enhanced.
Carole Durbin
Doug Heffernan
Chair
Chief Executive
Mighty River Power Limited Interim Report 31 December 2004
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Mighty River Power Limited Interim Report 31 December 2004
MT survey Tokoroa
8
Interim Financial Statements
For the six months ended 31 December 2004
10 Consolidated Statement of Financial Performance 11 Consolidated Statement of Movements In Equity 12 Consolidated Statement of Financial Position 14 Consolidated Statement of Cash Flows 15 Notes ot the Consolidated Interim Financial Statements
Mighty River Power Limited Interim Report 2004
9
Consolidated Statement of Financial Performance for the six months ended 31 December 2004 year ended 30 june 2004 audited
six months six months ended ended 31 december 2004 31 december 2003 unaudited unaudited
$000
774,654 (185,844)
note
Sales Less line and metering charges
2,341
Interest income
8,097
Other revenue
$000
414,775
391,870
(113,641)
(90,777)
1,695
990
3,980
3,738
599,248
Total Operating Revenue
306,809
305,821
199,551
Operating surplus before interest and non-recurring items
135,686
95,326
2,341
Interest income
(31,742)
Interest expense
(14,705)
Non-recurring items
155,445
Surplus Before Taxation
(55,748)
Taxation expense
99,697 131 99,828
2
3
Surplus After Taxation Share of associate net (deficit) surplus Net Surplus After Taxation
The notes set out on pages 15 to 18 form part of, and should be read in conjunction with, these interim financial statements.
10
$000
Mighty River Power Limited Interim Report 31 December 2004
1,695
990
(18,448)
(16,222)
0
0
118,933
80,094
(41,536)
(28,571)
77,397
51,523
(103)
(80)
77,294
51,443
Consolidated Statement of Movements in Equity for the six months ended 31 December 2004 year ended 30 june 2004 audited
six months six months ended ended 31 december 2004 31 december 2003 unaudited unaudited
$000
861,696
Equity at Beginning of the Period
$000
$000
886,524
861,696
99,828
Net surplus after taxation
77,294
51,443
99,828
Total Recognised Revenues and Expenses for the Period
77,294
51,443
0
0
Distributions to owners: (75,000)
Special dividend
0
Final dividend paid for 2004
(30,000)
0
886,524
Equity at End of the Period
933,818
913,139
The notes set out on pages 15 to 18 form part of, and should be read in conjunction with, these interim financial statements.
Mighty River Power Limited Interim Report 31 December 2004
11
Consolidated Statement of Financial Position As at 31 December 2004 30 june 2004 audited
31 december 2004 31 december 2003 unaudited unaudited
$000
$000
$000
Equity 377,561
Share capital
377,561
377,561
508,963
Reserves
556,257
535,578
933,818
913,139
1,204
51,387
365,821
384,459
367,025
435,846
0
1,665
84,417
63,833
0
0
886,524 Non-current Liabilities 1,204 329,821
Energy contracts Loans
331,025 Current Liabilities 0
Bank overdraft
91,863
Payables and accruals
75,000
Provision for dividend
4,254
Provisions
3,411
3,332
2,032
Provision for taxation
22,653
12,994
Deferred taxation
24,029
23,921
0
9,647
24,114 0 98,494
Energy contracts – current portion Loans – current portion
295,757 1,513,306
Total Equity and Liabilities
The notes set out on pages 15 to 18 form part of, and should be read in conjunction with, these interim financial statements.
12
Mighty River Power Limited Interim Report 31 December 2004
89,225
8,000
223,735
123,392
1,524,578
1,472,377
Consolidated Statement of Financial Position (continued) As at 31 December 2004 30 june 2004 audited
31 december 2004 31 december 2003 unaudited unaudited
$000
$000
$000
1,380,689
1,357,846
Investment in associate
13,278
4,255
Other non-current assets
13,981
15,626
1,407,948
1,377,727
Cash
3,707
0
Short term deposits
5,000
0
Non-current Assets 1,369,319 2,352 15,494
Property, plant and equipment
1,387,165 Current Assets 3,457 0 1,985 116,649 4,050
Investment in associate Receivables and prepayments
0 91,507
3,284
3,143
116,630
94,650
1,524,578
1,472,377
Inventories
126,141 1,513,306
0 104,639
Total Assets
The Board of Directors authorised the issue of the interim financial statements on 23 February 2005
The notes set out on pages 15 to 18 form part of, and should be read in conjunction with, these interim financial statements.
Mighty River Power Limited Interim Report 31 December 2004
13
Consolidated Statement of Cash Flows for the six months ended 31 December 2004 year ended 30 june 2004 audited
six months six months ended ended 31 december 2004 31 december 2003 unaudited unaudited
$000
note
$000
$000
318,117
309,546
Cash Flows from Operating Activities Cash was provided from (applied to): 574,572 1,426 (408,544)
Receipts from customers Interest received Payments to suppliers and employees
1,707
1,025
(157,051)
(202,791)
(30,966)
Interest paid
(18,151)
(16,156)
(47,500)
Taxation paid
(21,000)
(10,000)
123,622
81,624
88,988
Net Cash Inflow from Operating Activities
4
Cash Flows from Investing Activities Cash was provided from (applied to): 436 2,710 (47,120) (3,983) 0 (47,957)
Sale of property, plant and equipment Proceeds from investments Purchase of property, plant and equipment Purchase of other non-current assets
41
92
4,725
2,581
(31,869)
(10,172)
0
(2,360)
Purchase of associate
(13,000)
0
Net Cash Outflow from Investing Activities
(40,103)
(9,859)
26,731
0
0
(78,312)
(105,000)
0
Cash Flows from Financing Activities Cash was provided from (applied to): 0 (42,456) 0 (42,456)
Loan advances Loans repaid Dividends paid
(78,269)
(78,312)
Net Increase (Decrease) in Cash Held
5,250
(6,547)
4,882
Cash Balance at Beginning of the Period
3,457
4,882
3,457
Cash Balance at End of the Period
8,707
(1,665)
Cash (bank overdraft)
3,707
(1,665)
Short term deposits
5,000
0
8,707
(1,665)
(1,425)
Net Cash Outflow from Financing Activities
Cash balance comprises: 3,457 0 3,457
The notes set out on pages 15 to 18 form part of, and should be read in conjunction with, these interim financial statements.
14
Mighty River Power Limited Interim Report 31 December 2004
Notes to the Consolidated Financial Statements for the six months ended 31 December 2004 1. Statement of Accounting Policies
The interim financial statements presented here are the unaudited consolidated financial statements of Mighty River Power Limited for the six months ended 31 December 2004. These interim financial statements have been prepared in accordance with FRS-24 Interim Financial Statements, and should be read in conjunction with the Annual Report for the period ended 30 June 2004. The accounting policies used in the preparation of these interim financial statements are consistent with those used in the annual financial statements and the previously published interim financial statements. Certain prior year comparatives have been restated to conform with current period presentation.
2. Non-recurring Items
year ended 30 june 2004 audited
six months six months ended ended 31 december 2004 31 december 2003 unaudited unaudited
$000
(14,098) 600 (1,207)
$000
$000
Exit from Contracts for Differences
0
0
Revaluation of office land and buildings
0
0
Other
0
0
0
0
(14,705)
Exit from Contracts for Differences
On 28 June 2004 the Group exited from two Contracts for Differences. The amount of $14,098,000 relates to the net loss from exiting these arrangements, including a termination payment and reversal of a provision for an onerous energy contract.
Mighty River Power Limited Interim Report 31 December 2004
15
Notes to the Consolidated Financial Statements (continued) for the six months ended 31 December 2004 3. Taxation Expense
year ended 30 june 2004 audited
six months six months ended ended 31 december 2004 31 december 2003 unaudited unaudited
$000
155,445 51,297
Surplus before taxation Taxation at 33 cents
$000
$000
118,933
80,094
39,248
26,431
2,288
2,140
Taxation effect of permanent differences: 4,395 56 55,748
Other permanent differences Prior year adjustments Taxation expense
0
0
41,536
28,571
41,621
27,443
(85)
1,128
41,536
28,571
Analysis of taxation expense: 54,427
Current taxation
1,321
Deferred taxation
55,748
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Mighty River Power Limited Interim Report 31 December 2004
Notes to the Consolidated Financial Statements (continued) for the six months ended 31 December 2004 4. Reconciliation of Net Surplus After Taxation with Net Cash Flows from Operating Activities
year ended 30 june 2004 audited
six months six months ended ended 31 december 2004 31 december 2003 unaudited unaudited
$000
99,828
Net Surplus After Taxation
54,636
Depreciation
(9,225)
Amortisation of energy contracts
$000
$000
77,294
51,443
26,651
27,389
0
(5,032)
1,190
907
Add (less) non-cash items:
1,775 (55,637) (1,594)
Amortisation of other non-current assets Release from energy contracts Other non-cash items
(10,045)
0
0
(6,536)
178
21,305
23,442
12,010
3,584
766
(127)
Add (less) movements in working capital: (21,558)
Decrease (increase) in receivables and prepayments
(1,034)
Decrease (increase) in inventories
13,598
(Decrease) increase in payables and accruals
(8,289)
(15,278)
6,481
Increase in provision for taxation
20,621
17,443
1,321
(Decrease) increase in deferred taxation
(1,192)
(85)
1,128
25,023
6,750
0
(11)
Add (less) items classified as investing activities: 397
Movement in other non-current assets
397 88,988
Net Cash Inflow from Operating Activities
Mighty River Power Limited Interim Report 31 December 2004
0
(11)
123,622
81,624
17
Notes to the Consolidated Financial Statements (continued) for the six months ended 31 December 2004 5. Commitments
30 june 2004 audited
31 december 2004 31 december 2003 unaudited unaudited
$000
$000
$000
25,504
39,438
8,094
8,194
33,598
47,632
Capital Commitments 33,725
Commitments for future capital expenditure Operating Commitments
6,948
Commitments for future operating expenditure
40,673
6. Contingencies
Mighty River Power Limited has a number of potential obligations under on-going support projects with community based groups. Mighty River Power Limited has a contingent liability in respect of the Accident Compensation Corporation’s residual claims levy. The levy is payable annually from May 1999 for up to fifteen years. The Group’s future liability is a function of the Accident Compensation Corporation’s unfunded liability for past claims and future payments to employees. Mighty River Power Limited has guaranteed payment obligations of $16.8 million pursuant to a letter of credit provided by a bank in favour of TPC Holdings Limited. Mighty River Power Limited holds land and interests that may be affected by certain claims that have been brought or are pending against the Crown under the Treaty of Waitangi Act 1975. In the event that a recommendation is made by the Waitangi Tribunal for the return of some or all of the affected land, and that recommendation is confirmed by the Crown, resumption would be effected by the Crown under the Public Works Act 1981 and compensation would be payable to Mighty River Power Limited.
7. Subsequent Events
There have been no events subsequent to balance date that would affect the fair presentation of these interim financial statements.
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Mighty River Power Limited Interim Report 31 December 2004
Directory
Directors Carole Durbin, Chair John Baird Caroline Ball Ian Fraser David McConnell Sandy Maier Tania Simpson Rob Challinor, Chairman to 31.12.04
Executive Management Doug Heffernan Chief Executive Tim Densem General Manager Hydro/Thermal John Foote Group Operations Manager Tony Gray Group Finance Manager Stuart Lush General Manager Generation Development William Meek Enterprise Risk Strategist James Moulder General Manager Trading Greg Raasch General Manager Geothermal David Reeve General Manager Metrix Neil Williams General Manager External Affairs
Company Secretary Tony Nagel
Registered Office Level 19, 1 Queen Street, Auckland Telephone: 09 308 8200 Facsimile: 09 308 8209 Email: enquiries@mightyriver.co.nz Website: www.mightryriverpower.co.nz
Mighty River Power Limited Interim Report 31 December 2004
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