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Geothermal exit, dry weather wallop Mighty River earnings

Electricity generator and retailer Mighty River Power declared a massive drop in earnings for the six months to Dec. 31, falling from $116 million in the comparable prior period to $8 million, largely reflecting one-off writedowns as it exited its international geothermal interests.

However, dry weather also played a part, with earnings before interest, tax, depreciation, amortisation and changes in the fair value of financial instruments - a basic measure of operating earnings - falling $12 million to $258 million. That was due to lower total hydro-electric generation in the company's Waikato River chain of hydro stations and lower commercial sales.

MRP said it was maintaining its interim dividend at 14 cents per share, on top of a 5 cents per share special dividend paid in December.

However, earnings guidance has been lowered for the full financial year to Ebitdaf of between $480 million and $500 million, "reflecting lower-than-average rainfall." The result was achieved on total electricity sales of $856 million for the half-year, compared to $827 million in previous comparable period.

Underlying earnings, a measure preferred by the company and which strips out unusual factors, was $15 million lower than in the previous half year, at $90 million, reflecting the reduced Ebitdaf result and higher interest and depreciation costs associated with completion of its Ngatamariki geothermal power station.

"Over the interim period inflows to the Waikato River catchment were 18 percent below average and this has extended into the New Year," said chief executive Fraser Whineray, in a statement to the NZX. Hydrology since Dec. 31 had been more than 40 percent below average.

"However, total generation was up more than 4 percent on the prior comparable period, largely thanks to using the Southdown gas-fired power plant to offset lower hydro generation.

"We have deliberately continued to reduce commercial sales renewals in a low-yield environment. This has provided the company with greater flexibility to capture wholesale market opportunities," Whineray said.

Chair Joan Withers said MRP made "some firm decisions about investment criteria and capital management over the past six months" and was focused on delivering "efficiencies in our core business, building on MightyRiverPower's commercial strengths and developing longer-term growth opportunities."

In a nod towards MRP's advocacy for the uptake of electric cars, Whinerary said: "New Zealand's renewable electricity is a competitive advantage for the country. We believe this can be greatly leveraged over the long-term, delivering even better environmental outcomes and greater economic resilience by reducing New Zealand's reliance on imported fossil fuels that are expensive for Kiwi consumers."

The shares last traded at $3.375, and have gained 13 percent this year.