MightyRiverPower, whose first half earnings slumped as it wrote down the value of assets and exited its international geothermal interests, said its gas-fired Southdown power station will close at the end of the year in response to growth in renewable generation.
The 140-megawatt Southdown station in Auckland had played a small role in MightyRiverPower's portfolio the past two years, representing just 5 percent of the company's generation, and less than 1 percent of New Zealand's total electricity demand, chief executive Fraser Whineray said in a statement. The plant has high running costs compared with large renewable electricity plants, such as hydro and geothermal, he said.
Major investment in renewable electricity generation in New Zealand over the past decade has "squeezed out large volumes of gas and coal-fired generation out of New Zealand's electricity mix, because they're less economic to run," Whineray said. In total there has been a reduction of more than 4,000 gigawatt hours of thermal fuel commitments since 2013, representing more than 10 percent of the total generation in New Zealand.
MightyRiverPower has invested more than $1.4 billion in reliable base-load geothermal, including the completion of three major geothermal power plants since 2008, he said.
This investment had grown the company's generation base, with geothermal now making up more than 40 percent of the company's portfolio and complementing the Waikato Hydro System - the fastest peaking plant in the North Island - located close to Auckland, the country's largest demand centre.
The Southdown station is expected to close Dec. 31, and will then be dismantled for sale overseas. The company is working with Southdown's 17 employees to explore future opportunities with them, it said.
The Southdown station, excluding land, has a historic cost book value of about $50 million and MightyRiverPower said it will confirm any accounting impacts as part of its normal financial reporting process.
Shares in MightyRiverPower last traded at $3.17, and have gained 6.4 percent so far this year.