MightyRiverPower sheds retail customers, gains commercial sales

Russel Norman: $200m cost to taxpayer

BUSINESSDESK: MightyRiverPower continues to lose retail customers but has gained large extra volumes of commercial electricity sales in the year before its intended partial privatisation, figures released to the NZX show.

The state-owned power company issued its final quarterly update for the financial year to June 30, showing it shed 6000 retail customers in the year to June 2012, down from 392,000 a year earlier to 386,000.

The update will be the last before the company makes its scheduled announcement of full-year profit on August 28, which is the earliest date by which a prospectus for the MRP part-sale can be issued, given legal restraints that prevent a prospectus being issued within the so-called "window" ahead of official results announcements.

The government has announced a timetable to sell up to 49% of MRP by the end of the third quarter of this calendar year, although the timing looks likely to drift because of Maori challenges on water rights.

The offer's timing also remains subject to favourable market conditions.

Prime Minister John Key announced further details of the float at his National Party's annual conference in Auckland at the weekend, including provisions intended to improve uptake by small-scale New Zealand investors.

These include a minimum parcel of $1000 of shares, no scaling back for any retail investor seeking up to $2000 worth and the promise of an additional share issue for long-term holders, with a likely three-year threshold to qualify.

The update figures show sales to businesses and industry rose 29% to 679 Gigawatt hours in the three months to June, compared with the same period a year earlier, and were up 13.5% for the full year at 2412 GWh.

Residential sales at 2609GWh were down 1.6% for the year, although the average price of electricity sold to customers on fixed price, variable volume contracts rose to $115.48 a Megawatt hour, up 4.6% on the 2010-11 financial year.

MRP has been willing to lose retail customers in recent times after mopping up more of the residential market than intended during aggressive marketing campaigns in 2009 and 2010, including significant new customer bases in the South Island, where it was traditionally inactive because it has no generation capacity there.

The latest update highlighted "significant price separation between the North and South Islands influencing higher wholesale electricity purchase prices", as low hydro inflows to South Island lakes pushed up prices in the south.

Constrained capacity on the Cook Strait cable capacity made this worse by limiting total volumes of electricity capable of being sent from the North to the South Island to compensate.

That saw wholesale electricity purchase costs rise 58.2% from $47.44 a MWh on average in 2010-11 to $113.36 in 2011-12.

Total generation volumes for the year were 7068GWh, up from 6833GWh the previous year, although generation in the quarter under review was down 1640GWh, reflecting high inflows to MRP's Waikato catchments the previous winter.

As a result, MRP used its Southdown gas-fired plant in Auckland more heavily in the latest quarter, producing 179MWh of electricity compared with 33GWh in the same quarter a year earlier.

Geothermal production was flat at 556GWh, partially reflecting the impact of MRP selling a further 10% stake in its Nga Awa Purua geothermal power station to its Maori joint venture partner.

The company's wholesale market position for the quarter was "slightly short" at 34GWh, the company said.

Meanwhile, Green Party leader Russel Norman attacked Mr Key's bonus share proposal, suggesting that rewarding loyal local shareholders for holding on to their shares could cost taxpayers $200 million.

“If only a third of the shares were bought by retail investors and there was one free share for every 10 bought, then that’s a $200 million liability for the taxpayer … to the roughly 5% of the population that the government expects to buy shares directly."

Labour's state-owned enterprises spokesman Clayton Cosgrove said the proposal was akin to a "Ponzi scheme", leading Mr Key to label Cosgrove "an idiot" in a Radio New Zealand interview.

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14 Comments & Questions

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Yes, congratulations Russel. The cost of your brainless opposition to asset sales will be at least $200M to the taxpayers - and probably considerably more in other ways too.

As usual idiotic political policies are completely counter-productive - and they are entirely yours.


If this was a planned power system operated sensibly for the good of the country as opposed to the insane territorial duplication designed to extract the maximum amount of stealth taxes and let little boys pretend they are real businessmen extracting their bonuses for ripping off the public and business then the cable that was supposed to help NZ arrange it's power wouldn't now be the very thing making it more expensive, plain insanity!


You are a fool Norman, if you cannot do simple arithmetic, surely it is better you keep your mouth shut and be thought of as a fool, than open it and prove it beyond doubt?
The "free share" will not be "free". The issuing price will/must have the value of the "free share" factored in. DOH!!


Good point, John. Though of course the issue price will be a rough estimate of value only.


Yep and what I know about bean counters, I'm betting I know which side the "rough estimate" will be biased towards. :-) Cheers


Russell is this about the same amount you have spent of taxpayer money funding your opposition against the PARTIAL asset sale is it not?.

And Russell if we cannot PARTIALLY sell our assets to help the country where do we get the money to do all you say you would do if in power? It’s very easy to promise a wonderful Utopia to everyone when you know you will never be called on to deliver.


Where to get the money?

Return essential public services back to the SERVICE not COMMERCIAL model and cut out all these private piggies-in-the-middle with their snouts firmly in our public troughs!

Penny Bright
'Anti-corruption campaigner'



Berl report says it all,National couldn't run a p*ss up in a brewery.


Seen this?

"PEOPLE POWER time folks! SWITCH OFF / SWITCH FROM Mercury Energy - 100% owned by Mighty River Power. Switch to one of the other four publicly-owned retailers – Genesis Energy, Meridian, Energy Online & Powershop. Privately owned Contact Energy, Empower & TrustPower should most definitely be avoided

The Good Energy Kiwi says don't waste money.
Switch off Mercury Energy now!

Why switch off Mercury Energy?

Other than the fact that most companies will offer you cheaper electricity rates than what you currently get, Mercury Energy is the main retail arm of Mighty River Power which the Government is about to privatise. Switching away from Mercury to another electricity company will cut the profit of Mighty River Power, and therefore its future share value.

Contact Energy lost more than 40,000 customers in six months after a campaign against it when they doubled directors fees and increased power prices 12%. As a result their profit was cut in half!

How will switching to another company help?
Mighty River Power is the first publicly-owned State Asset the current minority National-led Government is putting up for sale. They plan to begin offering shares for sale in September, 2012.

Mighty River Power’s share value is driven mainly by the prospect of future profits. Any real threat to profits or share value will make Mighty River a risky investment, even before the share value actually drops. Investors won't want to buy if there’s a risk the share value will fall instead of rise, as happened with Facebook shares recently.

If the Government doesn’t get a high enough sale price, they probably won't sell Mighty River Power and it will raise serious questions about the ability of the Government to privatise or sell other publicly-owned assets.


Graphic produced by: Action for Good
Img # 23 Good Energy Kiwi vs Power Bill!


Why on earth would we want to devalue an asset we desperately need to sell to pay off the Labour parties woeful governance debts? I want to buy these shares and get the dividends they bring. That's how I put food on the table and pay my bills. Hopefully they will help me retire one day. Take some personnel responsibility , this is not Communist Russia even if you would like it to be. If you want to crusade against corruption and waste, campaign for halving the number of state houses in New Zealand. Now there's some public assets that are not performing.


Sorry, but sadly there is a large percentage of peeps in NZ who do not wish to contribute meaningfully to society, and they know that goods and services supplied by Gov. owned entities are a much softer touch than those that are privately owned.
They are forever seeking that free lunch and will support the poli' that promises it to them.


How true......it is a shame the electoral law can't be changed. "No representation without taxation!"


Hey 'stop the handouts' the mere fact you have a table to put food on is due the our power system, a few measly dollars of dividends will not put food on the average table and you know it, the higher the dividends the higher the cost of power... And Alan Wilkinson and John Morrison, by the tone of your stuck record postings obviously you are both (you may be the same person for all I know) going to take great delight in watching the 'losers' of society struggling to pay their power bills, yeah that will help in feeling superior. You po faced whingers are obviously prepared to fund the extra health budget to treat the kids with respiratory and poverty related conditions brought about by cold damp homes that ordinary folks won't be able to afford to heat or subsidise the industry shutdowns that will result from unaffordable power, cause that's what we have to look forward to until at least one of them is bought back... we get it already!

Here's what we need... a 100% publicly owned not for profit power system with a cheap monthly allocation to households that covers the basics, over and above that allocation it costs (like broadband plans) same for industry and even cheaper for exporters, we can make more money that way long term via economic growth for which there seems to be no plan, than from the short term sugar rush of flogging an essential asset and transferring wealth... now that's what I call a sensible set up, but sensible doesn't seem to cut it anymore in the face of greed.


Reading this post, I swear I could hear violins!
What people should really do is buy these shares and have the dividends offset their power costs.
The "100% not for profit power system" Paul N is asking for is a monopoly!
I believe NZ'ers have had a gutsful (I know I have) of monopolies like the old telecom, the old post office, fonterra, TAB, the Lotto Commission, Local Government et al.
The "fat cost" of monopolies is an absurd tax that is forced on the consumers to keep lazy fat cats fat and lazy. I abhor them, they are a proven shackle on societies progress.


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