Interim report 2007

INTERIM REPORT 31 DECEMBER 2006M I G H T Y R I V E R P O W E R L I M I T E D

Ground breaking work started in late 2006 on the 90 MW, $275 million Kawerau geothermal power station. It is the largest single geothermal power development in New Zealand in more than 20 years. Geothermal energy will meet a significant proportion of consumer requirements over the next 10 years.

MIGHT Y RI V ER P OW ER LIMITED INTERIM REP ORT 31 DECEMBER 2 0 06

BEST CUSTOMER SERVICE F O R T H E T H I R D Y E A R I N A R O W T H E T E A M AT M E R C U R Y E N E R GY H A S W O N T H E C U S T O M E R R E L AT I O N S H I P

M A N A G E M E N T AWA R D F O R B E S T C U S T O M E R S E R V I C E W I T H I N T H E E N E R GY I N D U S T R Y

GEOTHERMAL POWERC O N S T R U C T I O N O F T H E K AW E R AU G E O T H E R M A L P L A N T C O M M E N C E D, T H E L A R G E S T

S I N G L E G E O T H E R M A L D E V E L O P M E N T I N N E W Z E A L A N D I N M O R E T H A N 2 0 Y E A R S

RECORD PRODUCTIONO U T S TA N D I N G P R O D U C T I O N F R O M T H E G E O T H E R M A L P O W E R S TAT I O N S T H E C O M PA N Y

O P E R AT E S , A N D O W N S I N C O N J U N C T I O N W I T H I T S I W I PA R T N E R S

$136.2 MILLIONA S T R O N G O P E R AT I N G S U R P L U S B E F O R E I N T E R E S T,

N O N - R E C U R R I N G I T E M S A N D TA X AT I O N WA S R E C O R D E D

$74.6 MILLIOND U E T O FAV O U R A B L E O P E R AT I N G C O N D I T I O N S , N E T S U R P L U S A F T E R TA X AT I O N

I N C R E A S E D B Y O V E R $ 2 0 M I L L I O N F R O M T H E C O R R E S P O N D I N G P E R I O D

$154.1 MILLIONO P E R AT I N G C A S H F L O W I N C R E A S E D $ 3 2 . 8 M I L L I O N O N

T H E C O R R E S P O N D I N G P E R I O D L A S T Y E A R

HIGHLIGHTS

31 DECEMBER 2006

C

OPERATING SURPLUS BEFORE

INTEREST, NON-RECURRING

ITEMS AND TAXATIONFOR 6 MONTHS TO 31 DECEMBER

( $ M I L L I O N )

2002 2003 2004 2005 2006

79.4

95.3

135.7

106.8

136.2

2002 2003 2004 2005 2006

99.8

51.4

77.3

54.0

74.6

2002 2003 2004 2005 2006

47.4

81.6

123.6121.3

154.1

2002 2003 2004 2005 2006

55.9

62.061.3

76.875.3

2002 2003 2004 2005 2006

36.5

30.1

32.3

17.4

15.5

Net debt + EquityTotal EquityOperating cashflowNet Surplus After taxOperating Surplus before Interest

NET SURPLUS

AFTER TAXATIONFOR 6 MONTHS TO 31 DECEMBER

( $ M I L L I O N )

OPERATING CASH FLOWFOR 6 MONTHS TO 31 DECEMBER

( $ M I L L I O N )

2002 2003 2004 2005 2006

79.4

95.3

135.7

106.8

136.2

2002 2003 2004 2005 2006

99.8

51.4

77.3

54.0

74.6

2002 2003 2004 2005 2006

47.4

81.6

123.6121.3

154.1

2002 2003 2004 2005 2006

55.9

62.061.3

76.875.3

2002 2003 2004 2005 2006

36.5

30.1

32.3

17.4

15.5


2002 2003 2004 2005 2006

79.4

95.3

135.7

106.8

136.2

2002 2003 2004 2005 2006

99.8

51.4

77.3

54.0

74.6

2002 2003 2004 2005 2006

47.4

81.6

123.6121.3

154.1

2002 2003 2004 2005 2006

55.9

62.061.3

76.875.3

2002 2003 2004 2005 2006

36.5

30.1

32.3

17.4

15.5


MIGHT Y RI V ER P OW ER LIMITED INTERIM REP ORT 31 DECEMBER 2 0 06 2

TOTAL EQUITY/TOTAL ASSETSAT 31 DECEMBER

( P E R C E N T )

2002 2003 2004 2005 2006

HYDRO

COGENERATION

GEOTHERMAL*

BIOMASS*

* MIGHTY RIVER POWER DOES NOT OWN 100% OF THESE ASSETS AND/OR THE PHYSICAL OUTPUT

1000

1500

500

2000

2500

3000

2002 2003 2004 2005 2006

79.4

95.3

135.7

106.8

136.2

2002 2003 2004 2005 2006

99.8

51.4

77.3

54.0

74.6

2002 2003 2004 2005 2006

47.4

81.6

123.6121.3

154.1

2002 2003 2004 2005 2006

55.9

62.061.3

76.875.3

2002 2003 2004 2005 2006

36.5

30.1

32.3

17.4

15.5


NET DEBT/NET DEBT + EQUITYAT 31 DECEMBER

( P E R C E N T )

2002 2003 2004 2005 2006

79.4

95.3

135.7

106.8

136.2

2002 2003 2004 2005 2006

99.8

51.4

77.3

54.0

74.6

2002 2003 2004 2005 2006

47.4

81.6

123.6121.3

154.1

2002 2003 2004 2005 2006

55.9

62.061.3

76.875.3

2002 2003 2004 2005 2006

36.5

30.1

32.3

17.4

15.5


GENERATION DATA (GWh)FOR 6 MONTHS TO 31 DECEMBER

3MIGHT Y RI V ER P OW ER LIMITED INTERIM REP ORT 31 DECEMBER 2 0 06

H I G H L I G H T S

Favourable operating conditions have assisted Mighty River

Power to record a strong Net Surplus after Taxation of $74.6

million in the period to 31 December 2006, up $20.6 million

on the previous corresponding period.

The advantages of a diversified portfolio have been

highlighted in the period with healthy inflows into the

greater Waikato catchment increasing hydro production

by 18% over the six months. In contrast, production at

Southdown reduced by 59% during the half year with a

consequential reduction in the quantity of gas required,

a saving of $10.6 million. The complementarity of

Southdown and the Waikato hydro system has over the 2005

and 2006 periods illustrated the ability of the Company to

provide a consistent level of total generation output over

a wide range of climatic conditions.

Record geothermal production further contributed

to the pleasing growth in Operating Surplus before Interest

and Taxation from $106.8 million in the first half of the

previous financial year to $136.2 million for the six

months under review.

The company’s geothermal development plans remain

its strategic imperative. With construction now underway

at Kawerau and further major projects in the pipeline

at Rotokawa and Nga Tamariki, substantial growth in

geothermal capability will dominate the company’s

advancement for the foreseeable future.

A significant milestone in the Company’s geothermal

expansion was the commencement of construction on the

Company’s 90MW, $275 million power plant in Kawerau

in late 2006. The Kawerau plant is the largest single

geothermal development in New Zealand in more than 20

years and part of Mighty River Power’s plans to develop

around 400MW of geothermal energy in the next five to

ten years – enough power for around 400,000 homes.

Geothermal expansion has a number of key characteristics

that make it attractive to both the country and Company.

Geothermal energy is renewable, and importantly compared

to other renewables is reliable in that it is unaffected by

climatic conditions, such as whether the wind is blowing,

rain is falling or sun shining. The constant production and

high availability of geothermal power stations has the

potential to help underpin the secure supply of electricity

to New Zealand’s homes and businesses.

O N B E H A L F O F T H E B OA R D A N D

M A N AG E M E N T , W E A R E P L E A S E D TO

R E P O R T O N M I G H T Y R I V E R P OW E R ’ S

P E R FO R M A N C E FO R T H E S I X M O N T H S

TO 3 1 D E C E M B E R , 2 0 0 6 .

Chair and chief executive report


SIX MONTHS ENDED SIX MONTHS ENDED 31 DECEMBER 2006 31 DECEMBER 2005

1RETAIL 2 WHOLESALE 1RETAIL 2 WHOLESALE

Operating Results

Revenue

Gross Revenue 378.6 155.3 364.1 236.4

Less Transmission and Distribution Costs 154.5 - 136.7 -

Net Revenue 224.1 155.3 227.3 236.4

Costs

Energy Purchases 148.2 12.3 231.8 23.1

Other Direct Costs/ (Income) (17.5) 9.2 17.0 (0.1)

Energy Gross Margin 393.4 133.8 3(21.5) 213.4

Volumes/Pricing

Total Generator Volumes (GWh)4 - 2,695.3 - 2,612.6

Total Fixed Price Variable Volume Sales (GWh)5 2,063.7 - 1,982.1 -

Average Wholesale Electricity Price ($MWh) - 53.9 - 85.0

Average Fixed Price Variable Volume Price ($MWh) 97.2 - 92.1 -

1. Retail includes sales to end user customers of energy and the net impact of electricity financial derivatives (excluding inter-generator financial derivatives).

2. Wholesale includes all generation activities, the sale of energy to the wholesale energy market and the net impact of inter-generator electricity financial derivatives.

3. Retail Energy Gross Margin includes full metering costs incurred by Metrix, some of which are eliminated on consolidation.

4. Generation volumes exclude equity accounted volumes.

5. Does not include the volumes associated with electricity financial derivatives.

The key difference between the 2005 and 2006 Energy Gross Margin was the significant decrease in electricity spot prices

following the very dry conditions in 2005.

The table above shows that lower spot prices decreased the Wholesale Energy Margin to $133.8 million from $213.4 million.

This decrease was offset by retail energy purchase costs decreasing by $83.6 million to $148.2 million in 2006. The offsetting

nature of these movements resulted in an aggregate Energy Margin increase of $35.3 million.

ENERGY GROSS MARGIN ANALYSIS


An additional characteristic is the location of New Zealand’s

main geothermal resources in the central North Island. This

places the existing and future power stations close to both

the key growing load centre of the upper North Island and

the main transmission grid.

Only relatively minor modifications to the transmission grid

in the local Taupo region will be required to accommodate

our geothermal developments. A key factor is that

geothermal power is a very efficient user of transmission

capacity since extra capacity is not required to deal with

the variable and peaky production that is a feature of wind

and hydro generation.

A key theme for the Company is the importance we place

on diversification – across fuels, across geographical

regions, and across new technologies. This focus on building

capability has seen capital expenditure of $64.1 million

for the six month period. This follows the $148.4 million

invested in new energy developments and existing assets

in the full year to 30 June 2006.

In early 2007 Mighty River Power is also set to complete the

installation of a new 45MW gas-fired turbine generator at its

Southdown plant in Penrose. In addition to the construction

activity at Kawerau and Southdown, Mighty River Power

continues to investigate a large number of other potential

generation projects across a range of complementary fuel

sources including geothermal, wind, small hydro and gas.

Excellence in service is the ongoing commitment we make to

our retail customers – and is reflected across our products

and services, our initiatives to promote in-home energy

efficiency and billing innovations.

During the period, growth in customer numbers has been

maintained, rising from 354,000 to 371,000. However lower

wholesale prices led to reduced Operating Revenues of

$397.3 million compared to $478.5 million in the previous

corresponding period. Operating cash flow rose significantly

to $154.1 million, up $32.8 million from the 2005 half-

year, due primarily to the improved hydro and geothermal

production, lower gas costs and retail growth.

G E N E R AT I O N – O P E R AT I O N S

Total generation volumes rose to 3,113 GWh, compared with

2,989 GWh for the six months to December 2005. Increased

rainfall during mid 2006 lifted hydro production to 2,329

GWh from 1,981 GWh in the previous corresponding period.

The outstanding performance of the geothermal plants

the Company operates, and owns with its iwi partners,

continued in the six months to 31 December with production

records set for a second year running at both Mokai (419.3

GWh) and Rotokawa (146.2 GWh). Availability levels of 97.6%

(Mokai) and 97.2% (Rotokawa) achieved over the period are

well above international norms of 95%.

With good hydrological conditions over winter, there

was a reduced requirement to operate Southdown,

compared to the first half of 2005 in which Mighty River

Power experienced the second lowest hydro inflows in

the Company’s history. Total generation at Southdown

decreased from 464 GWh in the previous corresponding

period to 188.2 GWh in the six months under review. The

gas supply arrangements in place at Southdown provide

Mighty River Power with flexibility to run the plant when

the wholesale price is high enough, extra capacity is needed

to meet national peak demand, or other market conditions

warrant its operations.

G E N E R AT I O N – D E V E L O P M E N T

In addition to commencing construction at Kawerau, Mighty

River Power is making good progress in its plans to develop

further geothermal capability at Rotokawa with its joint

venture partner Tauhara North No. 2 Trust. The partners

plan to apply for resource consents for an 80MW plant at

Rotokawa and have geothermal rights at Nga Tamariki, an

undeveloped field, located approximately 10 kilometres

north of Rotokawa.

New Zealand’s wind resource is another form of renewable

energy which has an important role to play in our country’s

future. Mighty River Power is actively building its wind

portfolio, with monitoring equipment established on six

sites throughout the North Island and upper-South Island.


Thermal energy will continue to play an important role in

maintaining security of supply in a renewable dominated

supply system. The installation of the new 45MW gas-fired

turbine generator, will lift Southdown’s total generation

capacity to 170MW.

Meanwhile, Mighty River Power continues to expand its gas

exploration interests. A range of permits have been secured

in addition to gas exploration previously announced with

joint venture partner Swift Energy (NZ) Limited.

C U S T O M E R S

In a highly competitive retail environment, Mercury

Energy’s customer base rose from 330,000 electricity and

24,000 gas customers to 344,000 and 27,000 respectively

over the reporting period – representing supply to some

800,000 New Zealanders.

This result is a reflection of the business’s ongoing

commitment to customer service, including the launch

of price plan rebate and new channel options.

Mercury Energy’s industry-leading service was recognised

in September when the team won the highly coveted

Customer Relationship Management award, for best

customer service in the energy retail industry – the third

year Mercury has won the award. The Company also won the

silver award for best New Zealand contact centre with more

than 50 operators.

Metrix, our metering business, maintained strong growth

in new connections and continued its investment in modern

metering technologies. The results of the deployment

of “Smart Metering” solutions utilising modern two-way

communications technology will be available by year end.

The scale of improvements in retail business productivity

and the customer service benefits will be assessed prior

to determining the preferred pathway for large scale

deployment of “Smart Retailing” solutions.

L O O K I N G A H E A D

Mighty River Power’s service promise extends not just to

the 371,000 customers we supply today, but the future

generations we are expanding to support in the future.

Our everyday business is a balancing act, managing today’s

assets to build tomorrow’s energy solution, utilising existing

fuel sources while preserving the environment and essential

natural resources.

We are confident that as a company, Mighty River Power has

good momentum. Through geothermal developments such

as Kawerau, the expansion at Southdown and the ongoing

wind and gas exploration projects, Mighty River Power is

playing its part in providing a sustainable energy future for

New Zealand.

These developments and those of others in the industry have

bought time. The fuel supply outlook for the next ten years

looks secure. However beyond this, the industry and country

needs to take an innovative approach to the energy question,

to challenge and move beyond current thinking. Our

partners in the energy industry also need to be building for

the future – among the requirements is the need for better

transmission networks to carry the power to where

it is needed.

It is an exciting and positive time. Thank you to our staff,

commercial partners and other stakeholders, whose efforts

have allowed the Company to continue to develop and grow.

D O U G H E F F E R N A N

C H I E F E X E C U T I V E

C A R O L E D U R B I N

C H A I R


We are confident that as a company, Mighty River Power

is building good momentum. Through developments such

as Kawerau, the expansion at Southdown and the ongoing

wind and gas exploration projects, Mighty River Power is

playing its part in providing a sustainable energy future

for New Zealand.

These developments and those of others in the industry

have bought time. The fuel supply outlook through to 2014

looks secure. However beyond this, the industry and country

needs to take an innovative approach to the energy question,

to challenge and move beyond current thinking. Our

partners in the energy industry also need to be building for

the future – among the requirements is the need for better

transmission networks to carry the power to where

it is needed.

It is an exciting and positive time. Thanks to our staff,

commercial partners and other stakeholders, whose efforts

have allowed the Company to continue to develop and grow.

Interim Financial Statements FO R T H E S I X M O N T H S E N D E D 3 1 D E C E M B E R 2 0 0 6

C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P E R FO R M A N C E 9

C O N S O L I D AT E D S TAT E M E N T O F M O V E M E N T S I N E Q U I T Y 1 0

C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N 1 1

C O N S O L I D AT E D S TAT E M E N T O F C A S H F LO W S 1 3

N OT E S TO T H E C O N S O L I D AT E D I N T E R I M F I N A N C I A L S TAT E M E N T S 1 4

8

Consolidated Statement of Financial Performance FOR THE SIX MONTHS ENDED 31 DECEMBER 2006

YEAR ENDED SIX MONTHS SIX MONTHS 30 JUNE ENDED ENDED 2006 31 DECEMBER 31 DECEMBER 2006 2005

AUDITED UNAUDITED UNAUDITED

$000 NOTE $000 $000

1,255,385 Sales 533,849 600,510

(257,730) Less line and metering charges (145,447) (128,796)

2,501 Interest income 3,435 1,003

11,781 Other revenue 5,481 5,814

1,011,937 Total Operating Revenue 397,318 478,531

220,463 Operating surplus before interest and non-recurring items 136,214 106,772

2,501 Interest income 3,435 1,003

(37,147) Interest expense (19,342) (18,092)

(17,532) Non-recurring items 2 0 0

4,156 Share of associates net surplus 1,820 1,739

172,441 Surplus Before Taxation 122,127 91,422

(71,669) Taxation expense 3 (47,563) (37,374)

100,772 Net Surplus After Taxation 74,564 54,048

The notes set out on pages 14 to 18 form part of, and should be read in conjunction with, these Interim Financial Statements.




$000 $000 $000

2,033,315 Equity at Beginning of the Period 2,097,687 2,033,315

100,772 Net surplus after taxation 74,564 54,048

100,772 Total Recognised Revenues and Expenses for the Period 74,564 54,048

Distributions to owners:

(36,400) Final dividend paid for 2005 0 (36,400)

0 Final dividend paid for 2006 (50,400) 0

2,097,687 Equity at End of the Period 2,121,851 2,050,963

Consolidated Statement of Movements In Equity FOR THE SIX MONTHS ENDED 31 DECEMBER 2006


MIGHT Y RI V ER P OW ER LIMITED INTERIM REP ORT 31 DECEMBER 2 0 06 1 0

Consolidated Statement of Financial Position AS AT 31 DECEMBER 2006

30 JUNE 31 DECEMBER 31 DECEMBER 2006 2006 2005


$000 $000 $000

Equity

377,561 Share capital 377,561 377,561

1,720,126 Reserves 1,744,290 1,673,402

2,097,687 Total Equity 2,121,851 2,050,963

Non-current Liabilities

1,204 Energy contracts 1,204 1,204

28,751 Deferred taxation 43,526 27,845

435,591 Loans 532,500 438,002

465,546 Total Non-current Liabilities 577,230 467,051

Current Liabilities

144,433 Payables, provisions and accruals 103,346 139,966

753 Provision for taxation 14,995 13,774

145,186 Total Current Liabilities 118,341 153,740

2,708,419 Total Equity and Liabilities 2,817,422 2,671,754


1 1MIGHT Y RI V ER P OW ER LIMITED INTERIM REP ORT 31 DECEMBER 2 0 06

Consolidated Statement of Financial Position (continued) AS AT 31 DECEMBER 2006



$000 $000 $000

Non-current Assets

2,478,979 Property, plant and equipment 2,498,323 2,447,603

31,308 Investment and advances to associate 31,193 32,891

9,134 Other non-current assets 8,604 10,150

2,519,421 Total Non-current Assets 2,538,120 2,490,644

Current Assets

2,364 Cash 139,807 6,775

2,000 Short term deposits 3,000 5,000

180,225 Receivables and prepayments 131,794 164,937

4,409 Inventories 4,721 4,398

188,998 Total Current Assets 279,322 181,110

2,708,419 Total Assets 2,817,442 2,671,754

The Board of Directors authorised the issue of the interim financial statements on 22 February 2007.



Consolidated Statement of Cash Flows FOR THE SIX MONTHS ENDED 31 DECEMBER 2006



$000 NOTE $000 $000

Cash Flows from Operating Activities

CASH WAS PROVIDED FROM (APPLIED TO):

984,058 Receipts from customers 440,549 474,508

1,506 Interest received 2,997 414

(691,943) Payments to suppliers and employees (253,871) (319,727)

(34,847) Interest paid (17,057) (17,279)

(63,079) Taxation paid (18,545) (16,666)

195,695 Net Cash Flow from Operating Activities 4 154,073 121,250

Cash Flows from Investing Activities


147 Sale of property, plant and equipment 41 30

4,000 Repayment of advances by associates 2,000 0

(148,415) Purchase of property, plant and equipment (64,091) (65,263)

(448) Purchase of other non-current assets (89) 0

75 Disposal of other non-current assets 0 37

(144,641) Net Cash Flow from Investing Activities 4 (62,139) (65,196)

Cash Flows from Financing Activities


0 Loan advances 96,909 0

(33,703) Loans repaid 0 (31,292)

(36,400) Dividends paid (50,400) (36,400)

(70,103) Net Cash Flow from Financing Activities 46,509 (67,692)

(19,049) Net Increase (Decrease) in Cash Held 138,443 (11,638)

23,413 Cash Balance at Beginning of the Period 4,364 23,413

4,364 Cash Balance at End of the Period 142,807 11,775

CASH BALANCE COMPRISES:

2,364 Cash 139,807 6,775

2,000 Short term deposits 3,000 5,000

4,364 Cash Balance at End of the Period 142,807 11,775



Notes to the Financial Statements FOR THE SIX MONTHS ENDED 31 DECEMBER 2006

1. S TAT E M E N T O F A C C O U N T I N G P O L I C I E S

The interim financial statements presented here are the unaudited consolidated financial statements of

Mighty River Power Limited (The Group) for the six months ended 31 December 2006.

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 2006. The accounting policies

used in the preparation of these interim financial statements are consistent with those used in the previous annual

financial statements.

2 . N O N - R E C U R R I N G I T E M S



$000 $000 $000

(17,532) Impairment of exploration expenditure 0 0

Expenditure relating to exploratory drilling has been expensed as a consequence of a review of the economic viability

of the expenditure associated with this drilling.

3 . TA X AT I O N E X P E N S E



$000 $000 $000

172,441 Surplus before taxation 122,127 91,422

56,905 Taxation at 33 cents 40,302 30,169

Taxation effect of permanent differences:

15,015 Other permanent differences 7,261 7,205

(251) Prior year adjustments 0 0

71,669 Taxation expense 47,563 37,374

Analysis of taxation expense:

65,831 Current taxation 32,789 32,442

5,838 Deferred taxation 14,774 4,932

71,669 Taxation expense 47,563 37,374


Notes to the Financial Statements continued FOR THE SIX MONTHS ENDED 31 DECEMBER 2006

4 . R E C O N C I L I AT I O N O F N E T S U R P L U S A F T E R TA X AT I O N W I T H N E T C A S H F L O W S F R O M O P E R AT I N G A C T I V I T I E S



$000 $000 $000

100,772 Net Surplus after Taxation 74,564 54,048

Add (less) non-cash items:

82,462 Depreciation 42,596 40,880

1,080 Amortisation of other non-current assets 600 818

17,532 Impairment of exploration expenditure 0 0

(4,156) Share of associates net surplus (1,820) (1,739)

7,598 Other non-cash items 2,283 1,495

104,516 43,659 41,454

Add (less) movements in working capital:

(19,909) Decrease (increase) in receivables and prepayments 48,232 (4,449)

(1,355) Increase in inventories (312) (1,344)

3,078 (Decrease) increase in payables and accruals (41,088) 10,833

2,755 Increase in provision for taxation 14,243 15,776

5,838 Increase in deferred taxation 14,775 4,932

(9,593) 35,850 25,748

195,695 Net Cash Flow from Operating Activities 154,073 121,250

5 . C O M M I T M E N T S



$000 $000 $000

24,825 Commitments for future capital expenditure 178,110 22,732

17,642 Commitments for future operating expenditure 14,858 8,188

42,467 Total Commitments 192,968 30,920


Notes to the Financial Statements continued FOR THE SIX MONTHS ENDED 31 DECEMBER 2006

6 . C O N T I N G E N C I E S

Mighty River Power and certain subsidiaries have cross-guaranteed the due and punctual payment of each other’s Guaranteed

Indebtedness in relation to bank borrowings under a Standby and Cash Advances Facility and a Revolving Advances Facility.

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 the Crown agrees to the return of some or

all of the affected land resumption would be effected by the Crown under the Public Works Act 1981 and compensation would

be payable to Mighty River Power Limited.

A third party made a claim following a contract dispute. The amount of the claim has subsequently been significantly reduced

and is now immaterial. The Directors still consider that the claim can be successfully defended.

7. S U B S E Q U E N T E V E N T S

There have been no events subsequent to balance date that would affect the fair presentation of these interim

financial statements.

8 . I N T E R N AT I O N A L F I N A N C I A L R E P O R T I N G S TA N D A R D S

In December 2002 the New Zealand Accounting Standards Review Board (ASRB) announced that New Zealand entities

required to comply with NZ GAAP under the Financial Reporting Act would be required to apply International Financial

Reporting Standards (IFRS) for financial periods commencing on or after 1 January 2007 with earlier adoption permitted

from 1 January 2005. The new standards that have been approved by the ASRB for application in New Zealand are referred

to as New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) as certain adaptations have been

made to reflect New Zealand circumstances.

The Group intends to adopt NZ IFRS from 1 July 2007. A project team, monitored by a steering committee, has been

established to achieve transition to NZ IFRS reporting. The project involves assessing the impacts of conversion to NZ

IFRS reporting on existing accounting and reporting policies, procedures, systems and processes, then designing and

implementing the changes required to enable the delivery of financial reporting on an NZ IFRS compliant basis for the

30th June 2008 financial year.

The comparative period in the 30 June 2008 financial statements will also need to be reported on a NZ IFRS compliant basis.

Consequently during the period from 1st July 2006 to 30th June 2007, known as the transition year, two sets of records will

be maintained: one under current NZ GAAP; the other under NZ IFRS.

The differences between current NZ GAAP and NZ IFRS identified to date as having an effect on the Group’s financial

position are summarised below and are based on NZ IFRS that exist at the date of issue of these financial statements.

Future developments of those standards, that occur prior to the first set of financial statements under NZ IFRS, may result

in material amendments to the adjustments detailed below. No attempt has been made to identify all disclosure, presentation

or classification differences that would affect the manner in which transactions or events are presented. Only a complete

set of financial statements including notes, the first to be presented as at 30 June 2008, together with comparative balances,

will provide a true and fair presentation of the Group’s results in accordance with NZ IFRS.


8 . I N T E R N AT I O N A L F I N A N C I A L R E P O R T I N G S TA N D A R D S ( C O N T I N U E D ) FOR THE SIX MONTHS ENDED 31 DECEMBER 2006

Provisional reconciliation of the impact of adopting NZ IFRS on the current NZ GAAP statement of financial position as

at 1 July 2006 (Audited).

SHARE RETAINED OTHER TOTAL TOTAL TOTAL CAPITAL EARNINGS RESERVES EQUITY L IABILIT IES ASSETS

GROUP $000 $000 $000 $000 $000 $000

Total Reported under NZ GAAP 377,561 419,609 1,300,517 2,097,687 610,732 2,708,419

Fair value of derivative contracts 0 0 60,241 60,241 9,192 69,433

Deferred tax 0 (132,519) (375,546) (508,065) 508,065 0

Deemed cost adjustments 0 244,692 (244,692) 0 0 0

Revaluation of property, plant & equipment 0 (25,205) 25,205 0 0 0

Other adjustments 0 (45) 0 (45) (9,421) (9,466)

Restated to NZ IFRS 377,561 506,532 765,725 1,649,818 1,118,568 2,768,386

Provisional reconciliation of the impact of adopting NZ IFRS on the current NZ GAAP statement of financial position as at

31 December 2006 (Unaudited).

SHARE RETAINED OTHER TOTAL TOTAL TOTAL CAPITAL EARNINGS RESERVES EQUITY L IABILIT IES ASSETS

GROUP $000 $000 $000 $000 $000 $000

Total Reported under NZ GAAP 377,561 443,773 1,300,517 2,121,851 695,571 2,817,422

Fair value of derivative contracts 0 (66,736) 42,735 (24,001) 66,589 42,588

Deferred tax 0 (102,761) (369,769) (472,530) 472,530 0

Deemed cost adjustments 0 244,692 (244,692) 0 0 0

Revaluation of property, plant & equipment 0 (25,205) 25,205 0 0 0

Other adjustments 0 267 0 267 (7,603) (7,336)

Restated to NZ IFRS 377,561 494,030 753,996 1,625,587 1,227,087 2,852,674


8 . I N T E R N AT I O N A L F I N A N C I A L R E P O R T I N G S TA N D A R D S ( C O N T I N U E D ) FOR THE SIX MONTHS ENDED 31 DECEMBER 2006

FAIR VALUE OF DERIVATIVE CONTRACTS

On transition all derivative contracts (including electricity hedges, interest rate and foreign exchange contracts) will

be recorded in the statement of financial position at fair value under NZ IFRS and be adjusted against opening equity. Any

subsequent movement in the fair value of these instruments from year to year will have the potential to affect the statement

of financial performance and the statement of financial position, the extent to which will depend on whether hedge accounting

is adopted. NZ IFRS is very prescriptive on when a derivative contract can be considered an effective hedge of an underlying

position or future cash flow. The Group has therefore adopted hedge accounting practices where practical.

DEFERRED TAXATION

The IFRS basis of accounting for deferred tax is conceptually different to current NZ GAAP. Under current NZ GAAP deferred

taxation is calculated using an income statement approach whereas under NZ IFRS deferred taxation will be calculated based

on a balance sheet approach. This method recognises deferred tax balances where there is a difference between the carrying

value of an asset or liability and its tax base. The most significant impact for the Group will be the recognition of a deferred

tax liability in relation to the revaluation of generation assets and the recognition of the fair value of derivative contracts.

DEEMED COST ADJUSTMENTS

NZ IFRS 1 has some specific exemptions available to entities on initial transition to NZ IFRS. A first time adopter may have

established a deemed cost under previous GAAP for some or all of its assets and liabilities by measuring them at their fair

value because of a specific event. It may use such event-driven fair value measurements as deemed cost for NZ IFRS at

the date of that measurement. The Group will use this exemption in relation to the fair value exercise undertaken on the

acquisition of assets and liabilities on the break-up of ECNZ. The impact of this will be a transfer of $244.7 million between

the asset revaluation reserve and retained earnings.

REVALUATION OF PROPERTY PLANT & EQUIPMENT

Under NZ IFRS downward revaluations below cost of individual assets are not permitted to be set off in the reserve against

upward revaluations of other assets within the same asset class and are taken to the income statement. As permitted under

transition to NZ IFRS an amount of $25.2 million resulting from a devaluation of certain generation assets will be reclassified

from the asset revaluation reserve to retained earnings.


DIREC TOR S

Carole Durbin, BCom, LLB (Hons), FInstD, FAMINZ (Chair)

John Baird, BSc, BA, MA (Hons), Rhodes Scholar,

Dip Marketing (UK)

Caroline Ball, BE Chem (Hons)

Trevor Janes, BCA (Econ), CA

Sandy Maier, JD, BA

Neil Ranford, Dip Tchg, BSc, BE (Hons)

Sir Paul Reeves, ONZ, MA, GCMG, GCVO, QSO, KST.J, LTh

Tania Simpson, BA, MMM

Patrick Strange, BE (Hons), ME, PhD

E X ECUTI V E M A N AGEMENT

Doug Heffernan, BE (Hons), ME, PhD, FIPENZ (Chief Executive)

Ken Bugden, CA (Chief Financial Officer)

John Foote, BSc, BE (Civil) (General Manager Generation)

James Moulder, BA, BCA (General Manager Sales)

Greg Raasch, BSc, MSc, PE (Prof Engineer)

(General Manager Geothermal)

Neil Williams, BA (Group Strategist)

COMPANY SECRETARY

Tony Nagel, LLB, MComLaw (Hons)

REGISTERED OFFICE

Level 19, 1 Queen Street, Auckland

TELEPHONE 09 308 8200

FACSIMILE 09 308 8209

EMAIL [email protected]

WEBSITE www.mightyriverpower.co.nz

AUDITOR

The Auditor-General pursuant to section

14 of the Public Audit Act 2001.

J Freeman of Ernst & Young was appointed in February 2006

to perform the audit on behalf of the Auditor-General.

SOLICITOR S

Chapman Tripp

Kensington Swan

BA NK ER S

ANZ National Bank

ASB Bank

Citibank

Directory


INTERIM REPORT 31 DECEMBER 2006M I G H T Y R I V E R P O W E R L I M I T E D

Interim report 2007

Documents

Transcript of Interim report 2007