Wellington, Aug 31 NZPA - Mighty River Power's full year revenue and profit dropped after severe drought hit its Waikato hydro system when spot prices were at their highest.

For the year to the end of June the state-owned power company reported revenue of $1.1 billion, down from $1.12b a year earlier, with underlying earnings down to $139.6 million from $211.7m.

In the 2009 financial year the company had enjoyed record inflows into the Waikato catchment at a time when electricity spot prices were high, Mighty River said today.

"This equation was reversed in 2010, with the severe Waikato drought depleting hydro storage and forcing a cut to hydro production in April, when spot prices had reached their highest point over the year."

Along with the Waikato hydro system with nine power stations along the Waikato River, Mighty River also has geothermal plants within the Taupo and Bay of Plenty regions, the Southdown gas-fired station and is developing wind power.

Earnings before interest, tax, depreciation and amortisation and financial instruments (ebitdaf) were $327.8m in the latest year, down from $447.1m a year earlier.

Operating expenses were driven up by higher asset maintenance costs and increased spending on getting and keeping retail customers in a highly competitive market, Mighty River said.

Mighty River Power chairwoman Joan Withers said the company achieved important growth objectives in the 2010 financial year, both in generation capacity and retail numbers.

During the year the company opened the 140 megawatt (MW) Nga Awa Purua Geothermal Power Station, a joint venture with the Tauhara North No2 Trust, and with the trust secured resource consents for the development of a geothermal power station of up to 110MW on the Ngatamariki field, and it advanced the consenting process on the Turitea wind project, Mrs Withers said.

Mighty River Power's customer numbers increased by 30,000 to 412,000 and market share grew to 21 percent. A period of slower growth amid intense competition was expected, with a continuing focus on reducing operational spending.

In May, Mighty River announced its first major international investment. Through international partner GeoGlobal Energy (GGE), Mighty River Power invested an initial $US92m of its $US107m commitment to US-based geothermal company EnergySource.

EnergySource is building a 49.9MW geothermal power station in Southern California, and in Chile has secured a range of exploration permits and an extraction permit for the proposed Tolhuaca geothermal power station in the south of the country.

"Our investment in international geothermal projects via the GGE Fund is expected to lead to strong returns and we believe has the potential to become a significant success story for New Zealand, complementing our already successful domestic geothermal programme," Mrs Withers said.

Net profit for the 2010 financial year was $84.6m, well down on the record 2009 result of $159.6m.

The profit was hurt by non-cash after-tax accounting adjustments totalling $54.9m, Mighty River said.

During the year Mighty River Power had its generation assets independently revalued on a discounted cash flow basis. That resulted in a positive revaluation of $371m on those assets to a total of $4.3b.

Mighty River Power will pay a final dividend of $30.3m in September, having paid an interim dividend for the 2010 year of $56.2m.