Renewables growth behind Southdown closure - MRP

Mighty River Power today confirmed that its gas-fired Southdown power station will close at the end of the year in response to significant growth in renewable generation in New Zealand.

Chief Executive Fraser Whineray said the 140MW Southdown station in Auckland had played a very small role in Mighty River Power’s portfolio in past two years, representing just 5% of the Company’s generation, and less than 1% of New Zealand’s total electricity demand. The plant has high running costs compared with large renewable electricity plants, such as hydro and geothermal.

The Southdown station is expected to close on 31 December 2015, and will then be dismantled for sale overseas. The Company has been working closely with Southdown’s 17 employees to explore future opportunities with them.

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," Mr Whineray said. In total there has been a reduction of more than 4,000GWh of thermal fuel commitments since 2013, representing more than 10% of the total generation in New Zealand. This reflects the renewable advantage of New Zealand - one of the world leaders.

Mighty River Power has invested more than $1.4 billion in reliable base-load geothermal, including the completion of three major geothermal power plants since 2008.

This investment has strengthened and grown the Company’s generation base, with geothermal now making up over 40% 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.

"Mighty River Power has demonstrated through prolonged periods of very dry conditions over the past two financial years, when hydro inflows have been at record low levels, the resilience that comes from having two large and complementary renewable fuels to draw from, combined with a liquid hedge market and a strong national grid."

The Southdown station (excluding land) has a historic cost book value of approximately $50 million and Mighty River Power will confirm any accounting impacts in its normal financial reporting process.