Profit for Mighty River Power was down 46% to $68 million for the year to June compared with the previous year due to one-off unrealised charges and commitments made in 2008.
The company is in the final stages of being prepared for a partial privatisation and blamed the fall in profits on accounting-driven write-offs on financial products designed to protect it from rising interest rates.
Excluding one-off items, underlying profit edged up to $163 million.
Gross earnings rose 4% to $461 million due to higher electricity prices, while it sold more power to businesses and attracted new users.
Despite the industry experiencing flat demand from domestic and business customers, Mighty River recorded growth of 5% in sales volumes and prices.
Chief executive Doug Heffernan says the increased sales were partly due to its retail arm Mercury Energy pushing for higher volume residential customers south of Auckland.
In its annual report, the company said it entered into $1 billion geothermal expansion programme four years ago and agreed to pay interest rates averaging 7%.
Due to the financial crisis, rates fell to 4%, leaving Mighty River with an expensive overhang.
The company announced a final dividend of $45 million will be paid to the Government, taking the total dividend for the year to $120 million, up 9% from last year.
An energy analyst says the slump in profits at Mighty River Power does not reflect its performance.
Phil Anderson, of Devon Funds Management, says the write-off is not related to the company's underlying performance, which has been sound and its gross earnings result was a better measure.
However, he says the potential for Rio Tinto to pull the plug on its energy-hungry Tiwai Point aluminium smelter near Bluff is casting a pall over the outlook for Mighty River, along with all other power companies.
"Historically, we've seen demand growing consistently, but we've just come through a period of four years where demand hasn't grown at all and it's harder to see power companies' earnings growing strongly in the future in an environment of flat demand."