Meridian Energy delivered some more bad news for the
prospective Labour-Green government when it yesterday delivered
its first report since listing last year on the NZX.
Meridian chief executive Mark Binns said in his release to
the NZX that Meridian's last increase in energy prices was in
''While we will continue to pass on any increases or
decreases in transmission or network costs, we do not foresee
energy prices increasing until at least June 2015,'' he said.
Cost increases from the national grid and local monopoly
lines networks would be passed on.
Labour and the Greens are proposing a single buying authority
for the New Zealand electricity industry if they form the
next government after this year's general election.
The prospect of the regulatory change has hung over the
listings of Meridian and Mighty River Power, the other
company sold down by the Government last year.
Opposition parties have said the partial listings will result
in higher prices for consumers and the single buying
authority is needed to set the price of electricity.
Craigs Investment Partners broker Chris Timms said the
company had absorbed $11 million of higher transmission costs
in the period, something that could have been passed on to
Asked if it could be seen as a political move, Mr Timms said
the costs absorbed were from pole-to-pole and higher
''It's nice for the customers but not so good for
shareholders. Operating earnings were down in the period but
had the higher costs been passed on, the results would have
been in line with last year,'' he said.
The company reported a lower interim profit for the six
months ended December but brokers reacted well to the news
because the result was above the prospectus forecasts.
The company declared an interim dividend of 4.19 cents per
share, imputed to 90% of the corporate tax rate.
Forsyth Barr broker Andrew Rooney said Meridian Energy
produced a good first-up result, although he had to dig a bit
into the numbers to find the good news.
Operating earnings for the six months ended December were
$268.2 million, down 3.2% on the previous corresponding
period and 4.3% lower than forecast.
However, Meridian reported it was up 7%, or $17 million, on
what it assumed in the prospectus numbers. The energy margin
was $7 million better and operating costs were $8 million
lower than in the prospectus.
''Overall, this is a good start to life as a listed entity,
although lots of water has helped. Meridian has the strongest
earnings momentum of the 'gentailers' but if it stays dry,
like it did in 2013, Meridian will probably struggle to hit
the revised guidance, such is its earnings volatility,'' Mr
Meridian's reported profit was $116.9 million and the
underlying profit - which excludes the effects of non-cash
fair value movements, gains on sale of assets, impairments
and other one-off items - was $83 million. Meridian chief
executive Mark Binns said the earnings figures were ''very
''The above-average hydrology conditions in Meridian's
catchments contributed to consistently high generation market
share in the last six months, with generation volume being
the highest in the company's history.''
With hydrology inflows 122% of average in Meridian's
catchments, the company was able to maintain a high
generation market share of 36%, on average, during the
The completion of the Pole 3 upgrade in November resulted in
the highest weekly northward flows since 2007, he said.
The retail market remained competitive, with a decrease in
net retail contracted sales to $296.9 million, down 3% on
last year. Customer numbers across both the Meridian and
Powershop brands increased by 2% over the period, despite
In his outlook, Mr Binns said Meridian had continued to
deliver a strong operating performance since balance date.
Given performance to date, should inflows from this point
match the assumptions in Meridian's prospectus, the full-year
operating earnings would exceed the prospectus forecast by
But he warned investors to remain aware that hydrology and
other risks described in the prospectus could still
significantly affect results.