Meridian Energy chief executive Mark Binns.
Six months after its partial listing by the Government,
Meridian Energy is confident of hitting prospectus targets, but
its boss concedes the future of Tiwai Point aluminium smelter
remains the elephant in the room.
Of diminishing concern for Meridian is the possibility of a
Labour-Green government and change to a single buying
authority for the industry.
For consumers, the good news is Meridian's hydro storage is
well beyond 100% of averages, and it does not expect to be
raising prices until June 2015 at the earliest.
Tiwai is Meridian's largest customer and uses about 15% of
the country's electricity supply. Despite renewing its
electricity-take contract recently, majority owner Rio Tinto
could opt to quit the smelter as early as 2017, affecting
4000 direct and indirect jobs and leaving a gaping hole in
Meridian's customer base.
In a countrywide briefing for stockbrokers and shareholders
this week, Meridian's chief executive, Mark Binns, was in
Dunedin on Wednesday talking to an audience of about 40. Much
of the presentation was based on Meridian's first financial
report after its debut on the stockmarket in October, with
its shares issued at $1 (plus another 50c later), raising
$1.88 billion for the Government, which retains a 51% stake
in the company.
For the six months ended December, its operating earnings
were $268.2 million, down 3.2% on the previous corresponding
period and 4.3% lower than forecast.
However, Meridian's operating earnings were up 7%, or by $17
million, against prospectus expectations, while the energy
margin was $7 million better and operating costs $8 million
lower than the prospectus.
Following the presentation, Mr Binns was asked if Meridian
expected to equal or better its $116.9 million reported
profit or underlying profit of $83 million, of the previous
He reiterated expectations that earnings before interest,
tax, depreciation, amortisation and financial instruments
(ebitdaf) were expected to be up 7% on last year's $548
Profit forecasts cannot be released through the media, but he
said the company was expected to ''do well'' when the year to
June was reported in August.
Investors could also expect the forecast 10.5c per share
dividend, and while there were no guarantees, Mr Binns was
confident the forecast 13.4% rate of return would be
On Tiwai's future, Mr Binns said Meridian now had a couple of
years' breathing space with the deal stuck last year, and
maintained the relationship with Rio Tinto was very good.
The Tiwai issue was probably at the top of investors' minds.
''Yes, it's the elephant in the room,'' Mr Binns said.
The electricity price Rio Tinto received last year ''was the
best'' and, when asked, Mr Binns conceded there was not much
wriggle room left in the pricing.
''We think about the [Tiwai] scenario constantly and aren't
likely to be blindsided,'' he said.
If there was any ''plan B'', Mr Binns said it was likely to
be commercially sensitive.
He highlighted the large number of mum and dad investors who
had bought shares and was pleased for them.
With the $1 down so far, investors had in March received a
4.19c per share dividend, and with the shares holding well
above $1.20 recently, the gain was around 25% so far.
On the Labour-Green electricity policy issue, Mr Binns was
aware of polls which predicted a 75% chance of National
returning to power, which would result in the share price
lift if National led the next government.
On the question of oversupply, Meridian provided 2200MW at
present. When the 26 wind turbines at Mill Creek, near
Porirua were completed, another almost 60MW would be
generated, equating to about 30,000 households.
The focus would then go on long-dated renewable options, Mr