Meridian Energy has found another reason to return cash to shareholders, this time citing asset sales and the release of a tax liability to pay a special dividend of 1.51 cents per share.
Meridian, still partly owned by the Government, reported an operating profit before finance costs of $618 million in the period, up 5.6% on the $585 million reported in the previous corresponding period (pcp).
Revenue of $2.9 billion was up nearly 16% on the $2.5 billion reported in the pcp. Forsyth Barr broker Andrew Rooney said the key feature of the result was the return of dividends.
Meridian had started paying out the $625 million over five years identified in the first-half result, with an initial special dividend of 2.44cps.
But as it had done in other results, Meridian found a reason to return even more cash through asset sales and the release of a tax liability.
Add the ordinary dividend and Meridian was paying a total final dividend of 12.88cps - 35% imputed. The total dividend for the year was 18.2cps.
''Looking ahead, we suspect Meridian could easily pay more than it has previously guided to but its commentary is coy on the timing and means of returning the $625 million,'' he said.
Based on the Government's current holding in Meridian of 1.307 billion shares, it would receive a gross dividend for the year of $238.2 million.
Meridian's financial statement showed earnings before interest and tax were up 3.8% to $379 million, the before tax profit fell 21.2% to $249 million.
Only $2 million tax was paid compared with $87 million in the pcp to leave a reported profit of $247 million, up 7.5% on the $230 million in the pcp.
Mr Rooney said the result was in line with expectations at the operational level.
There were a ''significant number'' of account adjustments below the operation level, meaning normalised profit was $38 million below the reported profit.
''Overall, the result is a good one. Dividends are higher than forecast, highlighting Meridian's relaxed balance sheet. It has plenty of capacity to return capital to shareholders. Meridian remains one of our preferred electricity stocks with the strong dividend being a key factor.''
Forsyth Barr's 12-month target share price was $2.49 and the rating was outperform, he said.
Meridian chief executive Mark Binns said it was pleasing the company posted such a good result in the year that marked the end of the company's prospectus requirements.
''We continue to generate high levels of free cash flow and our shareholders have enjoyed a 36% total shareholder return in the year and 71% since the company listed.''
In the last year, there had been progress on several issues affecting the New Zealand electricity market, he said.
Modest demand growth was welcome, the Tiwai Point aluminium smelter's future was clearer and the Electricity Authority had proposed a more sustainable option on transmission pricing, he said.
''We are also seeing further changes to New Zealand's generation base being signalled with announcements of thermal plant retirement, enhancing prospects of achieving the Government's target of 90% of electricity generation from renewable sources by 2025.''
