Biggest power company, Meridian Energy, increases profit 51%

Wednesday, 1 March 2023

Meridian is lifting is dividend pay-out by 0.15 cents a share.

The country’s biggest power company, Meridian Energy, increased its profit by 51% to $201 million in the six months to the end of December.

Meridian’s operating profit, which can be a better guide to companies’ underlying performance, rose by a more modest 7.9% but still confirmed the second half of last year as a good one for the country’s three majority state-owned generation and retail businesses.

Mercury Energy last month reported an 86% rise in its operating profit for the period while Genesis increased its interim operating profit by 42%.

However, Mercury’s net profit was lower than in 2021 when it was boosted by a large one-off gain from the sale of its stake in its Australian wind farm business, Tilt Renewables.

Consumer Advocacy Council chairperson Deborah Hart says something needs to be done about electricity (video first published in November).

* Meridian says Government needs to be more accepting of some gas generation

* Electricity market needs to provide 'certainty', and that means change

Meridian joined Genesis in announcing a small lift in its pay-out to shareholders, raising its interim dividend from 5.85 cents a share to 6c.

Mercury authorised a much higher 9% rise in its interim dividend.

The stronger performance from the state-controlled gentailers comes at a time when the Green Party is calling for a tax on excess profits to help pay for the rebuild from Cyclone Gabrielle.

It also comes in the wake of a report from the Council of Trade Unions last year that accused them of “asset-stripping” and which warned they were not incentivised to invest quickly enough in new generation.

Meridian increased the book value of its assets by $740m.

Council of Trade Unions economist Craig Renney declined to take comfort from the relatively small size of Meridian and Genesis’ dividend rise, saying the pay-outs were only one part of the picture.

“What we want to see is sustained investment in new renewable generation. Regardless of what their plans are, the historical evidence is we haven’t seen the kinds of investment in new generation we need, to date,” he said.

Meridian chief executive Neal Barclay said it had “a bold vision for our renewable pipeline and we intend to continue to push hard and grow our renewable generation assets at pace”.

Tangible developments he pointed to were that Meridian was preparing to lodge a resource consent application for a new wind farm at Mount Munro in the Wairarapa and a 130MW solar farm at Ruakākā, south of Whangārei, and was investing $186m in battery storage at Ruakākā.

Barclay said the grid-connected battery would make a significant contribution to the reliability of the overall electricity grid, allowing more intermittent wind and solar generation to be accommodated within the system.

“We’re getting on with it,” he said.

Meridian’s net profit rise was 39% if adjusted to only take account of its continuing operations.

Barclay said on a conference call to analysts that discussions were continuing over a new power contract with the Tiwai Point aluminium smelter that would allow the smelter to stay open beyond the end of 2024.

But he said the negotiations could take some time and a deal was still far from certain.