‘Eye watering’ profits from gentailers, what does this mean for consumers?

Thursday, 29 August 2024

Consumer NZ has called the profit of three of New Zealand’s largest gentailers “eye watering” as more consumers struggle to pay their electricity bills.

But what do the huge profits mean for households and power bills?

First let’s breakdown each gentailers full financial year results:

Meridian

Meridian Energy had a net profit of $429m in FY24 compared to $95m in FY23.

It’s underlying profit was $909 million, while its revenue was $4.86 billion, up from $3.22 billion the year prior.

The company said the growth in net profit after tax was influenced significantly by net gains on hedge instruments.

It’s full year dividend was 21 cent per share (cps), which was up from 17.9 cps the year prior.

Mercury

Mercury Energy’s net profit for FY24 was $290m, which was up from $103m the year prior.

The company said it was down to changes in the fair value of unhedged financial instruments.

It’s revenue increased from $2.73b to $3.42b and it’s final dividend was 14 cent per share, which was up from 13.1 cps.

Contact

Contact Energy’s net profit for FY24 was $235m up from $127m and had operating earnings of $675m.

The improved operating result was driven by closer alignment of channel pricing to the wholesale market and greater thermal efficiency, partially offset by lower hydro generation, and reduced steam revenue following the closure of Te Rapa, the company said.

It’s revenue was up from $2.12b to $2.86b, while full year dividends were 37 cps up from 35cps.

Genesis

Genesis Energy was the only gentailer to have a decline in profit, with it dropping from $195.7m in FY23 to $131.1m in FY24.

The company put the drop in earnings down to low gas supply, hydro and wind levels and the outage of a power station unit.

It’s revenue in FY24 was $3.04b up from $2.3b, while full year dividends had dropped to 14 cps from 17.6 cps.

So what does this mean for consumers?

Consumer NZ campaigns manager Jessica Walker called the profits “eye watering”.

The consumer watchdog’s latest energy survey found more than 360,000 households had difficulty paying their power bill in the past year, and over a quarter of a million households had overdue fees added to their bill because they couldn’t afford to pay by the due date.

“When you consider that alongside ongoing increases in gentailer profits, it leads to some serious questions.

“Unless something changes, we are concerned that the current state of the market will inevitably lead to more people struggling.”

Infometrics chief forecaster Gareth Kiernan said households were already facing an estimated average increase in their power bill of $15/month in April next year from higher charges from the electricity lines companies and Transpower.

“The longer that wholesale electricity prices remain high and that higher-cost generation needs to be utilised, the greater the likelihood that the cost for electricity charged by the retailer will also increase, to protect their margins.”

The price of wholesale electricity had doubled between the June 2023 and June 2024 but Kiernan said even if wholesale prices stay high, it did not mean that profitability of the companies will remain as strong in 2024/25.

“The low levels in the hydro storage lakes mean that generation over coming months will be forced, to some degree, away from hydro towards higher-cost generation, until the lake levels improve.

“Thus the margins on electricity generation are set to be lower, suggesting that profits will not be as large in the coming financial year.”