Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Meridian sees strong 2nd half after testing first six months

Meridian sees strong second half after testing first six months

By Pattrick Smellie

Feb 25 (BusinessDesk) - Meridian Energy says it's ready for partial privatisation and expects a significant uplift in operating earnings in the second half after transmission outages and heavy rainfall knocked its performance in the six months to Dec. 31.

The state-owned power company's accounts also show a strong positive bounce in the unrealised value of its contracts to service the Bluff aluminium smelter, where the majority owner Rio Tinto is pressing to renegotiate a new long term contract to achieve lower prices.

The $102.1 million improvement in the unrealised value of financial instruments was the primary factor pushing Meridian to a net profit of $173.3 million in the first half, up by $164.1 million on the same period a year earlier.

However, the more useful measure of its operational performance is earnings before interest, tax, depreciation, amortisation and movements in the value of financial instruments showed a 6 percent decline to $277.1 million.

Underlying profit, an internally produced measure of earnings that smooths out large abnormal items , was $88.3 million, an 11 percent fall on the previous six months, but a significant improvement on the last six months of the last financial year, chief executive Mark Binns said.

That was because low inflows to hydro catchments in the second half of the previous year created difficult operating conditions.

Revenue for the first half was down 2 percent at $1.19 billion, reflecting falling wholesale prices and weak commercial and industrial demand for electricity.

There was no shortage of rain to Meridian's South Island catchments in the half-year under review, but heavy inflows depressed wholesale electricity prices, while a large number of transmission system outages relating to the commissioning of the new Pole 3 Cook Strait cable also pared first half earnings.

While further outages are a risk to second half earnings, Binns said Meridian had "returned to higher profitability this half year and is on track to achieve signficiant full-year ebitdaf growth."

"Operationally, we're in good shape and we're building resilience against New Zealand's medium term flat demand outlook," he said.

The improvement in the value of financial instruments is significant because they are largely tied to the smelter contracts and reflected "a softening of forward electricity prices and strengthening forward aluminium prices."

Binns offered no update in the company's statements to the NZX about the progress of negotiations with Rio Tinto, which is seeking to sell the smelter along with a suite of other mid-life plant in Australia, other to say the talks were progressing.

However, improving metal prices and a soft outlook for electricity prices suggest the conditions for a favourable outcome to the negotiations are improving.

In the retail electricity market, Meridian says it was facing 18 percent monthly customer churn rates, consistent with the rest of the industry, and that it has now completed its efforts to gain additional North Island customers following sector reforms that forced the SOE retailers to diversify their customer bases.

With other retailers announcing in recent days that electricity tariffs are unlikely to move up much in the next few years, Meridian said it had undertaken "some tariff changes repositioning to mid-market pricing and recover higher lines costs" and that the company anticipated "further pricing pressure."

Transmission costs rose 33 percent, or $14 million, in the half year under review, largely reflecting the cost of monopoly national grid operator Transpower's upgrade programme.

"The Electricity Authority's proposed transmission pricing methodology changes, if implemented, are likely to benefit Meridian over time," the company says, placing it at odds with most of its competitors, who are alarmed by the proposals, which will shift transmission costs to be less heavily borne by South Island generators.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Power Outages, Roads Close: Easter Storm Moving Down Country

The NZ Transport Agency says storm conditions at the start of the Easter break are making driving hazardous in Auckland and Northland and it advises people extreme care is needed on the regions’ state highways and roads... More>>

ALSO:

Houses (& Tobacco) Lead Inflation: CPI Up 0.3% In March Quarter

The consumers price index (CPI) rose 0.3 percent in the March 2014 quarter, Statistics New Zealand said today. Higher tobacco and housing prices were partly countered by seasonally cheaper international air fares, vegetables, and package holidays. More>>

ALSO:

Notoriously Reliable Predictions: Budget To Show Rise In Full-Time Income To 2018: English

This year’s Budget will forecast wage increases through to 2018 amounting to a $10,500 a year increase in average full time earnings over six years to $62,200 a year, says Finance Minister Bill English in a speech urging voters not to “put all of this at risk” by changing the government. More>>

ALSO:

Prices Up, Volume Down: March NZ House Sales Drop 10% As Loan Curbs Bite

New Zealand house sales dropped 10 percent in March from a year earlier as the Reserve Bank’s restrictions on low-equity mortgages continue to weigh on sales of cheaper property. More>>

ALSO:

Scoop Business: Chorus To Appeal Copper Pricing Judgment

Chorus will appeal a High Court ruling upholding the Commerce Commission’s determination setting the regulated prices on the telecommunications network operator’s copper lines. More>>

ALSO:

Earlier:

Cars: Precautionary Recalls Announced For Toyota Vehicles

Toyota advises that a number of its New Zealand vehicles are affected by a series of precautionary global recalls. Toyota New Zealand General Manager Customer Services Spencer Morris stressed that the recalls are precautionary. More>>

ALSO:

'Gardening Club': Air Freight Cartel Nets Almost $12 Million In Penalties

The High Court in Auckland has today ordered Swiss company Kuehne + Nagel International AG to pay a penalty of $3.1 million plus costs for breaches of the Commerce Act. Kuehne + Nagel’s penalty brings the total penalties ordered in this case to $11.95 million ... More>>

ALSO:

Crown Accounts: Revenue Below Projections

Core Crown tax revenue has increased by $1.9 billion (or 5.0%) compared to the same time last year. However this was $1.1 billion less than expected and is reflected across most tax types, continuing the pattern of recent months. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news