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

 

Balance Of Trade: NZ Posts Trade Deficit In October On Falling Dairy Exports

New Zealand’s posted its largest monthly trade deficit for October in six years, while narrowing the shortfall from September, led by a fall in dairy exports to China while all main imports into the country rose. More>>

ALSO:

Gigatown Winner: Plenty Of Positives For Dunedin

Although the city has taken the Gigatown title, along with new ultrafast 1Gbps broadband and funding for $700,000 worth of UFB-related initiatives across the community, Mr Cull says Dunedin has gained so much more through its involvement. More>>

ALSO:

R18: The Warehouse Group Praised For Removing Games

The decision by New Zealand’s largest retailer The Warehouse Group (TW Group), to withdraw stocks of the latest version of Grand Theft Auto V (GTA V) and other R18 games, has been praised by advocacy group Stop Demand Foundation. More>>

ALSO:

Air NZ Wine Awards: Victory For Villa Maria As Pinot Noir Thrills

It was a night to remember as Villa Maria Estate picked up one of the highest accolades of the evening, the O-I New Zealand Reserve Wine of the Show Trophy, at the 28th Air New Zealand Wine Awards. The Villa Maria Single Vineyard Southern Clays Marlborough ... More>>

ALSO:

Future Brighter Money: RBNZ Releases New Bank Note Designs

New Zealand’s banknotes are getting brighter and better, with the Reserve Bank today unveiling more vibrant and secure banknote designs which will progressively enter circulation later next year. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news