Meridian positive on what new government has flagged to date, CEO Binns says
By Rebecca Howard
Oct. 26 (BusinessDesk) - Outgoing Meridian Energy chief executive Mark Binns said there is a lot of detail in the coalition proposals from Prime Minister-designate Jacinda Ardern's government the company is keen to engage on and overall it is positive about what has been flagged to date.
"We now have a new government with different priorities and approach to the previous one. I have read the coalition agreement and there are aspects that will have implications for the electricity sector," said Binns in speech notes for today's annual meeting. Binns will stand down at the end of the year and is being replaced by general manager of retail Neal Barclay.
The incoming government's commitment to convert the government car fleet to electric by 2025/26 where practicable is positive, said Binns. He also noted the coalition is committed to an independent Climate Change Commission to advise on the setting of carbon reduction targets and hold the government accountable for delivery. "Meridian believes that climate change is real and tangible action over the next year should be welcomed by shareholders, given Meridian's commitment to NZ growing renewables," he said.
Meridian is supportive of the new government's emphasis on water quality but "the devil is always in the detail, so understanding the framework within which this will be considered is important." Freshwater is an issue that cannot be done "piecemeal," he said.
Hopefully, by this time next year we will know how the government intends to approach the issue given its material importance to the New Zealand economy, he said.
Binns said he also hopes the government will have completed its full-scale review into retail power pricing. He noted that competition has kept electricity prices low and is likely to continue doing so. "If the government wanted to look at some sacred cows for efficiency gains, it may pay them to look at the number of network companies in New Zealand - 29 compared to five in the state of Victoria, with a comparable population," he said.
According to Binns, the level of inefficiency that such a number drives into electricity costs is significant.
He also said the government should look at low fixed charges for low users, a policy that was meant to help lower income households on the premise that these households were low users. However, "when you see a number of people here at Meridian, for example, who don't fall into low-income households, qualify for this break - you know it is misdirected," he said.
Outside of New Zealand, Binns said he is looking forward to seeing Meridian's growth initiatives in Australia, the UK and Europe develop, given low demand growth in New Zealand.
The Australian market "is not for the faint-hearted" he said. Meridian has just signed off on the parameters for the final negotiation of power purchase agreements with a number of Australian developers, potentially underwriting a number of solar and wind projects in Victoria and New South Wales. The arrangements are expected to be completed in coming months, he said.
Binns said he expects "meaningful growth" in the 2018 calendar year in the UK, where Meridian has licensed the Powershop platform and brand to nPower and will be adding gas functionality in January.
Meridian is also engaging with nPower's German parent Innogy with a view to franchising the platform in other Europen countries, said chairman Chris Moller in his address. The aim is to make an "in-principle" decision early next year but a final commitment by both parties - assuming there is agreement - could take until the middle of 2018.
Regarding guidance for the current financial year, Moller said the company got away to a slow start due to entering the year with depleted water reserves following the lowest-ever hydro inflows between February and June. However, "perversely there has been above-average rainfall since July, not only in our catchments but across the total country, which has seen wholesale and forward prices fall significantly."
The start of the year "has not been optimal, but weather patterns can, and do, change quickly," he said.
Meridian shares last traded at $2.825 and have gained 10.5 percent this year.