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Strong profit fuels Meridian investment programme

Media Release

For immediate release, Friday, 21 October 2005

Strong profit fuels Meridian investment programme

State-owned power company Meridian Energy has reported an after-tax profit of $218.2 million for the year ended 30 June 2005 ­ a result it says will enable it to continue its high level of investment in new generation.

Announcing the result today, Meridian Chairman Wayne Boyd said the financial result was excellent in a year characterised by below-average inflows into the main storage lakes.

"Strong revenue growth was driven by high spot prices on the wholesale market in the latter part of the year, primarily created by thermal plant maintenance and increasing concerns over hydrology moving into winter."

Mr Boyd says the challenging hydrology and high prices reinforce the urgent need for New Zealand to grow its electricity supply.

For its part Meridian has invested more than $500 million in new generation capacity in the past five years, with more than $500 million planned for investment in new developments on the immediate horizon.

"More than any other power company Meridian has been investing heavily in new generation capacity to improve security of supply. Clearly we cannot commit to this level of development without achieving the kind of financial results that will give us the means to carry it out.

"It is critical that we can undertake projects without requiring a capital injection or underwriting from the Crown shareholder, especially as the public accounts may suffer as the economy softens."

Mr Boyd acknowledged that retail electricity prices had risen steeply in recent years, but stressed that Meridian had not repeated the same rate of increase this year as prices had reached a point which supports the company's generation development programme.

"We believe this highlights the advantages that New Zealand's renewable resources - wind and hydro ­ confer on the country as it faces the challenges of providing for future electricity needs."

Mr Boyd says Meridian has taken a renewables-only position because renewable fuels have given the country a competitive advantage for many decades, and can continue to do so at the same time as achieving a balance between social and environmental considerations.

The growing attractiveness of renewable generation was reflected in the strong interest shown by potential purchasers in the possible sale of Meridian's Australian subsidiary, Southern Hydro, said Mr Boyd.

ENDS

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