Meridian earnings beat forecast

The Meridian float added to market momentum. Photo / Simon Baker

Newly NZX-listed Meridian Energy beat its prospectus forecast for earnings in the six months to Dec. 31, thanks to high inflows to hydro lakes giving the company a larger than normal share of the generation market during the period.

Underlying net profit, the company's preferred measure of profitability because it removes distorting items, was $83 million, 6 per cent lower than for the same period a year earlier, but 27.7 per cent above the company's internal half year split of the prospectus forecast, said chief executive Mark Binns in a statement to the NZX.

"Given performance to date, should inflows from this point match the assumptions in Meridian's prospectus, full year EBITDAF would exceed the prospectus forecast by approximately 7 per cent."

Earnings before interest, tax, depreciation, amortisation and changes in the value of financial instruments (EBITDAF) was $268.2 million, 3.2 per cent below the same period last year, but 6.5 per cent above prospectus on the same split basis, Binns said.

Statutory net profit, at $116.9 million was 32.5 per cent lower than in the same period last year, largely reflecting big swings in unrealised changes in the value of financial instruments on Meridian's balance sheet.

The company is particularly exposed to changes in the value of the contracts governing its largest customer, the Rio Tinto-controlled aluminium smelter at Bluff.

Meridian declared a maiden dividend of 4.19 cents per share, 90 per cent imputed, to the 49 per cent of shareholders who took instalment receipts in its partial float in October, payable on April 15.

"With hydrology inflows 122 per cent of average in Meridian's catchments, the company was able to maintain a high generation market share (36 per cent) during the period," said Binns. The completion of the new Cook Strait cable connection, known as Pole 3, in November, had also assisted.

"In December, the upgrade resulted in the highest northward flows since 2007."

Reflecting competitive retail market conditions and low average wholesale electricity prices, Binns said Meridian "does not foresee energy prices increasing until at least June 2015" although cost increases from the national grid and local monopoly lines networks would be passed through.

Meridian instalment receipts listed in late October at $1, traded up to $1.11 in the following days and then sank as low as 89.5 cents in early December, but have recovered since to close yesterday at $1.035.