Meridian Energy reports flat earnings for FY17, explores Europe for Powershop

Meridian Energy is looking at rolling-out Powershop in continental Europe. Photo / Richard Robinson

Meridian Energy reported flat earnings for the year to June 30, reflecting a strong first-half performance offset by dry conditions in the South Island that limited its ability to generate electricity from its southern hydro dams.

Net profit after tax was $197 million, up from $185m the year before, but on its preferred measure of earnings before interest, tax, depreciation, amortisation and changes in the value of financial instruments (ebitdaf), earnings were just 5 per cent up on the previous year at $653m.

Delivering his last financial results before retiring later this year, chief executive Mark Binns described them as "another good financial result".

A final dividend of 8.7 cents per share, 88 per cent imputed, brings total ordinary dividends for the year to 14.03 cents per share, a 4 per cent increase on the previous year and represents 84 per cent of free cashflow.

Consistent with the previous year, Meridian will also pay an unimputed special dividend of 2.44 cents per share under its capital management programme, bringing to $312.5m the total special dividends paid since the capital management programme began in August 2015.

The result was achieved on total revenues of $2.319 billion, from $2.375b the previous year and total expenses of $1.666b, compared with $1.725b.

Binns warned of a "slow start" to the 2017/18 financial year, with the company continuing to generate less from its hydro assets and buying more electricity under arrangements with other generators, although hydro lakes are beginning to recover after the driest February to June in 84 years in Meridian's main catchments.

"Inflows in August 2017 have been above average so far," say notes for Binns's presentation to investors later today. "July 2017 saw New Zealand sales volumes up 14 per cent across all segments and ICP (customer/meter) numbers up 1.2 per cent.

The current financial year would show the impact of a full year of new, higher pricing for the Tiwai Point aluminium smelter, Meridian's single largest customer.

The systems behind the company's online retail electricity offering, Powershop, had been successfully launched before Christmas last year in the UK and the company was now contemplating roll-outs in continental Europe.

To achieve this, it has split the Powershop front end from the software system that drives it and constituted that business as a new entity, dubbed Flux Federation.

In Australia, where Meridian has wind farms and more than 100,000 Powershop customers for the first time, the policy environment was "volatile and uncertain".

"Higher wholesale and retail prices may elevate smaller retailer risk positions," the company said, with lower customer growth "a possible result".

Ebitdaf from Australian operations improved by $5m to $34m.

For the first time this year, Meridian is also using an integrated reporting framework aligned to the Global Reporting Initiative's Sustainability Reporting Guidelines.