Meridian lifts operating profit by 4pc, raises dividend

Meridian Energy, which has the Benmore Dam in its portfolio, has reported its first half result.

Meridian Energy says higher retail and wholesale sales helped drive its operating earnings up by 4 per cent in the first half to December.

The power generator and retailer said net profit came to $191 million over the period, $10m or 5 per cent lower than the same period last year, largely due to changes in the fair value of its hedge instruments.

Operating earnings, or earnings before interest, tax, depreciation, amortisation and financial instruments (ebitdaf), came to $443m, up $18m or 4 per cent.

Meridian highlighted the uncertainty around contract discussions with the owners of the Tiwai Point aluminium smelter over supply beyond 2024.

Chief executive Neal Barclay said he was especially pleased with how the retail business was performing in extremely competitive market conditions.

“This is a solid result overall, but the stand-out is a 3 per cent lift in retail sales volumes over the same period last year.”

This increase was driven by the agribusiness and large business segments, up 9 per cent and 6 per cent respectively.

Meridian gained momentum in supporting industrial customers to convert to electric boilers, including recent agreements with Fonterra and Open Country Dairy.

Meridian now has 891 gigawatt hours (GWh) of process heat either contracted or under memoranda of understanding.

“These deals are significant in terms of both sales volumes and their contribution to decarbonising our customers’ businesses and the New Zealand economy,” Barclay said.

Dairy co-op Fonterra’s installation of a 20-megawatt electrode boiler at its Edendale site in Southland would reduce the facility’s emissions by around 20 per cent or 47,500 tonnes of carbon dioxide a year – the equivalent of taking almost 20,000 cars off New Zealand roads, he said.

Meridian set an interim ordinary of 6.15 cents per share, up 3 per cent on last year’s interim dividend.

Meridian is still in discussions with its biggest customer, the Rio Tinto-controlled New Zealand Aluminium Smelter, over its long-term power contract, which ends this year.

“Shareholders are reminded outcomes from discussions with the owners of the Tiwai Point aluminium smelter on a potential contract beyond 2024 remain uncertain,” Meridian said.

Tiwai is by far the country’s biggest power user, consuming about 13 per cent of production.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.