Meridian Energy plans to spend $3 billion this decade on renewable energy projects, over and above the soon-to-be-completed Harapaki Wind Farm, near Napier.
Damage from Cyclone Gabrielle set the $448 million Harapaki project back by three months, but it is expected to deliver its first power in October this year and be in full swing by September next year.
Meridian has already invested heavily in renewables - mostly wind - over the years.
“We expect to spend $3b this decade on future investments, excluding Harapaki,” chief executive Neal Barclay told the Herald.
“We have a strong investment programme coming up.”
Meridian, which last year sold its Australian business, was in a strong position to invest.
“We have got cash in reserve and a strong development programme, so we are in a good position to invest in this market as it grows,” he said.
On completion, Harapaki - which will be New Zealand’s second-biggest wind farm - will have 41 turbines generating 176 megawatts (MW) of electricity - enough to power over 70,000 average households.
In its result, the company said its operating profit - Ebitdaf - rose 10 per cent in the June year to $783m, driven by higher customer sales, higher generation volumes and positive wholesale trading results.
The power generator and retailer’s net profit dropped to $95m from $664m last year, which included the gain on the sale of its Australian business and positive non-cash movements in the value of hedge instruments.
Excluding the gain on the sale, and non-cash movements in hedge instruments, underlying net profit after tax was up 35 per cent to $315m.
Meridian declared a final dividend of 11.90 cents per share, up 3 per cent on the previous year’s, bringing the total dividend for the year to 17.9c, also up 3 per cent.
Craigs Investment Partners senior research analyst Mohandeep Singh said the result was in line with expectations.
“The full-year dividend was up 3 per cent, which is modest, but shows that regardless of the economic backdrop, the sector is able to deliver reliable returns to investors,” Singh said.
Operating costs were up 9 per cent, with Meridian noting average salaries were up 7 per cent as it navigates the same labour market pressures we are seeing from a number of companies this results season.
Meridian is not alone on the rising costs front - Genesis reported an 11 per cent lift in its results, while Contact’s costs were up by around by 8 per cent.
“The balance sheet remains in good shape, which leaves plenty of room for ongoing development of generation assets, and North Island battery storage,” Singh said.
“Meridian completed the sale of its Australian Powershop business in early 2022 for A$740m ($805m), which has given them good capacity to pursue growth initiatives in the NZ market,” Singh said.
On the future of NZ Aluminium Smelters’ Tiwai Point plant, Meridian said discussions were ongoing with NZAS on a potential supply contract beyond 2024.
Meridian said it had entered into a “demand flex” agreement with Open Country Dairy, similar to the one it has with NZAS – the country’s biggest power user.
Such deals are designed to give the power grid flexibility, with customers agreeing to cut back on consumption when the national power grid is under stress.
The company also has secured partners to advance the Southern Green Hydrogen project.
“We see this as a potential game-changer, as it will support Aotearoa’s drive to energy independence by providing significant demand response and an energy source for hard-to-abate processes,” the company said.
The company has doubled its pipeline of potential projects to 4.7 gigawatts (GW), with 1.5GW of that capacity secured and 3.2GW in advanced prospects.
“The sector is experiencing a growth phase greater than at any other time in New Zealand’s history,” Barclay said.
“For Meridian to do our share of the heavy lifting [for decarbonisation], we’ll need to build the equivalent of 20 large wind farms by 2050,” he said.
The company has started building grid-scale battery storage system at Ruakākā.
It also plans a solar large solar project for the area - likely to be worth over $200m - and has lodged consent applications for the 300GW/h Mt Munro wind farm in the Wairarapa.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.