Meridian Energy's revenues from offshore activities are closing in on 10 per cent of total income, with political uncertainty in Australia about the use of renewable energy offering both opportunities and risks for the Wellington-based renewable electricity generator and retailer.

In the six months to December 31, international income totalled $104 million, all but $2m of which was earned in Australia from a combination of wind farm operations and the growth of its Powershop retail brand, which has most recently launched in the state of Queensland and boasts 91,000 customers across the ditch.

For the half-year, the company reported earnings before interest, tax, depreciation, amortisation and changes in the value of financial instruments of $352m, up 6 per cent, despite a slight fall in total income for the period of $1.13 billion, from $1.21b in the previous comparable period.

Trading conditions in New Zealand were relatively flat during the half-year, with demand and wholesale electricity prices suppressed by a combination of mild winter weather, reduced irrigation demand because of a wet spring, and some loss of load caused by contracts with major industrial customers coming to an end and being only partially offset by new signings from small and medium-sized customers.


In Australia, however, total generation volumes rose by 19 per cent and the company's international segment produced an 88 per cent uplift in ebitdaf over the same period a year earlier, at $32m, just $2m short of ebitdaf for the whole of the previous financial year.

Powershop retail sales of 78 gigawatt hours were up 48 per cent as the brand expanded its footprint into Queensland and was nominated 'greenest' Australian energy supplier by the environmental lobby group Greenpeace for the second year in a row.

However, political turmoil in Australia's electricity sector was becoming an issue, with the recent storm-related outage in South Australia being tied back to the country's pursuit of increased contributions from renewable, particularly wind, energy to offset Australia's heavy reliance on coal and natural gas to produce electricity.

It was unclear whether political support was sufficiently solid for the federal government's 2020 Renewable Energy Target to see the target met, although this was leading to some firming in prices for renewable electricity under Australia's scheme, which produces a spot price for renewables under a Large-Scale Generation Certificates scheme.

"This inability to provide political certainty for investors is seeing the build rate to meet Australia's 2020 RET rise to a point where most commentators do not deem it realistically achievable," directors said in the Meridian interim report, published today. "The flip side to this has been a strong price for LGCs, which has been a contributor to improved generation prices."

Meanwhile, Meridian believes its largest customer - the Rio Tinto-controlled aluminium smelter near Bluff - "remains cash positive at current prices and exchange rates". Since January 1, the smelter has been paying a new, higher price for electricity, but is also now able to announce termination of supply at any time under complex renegotiations that occurred before Meridian's partial privatisation in October 2013.

The smelter consumes about 12 per cent of all electricity generated in New Zealand.

Meridian chair Chris Moller and chief executive Mark Binns noted that global aluminium prices had firmed by around 4 per cent at the same time as the New Zealand dollar had weakened about 3 per cent against the US dollar, with early signs that the new regime in the US may bolster metal prices.

"It will be interesting to see if the new US president, with both a pro-growth agenda and a stated intention of addressing perceived unfair trade practices, has an impact, on both the supply and demand sides of the world aluminium market," they said. "Initial indications have been positive, with the aluminium price on the London Metal Exchange having improved by 7 per cent from the date of the US presidential election through to the end of January."

The company also this morning announced an intention to raise to an unspecified sum via an issue of unsecured, unsubordinated, fixed rate seven-year retail bonds of which further details will eventually emerge.

The company announced a slight increase in interim dividend to 5.33 cents per share, 88 per cent imputed, and a special dividend of 2.44 cents.

Meridian shares were trading late morning at $2.67, a 0.2 per cent rise on yesterday's close. In the last 12 months, the shares have risen 25 per cent.