Meridian profit ahead of forecast

JAMES WEIR
Last updated 14:33 18/08/2014

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Meridian Energy is paying a special dividend of 2 cents a share after posting a solid profit of $229.8 million for the June year, even as household power bills went down slightly in the past year.

But the Green Party says the "folly" of the National-led Government's asset sales was exposed by Meridian's windfall dividend, which the Government would now get only half of.

"Meridian's windfall dividend underlines that selling good assets to cut debt is plain bad economics," Green co-leader Russel Norman said. "These are dividends that the Government should have".

The Crown would get a $26.2m windfall from Meridian, but it would have been more than $50m had the Government not sold "this superb asset", Norman said.

The latest June-year's profit was down from $295.1m in the previous financial year, boosted by a couple of large one-off factors.

But the June-year profit was ahead of Meridian's prospectus forecast and in line with its guidance earlier this year. The net profit was about 22 per cent ahead of prospectus forecast.

Meridian announced a final ordinary dividend of 6.82 cents a share, taking the full year dividends to a total of 11.01c. As well, the company will pay a special dividend of 2c a share from the sale of excess land and other assets, including aluminium hedge contract proceeds.

Sales of surplus land and assets in the United States realised $62.2m.

Both dividends will be paid on October 15.

Meridian's share's last traded at $1.27.5, down 1c today, compared with the initial issue price of $1 for the instalment receipt. The company listed in late last year.

Including the special dividend, the gross yield on Meridian's instalments of $1 a share was more than 17 per cent, compared with 13.4 per cent in the prospectus. That was equal to an 11.7 per cent gross yield on the final share float price of $1.50 a share.

Underlying net profit after tax, excluding the effects of non-cash fair value movements, gains on sale of assets, impairments and other one-off items, was $194.6m.

Operating profits at the ebitdaf level were $585.3m, almost 7 per cent ahead of prospectus forecasts. The operating profits were flat on the same period last year, but that previous year included six months when the Tiwai smelter power contract was at a higher price and five months of earnings from the company's interest in the Macarthur wind farm in Australia, since sold.

The 2013 June year profits included higher operating profits from the new New Zealand Aluminium Smelter which started on January 1, 2013, and was then changed on July 2013.

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Meridian said operating cashflow in the year was almost 28 per cent ahead of prospectus forecast.

Meridian noted a "competitive retail landscape", with the Ministry of Business, Innovation and Employment reporting a 0.3 per cent annual fall in residential sales of electricity.

"This was despite a 1.7 per cent increase in lines charges, which was more than offset by decreases in Meridian's energy charges," the company said.

Total electricity demand remained relatively flat, Meridian said, with demand from manufacturing subdued, though net migration was rising and the economy was growing.

Norman said while Meridian reported flat demand for electricity, households were still paying higher bills.

"The average power bill has risen 20 per cent since National came to office," Norman said.

The Labour-Green plan to reform the power system if they won the election next month was expected to cut the average household power bill by $300 a year, he said.

Meridian said its customer numbers rose 1.7 per cent in the year.

Meridian's wind farms at Mill Creek near Wellington and at Mt Mercer in Victoria were nearing completion.

Hydro power water inflows in the June year were 111 per cent of historic average, but they also included the fourth-driest February to April period on record.

Meridian's generation was almost 9 per cent up on the previous June year, but with large swings in weekly market share.

Meridian's total operating revenue in the year was $2.5 billion, down from $2.7b in the previous year.

- Stuff

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