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.
And depending on what happens in next month's election and if the Tiwai Pt aluminium smelter stays open, shareholders could be in line for another windfall later next year, with Meridian dangling the possibility of an extra dividend or a share buyback.
An analyst said a buyback was a good way of keeping a company's share price high, but it also indicated "they can't think of anything else to do with the money". With the market "awash" with generation and strong cash flows, there was little else but to give the money back to shareholders.
Meridian shares closed at $1.27.5 yesterday, down 1c, compared with the initial issue price of $1 for the instalment receipt.
The full-year profit was down from $295.1 million in the previous financial year, which was boosted by a couple of large one-off factors. But the June-year profit was 22 per cent ahead of the prospectus forecast and in line with its guidance earlier this year.
Meridian announced a higher-than-forecast final ordinary dividend of 6.82 cents, taking the full-year dividends to 11.01c, better than the prospectus forecast of 10.5c.
As well, it will pay a special dividend of 2c a share from the sale of excess land and other assets, including aluminium hedge contract proceeds. Both dividends will be paid on October 15. Sales of surplus land in the South Island and assets in the United States realised $62.2 million.
The Green Party says the "folly" of the Government's asset sales was exposed by Meridian's windfall dividend, of which the Crown would now get only half - $26.2m - instead of the more than $50m had the Government not sold "this superb asset", Green co-leader Russel Norman said.
Meridian chief executive Mark Binns said the company expected to make an announcement on its capital structure in February, but the final detail of that would depend on the future of Tiwai Pt and the election result.
"I'm still hopeful that [the smelter] will stay, but that is their decision and that hope is not based on anything I've been told by them," Binns said yesterday.
Meridian expected the smelter to take a longer-term view of aluminium prices when the critical decision is made next July 1 about the future of the smelter.
Options for Meridian's capital structure included a share buyback programme or enhanced special dividends, but Binns rejected that that was from "excessive profits".
Meridian's household power prices had actually gone down in the past year as it tried to win new customers "and save ones that have been pinched".
It noted a "competitive retail landscape", with Ministry of Business, Innovation and Employment figures showing a 0.3 per cent annual fall in residential sales electricity charges.
"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.
Analyst Andrew Harvey-Green of Forsyth Barr said Meridian's operating profits were in line with expectations, with the dividend a little better than expected, reflecting asset sales.
Meridian was the lowest-geared of any of the big power companies, so they were looking at possible share buyback or an extra dividend.
"It would be a reasonable uplift - it won't be minuscule," Harvey-Green said.
- The Dominion Post