Meridian's underlying profit, which rose 53 per cent on last year, has been welcomed as a sign the firm has the systems in place to cope with dry years, even if it came with a $500 million asset writedown.
The soon-to-be-listed electricity generator and retailer reported underlying profit of $162.7m for the year ending June 30, up from $106.1m a year ago.
Once a $101m gain from the sale of the MacArthur wind farm and other fair value movements are factored in, full year net profit was $295m, up almost 300 per cent on a year ago.
Still, the eye-catching bottom-line figures were matched by a $476 million writedown on the value of its assets, reflecting the lower price it expects to get from the new Tiwai Pt smelter power contract, which was signed last week.
Meridian chief executive Mark Binns took pains to defend the deal, saying Tiwai's owners, Rio Tinto and Sumitomo, would not have haggled so fiercely if they intended to quit the market any time soon.
That suggests the power firm could recoup lost ground when aluminium prices rose or the New Zealand dollar fell.
Phillip Anderson, an energy sector analyst at Devon funds, said the earnings figures were more significant than they seemed on paper because they were generated during another challenging year for the firm's hydro dams.
Yet, unlike 2012, when a dry end to the summer reduced Meridian's net earnings to just $71m as it bought contracts to cover its electricity shortfall, this financial year showed the firm had its house in order, despite the summer drought.
"The risk-management tools and changes meant they have dealt with a similarly difficult situation but managed to retain the profitability of the business," Anderson said.
In addition, many of the operational challenges, such as 42 days of HVDC outages in which South Island producers could not sell their power to more profitable North Island users, and the Tekapo canal repairs, will be behind the firm.
That has reinforced confidence that Meridian, which is being tidied up to be partly floated on the NZX by the end of October, will be able to sustainably produce the cash flows that yield-hungry investors are looking for.
Anderson said the $252m final dividend extracted by the Government suggested the firm's payout ratio would remain at about 85 per cent of net profit.
Certainly the balance sheet looked set for the float, with the firm's gearing ratio at 14.5 per cent, down from 25 per cent previously.
Meridian's stellar financial results did little for the rest of the market, with shares in Contact Energy and Mighty River Power closing 1.3 per cent and 2.2 per cent lower respectively.
This trailed a 0.3 per cent decline on the NZX50 benchmark.
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