Meridian Energy is setting out its stall in the race to be the second state-owned enterprise to be privatised.
New Zealand's largest generation company confirmed a sharp fall in annual profits in the year till June 30 yesterday, but took substantial steps to tidy up its balance sheet during the period.
Chief executive Mark Binns, who has moved to sell niche businesses and cancel marginal generation projects since joining from Fletcher Building in January, also denied the company would be pressured into a deal with Rio Tinto, which wants cheaper electricity for the aluminium smelter at Bluff.
The mining giant has said it will close unprofitable smelters.
"Reading some of the press there seems to be this indication that Meridian's going to 'take one for the team' if you like . . . I would just reiterate that the board and management are very clear about what their obligations are," Binns said, with the Companies Act obliging the board to act in the best interests of the company.
"Clearly we would like them to stay, but we would like them to stick to the contract," he said.
Meridian's financial results disclosed yesterday were poor. Net profit after tax plunged 75 per cent to $74.6 million, or 52 per cent, to $106.1m once one-off items, such as last year's sale of two South Island canals to Genesis, were excluded.
The company blamed "unprecedented hydrology" - the lowest rainfall in 79 years during the early part of the year - for the drop, as it cut generation from its South Island hydro stations.
But while the results showed Meridian's results are dependent upon the whim of nature, Binns said its financial performance was $100 million stronger than 2008, the last "dry year", despite hydro inflows being 10 per cent lower.
In spite of higher wholesale prices, Meridian's earnings from its retail business moved from a $4.10 loss on every megawatt of energy sold, to a profit of $1.80.
Binns said retail performance was being boosted by better analysis of which segments were profitable, but it was still not making an acceptable return and that would be a focus for the coming year. "The issue for us isn't around growing the book, it is around ensuring we have the best customers and we're focusing on the right segments."
Though the Government has signalled that Mighty River Power will be the first of a series of state-owned enterprise privatisations, there has been no discussion on which would be second.
Officials say the companies are striving to be in the best shape for sale, and that telling them their place in the queue might dampen the competition.
Binns told reporters yesterday that they probably knew more than he did about when Meridian was to be sold.
"We are prepared for mixed ownership, government share sales, [or] whatever the vernacular is at the moment . . . and are ready to go if the Crown was to tell us we're next on the list."
Binns conceded that the uncertainty over the smelter contract, which uses about 14 per cent of New Zealand's electricity, made it harder to value the company.
However, he hinted that once the North-South line was completed, the impact might fall more on Meridian's rivals.
- © Fairfax NZ News
Do you think state schools should conduct religious instruction for primary-aged children?