Hydro power glut hurts Meridian

JASON KRUPP
Last updated 05:00 04/02/2013
CUP RUNNETH OVER: Water spills from Benmore dam. Meridian’s hydro generation volumes rose 7.4 per cent  but plentiful power pushed prices down.
Fairfax NZ

CUP RUNNETH OVER: Water spills from Benmore dam. Meridian’s hydro generation volumes rose 7.4 per cent but plentiful power pushed prices down.

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Electricity company Meridian's operations closed 2012 on a weaker note, with a glut of hydro power pushing down prices even as customer numbers and power sales slipped.

According to the state-owned firm's operational metrics for the three months to the end of December, generation volumes rose 7.4 per cent to 3235 giga-watt hours.

That was chiefly because of above-average flows at the firm's South Island lakes, which saw hydro generation volumes rise 6.4 per cent to 2893GWh. Meridian's wind farms also chalked up a bumper production period, with output increasing by 16.7 per cent to 342GWh.

"It's been a strong performance this quarter as generation increased from low levels during the record dry winter," chief executive Mark Binns said. "By the end of the period Meridian's renewable generation was meeting 40 per cent of the country's electricity demand."

The downside of the added supply was that it pushed wholesale prices sharply lower in the period, with the company earning an average of $31.21 per megawatt hour, down from $60.88/MWh in the previous quarter, and $69.12.MWh a year ago.

Competition on the retail side of Meridian's balance sheet remained high, with the monthly Individual Customers Premises (ICP) churn rate sitting at 18 per cent.

Overall, Meridian's ICPs fell 2.2 per cent in the December to 235,879, although some of that was cannibalisation from the firm's Powershop subsidiary, which picked up 7000 new customers last year to give its total of 48,794 at the end of December.

Similarly, Meridian's electricity sales fell 9.1 per cent to 1303GWh in the quarter compared with the same period a year ago, although the comparison may be skewed by the Tiwai Point aluminium smelter scaling back its power use at the start of 2012.

Rio Tinto, which owns the facility, started cutting production at the plant as the slow pace of global economic growth weighed on aluminium prices. Tiwai previously accounted for about 15 per cent of the country's electricity consumption, a level that has since fallen to around 12 per cent.

The weaker quarterly figures could potentially weigh on the firm's earnings announcement at the end of February when it will report financial results for the six months ending December 31.

Meridian said it would continue to rationalise its development pipeline because of price and oversupply issues. However, work was still proceeding at its Mill Creek wind farm in Wellington, and it had started construction on the Mt Mercer wind farm in Western Australia.

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- BusinessDay.co.nz

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