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Sales up but prices down in first half for Meridian Energy

Meridian Energy [NZX: MELCA] sold more electricity in the first six months of the current financial year than in the previous year, but prices achieved were significantly lower, despite what the company says are signs that growth in demand emerging after a long period of weakness.

In its monthly operating report for December, the government-controlled power company, whose instalment receipts covering 49 percent of the company's shares listed on the NZX on Oct. 29, Meridian shows higher than average hydro lake storage levels contributing to low wholesale prices.

Although inflows were lower than average in the month of December, storage at mid-January is 129 percent of average and inflows over the full six months were the seventh highest on record.

That resulted in Meridian achieving lower average prices for electricity generated at its hydro and wind power installations in five of the first six months of the current financial year, compared to the year before.

The average generation price in the six months to Dec. 31 was $39.70 per Megawatt hour, down 17 percent from the $47.70 per MWh achieved the previous year. Both are less than half the $80 to $100 per MWH regarded as the trigger for justifying the construction of new generation capacity, owing to prolonged weak electricity demand following the global financial crisis.

Likewise, retail contracted sales averaged $102.9 per MWh in the most recent period, compared with $109 per MWh in the first six months of the previous financial year.

However, after stripping out the impact of both its sales to the Tiwai Point aluminium smelter and reduced sales to Norkse Skog's Tasman pulp and paper mill, which reduced production in 2012, Meridian says there are signs of an uptick in national electricity demand in calendar 2013.

"National demand, excluding Norske Skog consumption, showed growth of 1.1 percent in the 12 months to December 2013, despite a very mild winter," the company said. Consumption by New Zealand Aluminium Smelters, Meridian's largest single customer, was "slightly above the 572MW base quantity of the NZAS Agreement."

There was also some uplift in futures prices for delivered electricity through the end of next year.

In the six months under review, total generation volumes somewhat offset lower wholesale prices, totalling 6,651 Gigawatt hours, compared with 6,060GWh in the same period a year earlier.

Customer number comparisons with the previous period are complicated by the loss in December 2012 of 14,000 customers when Energy Direct NZ decided to operate as an independent retailer instead of selling through Meridian.

However, customer numbers had improved by 1.6 percent between June and December, through a combination of 3 percent growth in Meridian brand customers in the North Island and a 1.9 percent increase in customers under the company's online sub-brand, Powershop, to total 276,564 at Dec. 31.

Meridian instalment receipts, which convert to ordinary shares in May 2015, listed at $1, rose to high point of $1.11 in early November and dived to 89.5 cents in early December. They rose 0.5 percent to 99 cents at the market open today.

(BusinessDesk)