Meridian Energy profit down but well ahead of prospectus guidance

Meridian Energy [NZX:MELCA] has posted a 22.1% fall in net profit for the year to June 30 but the result exceeded prospectus forecasts issued when the company listed shares on the NZX last year.

Meridian’s net profit was $229.8 million, down on the previous year’s $295.1 million, which benefited from higher non-cash fair value gains and profit on the sale of the Macarthur wind farm.

The company had forecast a net profit of $187.9 million in its prospectus and analysts on average were picking $206 million, according to a Reuters poll.

Underlying net profit, which removes the impact of hedging contracts and other one offs, was $194.6 million against last year's $162.7 million and 20.5% ahead of prospectus forecast.

The company will pay a dividend of 11.01c a share, plus a  special dividend of 2c a share from the sale of excess land and other assets.

Chief executive Mark Binns described the result as solid.

“The solid operating results reflected better than anticipated generation volumes and pricing in the corporate and industrial market in New Zealand coupled with good control on costs,” Mr Binns said.

The company’s operating earnings as measured by ebitdaf (earnings before interest and taxation, depreciation and amortisation and fair value adjustments) was $585.3 million; 6.7% ahead of financial forecasts in the prospectus and in line with a market update provided in February.

Compared to last year, ebitdaf was flat but last year’s result included earnings for six months under the then "unvaried and higher priced" Tiwai Point contract and five months operating earnings from the company’s interest in the Macarthur wind farm in Australia, which has since been sold.

“While inflows into our southern catchments were 111% of average, we experienced difficult wholesale trading conditions from February to April when inflows were around 62% of average. Despite this, electricity generation was up by 8.9% over the previous year,” Mr Binns said.

Meridian supplies about 30% of the country's power, with hydro, wind and gas generation.

The company says 2014 inflows into its hydro dams were 111% of historic average and the year included the fourth driest February to April period on record.

The reporting period also coincided with the Tekapo canal outage, lower South Island transmission work and periods of HVDC outages.

Meridian’s Waitaki catchment storage at June 30 was 113.2% of historic average.

The residential segment of the retail market remained very competitive, Mr Binns said.

The company saw some growth  [1.7%] in customer numbers in New Zealand, while Powershop Australia grew faster than expected, with 13,400 customers,” Mr Binns said.