Meridian Energy reveals flat earnings, with gains offset by lower Tiwai Point revenue

Meridian Energy has reported its result for the first half. Photo / Supplied

Meridian Energy, New Zealand's largest electricity generator, has reported a fall in first-half profits, with its new contract with the Tiwai Point aluminium smelter hitting revenues.

The Wellington-headquartered company, which generates most of its revenue from hydro systems in the lower South Island, reported a net profit after tax of $145 million for the six months to December 31, a fall of 36 per cent on the same period a year earlier. Most of the fall reflected changes in the value of its hedge instruments.

Meridian's earnings before interest, tax, amortisation and fair value adjustments (ebitdaf) - analysts' preferred measure of a power company's financial performance - was $394m, down $1m from the same period in 2020.

Chief executive Neal Barclay said the period included a reduction in revenue from its largest customer, the aluminium smelter, meaning an on-par financial performance reflected momentum in Meridian's operating business.

"It's pleasing to see continued growth in retail sales, which reflects an enduring commitment to excellent customer service and support. Our retail performance has helped offset the impact of NZAS exit pricing, and we're making sound progress on our strategy to develop new sources of South Island demand following the Tiwai contract end in 2024," Barclay said.

At the start of 2021, Meridian cut a deal with the smelter's owners to keep it operating until at least the end of 2024, lifting the threat of closure.

Now Meridian and Contact - which also generates a large proportion of its revenue from the lower South Island, making it exposed to a loss of demand there - are seeking alternative uses for electricity in Southland.

Meridian's board has declared an interim dividend of 5.85c per share, a 2.6 per cent increase on a year ago.

In January, Meridian completed the sale of Meridian Energy Australia for A$740m (NZ$793m). The company said it expected to report a gain on the sale of $240m for the year to June 30.

"This transaction is an outstanding result for Meridian's shareholders and a testament to the quality of the Meridian Energy Australia business and the employees who have been dedicated to its success," Barclay said.