Meridian's Benmore power station. The company reported a “solid” result, underpinned by continued growth in the volume of energy sold to customers. Photo / NZME
Meridian's Benmore power station. The company reported a “solid” result, underpinned by continued growth in the volume of energy sold to customers. Photo / NZME
Meridian Energy will raise its prices by an average of 6 per cent from April 1 after reporting what it sees as a solid profit for the first half.
The country’s biggest power generator saidits net profit came to $191 million for the six months to December, $10m or 5 per cent lower than the same period last year, largely due to changes in the fair value of its hedge instruments.
Operating earnings, or earnings before interest, tax, depreciation, amortisation and financial instruments (Ebitdaf), came to $443m, up $18m or 4 per cent.
Meridian did not offer guidance for the full year, highlighting the uncertainty around contract discussions with the owners of the Tiwai Point aluminium smelter over supply beyond 2024, and the uncertain impact the weather can have on its hydro and wind power generating assets.
Chief executive Neal Barclay said it was a “solid” result, underpinned by continued growth in the volume of energy sold to customers.
Meridian, one of the country’s biggest companies by market capitalisation, reviews its “headline” prices around this time of year.
“In the last four years, we have kept price adjustments to well below the rate of inflation,” Barclay said.
“This year it’s a bit higher because some of those costs have caught up with us, so the average headline price will be up by around 6 per cent for the average Meridian customer,” he said.
But Barclay said prices would affect only 30 per cent of Meridian’s customers because most were on fixed-price plans.
A 6 per cent increase equated to about $2.80 for the average customer a week.
Ministry of Business, Innovation and Employment data shows power prices have typically lagged inflation over the past few years.
About half the price increase would come from increased transmission and distribution charges, the other half coming from the impact of higher costs.
“Ultimately, as we deploy more renewable energy and we electrify people’s vehicles and other energy uses, we think that overall energy prices should come down for the average Kiwi home and Kiwi business,” Barclay said.
On Tiwai, Barclay said the company was still in discussion with NZAS, which owns and operates the smelter, whose contract runs out at the end of this year.
“We are not sure what the status is of the discussions that they are having with the other parties as well,” he said.
Meridian chief executive Neal Barclay. Photo / File
“We are not the only energy provider to the smelter.”
Meridian has invested heavily in renewable energy projects over the years.
It is close to finishing its Harapaki wind power project in Hawke’s Bay.
The Ruakaka grid-scale battery project - the first of its kind in New Zealand - will be completed this year.
Looking ahead, Barclay said Meridian had a number of other projects that were going through the consent process.
He expected a new project to kick off “probably early next year”.
“We going through the consent process now, so we are going to kick off another large, renewable energy project - probably early next year.
“We have got potentially strong options on the table that we think are viable now.”
On the result, Barclay said the retail business performed strongly in extremely competitive market conditions.
The company, 51 per cent owned by the Government, set an interim ordinary of 6.15 cents a share, up 3 per cent on last year’s interim dividend.
Jarden analysts, in a research note, said it looked like Meridian was on track towards beating the broker’s full-year 2024 Ebitda estimate of $841m.
“We consider this a buoyant result and a looming Tiwai decision (hopefully within the next two months) should underpin the current price,” Jarden said.
While the likely outcome of contract negotiations with NZAS remained unclear, the market did gain confidence from this week’s announcement that majority owner Rio Tinto had agreed to cut back power demand to make more power available to the grid over winter.
Meridian is not the first power company to announce price increases.
Earlier this month, Mercury NZ said its prices would rise by between 5 to 8 per cent for most customers from April 1, reflecting higher costs.
Contact Energy warned consumers would face significantly higher power bills from April, and then higher still in April 2025 when new regulated line charges kick in.
However, Genesis Energy said it will not be raising its power prices any time soon, despite a slump in its first-half earnings.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.