Better second half helps Meridian

WELLINGTON: A strong generation rebound in the June quarter and improved retail earnings in New Zealand, Australia and the UK have produced a modest rise in fullyear earnings for Meridian Energy.

The company, New Zealand’s biggest power generator, benefited by adding about 1400 new customers across both its Meridian and Powershop brands in the local market during the past year while using technology to reduce costtoserve by $15 per customer.

Retail volumes rose 5%, reflecting higher irrigation, corporate and small business volumes, and the firm also sold 43% more volume through derivatives.

Meridian also benefited from an inflation adjustment on its sales contract with the Tiwai Point smelter — its biggest customer — and one month of an escalation factor for higher aluminium prices.

But the firm also reported improved earnings in Australia and in the UK, where the Flux Federation business has helped Npower sign up more than 32,000 customers on to the Powershop UK platform. Revenue from the UK increased 57% to $11 million.

Earlier this year, Meridian announced a threeyear plan to shift all its customers on to the Flux platform developed for Powershop.

‘‘Flux will enable Meridian to improve its customer experience significantly, allowing us to respond to customers’ needs and deliver products to market faster than our competition,’’ the firm said in its annual report.

‘‘Meridian customers provide Flux with scale to drive growth and expansion opportunities.

‘‘Accordingly, the journey for Flux is far from limited to our existing businesses. We are presently focused on supplementing the existing technical capability with account management and business development capabilities to drive an international sales and business growth strategy.’’

Meridian shares rose 3.5c to $3.285 on the NZX yesterday. They have gained almost 10% so far this year.

The company yesterday reported a net profit of $201 million for the year ended June 30, up from $200 million a year earlier. Earnings before interest, tax, depreciation, amortisation and changes in financial instruments rose to $666 million, up 1.4% from $657 million a year earlier. Prioryear earnings were restated for a change in accounting policy.

For a second year running, low South Island inflows reduced Meridian’s generation. While fullyear inflows were only 2% below average, the severity of the dry period in the first half was masked by unusually high inflows in the June quarter.

Firsthalf generation was down 16% and Meridian called on its backup generation swaption with Genesis Energy in July, August, December, January and February.

Chief executive Neal Barclay said the firm did well to turn around the $25 million earnings reduction reported for the first half.

Secondhalf ebitdaf was $337 million, $34 million higher than the year before. Secondhalf generation was also 5% higher, lifting fullyear output to 12,528 GWh — still 6% less than the year before.

In Australia, fullyear revenue increased almost 30% to $249 million.

Operating earnings increased by $8 million, reflecting an 8% lift in output from the firm’s two wind farms and the acquisition of Trustpower’s three hydro plants there earlier this year.

Total generation increased 14% to 581 GWh, while average prices were also 15% higher. Powershop’s customer base there was largely unchanged at 100,545 at the end of June; sales volumes in the year were about 12% higher.

Powershop had slowed recruiting in Australia while it accessed more renewable generation there. In June the company started also offering gas in Victoria.

Meridian noted the importance of the Australian operations in the group’s fullyear performance.

‘‘Our operations in Australia also delivered good growth and demonstrated the value of our strategy to diversify the Meridian business geographically by leveraging our core capabilities in asset management, energy markets risk management and energy retailing in that country.’’