Meridian’s February earnings a record
MERIDIAN Energy has reported another record earnings performance in February, despite its national hydro storage declining from 89% of its historical average to 81%.
Irrigation has underpinned much of the demand, which also included a boost to retail, commercial and industrial use.
In an operating update for February, chief executive Neal Barclay said February had below normal rainfall and above average temperatures across the country.
South Island hydroelectric storage was at 82% of average and North Island at 72%, as at midMarch.
Meridian operates Ohau A, B and C, and the Benmore, Aviemore and Waitaki dams, as well as Manapouri, and three dams in New South Wales. It has nine wind farms, including two in Australia.
Between Waitaki and Manapouri, Meridian manages about 50% of the country’s hydroelectric storage.
Meridian shares were trading around $3.83 yesterday, up more than 35% for the year.
Forsyth Barr broker Damian Foster said Meridian had had a ‘‘great start’’ to its secondhalf trading in 2019, February having shown another record earnings performance.
For February, its estimated energy margin rose by $24 million to $95 million, and for its yeartodate, that margin grew by $104 million to $696 million.
‘‘Meridian has once again benefited from being longgeneration at a time when wholesale electricity prices are elevated,’’ he said.
Being a generatorretailer meant Meridian was generating more electricity than it retailed, so sold the extra not needed through the wholesale electricity market, Mr Foster said.
Meridian was also benefiting from an increased retail load, up 22%, and its volumes sold to commercial and industrial were up 15% at ‘‘good prices — with more to come’’.
‘‘Effectively, all the growth is due to increased irrigation load,’’ he said.
Meridian’s Mr Barclay said national electricity demand for February was 4.7% higher than a year ago.
‘‘At the end of February, drier than normal soils were present across much of the coun try,’’ Mr Barclay said.
Meridian’s Waitaki catchment at the end of February was at 90% of historical average, while the Waiau catchment of Lake Manapouri was above average for the same period.
Mr Foster said February data was positive to Forsyth Barr’s fullyear forecast. Earnings before interest, tax, depreciation, amortisation and financial instruments were $10 million above market consensus, at $758 million.
He said generation volumes were up 14% on a year ago, as Meridian took advantage of its ‘‘reasonable hydro position’’ and also the high prices of wholesale electricity.
‘‘Storage volumes are declining but not yet in dangerous territory,’’ Mr Foster said.
Meridian has a contract with Genesis Energy to access backup supply during dry periods or peak demand times, and called on this during February and early March.
Mr Foster said use of the contract was not really needed, but it did assist Meridian with its earnings.
Craigs Investment Partners broker Peter McIntyre said the February record month was driven by hydro and acquired generation, supporting Meridian’s long exposure to the elevated wholesale spot prices.
He said the weather was drifting towards dry, so continued record performance would get more difficult without inflows, but with Lake Pukaki at 92% of average storage, which accounted for 75%80% of overall storage, there were no issues at this stage.
The company had benefits from the increase in carbon pricing, reduced disruption from any future Tiwai exit and dam storage which better navigated the rise in windgenerated power, as a percentage of generation impact across its energy portfolios.