Meridian’s value boosted by $2b as shares surge
The value of Meridian Energy soared by more than $2 billion yesterday as its share price jumped more than 10 per cent on the NZX.
The company’s shares were 6 per cent up in late afternoon trading before a sudden surge in the final hour of trading saw them close up 87 cents, or 10.2 per cent higher, at $9.40.
Meridian’s share price has leapt more than 46 per cent since the start of December, since when it has overtaken Fisher & Paykel
Healthcare as the most valuable company on the NZX, worth $24b.
Its recent strength prompted a query from the NZX last week to which company secretary Jason Woolley responded that Meridian was in compliance with its continuous disclosure obligations.
There has been speculation Meridian may be benefiting from its inclusion in S&P’s Global Clean Energy index, with firms in that sector finding more favour with investors following Joe Biden’s win in the United States presidential election.
The stellar performance comes despite lingering uncertainty over the future of its biggest customer, the Tiwai Point aluminium smelter, and the prospect
of a large charge to settle an investigation by the Electricity Authority. A longer-term threat is the Government’s decision to develop a business case for a massive stored hydro power station at Lake Onslow in Otago which an analyst says could tip the electricity market on its head.
The Government and Rio Tinto have yet to announce an expected deal securing the aluminium smelter’s temporary reprieve. But the case for Rio Tinto closing the smelter as previously planned by August may be receding, with aluminium prices climbing above US$2000 a tonne to a two-year high.
US analyst Trading Economics said aluminium futures were expected to remain strong in coming months on the back of tight supply coupled with strong demand from China and the US.
The amount of compensation and the size of any penalty Meridian may have to pay in relation to a pre-Christmas ruling from the Electricity Authority that it unnecessarily spilt water from its South Island dams in December 2019 remains subject to conjecture. However, the authority has estimated the ‘‘undesirable trading situation’’ had a $70 million impact on prices in the electricity spot market.
Analyst Morningstar said in December that Meridian was tracking better than it expected but it still expected the company’s operating profit to fall 10 per cent in the year to June. Morningstar rates Meridian’s shares a ‘‘sell’’, valuing them at only $3.70.