Meridian issues profit warning for year

Meridian Energy says it will pursue customer growth less aggressively this year, with low hydro storage levels forcing the state-owned electricity generator to conserve water and issue a profit warning.

The company, in line to be partsold by the Government, reported a 20 per cent fall in underlying aftertax profits of $98.9 million for the six months to December 31 yesterday. However, the fall in profit related to the settlement of a legal dispute in 2010 and the forced sale of some of the Tekapo hydro canals to rival state-owned company Genesis.

Chief executive Mark Binns said the first-half results were solid.

But he warned that Meridian was on track to miss its stated financial targets for the full year, amid falling water levels in the South Island hydro electricity systems, which represent most of its generation.

Current hydro storage levels across New Zealand were similar to those of February 1992, which Binns said was the ‘‘benchmark’’ for dry years, and which prompted campaigns for consumers to limit power use. A power crisis in 1992’s severe drought caused blackouts and water-heating cuts.

Meridian’s forecasters were predicting storage levels would probably return to ‘‘normal’’ by winter. However, Binns said it had no choice but to conserve generation.

‘‘The New Zealand position is obviously trending towards that [1992] level. We’ve got the modellers saying ‘don’t panic’ because we’ve got 80 years of statistics . . . [but] from a practical point of view we look at where we are and say we have to manage our water conservatively,’’ he said, adding that public campaigns to cut power use were a ‘‘long way’’ away.

Meridian has held talks with national grid operator Transpower about possible ‘‘contingencies’’ if the dry southern weather continued. Both Meridian and Transpower played down the talks.