18 Aug 2014

Meridian and Contact Energy profit up

5:32 pm on 18 August 2014

Two of the country's biggest power companies have reported an increase in underlying profit for the year.

Meridian Energy made a net profit of $229.8 million in the twelve months to June, a decrease of 22 percent compared with the previous year.

But, after stripping out one-off items, including the sale of the Macarthur wind farm in Australia, Meridian's underlying profit rose 20 percent to $194 million.

Meridian chief executive Mark Binns said the result was driven by a number of things but "essentially we had good inflows".

"We had about 111 percent of average inflows, so we generated around about 9 percent more in terms of gigawatt hours in New Zealand," he said.

"We've reduced our costs considerably. Our costs were down about 6.1 percent on an underlying basis, and we had better prices and volumes in the commercial and corporate areas."

The company is paying more than 13 cents per share in dividends, compared with the 10.5 cents forecast.

It is also considering returning capital to shareholders, with a decision expected next February.

Meanwhile, Contact Energy's profit was up 18 percent to $234 million in the year to June, primarily due to a reduction in the cost of hydro generation.

Despite subdued demand for electricity, both Meridian and Contact benefited from fuller hydro lakes which led to reduced costs.

Contact said a 14 percent increase in hydro generation reduced the need for more expensive thermal generation.

Meridian Energy's Lake Benmore hydro dam.

Meridian Energy's Lake Benmore hydro dam. Photo: PHOTO NZ

Competition remains intense for both retailers - 20 percent of Meridian customers and 10 percent of Contact customers switched to another provider in the last year.

Both firms declared a strong dividend.

Labour and the Green Party are proposing an overhaul of the electricity market if elected.

but both Meridian and Contact believe the energy market is working well, and there is no need for major change.

Get the RNZ app

for ad-free news and current affairs