26 Aug 2020

Meridian's full year profit slumps despite record generation levels

11:24 am on 26 August 2020

The energy company Meridian has made a loss in the second half of the year, dragging its full year profit down 48 percent to $176 million.

Meridan Energy Wellington.

Photo: RNZ / Alexander Robertson

The drop was due to writedowns for its Australian infrastructure, a decrease in the fair value of electricity and other hedges and depreciation.

The company also increased its debt provisions by $11m to $16m.

Chief executive Neal Barclay said overall 2020 was a successful year, with earnings before tax and other charges (EBITDAF) up 2 pct to a record $854m.

Revenue was flat at $3.4 billion.

"Financially it was a solid year for Meridian with another record EBITDAF result, although net profit after tax was lower.

"Our customer numbers were higher than they were last year, and we also increased our overall customer satisfaction ratings. Our retention rates continued to improve, and our Meridian brand sets the benchmark for customer retention in New Zealand."

Meridian generated a record amount of electricity in New Zealand in 2020 and the volume of electricity sold to customers increased by 18 percent.

Barclay said the pandemic and the impending closure of the New Zealand Aluminium Smelter (NZAS) at Tiwai Point would make the future challenging.

"Meridian worked with the industry to offer the smelter what we believe was a good deal worth $50 million per annum from day one, increasing to close to $60 to $70 million per annum over the next three years.

"Despite our efforts the owners have made the decision to terminate the electricity supply agreement with Meridian in August 2021 and close the smelter. We have engaged with the smelter owners on the possibility of extending the closure period from one year to four years, at this stage we are not aware if an extended closure proposition is acceptable to them."

He said given the age of the facility a closure within the next ten years was likely inevitable in any event.

"NZAS leaving New Zealand creates an imperative for our country to use it as an opportunity to further reduce our emissions and our reliance on fossil fuels. Meridian will work with government, industries and our customers to support the future electrification and decarbonisation of the New Zealand economy."

The decision has meant construction of its planned Harapaki wind farm in the Hawke's Bay would be deferred.

"While the business case for Harapaki is very sound, the market needs time to adjust to Rio Tinto's decision to exit New Zealand. We're still confident that we'll build Harapaki in the future."

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