Meridian reports $121m loss for second half of 2024

Meridian Energy says it had a net loss after tax of $121 million for the six months ending December 31, 2024, compared to a net profit after tax of $191 million in the previous interim result.

Operating cash flows were $50 million, down from $303 million.

These results were heavily impacted by the cost of hedge contracts for winter 2024 in the face of one-in-90-year record low inflows and an unexpected and unprecedented shortage of domestic gas, the company says.

The hedge contracts included calling the largest demand response option with New Zealand’s Aluminium Smelter (NZAS).

EBITDAF fell from $443 million to $257 million and underlying net profit fell from $175 million to a $5 million loss.

“The combination of particularly low hydro inflows, low wind and gas shortages made the operating environment for the first half of this financial year as tough as I can recall experiencing,” says Meridian chief executive Neal Barclay.

“We took a hit for New Zealand.

“Meridian put this country’s security of supply first and, as New Zealand’s largest renewable electricity generator, our balance sheet tends to underwrite the mitigation of extended droughts.

“That’s one of the ways the country benefits from having large and financially strong gentailers,” says Barclay.

“While the situation was particularly challenging, we know we rely on Mother Nature for our fuel and accept the financial impact droughts bring. We prepare the business to deal with these kinds of eventualities, including maintaining a strong and flexible balance sheet.”

Barclay says Meridian has plenty of time before the coming winter and is highly focused on managing risks to winter 2025 security.

“We have reached a new agreement with NZAS for them to reduce demand by 50MW and are looking for simple rule changes to access this country’s existing contingent hydro storage.

“The bigger issue, though, is the structural and significant shortage of domestic gas,” he says.

“New Zealand needs to take urgent action to address this. Gas is the biggest factor in setting spot and future electricity prices.”

The challenging first half to the financial year sees the Meridian board maintain the interim dividend at the same level as the prior period, declaring an interim ordinary dividend of 6.15 cents per share.

Barclay says Meridian has continued to build strong momentum to set the business up for future growth, expecting to commit more than $1 billion of capital this year to new development projects.

“The relatively fast decline in gas resources has put even greater emphasis on the need to deploy new renewable developments as quickly as possible and also get more out of our existing fleet of hydro and wind generation,” he says.

“In that regard, we’ve had a few wins recently.

“We’ve reinstated capacity in the generation fleet after resolving transformer issues at Manapouri and West Wind, and we’ve begun commissioning our Ruakaka grid scale battery. We’ve also made great progress in advancing a development pipeline that will deliver additional megawatts for many years to come.”

Meridian recently announced a finalised consent for its 120MW Ruakaka solar development, consent for its 90MW Mt Munro Wind Farm near Eketahuna, an agreement as part of its bid to acquire the remaining shares in NZ Windfarms (all three in February), an agreement with Harmony Energy/First Renewables about a joint venture to build the 150MW Tauhei Solar Farm in the Waikato (January),and a joint venture with Nova Energy to build the 400MW Te Rahui solar farm at Rangitaiki near Taupo (December 2024).

The first half of FY25 has also seen progress in Meridian’s retail business.

Having completed a strategic reset and restructure to enable the business to meet changing technology and consumer needs, the company has launched three new products (Smart Hot Water, Smart EV Charging and the Four Hours Free Plan), with more to come over the rest of the financial year.

“As of January 1, we had achieved our highest ever market share of electricity connections, with 16.58% across the Meridian and Powershop brands,” says Barclay.

“Our brands also led the industry rankings for new connections in December, with Powershop first and Meridian second, and more than 4000 connections that month across both brands.”

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