A Slight Beat from Meridian Energy, but Outlook Remains Subdued

Meridian Energy’s fiscal 2014 results were slightly ahead of our expectations. Underlying earnings before interest, tax, depreciation and amortisation, or EBITDA, at NZD 585 million was 2.5% ahead of our forecast primarily due to better margins in the New Zealand division, lower-than-anticipated transmission costs. and good control on overhead operating costs. Transmission cost increased by NZD 15 million over the prior period, and was the main reason for the flat results over the previous corresponding period. This reflects Transpower’s cost recovery from the construction of a new high frequency direct current, or HVDC, link connecting the North Island to the South Island with Meridian bearing a significant chunk of that cost, being a South Island generator. Price increases for retail customers remained subdued whilst the new contract with New Zealand Aluminum Smelters (Meridian’s largest customer) resulted in a 17% decline in commercial and industrial prices.