The result, after accounting for unrealised revaluations of financial instruments under IFRS, is a loss of $20.5 million, for the six months ended 31 December 2008.
Meridian Chief Executive Tim Lusk says the result puts the company in good shape.
“We are pleased to report a strong underlying profit following what has been a challenging time for the energy industry in New Zealand. It means the company is on track to deliver a positive underlying earnings result for the year,” he says.
Meridian has adopted the new IFRS accounting rules, which require non-cash movements in the fair value of financial instruments, such as electricity and financial derivatives, to be recorded in the profit and loss statement, if hedge accounting is not applied.
An unrealised loss on electricity derivatives of $55.9 million relates to the 2013 pricing agreement with New Zealand Aluminium Smelters, with the loss caused mainly by a significant reduction in the world price for aluminium (which is part of the pricing formula).
A second unrealised loss of $49.7 million relates to interest rate derivatives and the significant decline in the New Zealand swap yield curve during the interim period.
The difficult hydrological conditions during the winter of 2008 also impacted Meridian’s financial performance.
“The winter of 2008 was particularly challenging for Meridian,” says Tim Lusk.
“Volatile weather patterns led to inflow extremes in our hydro lakes. This, coupled with ongoing inter-island transmission constraints, impacted on the company’s financial performance.”
An independent investigation by the Electricity Commission into the challenges faced by the industry in the winter of 2008 found the market withstood considerable stress and maintained an uninterrupted supply of electricity to consumers at a time when national inflows were at the lowest since 1931.
Operational issues at the Tiwai Smelter also impacted on Meridian’s financial performance.
“Our financial result, however, highlights the importance to Meridian of both our current contract with Rio Tinto Alcan New Zealand and our future pricing agreement with New Zealand Aluminium Smelters Limited for electricity supply to the Tiwai aluminium smelter.”
Tim Lusk says Meridian remains committed to taking a long-term approach to meeting the energy needs of New Zealanders.
“During the latest reporting period Meridian progressed a number of renewable energy projects to help ensure a secure supply of energy to New Zealanders. At present we have data on around 70 development opportunities in New Zealand,” he says.
“Construction is well on track at our West Wind site in Wellington, which will provide enough electricity to power 70,000 homes, and Meridian was also granted water-only consents for its North Bank Tunnel hydro project in the Waitaki Valley.
“We have also formed a Solar Advisory Board to investigate solar radiation as a source of energy in New Zealand, and invested in wind generation in Australia to increase Meridian’s financial resources,” he added.
Tim Lusk says excellence in customer service is a priority for Meridian. During the latest reporting period Meridian’s customer numbers grew from 183,000 to 187,000 and customer satisfaction targets were exceeded for residential and business customers.
“We have been working on a number of new initiatives to enhance the customer experience. We installed an additional 25,700 smart meters in Canterbury, enabling customers to better manage their electricity usage and more than 8,500 customers have registered for the new ‘My Meridian’ customer portal,” he says.
In September 2008 Meridian’s Board also approved a business case to develop a state of the art customer contact centre in Christchurch to better respond to customer needs, at a time when other companies are outsourcing their call centres overseas.
Meridian also continues to be a significant contributor to the communities in which it operates. Meridian extended its sponsorship of the Royal New Zealand Ballet and Canterbury Rugby for a further three years, and supported a variety of events from Waimate’s Strawberry Fare to the Aviemore Classic near Twizel.
Meridian also established its fourth Community Fund, in Mossburn, to acknowledge the important contribution Southland communities made to New Zealand’s electricity generation during the construction and operation of the White Hill Wind Farm.
For more information contact:
Claire Shaw
External Relations Manager
021 370 677