Bottoms in
https://www.stuff.co.nz/business/127...7+January+2022
Printable View
Likely to provide a far better return than a Bank term deposit (which will have a negative real return with rising inflation driving a rising interest rate environment )
Looks a really good yield that has the potential to massively increase when current Tiwai contract expires .
As to the SP impossible to pick the bottom but it must be close .
The rationale I use is ask myself is the sp likely to be a dollar higher in 5 years or a dollar lower.Then I move to 2 dollars higher or lower and so on
Yes the new contract will be different in due course but that's quite some time away and then there's this to also consider.
What faith do you have in management who were so stupid to sign such a MASSIVE giveaway deal to Tiwai point with no price escalation clause if Aluminum recovered ? How do you have confidence in these people going forward that they can execute future commercial deals that optimize returns for shareholders ?
For mine, Rio showed management up as completely incompetent and for my money that insight has value to me in terms of whether I would choose to trust management going forward.
Disc: GNE shareholder on a vastly higher yield and a believer that all things highly ESG are currently priced well beyond fair value for no other reason than its the "flavour of the month and year to do so"
This new data centre is good news for both Meridian and Contact.
https://www.stuff.co.nz/business/127...OZv9Ii6AXEBv8U
Thank you for confirming this-I tend to forget about Contact with Tiwai but they also felt compelled to give cheap power to Tiwai .
Jantar your expert input is always much appreciated .
Can I ask your opinion re the future of the tiwai contract assuming aluminium price stays high .
I assume the data centre has already negotiated a supply price which would be higher than Meridian and Contact are supplying Tiwai now .
Has Tiwai shot itself in the foot by paying a low price in the current Contract ?
Would it be in Tiwai s best interest to start negotiating now for 2025 onwards ?
I no longer have the inside information I used to have access to. My gut feeling is that Tiwai has shot itself in the foot to some extent. If they decide to keep operations going they may be able to negotiate a favourable short term contract, but longer time frames will see them paying similar to other large users. Apart from the data centre MEL and CEN are investigating a hydrogen plant in Southland that would use a similar amount of energy that Tiwai does now. The advantage of a hydrogen plant is that it can stop production instantly and remain off without damage until supply is restored. That means they can react to price, and have a ceiling price at which production would stop. The smelter can't be offline for more than 90 minutes without suffering damage.
I would assume that tentative negotiations for electricity supply to the data centre have already happened, and would likely to be at least 50% higher than Tiwai pay.
thanks Jantar
Hydrogen plants look exciting-so versatile and as you say can stop energy requirement instantly
wholesale prices are spiking high as I write .
It used to be said that cen made big profits in a dry year but is this still the case ?
Is mel positioned well in this regard?
Media coverage on Tiwai Point aluminium smelter - NZX, New Zealand’s Exchange
Meridian Energy notes today’s media coverage on the future of the Tiwai Point aluminium smelter. Meridian confirms it is not in discussions with the smelter’s owner, NZAS1, about a new electricity contract. The existing contract between Meridian and NZAS ends on 31 December 2024.
1NZAS is a joint venture between Rio Tinto (79.36%) and Sumitomo Chemical Company Limited (20.64%).
Does todays finish point to a pleasant surprise tomorrow?
Nope, no special.
Meridian Energy Limited 2022 Interim Results - NZX, New Zealand’s Exchange
Meridian Energy has reported net profit after tax of $145 million from continuing operations for the six months ended 31 December 2021, $82 million (36%) lower than the same period last year, mainly reflecting negative changes in the value of hedge instruments. Excluding these hedge value movements, Meridian reported a $1 million decrease in EBITDAF1 and a $5 million decrease in underlying net profit after tax2.
Meridian’s Board has declared an interim ordinary dividend of 5.85 cents per share, 2.6% higher than for the same period last year. The company’s Dividend Reinvestment Plan will apply to this year’s interim dividend, at no discount to the average market price over a five-day period ending on 23 March 2022. The interim dividend will be paid, and new shares issued under the reinvestment plan on 8 April 2022.
Meridian’s Chief Executive Neal Barclay says that operating performance in the first half of this financial year includes a reduction in revenue received from the Tiwai Point Aluminium Smelter, so the on-par performance with last year reflects continued strong momentum in the company’s operating business.“It’s pleasing to see continued growth in retail sales, which reflects an enduring commitment to excellent customer service and support.
Our retail performance has helped offset the impact of NZAS exit pricing, and we’re making sound progress on our strategy to develop new sources of South Island demand following the Tiwai contract end in 2024,” Mr Barclay says.Meridian completed the sale of MEA (which includes Powershop Australia) on 31 January 2022. The final sale price was A$740 million including interest and intercompany funding movements since 1 July 2021.
With completion of the MEA sale having occurred on 31 January 2022, Meridian’s investment in MEA has been classified as held for sale and a discontinued operation at 31 December 2021. Meridian expects to recognise a gain on sale in the order of $240 million in its full year accounts for 2022. “This transaction is an outstanding result for Meridian’s shareholders and a testament to the quality of the Meridian Energy Australia business and the employees who have been dedicated to its success,” says Mr Barclay.
Meridian has commenced bulk earthworks at its Harapaki wind farm development in Hawke’s Bay and has been actively working to increase its renewable development pipeline. This includes the company’s November 2021 announcement of the development of Ruākākā Energy Park.
This project will house a battery energy storage system (BESS) at least 100MW in capacity, as well as a utilityscale solar farm.F
our potential partners have been selected for the next phase of the Southern Green Hydrogen project, a joint venture between Meridian Energy and Contact Energy to investigate the feasibility of developing the world’s first large-scale green hydrogen plant in Southland.A process is now underway to assess proposals from each of the four counterparties to develop the production and export facility in Southland.
“We’re excited to move forward with the RFP and bring the project closer to fruition,” adds Mr Barclay.The electricity sector has been the focus of a number of regulatory reviews, including the Electricity Authority’s Wholesale Market Review and reviews of the 9 August 2021 power outages.
“While we have some concerns with some of the preliminary findings from the Electricity Authority’s most recent Wholesale Market Review, there is no doubt that as an industry we need to move faster to help New Zealand achieve its climate goals. We always support ways that the sector can provide better outcomes to consumers, and we’re committed to working with the sector, businesses, government, and consumers to ensure we achieve these goals
Nothing stands out as impressive in this one. Guess they have to wait till 2025 and they put the price up on tiwai
Aluminium is often refered to as electricity in solid form.
The price of aluminium is going gang busters, and could go even higher if aluminium sanctions are placed on Czar Putin.
Rio Tinto know the intimidation they used on the Government and Meridian last time won't work in the future. This hopefully will mean more jingling in Meridians cash register.
Boop boop de do
Marilyn
Hello everyone, from my stance looking at the report I can get the following take away.
Retail, wholesale and commercial businesses are growing which is a positive however the poorer margins from the NZAS has been weighing overall topline, cashflow and EBITDAF1 down.
This is somewhat expected however with aluminum prices rising there is an opportunity to improve the energy margins going forward.
What I am hoping someone would help me with is understand is whether or not there is any material impact of the drop in the value of hedge instruments?
Please see from above report
"Meridian Energy has reported net profit after tax of $145 million from continuing operations for the six months ended 31 December 2021, $82 million (36%) lower than the same period last year, mainly reflecting negative changes in the value of hedge instruments."
When I look at the income statement I can see the main culprit is:
Net change in fair value of energy hedges - (68) vs previous period 73
Going into the notes under D1 I have found that they are a combination of:
1. Total Treasury Hedges - Assets 82 vs previous period Assets 88
2. Foreign Exchange hedges and swaps - Assets 24 Liabilities (84) vs previous period Assets 24 Liabilities (207)
3. Energy Hedges - Assets 256 Liabilities (52) vs previous period Assets 194 Liabilities (64)
Net Position Assets 362 Liabilities (136) vs previous period Assets 306 Liabilities (271)
Unfortunately I was not able to make sense of the notes enough to make this section balance the income statement...
However going back to my initial question, does this have any material impact on the actual profitability of the business?
Also if anyone would like to assist in making this balance I would very much appreciate it.
Thanks Meridian & NZ for helping us achieve this profit..........
"Rio Tinto has reported its best-ever annual profit and a record full-year dividend of US$16.8bn"
I can't understand why they didn't link the price Rio paid for electricity to the price of Aluminium on the spot market.
They complained about the low prices and it not being viable for them to operate . MEL look like they wrote a one way deal , very poor for shareholders.
Don't you just love it when one of your biggest holdings paid you a dividend today :t_up: This payment made each share of mine basically at 18 cents as far as my ledger is concerned. Another year with a higher pay out will make this another negative-book-value holding :p
MEL has been a great investment, best amongst my energy sector.
lake levels getting low
https://www.nzx.com/announcements/390582
Up nearly 7% today. The big boys reshuffling or something brewing, like Tiwai and MEL talking?
Look who's come crawling back. Hopefully MEL have a stronger negotiating position this time with the proposed hydrogen plant lining up as an alternative.
https://i.stuff.co.nz/national/12940...en-beyond-2024
Meridian notes NZAS statement on Tiwai Point smelter - NZX, New Zealand’s Exchange
Meridian Energy notes the statement from New Zealand’s Aluminium Smelter (NZAS1), that the owners of the Tiwai Point smelter have begun exploring potential pathways with electricity generators for the smelter’s future, beyond the end of the current contract in December 2024.
Meridian will engage with NZAS as part of its process and expects this will include contract negotiations.
A copy of NZAS’s statement can be found here:
http://www.nzas.co.nz/files/3841_202...1658951845.pdf
NZAS cannot be trusted. Their negotiation tactics are reprehensible. I'm happy for them to keep operating, but they must pay a price that is stand-alone profitable. The current situation where pricing requires subsidy from all other electricity users in NZ is unacceptable
Any new agreement must be long term eg. 10 years. With pricing and annual increases linked to a publicly accessible benchmarks
They screwed the government when the power companies had their IPOs. They screwed MEL a couple of years ago by threatening to close the joint. They screwed transpower over transmission costs. They have screwed all other electricity users in NZ for decades. Now it's pay-back time
Come 2024, there will be other options for the power. Those options don't have the baggage that NZAS has. Make NZAS tender for electricity supply
But yes, very good news for all electricity generators. Nothing like competition for available electricity. Moves the balance of power firmly into the generators court
No. This mining company has been playing successive governments like a pack of naive fools, and the current government is probably the most naive and foolish of them all. RT know labour will buckle under the threat of blue collar jobs going in the run up to a cliff hanger election and Meridian et al will bend over and touch their toes at the 'negotiation table' for another 4 years of taxpayer subsidised fiscal sxdomy. It's time NZ grew up and chucked these bxtards out of the country.
I hear Iceland's national power generating company is doing very well from Rio Tinto this year after signing a different contract in February 2021 that included an electricity price base linked to the USA CPI and aluminium prices.
That was achieved after years of wrangling and word for word same tactics by Rio Tinto as we have seen in NZ.
https://energycluster.is/agreement-r...and-rio-tinto/
That's not difficult. No NZ household has the volume to exert pricing power. RT has the volume to exert pricing power. So it does. You or I would do the same.
But once there are serious options available to use the electricity currently used by RT, the threat of closure diminishes and the picture changes.
Now, out of idle curiosity, should RT close the smelter, who is liable for any site clean-up costs?
Rio T will be thinking there is no way the manapouri electricity will be used for any other purpose because the current Government simply can't build or deliver anything. Talk of a green hydrogen plant is pie in the sky. RT must be laughing.
Redeployment of smelter workers at a data centre is not going to happen as these are largely lights out operations.
Meridian and co will tell us they're going to talk tough...then later we'll hear they sold NZ down the drain, again.
NZAS will be prepared to pay more so that they can start getting the emissions trading scheme industrial allocation subsidy again.
here's a little summary of that change earlier this year for those who missed it
https://www.newsroom.co.nz/smelters-...ubsidy-slashed
and if you want the detail:
https://www.treasury.govt.nz/sites/d...seaf-mar22.pdf
Quietly keeps on trucking in the right direction. I love it.
Electricity Authority makes 'urgent' move to block cheap Tiwai smelter power deal
https://www.stuff.co.nz/business/129...ter-power-deal
Looked like a big increase in revenue was coming for Meridian:
The bureaucrats think they know better than the professionals though...Quote:
The smelter is believed to paying its major supplier, Meridian Energy, a low-ball price of about 3.5 cents per kilowatt-hour for power
....
Market speculation prior to the authority’s intervention suggested that a new power contract could be struck at a price in the region of 6 to 8 cents per kilowatt-hour.
A positive interpretation is the EA will leverage Rio Tinto into paying more but we all know they are just a political construction so can and will be ignored by the government once the pressure comes on. So will just result in an increase in costs and uncertainty for everyone and yet more bureaucrats being hired where there should be none.
Amazing how dysfunctional and inefficient the power market is.
Meridian Energy Limited 2022 Full Year Financial Results - NZX, New Zealand’s Exchange
Meridian Energy has reported underlying net profit after tax1 of $233 million, a slight increase on the prior year figure of $231 million. EBITDAF2for the year was $709 million, up $17 million or 2.5% on the prior year. Including the benefit of a $214 million gain on the sale of its Australian business and $281 million of positive non-cash movements in the value of hedge instruments, Meridian Energy has reported$664 million of net profit after tax for the year ended 30 June 2022
A good monthly update, moi thinks.
https://www.meridianenergy.co.nz/new...ew-blog-post-7
Thought this might have warranted market advice.
For those interested.
Seems Meridian is trying to pitch this as an alternative to onslow. Will be interesting to see where it goes, especially after contact backs out
Meridian to build battery at Ruakaka. 100MW peak delivery, with 200MWh of storage to be completed in 2nd half 24
Meridian to build Ruakākā Battery Energy Storage System - NZX, New Zealand’s Exchange
Divvy in the bank yesterday. One more payment like it will make this holding in the negative-book-value territory. A very nice gift from the gov't had you participated and/or accumulated since its IPO. Congrats to all holders :t_up:
https://www.nzx.com/announcements/417236
Meridian Energy has reported net profit after tax of $95 million for the year ended 30 June 2023, downfrom $664 million reported last year, which included the gain on the sale of Meridian's Australianbusiness and positive non-cash movements in the value of hedge instruments.
Excluding the gain on sale and non-cash movements in hedge instruments, underlying net profit aftertax1 was up 35% to $315 million and operating earnings or EBITDAF2, was up 10% to $783 million forthe year ended 30 June 2023. This improved operating result was driven by higher customer sales,higher generation volumes and positive wholesale trading results.
“We’ve continued to focus on playing a key role in helping Aotearoa New Zealand to decarbonise bydriving forward with our renewable developments and offering customers an enhanced range of cleanenergy solutions,” says Chief Executive Neal Barclay.“I’m particularly proud that Meridian is leading the market in being the first New Zealand company toprogress a grid-scale battery construction in this country, which will add significantly more flexibility tothe electricity system in the form of energy storage. We have also secured credible and committedpartners to advance the Southern Green Hydrogen project. We see this as a potential game changeras it will support Aotearoa’s drive to energy independence by providing significant demand responseand an energy source for hard to abate processes.”
The Board declared a final ordinary dividend of 11.90 cents per share, 3% higher than the previousyear. This brings the total ordinary dividends declared for the year to 17.90 cents per share, also 3%higher than the previous year.
Meridian grew overall sales volumes by 2.6%, while also increasing focus on creating moremeaningful relationships with customers to support their decarbonisation opportunities.
The company has made good progress expanding the Zero electric vehicle charging network, as wellas electric vehicle and solar customer participation. Meridian is also supporting customers with bothprocess heat conversion and demand flexibility volumes, which is building on the 50MW demandresponse agreement reached with New Zealand’s Aluminum Smelter, announced in June, andsupports our low carbon hedge portfolio.
This month, Powershop won Consumer New Zealand’s People’s Choice award for the third year in arow, and the sixth time since 2015.During the year, Meridian completed the migration of the Meridian customers to the Flux customercare and billing platform.
All Meridian customers are now on this world-class platform that will enablethe business to continue to deliver great customer service and innovative products in a rapidlyevolving competitive environment. The company also expects to continue to reduce the cost to serveits customers.
Meridian’s Energy Wellbeing program, launched during the year, continued to support the company’smost vulnerable customers.“An initial trial provided support for 250 households, and we found that by being a conduit into socialsupport agencies and by applying our own capabilities we were able to help these customers withenergy affordability challenges,” says Barclay.
“We are now ramping up the program and targeting $5 million into a new Energy Wellbeing Fund tosupport families in energy hardship with the aim of reaching 5,000 households by the end of 2024.”
The United States has announced sanctions prohibiting the trading of Russian metals including aluminum on the London Metal Exchange and the Chicago Mercantile Exchange. In addition they have prohibited the import of these metals into the United States.
This should strengthen the hand of Meridian in power supply negotiations with the smelter
https://www.bloomberg.com/news/artic...s-on-exchanges
Boop boop de do
Marilyn
I think the deal has largely been agreed already.
The smelter recently bought new uniforms for all their staff, the cost was eye-watering (6 figures from memory). No business about to "up sticks and leave" would waste that amount of money on new sets of kit for soon the be redundant employees
And transpower has upgraded the lines heading north, so manapouri power is no longer entirely stranded in southland if NZAS ever decides to leave
The days of NZAS having overwhelming leverage are gone. However, NZAS pays an important role in the electricity market, helping to keep supply and demand balanced (always on the tight side), and consequentially keeping wholesale prices high. So this will have added some restraint to price demands
https://www.nzx.com/announcements/432102
Meridian and NZAS Sign Long Term Contracts
Meridian Energy and New Zealand’s Aluminium Smelter (NZAS) have signed a package of conditional 20-year contracts for part of the NZAS Tiwai Point aluminium smelter’s electricity needs. The package includes a long-term fixed price contract for wholesale electricity price cover and a significant demand response agreement.
Meridian Energy Chief Executive Neal Barclay says the agreement is an excellent result after many years of hard work.
“This is a fantastic outcome for New Zealand and the Southland region. It’s further proof that large industrial businesses can utilise New Zealand’s renewable energy advantage and create low carbon sustainable products, high value jobs and export dollars for our country.”
“We are very pleased that the NZAS team have adopted a more flexible approach toward their operations. The demand response element of this new agreement is groundbreaking, not only for this country but globally. The level of flexible demand offered by NZAS will support the electricity system to become even more renewable, while relying less on coal and gas when the hydro lakes are low.”
Mr Barclay says the contracts are also a good result for Meridian.
“This new package of contracts is commercially sustainable and delivers value for our shareholders, so we are talking a real win-win here. The NZAS decision to extend the smelter life removes significant uncertainty for the electricity sector, which also helps pave the way for new renewable energy to be built.”
Meridian will now consider implications on future pipeline investment and dividend policy. An update on the dividend policy can be expected at Meridian’s full year results briefing in late August.
Key terms of the long-term contracts include:
• 377 MW base load volume from 2025
• pricing that begins 1 July 2024 with a 20-year term, up to and including 31 December 2044
• four demand response options, ranging from 25 MW to 185 MW – an upper limit that roughly equates to one of Huntly’s Rankine units. Three quarters of a called option will come off Meridian’s contracted volume
A maximum of approximately 800 GWh of demand response is available in any given year, with an average of approximately 400 GWh per annum over the 20-year term of the contract. This will be valuable during periods of low lake inflows, providing critical dry year cover to the electricity system.
The new arrangements will replace all the current arrangements between Meridian and NZAS, with the current arrangements terminating when the new arrangements take effect.
The contracts are conditional on satisfaction of conditions precedent, which include regulatory approval from the Electricity Authority. If approval is given, the contracts will take effect from the later of 1 July 2024 and the date Meridian confirms to NZAS that all conditions precedent are satisfied or waived. If conditions precedent are not all satisfied or waived before 31 December 2024, the contracts will not come into effect.
NZAS has provided Meridian with a letter setting out their commitment to environmental remediation of the smelter site, including details of their work to date with key stakeholders. A copy of the environmental remediation letter accompanies this release.
A copy of the long-term electricity contract, the demand response agreement and the other related conditional contracts signed by Meridian and NZAS are available here. A summary of the key terms of the long-term electricity contract and the demand response agreement accompanies this release.
looks like they are already deploying the terms of the agreement with NZAS, as they have issued a 25MWh reduction notice for end of June, July and beginning of August
Guess this means they see a shortfall in their available quantity of hydro during this period. And they'll have to pay NZAS for use of this facility ...
Is this the only way to get consents consented?
"Meridian silent on Ngāi Tahu Waitaki River consent payment"
"A figure of $180m had been published as the amount paid to the the Ngāi Tahu hapū and other parties by Meridian and Genesis."
https://www.stuff.co.nz/business/350...+3+August+2024
https://www.nzx.com/announcements/436964
Meridian lifts financial performance and lays foundation forfuture growth
28 August 2024
Meridian Energy has reported operating cash flows of $667 million for the year ending 30 June 2024,up from $509 million the previous year, with net profit after tax up from $95 million to $429 million.
The growth in net profit after tax was influenced significantly by net gains on hedge instruments of$249 million in the 2024 financial year. In the prior year the company recorded net losses on hedgeinstruments of $351 million.EBITDAF1 was up 16% to $905 million and underlying net profit2rose 14% to $359 million.
Both ofthese are non-GAAP measures.
“This is a strong and improved operating result that allowed us to invest $349 million in new andexisting generation assets during the year,” says Chief Executive Neal Barclay.
The Board declared a final ordinary dividend of 14.85 cents per share. This brings the total ordinarydividends declared in FY24 to 21.00 cents per share. The Board has approved the continuation of theDividend Reinvestment Plan at a 2% discount.
The company notes that, while the operating result for the last financial year was strong, the operatingenvironment shifted dramatically during May as a drought emerged. Inflows into Meridian’s hydrocatchments from May 2024 through to mid-August 2024, have been the lowest on record and, as aresult, the 2025 financial year currently looks to be far more challenging.
“Record low inflows have combined with a shortage of gas and unseasonally low wind, causingwholesale prices to lift materially. As a result, Meridian called on hedge arrangements to ensure ourhydro lakes were managed within consent conditions to maintain security of supply,” says Neal
Snow data a few days old so might make a bit of a difference, but need alot more rain......there is a current heavy rain warning for headwaters of Canterbury south of Arthurs Pass.
https://www.meridianenergy.co.nz/pow...s/snow-storage
https://www.meridianenergy.co.nz/pow...ls#lake-levels
https://www.genesisenergy.co.nz/abou...o-power-scheme
https://envdata.orc.govt.nz/AQWebPor...nterval/Latest
https://envdata.orc.govt.nz/AQWebPor...nterval/Latest
Final dividend bringing total 21cps.
3.42% net as of this arvo.
Thrilling stuff. :mellow:
Worth remembering the new NZAS terms came into effect after the end of this period. With a little luck the better terms will outweigh the dry year pain in the current period...