Meridian Energy Limited 2022 Interim Results
Release
M e r i d i a n E n e r g y L i m i t e d ( A R B N 1 5 1 8 0 0 3 9 6 ) A c o m p a n y i n c o r p o r a t e d i n N e w Z e a l a n d
L e v e l 2 , 5 5 L a d y E l i z a b e t h L a n e , P O B o x 1 0 8 4 0 , W e l l i n g t o n 6 1 4 3
m e r i d i a n e n e r g y . c o . n z
Stock Exchange Listings NZX (MEL) ASX (MEZ)
Meridian Energy interim net profit lower, cash earnings
1
stable
23 February 2022
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 EBITDAF
1
and a $5 million decrease in
underlying net profit after tax
2
.
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.
1
EBITDAF is a commonly used non-GAAP measure reflecting earnings before interest, tax, depreciation, changes in fair value
of hedges and other significant items (see page 3 for a reconciliation).
2
Net profit after tax adjusted for the effects of non-cash fair value movements and other one-off items (see page 3 for a
reconciliation).
m e r i d i a n e n e r g y . c o . n z
PG 2
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 utility-
scale solar farm.
Four 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.”
m e r i d i a n e n e r g y . c o . n z
PG 3
ENDS
Neal Barclay
Chief Executive
Meridian Energy Limited
For investor relations queries, please contact:
Owen Hackston
Investor Relations Manager
021 246 4772
For media queries, please contact:
Rheilli Uluilelata
External Communications Advisor
022 589 1052
---
Generating change:
Changing generation
Condensed Interim
Financial Statements.
As at and for the six months
to 31 December 2021.
3Income Statement
The income earned and operating
expenditure incurred by the Meridian
Group during the six months.
3Comprehensive Income Statement
Items of income and operating
expense that are not recognised
in the income statement and
hence taken to reserves in equity.
4Balance Sheet
A summary of the Meridian Group
assets and liabilities at the end of
the six months.
5Changes in Equity
Components that make up the
capital and reserves of the Meridian
Group and the changes of each
component during the six months.
6Cash Flows
Cash generated and used
by the Meridian Group.
7About this report
8Significant matters in the six months
S1. Meridian Energy AustraliaS2. Dividend reinvestment plan
11A. Financial performance
A1. Segment performance
A2. Income
A3. Expenses
A4. Taxation
16B. Assets used to generate and sell electricity
B1. Property, plant and equipment
B2. Intangible assets
17C. Managing funding
C1. Capital management
C2. Earnings per share
C3. Dividends
C4. Borrowings
C5. Green financing
22D. Financial instruments
D1. Financial instruments
26E. Other
E1. Group structure
E2. Contingent assets and liabilities
E3. Subsequent events
E4. Changes in financial
reporting standards
27Review report
Independent review report
Notes to the Condensed Interim Financial Statements Condensed Interim Financial Statements
2
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
Income Statement
For the six months to 31 December 2021
The notes to the condensed interim financial statements form an integral part of these financial statements.
Comprehensive Income Statement
For the six months to 31 December 2021
UnauditedUnaudited
Note
2021
$M
2020
$M
Operating revenueA2 1,672 1,690
Operating expensesA3(1,278) (1,295)
Earnings before interest, tax, depreciation,
amortisation, changes in fair value of hedges
and other significant items (EBITDAF)
394 395
Depreciation and amortisationB1, B2(144) (137)
Net change in fair value of energy hedgesD1(68) 73
Operating profit182 331
Finance costsA3(39) (41)
Net change in fair value of treasury instrumentsD1 58 25
Net profit before tax from continuing operations201 315
Income tax expense A4(56) (88)
Net profit after tax from continuing operations
145 227
Net profit / (loss) from discontinued operations after taxS1
(12)–
Net profit after tax attributed to the Shareholders
of the parent company
133227
Earnings per share (EPS) attributed to
the shareholders of the parent company
Cents Cents
Basic and diluted EPS from continuing operationsC25.68.9
Basic and diluted EPSC25.28.9
UnauditedUnaudited
2021
$M
2020
$M
Net profit after tax 133 227
Other comprehensive income
Net gain / (loss) on cash flow hedges 9 (6)
Exchange differences arising from translation of foreign operations(4) –
Income tax on the above items(3) 2
Other comprehensive income for the period, net of tax 2
(4)
Total comprehensive income for the period, net of tax
attributed to shareholders of the parent company
135 223
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
3
The notes to the condensed interim financial statements form an integral part of these financial statements.
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
4
Balance Sheet
As at 31 December 2021
UnauditedUnauditedAudited
Note
31 Dec 2021
$M
31 Dec 2020
$M
30 Jun 2021
$M
Current liabilities
Payables and accruals 326 333 577
Employee entitlements 13 19 25
Customer contract liabilities 14 21 23
Current portion of term borrowingsC4 269 271 378
Current portion of lease liabilitiesC4 4 7 7
Financial instrumentsD1 48 57 63
Liabilities held for saleS1 197 – –
Current tax payable 30 29 37
Total current liabilities 901 737 1,110
Non-current liabilities
Term borrowingsC4 1,530 1,408 1,298
Deferred tax 1,883 1,852 1,94 0
Provisions – 18 23
Lease LiabilitiesC4 46 91 90
Financial instrumentsD1 88 214 131
Term payables 59 46 40
Total non-current liabilities 3,606 3,629 3,522
Total liabilities 4,507 4,366 4,632
Net assets 5,135 5,018 5,224
Shareholders’ equity
Share capital 1,658 1,598 1,595
Reserves 3,477 3,420 3,629
Total shareholders’ equity 5,135 5,018 5,224
For and on behalf of the Board of Directors who authorised the issue of the condensed interim financial
statements on 22 February 2022.
Mark Verbiest
Board Chair
Julia Hoare
Chair Audit & Risk Committee
UnauditedUnauditedAudited
Note
31 Dec 2021
$M
31 Dec 2020
$M
30 Jun 2021
$M
Current assets
Cash and cash equivalents 152 122 148
Trade receivables 303 303 491
Customer contract assets 15 25 25
Financial instrumentsD1 121 151 192
Assets held for saleS1 729 – –
Other assets 35 52 61
Total current assets 1,355 653 917
Non-current assets
Property, plant and equipmentB1 7,9 6 6 8,466 8,598
Intangible assetsB2 80 76 84
Deferred tax – 34 35
Financial instrumentsD1 241 155 214
Other assets – – 8
Total non-current assets 8,287 8,731 8,939
Total assets 9,642 9,38 4 9,85 6
The notes to the condensed interim financial statements form an integral part of these financial statements.
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
5
Changes in Equity
For the six months to 31 December 2021
$M
AuditedNote
Share
capital
Share option
reserve
Revaluation
reserve
Foreign
currency
translation
reserve
Cash flow
hedge
reserve
Retained
earnings
Shareholders
equity
Balance at 1 July 2020 1,598 1 5,053 (26) (2) (1,542) 5,082
Net profit for the year – – – – – 428 428
Other comprehensive income
Asset revaluation – – 202 – – – 202
Transfer to retained earnings on disposal – – 1 – – (1) –
Net gain (loss) on cash flow hedges – – – – 6 – 6
Exchange differences from translation of foreign operations – – – 2 – – 2
Income tax relating to other comprehensive income – – (58) – (2) – (60)
Total other comprehensive income, net of tax – – 145 2 4 (1) 150
Total comprehensive income for the year, net of tax – – 145 2 4 427 578
Share-based transactions(3) – – – – – (3)
Dividends paidC3 – – – – – (433) (433)
Balance at 30 June 2021 and 1 July 2021 1,595 1 5,198 (24) 2 (1,548) 5,224
Unaudited
Net profit for the period – – – – – 133 133
Other comprehensive income
Net gain (loss) on cash flow hedges – – – – 9 – 9
Exchange differences from translation of foreign operations – – – (4) – – (4)
Income tax relating to other comprehensive income – – – – (3) – (3)
Total other comprehensive income, net of tax – – – (4) 6 – 2
Total comprehensive income for the period, net of tax – – – (4)6133135
Share-based transactions(2) – – – – – (2)
Dividend reinvestment planS2, C3 65 – – – – – 65
Dividends paidC3 – – – – – (287) (287)
Balance at 31 December 2021 1,658 1 5,198 (28) 8 (1,702) 5,135
Unaudited
Balance at 1 July 2020 1,598 1 5,053 (26) (2) (1,542) 5,082
Net profit for the period – – – – – 227 227
Other comprehensive income
Net gain (loss) on cash flow hedges – – – – (6) – (6)
Income tax relating to other comprehensive income – – – – 2 – 2
Total other comprehensive income, net of tax – – – – (4) – (4)
Total comprehensive income for the period, net of tax – – – – (4) 227 223
Dividends paidC3 – – – – – (287) (287)
Balance at 31 December 2020 1,598 1 5,053 (26) (6) (1,602) 5,018
Cash Flows
For the six months to 31 December 2021
The notes to the condensed interim financial statements form an integral part of these financial statements.
UnauditedUnaudited
Note
2021
$M
2020
$M
Operating activities
Receipts from customers 1,986 1,885
Payments to suppliers and employees(1,629) (1,523)
Interest paid(40) (41)
Income tax paid(92) (134)
Operating cash flows 225 187
Investing activities
Purchase of property, plant and equipment(82) (22)
Purchase of intangible assets(13) (20)
Investing cash flows(95) (42)
Financing activities
Term borrowings drawnC4 182 97
Term borrowings repaidC4(63) (5)
Lease Liabilities paidC4(4) (4)
Dividends C3(222) (287)
Financing cash flows(107) (19 9)
Net increase / (decrease) in cash and cash equivalents 23
(54)
Cash and cash equivalents at beginning of the six months 148 176
Adjustment for cash classified as assets held for saleS1(19) –
Cash and cash equivalents at end of the six months 152 122
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
6
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
7
About this report
In this section.
The summary notes to the
condensed interim financial
statements include information
which is considered relevant
and material to assist the reader
in understanding changes in
Meridian's financial position
or performance. Information
is considered relevant and
material if:
• the amount is significant
because of its size and nature;
• it is important for understanding
the results of Meridian;
• it helps to explain changes
in Meridian's business; or
• it relates to an aspect of
Meridian's operations
that is important to
future performance.
Australian Securities Exchange (ASX).
As a Mixed Ownership Company,
majority owned by Her Majesty the
Queen in Right of New Zealand, it is
bound by the requirements of the
Public Finance Act 1989.
These unaudited condensed
interim financial statements for the
six months ended 31 December 2021
have been prepared:
• using Generally Accepted
Accounting Practice in New Zealand
(NZ GAAP) as appropriate for interim
financial statements, accounting
policies consistent with International
Financial Reporting Standards (IFRS)
and the New Zealand equivalents
(NZ IFRS) and in accordance with
IAS 34: Interim Financial Reporting
and NZ IAS 34: Interim Financial
Reporting, as appropriate for a
for-profit entity;
• in accordance with the
requirements of the Financial
Markets Conduct Act 2013;
• on the basis of historical cost,
modified by revaluation of
certain assets and liabilities; and
• in New Zealand dollars (NZD).
The principal functional currency
of international subsidiaries is
Australian dollars. The closing
rate at 31 December 2021 was
0.9401 (December 2020: 0.9339,
30 June 2021: 0.9311).
All values are rounded to millions
($M) unless otherwise stated.
Accounting policies
The accounting policies, methods
of computation and classification
set out in the Group financial
statements for the year ended
30 June 2021 have been applied
consistently to all periods presented
in the condensed interim financial
statements, except as noted below.
Judgements and estimates
The basis of key judgements and
estimates have not changed from
those used in preparing the financial
statements for the year ended
30 June 2021.
Basis of consolidation
The condensed interim Group
financial statements comprise the
financial statements of Meridian
Energy Limited and its subsidiaries
and controlled entities.
Assets and disposal
groups held for sale
Assets and disposal groups classified
as held for sale (HFS) are measured
at the lower of carrying amount or
fair value less costs to sell. Assets and
disposal groups are classified as held
for sale if their carrying amount will be
recovered through a sale transaction
rather than through continuing use.
The condition is regarded as met
only when the sale is highly probable
and the asset (of disposal group) is
available for immediate sale in its
present condition and the sale of the
asset (or disposal group) is expected
to be completed within one year
from the date of classification.
On the balance sheet, HFS assets
and liabilities are shown as separate
line items under current assets and
current liabilities. No adjustment is
made to the prior period balance
sheet figures or classifications.
Discontinued operations
Classification as a discontinued
operation occurs on disposal, or
when the operation meets the criteria
to be classified as a non-current asset
or disposal group HFS (see above), if
earlier, and represents a separate major
line of business or geographical area
of operations. When an operation is
classified as a discontinued operation,
the comparative statement of
comprehensive income is re-
presented as if the operation had
been discontinued from the start of
the comparative year. The comparative
balance sheet is not adjusted. In the
cash flow statement, neither current
or comparative period are adjusted.
Meridian Energy Limited is a for-
profit entity domiciled and registered
under the Companies Act 1993 in
New Zealand. It is a FMC reporting
entity for the purposes of the Financial
Markets Conduct (FMC) Act 2013.
Meridian's core business activities
are the generation, trading and
retailing of electricity and the sale
of complementary products and
services. The registered office of
Meridian is 55 Lady Elizabeth Lane,
Wellington. Meridian Energy Limited
is dual listed on the New Zealand
Stock Exchange (NZX) and the
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
8
S1 Meridian Energy Australia
In June 2021, Meridian announced that
it had begun a review of its ownership
of Meridian Energy Australia (MEA)
and was considering all options,
including partial or full divestment.
On 20 August 2021, Meridian
deemed that MEA was HFS.
On 22 November 2021, Meridian
announced that an agreement had
been reached with a consortium,
comprised of Shell Energy Operations
Pty Ltd and Infrastructure Capital
Group, to purchase the MEA business
for consideration of A$729m, subject
to possible adjustment depending
on timing of completion, with this
expected to occur in the first quarter
of 2022. Completion has now occurred,
refer to Section E and the post balance
date events note for further details.
As the carrying amount of Meridian's
investment in MEA is to be recovered
through a sale transaction, the
investment in MEA has been
classified as HFS and a discontinued
operation at 31 December 2021. The
comparative consolidated statement of
comprehensive income and respective
notes have been re–presented to show
the discontinued operation separately
from continuing operations.
As at 22 November 2021, the
expected sales proceeds less costs
to sell are higher than the carrying
amount and as a result no adjustment
has been made to the carrying value
of Meridian's investment in MEA.
Significant matters
in the six months
In this section.
Significant matters which
have impacted Meridian's
financial performance.
Six months ended 31 December
Results of discontinued operation
2021
$M
2020
$M
Operating revenue 184 180
Operating expenses (160) (152)
Net result from operating activities 24 28
Depreciation and amortisation (6) (16)
Gain / (loss) on sale of investment(12) –
Net change in fair value of energy hedges (16) (10)
Operating profit / (loss)(10) 2
Finance costs (2) (2)
Net change in fair value of treasury hedges – –
Net profit / (loss) before tax(12) –
Tax expense – –
Net profit / (loss) from discontinued operations after tax(12) –
Basic and diluted earnings per share (cents per share) – –
Current assets 729 663
Current liabilities 197 168
Net assets of discontinued operation 532 495
Cash flows from / (used in) discontinued operation
Net cash from / (used in) operating activities 12 1
Net cash from / (used in) investing activities (8) (9)
Net cash from / (used in) financing activities – (46)
Net cash flows of discontinued activity 4 (54)
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
9
Significant matters
in the six months continued
Effect of reclassification of the disposal group
on the financial position of the Group
At
31 December
2021
$M
Cash and cash equivalents (19)
Trade receivables (34)
Customer contract assets (11)
Financial instruments (assets) (40)
Other assets (15)
Property, plant & equipment (570)
Intangible assets (6)
Deferred tax (asset) (34)
Payables and accruals 49
Employee entitlements 2
Customer contract liabilities 9
Term borrowings –
Lease liabilities 44
Financial instruments (liabilities) 41
Current tax payable –
Deferred tax (liability) 31
Provisions 21
Term payables –
Net reclassification of (assets) and liabilities (532)
The effect of the reclassification of the discontinued operation on the financial
position of Meridian is to transfer the carrying value of the individual assets and
liabilities that relate to MEA to assets and liabilities held for sale at 31 December 2021.
S2 Dividend reinvestment plan
In March 2021, the Meridian Board
approved the creation of a Dividend
Reinvestment Plan (DRP), with
program details later released in
August 2021. The DRP was available
for use on the FY21 final dividend,
which was paid to shareholders
on 15 October 2021.
Under the DRP, Meridian shareholders
can elect to receive Meridian shares
in lieu of cash for all or part of their
dividend. Of the final dividend paid
in October 2021, $65m was settled
under the DRP by the issuance of
13,400,114 new Meridian shares.
New shares are issued at the
prevailing market price around the
time of issue, which may be subject
to a small discount (at the Meridian
Board's discretion). A 2% discount
was approved in relation to the DRP
for October 2021.
Further details on the DRP can
be found at www.meridianenergy.
co.nz/investors/dividend#Dividend-
reinvestment-plan.
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
10
In this section.
This section outlines significant
matters which have impacted
Meridian's financial performance
and an explanation of non-
GAAP measures used within
the notes to the condensed
interim financial statements.
Hydro Inflows
After starting the financial
year at low levels, there was a
recovery in Lake Pūkaki storage
during July. This trend continued
through to October, as the
Waitaki experienced one of the
wetter winter quarters in our
historical record. Snow began
to melt in October and there
were significant inflow events
in November and December,
leading us to end the calendar
year with close to maximum
storage in Lake Pūkaki.
The Waiau Lakes also experienced
above average inflows from July
to September. Spill began there
in September and continued into
October. Lake Manapōuri and Te
Anau were within their main ranges
for November and December.
COVID-19
In light of the continuing uncertainty
around the economy, Meridian
continues to hold a higher provision
for credit losses in the short to medium
term. Meridian will continue to assess
the level of the provision at each
reporting date to ensure it reflects
current economic conditions.
Meridian has also considered the
potential impact of COVID-19 as part
of our key assumptions when valuing
our property, plant and equipment
and financial instruments. However,
there was no impact when taking this
into consideration. Refer to Notes B1
Property, plant & equipment and D1
Financial instruments for further detail.
Non-GAAP measures
Meridian refers to non-GAAP financial
measures within these condensed
interim financial statements and
accompanying notes. The limited
use of non-GAAP measures is
intended to supplement GAAP
measures to provide readers with
further information to broaden their
understanding of Meridian's financial
performance and position. They are
not a substitute for GAAP measures.
As these measures are not defined
by NZ GAAP, IFRS, or any other
body of accounting standards,
Meridian's calculations may differ
from similarly titled measures
presented by other companies.
The measures are described below,
including page references for
reconciliations to the condensed
interim financial statements.
EBITDAF
Earnings before interest, tax,
depreciation, amortisation, change
in fair value of hedges, impairments
and gains and losses on sale of assets.
EBITDAF is reported in the income
statement allowing the evaluation of
Meridian's operating performance
without the non-cash impact of
depreciation, amortisation, fair value
movements of hedging instruments
and other one-off or infrequently
occurring events and the effects
of Meridian's capital structure and
tax position. This allows a better
comparison of operating performance
with that of other electricity industry
companies than GAAP measures
which include these items.
Energy margin
Energy margin provides a measure
of financial performance that,
unlike total revenue, accounts for
the variability of wholesale energy
markets and the broadly offsetting
impact of the wholesale prices on
the cost of Meridian's energy
purchases and revenue from
generation. Meridian uses the
measure of energy margin within
its segmental financial performance
in Note A1 Segment performance.
Net debt
Net debt is a metric commonly used
by investors as a measure of Meridian's
indebtedness that takes account
of liquid financial assets. Meridian
uses this measure within its capital
management and this is outlined in
Note C1 Capital management.
Significant matters
in the six months continued
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
11
A1 Segment performance
The Chief Executive monitors the
operating performance of each
segment for the purpose of making
decisions on resource allocation
and strategic direction.
The Chief Executive considers the
business according to the nature of the
products and services and the location
of operations, as set out below:
New Zealand wholesale
• Generation of electricity and
its sale into the New Zealand
wholesale electricity market.
• Purchase of electricity from the
wholesale electricity market and
its sale to the New Zealand Retail
segment and to large industrial
customers, including NZAS
representing the equivalent of
36% (31 December 2020: 38%)
of Meridian's New Zealand
generation production.
• Development of renewable
electricity generation
opportunities in New Zealand.
New Zealand retail
• Retailing of electricity and
complementary products through
two brands (Meridian and
Powershop) in New Zealand.
• Electricity sold to residential,
business and industrial customers
on fixed price variable volume
contracts is purchased from
the Wholesale segment at an
average annual fixed price of
$93 per megawatt hour (MWh)
and electricity sold to business
and industrial customers on spot
(variable price) agreements is
purchased from the Wholesale
segment at prevailing wholesale
spot market prices.
• Agency margin from spot sales
is included within "Contracted
sales, net of distribution costs".
• Meridian provides front line
customer and back office services
for Powershop Australia. Revenue of
$2m has been recorded in 'Other
revenue' and is eliminated on
Group consolidation.
Australia
• Generation of energy from
Meridian's two wind farms, three
hydro power stations and acquired
under power purchase agreements,
for sale into the Australian wholesale
electricity market.
• Retailing of electricity and gas,
mainly through the Powershop
brand in Australia.
• Development of renewable
electricity generation options
in Australia.
• As noted in the Significant
Matters section, the Australia
segment is now shown as HFS
and a discontinued operation.
Other and unallocated
• Other operations, that are not
considered reportable segments,
including licensing of the Flux
developed electricity and gas
retailing platform.
• Activities and centrally based costs
that are not directly allocated to
other segments.
The financial performance of the
operating segments is assessed using
energy margin and EBITDAF (see page
10 for a definition of these measures)
before unallocated central corporate
expenses. Balance sheet items are not
reported to the Chief Executive at an
operating segment level.
Financial
performance
In this section.
This section explains the financial
performance of Meridian,
providing additional information
about individual items in the
income statement, including:
a. accounting policies,
judgements and estimates that
are relevant for understanding
items recognised in the income
statement; and
b. analysis of Meridian's
performance for the six months
by reference to key areas
including: performance by
operating segment, revenue,
expenses and taxation.
A
A1 Segment performance continued
For the six months to 31 December
NZ Wholesale NZ Retail Australia Other and Unallocated
Inter–segment and
discontinued operations
Group
2021
$M
2020
$M
2021
$M
2020
$M
2021
$M
2020
$M
2021
$M
2020
$M
2021
$M
2020
$M
2021
$M
2020
$M
Contracted sales, net of distribution costs 270 256 518 460 85 92 – – (85) (92) 788 716
Costs to supply customers (937) (998) (422) (370) (73) (54) – – 527 471 (905) (951)
Net cost of hedging (4) 24 – – 1 (8) – – (1) 8 (4) 24
Generation spot revenue 661 755 – – 40 30 – – (40) (30) 661 755
Inter–segment electricity sales 454 417 – – – – – – (454) (417) – –
Virtual asset swap margins 3 1 – – – – – – – – 3 1
Other market revenue/(costs) (6) (4) – – (1) (1) – – 1 3 (6) (2)
Energy Margin 441 451 96 90 52 59 – – (52) (57) 537 543
Other Revenue 1 1 7 7 1 1 23 23 (18) (21) 14 11
Dividend Revenue – – – – – – – 46 – (46) – –
Energy transmission expense (38) (41) – – (3) (3) – – 3 3 (38) (41)
Energy metering expenses – – (21) (20) – – – – – – (21) (20)
Gross Margin 404 411 82 77 50 57 23 69 (67) (121) 492 493
Employee expenses (12) (16) (16) (16) (8) (7) (17) (15) 8 7 (45) (47)
Other operating expenses (29) (28) (17) (17)(18)(22) (15) (13)2629 (53) (51)
EBITDAF 363 367 49 44 2428(9) 41 (33)(85) 394 395
Depreciation and amortisation–––––––––– (144) (137)
Net change in fair value of electricity and other hedges–––––––––– (68) 73
Operating profit––––––––––182 331
Finance costs–––––––––– (39) (41)
Net change in fair value of treasury instruments–––––––––– 58 25
Net profit before tax from continuing operations
––––––––––201 315
Income tax expense–––––––––– (56) (88)
Net profit after tax from continuing operations––––––––––145 227
Net profit / (loss) from discontinued operations after tax (12) –
Net profit after tax attributed to the shareholders
of the parent company
133 227
Reconciliation of energy margin
Electricity sales revenue, net of hedging 1,229 1,295 883 800 183 179 – – (637) (595) 1,658 1,679
Electricity expenses, net of hedging (788) (844) (460) (421) (76) (66) – – 530 484 (794) (847)
Electricity distribution expenses – – (327) (289) (55) (54) – – 55 54 (327) (289)
Energy margin 441 451 96 90 52 59 –
– (52) (57) 537 543
The Australia segment is classified as HFS and treated as a discontinued operation as at 31 December 2021.
A
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
12
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
13
A2 Income
Six months ended 31 December
UnauditedUnaudited
Operating revenue
2021
$M
2020
$M
Energy sales to customers 971 948
Generation revenue net of hedging 687 731
Energy related services revenue 5 4
Other revenue 9 7
1,672 1,690
Total revenue by geographic area
New Zealand 1,664
1,684
United Kingdom 8
6
Total operating revenue 1,672 1,690
A
Operating revenue
Energy sales to customers
Revenue received or receivable from
residential, business and industrial
customers. This revenue is influenced
by customer contract sales prices and
their demand for energy.
Generation revenue, net of hedging
Revenue received from:
• energy generated and sold into
the wholesale markets; and
• the net settlement of energy
hedges sold on futures markets,
and to generators, retailers and
industrial customers.
This revenue is influenced by
the quantity of generation and
the wholesale spot price and is
recognised at the time of generation
or hedge settlement.
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
14
A3 Expenses
Six months ended 31 December
UnauditedUnaudited
Operating expenses
2021
$M
2020
$M
Energy expenses, net of hedging 794 847
Energy distribution expenses 327 289
Energy transmission expenses 38 41
Energy metering expense 21 20
Employee expenses 45 47
Other expenses 53 51
1,278 1,295
Finance costs
Interest on borrowings 41 39
Interest on option premiums– 1
Interest on lease liabilities 1 1
Less capitalised interest(3) –
39 41
Energy expenses, net of hedging
The cost of:
• energy purchased from wholesale
markets to supply customers;
• the net settlement of buy-side
energy hedges; and
• related charges and services.
Energy expenses are influenced
by quantity and timing of customer
consumption and the wholesale
spot price.
Energy distribution expenses
The cost of distribution companies
transporting energy between where
it is transmitted/stored and customers'
properties.
Energy transmission expenses
Meridian's share of the cost of the
high voltage direct current (HVDC)
link between the North and South
Islands of New Zealand and the cost of
connecting Meridian's generation sites
to the national grid by grid providers.
Employee expenses
Provision is made for benefits owing
to employees in respect of wages and
salaries, annual leave, long service
leave and employee incentives for
services rendered. Provisions are
recognised when it is probable they
will be settled and can be measured
reliably. They are carried at the
remuneration rate expected to
apply at the time of settlement.
Provision is made for benefits owing
to employees in respect of wages and
salaries, annual leave, long service
leave and employee incentives for
services rendered. Provisions are
recognised when it is probable they
will be settled and can be measured
reliably. They are carried at the
remuneration rate expected to
apply at the time of settlement.
The current period includes the
release of a $7m provision. This
related to a Ministry of Business,
Innovation and Employment review
of Meridian's approach to application
of the Holidays Act (2003). It had
previously been assessed that
liability was probable and therefore
a provision was created. However,
recent legal cases have meant this
position has reversed, that Meridian's
application of the Holidays Act
(2003) is appropriate, and that
further liability is highly unlikely.
Finance costs –
capitalised interest
In the six month ending 31 December
2021, Meridian commenced
capitalisation of interest costs relating
to the build of the Harapaki wind farm.
A
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
15
A4 Taxation
Six months ended 31 December
UnauditedUnaudited
Income tax expense
2021
$M
2020
$M
Current income tax charge85 85
Deferred tax (29) 3
Income tax expense 56 88
Reconciliation to profit before tax
Profit before tax 201 315
Income tax at applicable rates 56 88
Expenditure not deductible for tax––
Income tax expense 56 88
Income tax expense
Income tax expense is the income
tax assessed on taxable profit for
the period. Taxable profit differs
from profit before tax reported in
the income statement as it excludes
items of income and expense that are
taxable or deductible in other periods
and also excludes items that will never
be taxable or deductible. Meridian’s
liability for current tax is calculated
using tax rates that have been
enacted or substantively enacted
at balance date, being 28% for
New Zealand and 30% for Australia.
Income tax expense components are
current income tax and deferred tax.
A
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
16
Assets used to generate
and sell electricity
B
B1 Property, plant and equipment
UnauditedUnauditedAudited
Position as atNote
31 Dec 2021
$M
31 Dec 2020
$M
30 Jun 2021
$M
Opening net book value 8,598 8,594 8,594
Additions 80 19 80
Transfers to Held For SaleS1(570) – –
Disposals(1) (1) (9)
Decomissioning asset – remeasurement – – 11
Adjustment of Right of Use assets – (4) 1
Foreign currency exchange rate movements (6) 2 4
Generation structures and plant revaluation:
– revaluation reserve – – 202
Depreciation expense
1
(135) (144) (285)
Closing net book value 7,9 6 6 8,466 8,598
Recognition and measurement
Generation structures and plant
assets (including land and buildings)
are held on the balance sheet at their
fair value at the date of revaluation,
less any subsequent depreciation and
impairment losses. All other property,
plant and equipment are stated
at historical cost less accumulated
depreciation and any accumulated
impairment losses.
In this section.
This section shows the assets
Meridian uses in the production
and sale of electricity to generate
operating revenues. In this
section of the summary notes
there is information about:
a. property, plant and
equipment, and
b. intangible assets
B2 Intangible assets
UnauditedUnauditedAudited
Position as atNote
31 Dec 2021
$M
31 Dec 2020
$M
30 Jun 2021
$M
Opening Net Book value 84 65 64
Additions 11 20 40
Expensed to income statement – – (2)
Amortisation expense
1
(9) (9) (18)
Transfers to Held For SaleS1(6) – –
Closing net book value 80 76 84
1. Depreciation and amortisation expense for the six months ended 31 December 2020 does not
match the Income Statement, due to the re-presenting of the Income Statement for the MEA
discontinued operation.
Fair value and revaluation of
generation structures and plant
Within Property, plant & equipment,
generation structures and plant
are carried at fair value for financial
reporting purposes. Revaluations are
performed with sufficient regularity
to ensure that carrying value does
not differ materially from that which
would be determined using fair
values at balance date.
Meridian continues to use an income
approach in calculating the fair value
of generation structures and plant.
Meridian uses a discounted cash
flow (DCF) approach to determine
a fair value range.
A review and assessment of key
inputs included in the valuation of
generation structures and plant has
been undertaken as at 31 December
2021, indicating that there has been
no material change in fair value.
The value of our generation structures
and plant is sensitive to movements
in fair value as a result of a change in
each valuation input, the nature of
these sensitivities has not significantly
changed since 30 June 2021.
Capital Commitments
As at 31 December 2021 Meridian
Energy Limited has capital
commitments of $286m
(30 June 2021: $329m).
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
17
C1 Capital management
Capital risk
management objectives
Meridian's objective when managing
capital is to provide appropriate returns
to shareholders whilst maintaining a
capital structure that safeguards its
ability to remain a going concern
and optimises the cost of capital.
Capital is defined as the combination
of shareholders' equity, reserves and
net debt.
Meridian manages its capital
through various means, including:
• adjusting the amount of dividends
paid to shareholders;
• raising or returning capital; and
• raising or repaying debt.
Meridian regularly monitors its capital
requirements using various measures
that consider debt facility financial
covenants and credit ratings. The key
measures being net debt to EBITDAF
and interest cover. The principal
external measure is Meridian's credit
rating from Standard & Poor's.
Meridian is in full compliance with
debt facility financial covenants.
UnauditedUnauditedAudited
Position as at
Note
31 Dec 2021
$M
31 Dec 2020
$M
30 Jun 2021
$M
Share capital 1,658 1,598 1,595
Retained earnings(1,702) (1,602) (1,548)
Other reserves 5,179 5,022 5,177
5,135 5,018 5,224
Drawn borrowingsC4 1,718 1,582 1,589
add Lease liabilities 50 98 97
less: Cash and cash equivalents (152) (122) (148)
1,616 1,558 1,538
Net capital 6,751 6,576 6,762
In this section.
This section explains how
Meridian manages its capital
structure and working capital,
the various funding sources,
and how dividends are returned
to shareholders. In this section
of the summary notes there
is information about equity
and dividends.
Managing
funding
C
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
18
C2 Earnings per share
UnauditedUnaudited
Basic and diluted earnings per share (EPS)
31 Dec 202131 Dec 2020
Net profit after tax from continuing operations145 227
Net profit after tax attributed to the shareholders
of the parent company
133 227
Weighted average number of shares used in the calculation of EPS 2 ,5 69,70 0,057 2,563,000,000
Basic and diluted EPS from continuing operations (cents per share)5.68.9
Basic and diluted EPS (cents per share) 5.2 8.9
C
C3 Dividends
Six months ended 31 December
UnauditedUnaudited
Dividends declared and paid
2021
$M
2020
$M
Final ordinary dividend 2021: 11.2cps (2020: 11.2cps) 287 287
Total dividends paid 287 287
Dividends declared and not recognised as a liability
Interim ordinary dividend 2022: 5.85cps (2021: 5.7cps) 151 146
Dividend policy
Meridian's dividend policy considers
free cash flow, working capital
requirements, the medium-term
investment programme, maintaining
a BBB+ credit rating and risks from
short and medium-term economic,
market and hydrology conditions.
Subsequent event – dividend declared
On 22 February 2022 the Board
declared a partially imputed interim
ordinary dividend of 5.85 cents
per share.
Dividend Reinvestment Plan (DRP)
As noted in the Significant Matters
section, Meridian has instituted a DRP
under which shareholders can elect to
receive dividends in additional shares
rather than cash. The first time the
DRP was available for use was for the
October 2021 final dividend payment.
For the October 2021 dividend
payment, new shares were issued at
a 2% discount to the prevailing market
price of Meridian shares around the
time of issue. Whether a discount is
available, and if so the level of that
discount, is at the discretion of the
Meridian Board.
In October 2021, 13,400,114 new
Meridian shares with a value of $65m
were issued to Meridian investors.
Shares issued in lieu of cash are
excluded from dividends paid in
the Statement of Cash Flows.
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
19
UnauditedUnauditedAudited
Position as at31 Dec 202131 Dec 202030 Jun 2021
Group (NZ$M)
Currency
borrowed in
Drawn
facility
amount
Transaction
costs
Fair value
adjustment
Carrying
amount
Drawn
facility
amount
Transaction
costs
Fair value
adjustment
Carrying
amount
Drawn
facility
amount
Transaction
costs
Fair value
adjustment
Carrying
amount
Current borrowings
Unsecured borrowings NZD 270 (1) – 269 215 (1) – 214 321 (1) – 320
Unsecured borrowings USD – – – – 47 – 10 57 47 – 11 58
Total current borrowings 270 (1) – 269 262 (1) 10 271 368 (1) 11 378
Non-current borrowings
Unsecured borrowings NZD 835 – – 835 765 (1) – 764 665 (1) – 664
Unsecured borrowings AUD 59 – – 59 – – – – – – – –
Unsecured borrowings USD 554 (1) 83 636 555 (1) 90 644 556 (1) 79 634
Total non-current borrowings 1,448 (1) 83 1,530 1,320 (2) 90 1,408 1,221 (2) 79 1,298
Total borrowings 1,718 (2) 83 1,799 1,582 (3) 100 1,679 1,589 (3) 90 1,676
C4 Borrowings
C
Meridian has committed bank
facilities of $955 million of which
$377m were undrawn at 31 December
2021 (31 December 2020: facilities
of $755m of which $525m were
undrawn). Where facilities have
expiry dates, these expiries range
from March 2022 to April 2026.
$275m of facilities are evergreen /
have no expiry date.
Borrowings, measurement
and recognition
Borrowings are recognised initially
at the fair value of the drawn facility
amount (net of transaction costs
paid) and are subsequently stated
at amortised cost using the effective
interest method. Any borrowings
which have been designated as
hedged items (USD borrowings)
are carried at amortised cost plus a
fair value adjustment under hedge
accounting requirements. Any
borrowings denominated in foreign
currencies are retranslated to the
functional currency at each reporting
date. Any retranslation effect is included
in the "Fair value adjustment" column
in the above table.
Meridian uses cross currency interest
rate swap (CCIRS) hedge contracts to
manage its exposure to interest rates
and borrowings sourced in currencies
different to that of the borrowing
entity's reporting currency.
Fair value of borrowings held at amortised cost
UnauditedAudited UnauditedAudited
Position as at
31 Dec
2021
$M
31 Dec
2020
$M
30 Jun
2021
$M
31 Dec
2021
$M
31 Dec
2020
$M
30 Jun
2021
$M
Group (NZ$M)
Carrying valueFair value
Retail bonds 500 500 500 518 554 540
Floating rate notes 50 50 50 50 51 51
Unsecured term loan (EKF facility) 45 55 50 47 58 52
Within term borrowings there are longer
dated instruments which are not in hedge
accounting relationships. The carrying
values and estimated fair values of these
instruments are noted in the table above.
Fair value is calculated using a discounted
cash flow calculation and the resultant
values are classified as Level 2 within the
fair value hierarchy. The Retail Bonds
are listed instruments; however, a lack of
liquidity on the NZX precludes them from
being classified as Level 1 (a definition
of levels is included in note D1 Financial
instruments).
Carrying value approximates fair value for all
other instruments within term borrowings.
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
20
Unaudited
31 Dec 2021
Group (NZ$M)
Balance at
30 Jun 2021
Term
borrowings
drawn
Term
borrowings
repaid
Fair value
adjustments
Foreign
Exchange
Transferred
to Held
For Sale
Lease
liabilities
recognised
Lease
liabilities
paid
Lease
derecognition
Unwind of
discounting
Balance at
31 Dec 2021
Unsecured borrowings – NZD 984 125 (5) – – – – – – – 1,104
Unsecured borrowings – AUD – 57 – 2 – – – – – 59
Unsecured borrowings – USD 692 – (58) 1 1 – – – – – 636
Lease Liabilities 97 – – – – (44) – (4) – 1 50
Total 1,773 182 (63) 1 3 (44) – (4) – 1 1,849
Audited
30 Jun 2021
Group (NZ$M)
Balance at
30 Jun 2020
Term
borrowings
drawn
Term
borrowings
repaid
Fair value
adjustments
Foreign
Exchange
Transferred
to Held
For Sale
Lease
liabilities
recognised
Lease
liabilities
paid
Lease
derecognition
Unwind of
discounting
Balance at
30 Jun 2021
Unsecured borrowings – NZD 886 108 (10) – – – – – – – 984
Unsecured borrowings – USD 802 – – (58) (52) – – – – – 692
Lease Liabilities 104 – – – – – 1 (7) (5) 4 97
Total 1,792 108 (10) (58) (52) – 1 (7) (5) 4 1,773
Unaudited
31 Dec 2020
Group (NZ$M)
Balance at
30 June 2020
Term
borrowings
drawn
Term
borrowings
repaid
Fair value
adjustments
Foreign
Exchange
Transferred
to Held
For Sale
Lease
liabilities
recognised
Lease
liabilities
paid
Lease
derecognition
Unwind of
discounting
Balance at
31 Dec 2020
Unsecured borrowings – NZD 886 97 (5) – – – – – – – 978
Unsecured borrowings – USD 802 – – (31) (70) – – – – – 701
Lease Liabilities 104 – – – – – – (4) (4) 2 98
Total 1,792 97 (5) (31) (70) – – (4) (4) 2 1,777
Reconciliation of liabilities arising from financing activities
The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes.
C
C4 Borrowings continued
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
21
C
C5 Green financing
Green Debt Instruments under Meridian's Green Finance Programme
UnauditedUnauditedAudited
Green Debt allocated to the Hydro Pool
1
31 Dec 202131 Dec 202031 June 2021
Type – Group (NZ$M)
CUSIP/
NZX Code
Currency
borrowed in
Facility
amount
Drawn
facility
amount
Facility
amount
Drawn
facility
amount
Facility
amount
Drawn
facility
amount
USPP Series 2014 – 1 Tranche A
2
Q5995*AA6USD––47474747
USPP Series 2014 – 1 Tranche B
2
Q5995*AB 4USD115115116116117117
USPP Series 2019 – 1 Tranche A
2
Q5995#AE4USD183183183183183183
USPP Series 2019 – 1 Tranche B
2
Q5995#AF1USD183183183183183183
USPP Series 2019 – 1 Tranche C
2
Q5995#AG9USD737373737373
Total USPP554554602602603603
Wholesale FRN – 10yrNZD505050505050
Bank Facilities
3
NZD955377700175770161
Commercial Paper
4
NZD192192200200225225
Total Green Debt allocated to the Hydro Pool 1,751 1,173 1,552 1,027 1,648 1,039
UnauditedUnauditedAudited
Green Debt allocated to the Wind Pool
5
31 Dec 202131 Dec 202031 Jun 2021
Type – Group (NZ$M)
CUSIP/
NZX Code
Currency
borrowed in
Facility
amount
Drawn
facility
amount
Facility
amount
Drawn
facility
amount
Facility
amount
Drawn
facility
amount
Retail Bond (Mar-23)MEL030NZD150150150150150150
Retail Bond (Mar-24)MEL040NZD150150150150150150
Retail Bond (Mar-25)MEL050NZD200200200200200200
Total Domestic Bonds500500500500500500
EKF Amortising FacilityNZD454555555050
Total Green Debt allocated to the Wind Pool 545 545 555 555 550 550
Total Green Debt 2,296 1,718 2,107 1,582 2,198 1,589
At 31 December 2021, Meridian remains compliant with the requirements of the programme.
To recognise Meridian’s commitment,
leadership and investment in renewable
energy, Meridian operates a Green
Finance Programme which covers
both existing and future issuances
of debt instruments ("Programme").
The Programme Framework
(Framework) sets out the process,
criteria and guidelines under which
Meridian intends to issue and/or manage
existing and future bonds and loans
under the Programme which contribute
towards achieving Meridian’s sustainable
objectives. The Framework is aligned
with the following market standards
as at the date of the Framework:
International Capital Markets
Association (ICMA) Green Bond
Principles (GBP); Climate Bonds
Standard currently version 3.0 (CBS);
and Asia Pacific Loan Market Association
Green Loan Principles (GLP), (together
the Market Standards).
The proceeds of Meridian’s debt
instruments, outlined in the following
tables, have been allocated (directly
or notionally) to refinance eligible
wind and hydro projects and assets
that meet the market standards.
Further information on the Green
Finance Programme, including the
Programme framework document,
opinions from DNV GL Business
Assurance Pty. Ltd, Climate Bonds
Standard Certification and Green
Asset and Debt registers are available
on Meridian’s website at
www.meridianenergy.co.nz/investors/
reports-andpresentations/green-finance.
1. Verified as meeting the criteria established for Meridian by DNV GL which align with the stated definition of Green Bonds and Loans within the
Green Bond/Loan Principles.
2. United States private placement (USPP) Notes are included as the NZD equivalent under the Cross –Currency Interest Rate Swaps related to the Issue.
3. Committed Bank facilities are included at the face value of the facilities.
4. Commercial Paper is included as the amount on issue.
5. Climate Bonds Standard Certified.
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
22
D
Financial
instruments
In this section.
In this section of the summary
notes there is information:
a. analysing financial (hedging)
instruments used to manage
risk; and
b. outlining Meridian's fair value
techniques and key inputs.
Fair value on
the balance sheet
Fair value movements
in the income statement
UnauditedAuditedUnaudited
31 Dec 202131 Dec 202030 June 202131 Dec 202131 Dec 2020
Level
Assets
$M
Liabilities
$M
Assets
$M
Liabilities
$M
Assets
$M
Liabilities
$M$M$M
Treasury Hedges
Cross currency interest rate swap (CCIRS) –
interest rate risk
251 –89 –62 – – –
CCIRS – basis and margin risk2(1) –(11) –(6) – – –
CCIRS – foreign exchange risk232 –10 –28 – – –
Total CC IRS82 –88 –84 – – –
Foreign exchange hedges211(1)1 –6 –(1) –
Interest rate swaps (IRS)213(83)23(207)16(145)5925
Total Treasury Hedges106(84)112(207)106(145)5825
Energy hedges
Market traded electricity hedges1117(22)86(23)149(21)(21)2
Market traded gas hedges1 – – –(1) – – – –
Other electricity hedges385(30)49(11)113(14)(40)78
Other gas hedges2 – – –(11)3 – – –
Electricity options354 –43 –29 –(7)(7)
Large scale generation certificates (LGC) –
Holdings created from wind farm generation
1 – –14 –5 – – –
LGC – forward and option contracts2 – –2(18)1(14) – –
Energy hedges 256(52)194(64)300(49)(68)73
Total hedges362(136)306(271)406(194)(10)98
D1 Financial instruments
Fair value of hedging
financial instruments
The recognition and measurement
of hedging financial instruments
requires management estimation
and judgement (this is discussed in
further detail later in this note). These
estimates can have a significant risk of
material adjustment in future periods.
Fair value measurements are grouped
within a three-level fair value hierarchy
based on the observability of valuation
inputs (described below).
• Level 1 Inputs – Quoted prices
(unadjusted) in active markets
for identical assets or liabilities
that the entity can access at the
measurement date.
• Level 2 Inputs – Either directly (i.e. as
prices) or indirectly (i.e. derived from
prices) observable inputs other than
quoted prices included in Level 1.
• Level 3 Inputs – Inputs for the
asset or liability that are not
based on observable market
data (unobservable inputs).
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
23
Settlements
The following provides a summary of the settlements through EBITDAF for energy hedges:
UnauditedUnaudited
20212020
$M
Operating
Revenue
Operating
expenses
Total
Settlements
In EBITDAF
Operating
Revenue
Operating
expenses
Total
Settlements
In EBITDAF
Market traded electricity hedges 28 (32) (4) (5) (9) (14)
Other electricity hedges(5) 33 28 (19) 51 32
Electricity options – 3 3 – 1 1
Total settlements in EBITDAF 23 4 27 (24) 43 19
Level 3 financial instrument analysis
The following provides a summary of the movements through EBITDAF and movements in the fair value of level three financial instruments:
UnauditedUnaudited
20212020
$M
Other
Electricity
Hedges
Electricity
Options Total
Other
Electricity
Hedges
Electricity
Options Total
Energy hedges settled in EBITDAF:
Operating revenue(5) –(5)(19) –(19)
Operating expenses3333651152
Total settlements in EBITDAF2833132133
Net change in fair value of energy hedges:
Remeasurement(12)(4)(16)108(6)102
Hedges settled(28)(3)(31)(32)(1)(33)
Total net change in fair value of energy hedges
(40)(7)(47)76(7)69
Balance at the beginning of the period9929128(38)5012
Fair value movements(40)(7)(47)76(7)69
Balance transferred to Held For Sale(4) –(4) – – –
New hedge recognised –3232 – – –
Balance at the end of the year5554109384381
D1 Financial instruments continued
D
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
24
Fair value technique
and key inputs
In estimating the fair value of an
asset or liability, Meridian uses
market-observable data to the extent
that it is available. The Audit and Risk
Committee of Meridian determines
the overall appropriateness of key
valuation techniques and inputs for
fair value measurement. The Chief
Financial Officer explains fair value
movements in his report to the Board.
The table below describes the additional key inputs and techniques used in the valuation of level 2 and 3 financial instruments:
Financial asset or liability Description of input
Range of significant
unobservable inputsRelationship of input to fair value
Energy hedges,
valued using DCFs
Price, where quoted prices are not available
or not relevant (i.e. for long dated contracts),
Meridian's best estimate of long-term
forward wholesale electricity price is used.
This is based on a fundamental analysis
of expected demand and the cost of new
supply and any other relevant wholesale
market factors.
Calibration factors, which are applied to
forward curves as a consequence of initial
recognition differences (see following page)
$27/MWh to $118/MWh
(in real terms), excludes
observable ASX prices.
An increase in forward wholesale
electricity price increases the fair value
of buy hedges and decreases the fair
value of sell hedges. A decrease in
forward wholesale electricity price
has the opposite effect.
LGC forward contracts and options,
valued using DCFs/Black-Scholes
Price, based on a forward LGC price
curve from a third-party broker and
benchmarked against market spot prices.
A$18 – A$43An increase in the forward LGC
price decreases the fair value of
sell hedges and increases the fair
value of buy hedges. A decrease
in forward LGC prices has the
opposite effect.
Where the fair value of a financial
instrument is calculated as the present
value of the estimated future cash
flows of the instrument (DCFs), a
number of inputs and assumptions
are used by the valuation technique.
These are:
• forward price curves referenced to
the ASX for electricity, published
market data on gas/oil prices,
published market interest rates
and published forward foreign
exchange rates;
• Meridian's best estimate of
electricity volumes called over
the life of electricity options;
• discount rates based on the
forward IRS curve adjusted
for counterparty risk;
• calibration factor applied
to forward price curves as
a consequence of initial
recognition differences;
• NZAS continues to operate; and
• contracts run their full term.
D
D1 Financial instruments continued
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
25
Movements in recalibration differences arising from energy hedges
UnauditedUnauditedAudited
Position as at31 Dec 2021
$M
31 Dec 2020
$M
30 Jun 2021
$M
Opening difference
(2) (1) (1)
Recalibration for future price estimates and time – – (1)
Closing difference
(2) (1) (2)
D1 Financial instruments continued
D
Initial recognition difference
An initial recognition difference
arises when the modelled value
of an energy hedge differs from
the transaction price (which is the best
evidence of fair value). This difference
is accounted for by recalibrating the
valuation model by a fixed percentage
to result in a value at inception equal to
the transaction price. This recalibration
is then applied to future valuations
over the life of the contract.
The resulting difference shown in
the table reflects potential future gains
or losses yet to be recognised in the
income statement over the remaining
life of the contract.
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
26
E1 Group structure
No changes occurred to Meridian's
Group structure in the six months
to 31 December 2021. As noted in
the Significant Matters sections,
Meridian's MEA business has been
classified as HFS and is treated as
a discontinued operation in the
current reporting period.
E2 Contingent assets
and liabilities
There were no contingent assets
or liabilities at 31 December 2021
(31 Dec 2020: $0m, 30 Jun 2021: $0m).
E
Other
E3 Subsequent events
On 1 February 2022, Meridian
announced that it had completed
the sale of MEA with a final purchase
value of A$740m. The completion of
the sale represents a non-adjusting
post balance date event and as
such, MEA is still shown as HFS and
a discontinued operation in these
interim financial statements.
The Directors declared an interim
dividend on 22 February 2022. Refer to
Note C3 Dividends for further details.
E4 Changes in financial
reporting standards
Meridian is not aware of any standards
in issue but not yet effective which
would materially impact on the
amounts recognised or disclosed
in the financial statements.
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
27
Independent Review Report
To the Shareholders of Meridian Energy Limited
The Auditor-General is the
auditor of Meridian Energy
Limited (the ‘Company’) and
its subsidiaries (the ‘Group’).
The Auditor-General has
appointed me, Mike Hoshek,
using the staff and resources
of Deloitte Limited, to carry out
the review of the condensed
consolidated interim financial
statements (‘interim financial
statements’) of the Group on
his behalf.
Conclusion
We have reviewed the interim financial
statements of the Group on pages
3 to 26, which comprise the balance
sheet as at 31 December 2021, and the
income statement, comprehensive
income statement, statement of
changes in equity and statement of
cash flows for the six months ended
on that date, and a summary of
significant accounting policies and
other explanatory information.
Based on our review, nothing has
come to our attention that causes us
to believe that the interim financial
statements of the Group do not
present fairly, in all material respects,
the financial position of the Group as
at 31 December 2021 and its financial
performance and cash flows for the
six months ended on that date in
accordance with NZ IAS 34 Interim
Financial Reporting and IAS 34
Interim Financial Reporting.
Basis for Conclusion
We conducted our review in
accordance with NZ SRE 2410
(Revised) Review of Financial
Statements Performed by the
Independent Auditor of the Entity
(‘NZ SRE 2410 (Revised)’). Our
responsibilities are further described
in the Auditor’s Responsibilities for
the Review of the Interim Financial
Statements section of our report.
We are independent of the Group
in accordance with the Auditor-
General’s ethical requirements relating
to the audit of the annual financial
statements, which incorporate the
independence requirements issued
by the New Zealand Auditing and
Assurance Standards Board, and
we have fulfilled our other ethical
responsibilities in accordance with
these requirements.
In addition to this review and the
audit of the Group annual financial
statements, our firm carries out
other assurance assignments for the
Group in the areas of greenhouse
gas assurance, limited assurance of the
sustainability content in the integrated
report, audits of the securities registers,
and the solvency returns of Meridian
Energy Captive Insurance Limited, as
well as a review of the vesting of the
executive long-term incentive plan and
supervisor reporting. We also carried
out non-assurance assignments for
the Group relating to the Corporate
Taxpayers Group and the CFO Vantage
Programme, which are compatible with
those independence requirements.
In addition to these assignments,
partners and employees of our firm
deal with the Group on normal
terms within the ordinary course of
trading activities of the Group. These
services and trading activities have
not impaired our independence as
auditor of the Group.
Other than these assignments
and trading activities, we have
no relationship with, or interests
in the Group.
Group financial statements for the six months ended 31 December 2021
Meridian Energy Limited
28
Directors’ responsibilities for
the interim financial statements
The directors are responsible on
behalf of the Company for the
preparation and fair presentation of
the interim financial statements in
accordance with NZ IAS 34 Interim
Financial Reporting and IAS 34
Interim Financial Reporting and for
such internal control as the directors
determine is necessary to enable the
preparation and fair presentation of
the interim financial statements that
are free from material misstatement,
whether due to fraud or error.
Auditor’s responsibilities
for the review of the interim
financial statements
Our responsibility is to express a
conclusion on the interim financial
statements based on our review.
NZ SRE 2410 (Revised) requires us
to conclude whether anything has
come to our attention that causes us
to believe that the interim financial
statements, taken as a whole, are not
prepared, in all material respects, in
accordance with NZ IAS 34 Interim
Financial Reporting and IAS 34 Interim
Financial Reporting.
A review of the interim financial
statements in accordance with
NZ SRE 2410 (Revised) is a limited
assurance engagement. We
perform procedures, primarily
consisting of making enquiries,
primarily of persons responsible
for financial and accounting
matters, and applying analytical
and other review procedures. The
procedures performed in a review
are substantially less than those
performed in an audit conducted
in accordance with International
Standards on Auditing (New Zealand)
and consequently does not enable
us to obtain assurance that we would
become aware of all significant
matters that might be identified
in an audit. Accordingly we do not
express an audit opinion on the
interim financial statements.
Mike Hoshek
for Deloitte Limited
On behalf of the Auditor-General
22 February 2022
CHRISTCHURCH, NEW ZEALAND
This review report relates to the unaudited interim financial statements of Meridian Energy for the six months ended 31 December 2021 included on
Meridian Energy’s website. The Board of Directors is responsible for the maintenance and integrity of Meridian Energy’s website. We have not been
engaged to report on the integrity of Meridian Energy’s website. We accept no responsibility for any changes that may have occurred to the unaudited
interim financial statements since they were initially presented on the website. The review report refers only to the unaudited interim financial statements
named above. It does not provide an opinion on any other information which may have been hyperlinked to/from these unaudited interim financial
statements. If readers of this report are concerned with the inherent risks arising from electronic data communication they should refer to the published
hard copy of the unaudited interim financial statements and related review report dated 22 February 2022 to confirm the information included in the
unaudited interim financial statements presented on this website. Legislation in New Zealand governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Meridian.co.nz
Condensed Interim
Financial Statements.
As at and for
the six months to
31 December 2021.
---
2022 Interim Results Presentation
23 FEBRUARY 2022
2022 INTERIM RESULTS PRESENTATION
2
23 FEBRUARY 2022
Highlights
Harapaki bulk
earthwork
commenced
2.6% lift in interim
dividend
8% growth in NZ
electricity sales
volumes
lower NZAS pricing
change absorbed by
higher retail sales
$A740M in sale
proceeds from
Australia
8% growth in New
Zealand customer
numbers
North Island battery
and solar site acquired
good progress on NZAS
contract termination
mitigations
7% growth in NZ
physical generation
volumes
3
Financial performance
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
4
Dividends and capital structure
Interim ordinary dividend declared of 5.85 cps (86%
imputed), 2.6% increase from 1H FY21
Dividend reinvestment plan will apply to this interim
dividend ay 0% discount
Changes to Dividend Policy:
payout range increasing to 80%-100% of free
cash flow (previously 75%-90%)
Stay in business capex decreasing to $50M with
MEA sale (previously $65M)
Board is committed to maintaining current BBB+
credit rating
Meridian will take more time to advance future
investment opportunities, including new generation
development
Dividends declared1H FY221H FY21
centsper shareimputationcentsper shareimputation
Ordinary dividends5.8586%5.7086%
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
5.38
5.705.705.70
5.85
2.44
2.442.44
7.82
8.148.14
0
1
2
3
4
5
6
7
8
9
10
20172018201920202021
CPS
Six Months ended 31 December
Interim dividend declared
Ordinary dividendSpecial dividendTotal
Source: Meridian
Dividend Reinvestment Plan Dates
Ex dividend date17 MarStrike price announced24 Mar
Record date18 MarDividend paid/shares issued8 Apr
Elections close21 Mar
5
Australia sale
Sale completed 31 January 2022
Proceeds of A$740M including interest and intercompany
funding movements since 1 July 2021
Expected $240M gain on sale in FY22 full year accounts
Some proceeds initially used in repayment of short-term
borrowing; bank debt and commercial paper
Sale supports medium to longer investment in Meridian’s
core NZ market
Minimum 3-year agreement with Flux for retail software
services and for call centre services
Agreement for transitional services provided by Meridian
Energy Ltd for up to 12-months
Australia treated as discontinued operations in the FY22
interim results, re-presented below EBITDAF
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
394394
395
-6
+3
+3
-1
300
325
350
375
400
EBITDAF 31
Dec 20
NZ energy
margin
Other
revenue
Transmission
expenses
Metering
expenses
Operating
expenses
EBITDAF 31
Dec 21
$M
NZ Operations EBITDAF movement
293
348
426
395
394
329
426
361
296
622
774
787
691
0
200
400
600
800
1,000
20182019202020212022
$M
Financial Year ended 30 June
NZ Operations EBITDAF
InterimFinal half-yearTotal
6
EBITDAF
EBITDAF
1
$1M lower than 1H FY21
Lower NZAS pricing absorbed by higher retail
contracted sales revenue
Higher physical generation, lower spot prices
Operating costs flat to 1H FY21
2H FY22 has started with low inflow conditions
and higher wholesale prices
2022 INTERIM RESULTS PRESENTATION
Source: Meridian
23 FEBRUARY 2022
1
Earnings before interest, tax, depreciation, amortisation, changes
in fair value of hedges and other significant items
Source: Meridian
0
New Zealand energy margin
537
543
+25
+33
-58
-94
+86
+84
-80
+2
-4
300
400
500
600
700
Energy
Margin 31
Dec 20
Mass market
sales
C&I salesNZAS salesGeneration
spot
revenue
Cost to
supply
customers
Derivative
sales and
purchases
Cost of
derivative
sales and
purchases
Net VASOtherEnergy
Margin 31
Dec 21
$M
New Zealand energy margin movement
7
Customer and sales volume growth across
residential, small business and corporate
segments
Lift in both mass market and corporate average
pricing
Lower NZAS revenue from revised contract pricing
Increased physical generation, +435 GWh
Financial contract, spot generation and hedging
revenues all reflected lower wholesale prices
Those lower prices decreased costs in the portfolio
Higher hedging volumes and contract sales
increased costs in the portfolio
Refer to pages 39-42 for further breakdowns of New Zealand energy margin
Source: Meridian
2022 INTERIM RESULTS PRESENTATION
Physical
-$8M
Financial
+$6M
23 FEBRUARY 2022
New Zealand customers
14% sales volume growth in residential and 20% in
small medium business
3% higher mass market average sales price
Mass market revenue increased $25M (8%)
12% growth in corporate sales volume at a 7%
higher average sales price
Corporate sales revenue increased $33M (20%)
8
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
CustomersalesAverage price
($/MWh)
Total sales
volume (GWh)
North Island
sales volume
(GWh)
South Island
sales volume
(GWh)
1H FY22
Residential963533430
Small medium business750459291
Agricultural590202388
Large business266166100
Total mass market$1252,5691,3601,209
Corporate$1051,8831,287596
1H FY21
Residential848463385
Small medium business624366258
Agricultural674185489
Large business289182107
Total mass market$1212,4351,1971,238
Corporate$981,6841,133551
93
124
101
113
93
0
20
40
60
80
100
120
140
20172018201920202021
$/MWh
Six Months ended 31 December
NZ average generation price
New Zealand generation
7% higher generation in 1H FY22, notably lower
wind volumes
Inflows 122% of average in 1H FY22
Record low inflows in January 2022
February 2022 rainfall has now lifted Lake Pukaki
storage to 118% of average
Manapōuri storage remains low
Factors outside of hydrology continue to put
upward pressure on wholesale prices
9
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
Source: Meridian
10
Operating costs and capital expenditure
Operating costs flat compared to 1H FY21
Modest growth in Australia and Flux spend, offset
by lower NZ asset maintenance
Expecting FY22 NZ operating costs of between
$215M and $220M, including release of $6.8m
provision in relation to holiday pay
NZ operations capex of $92M in 1H FY22
Expecting FY22 NZ operations capex of between
$165M and $175M
$45M to $50M of stay in business capex
$120M to $125M of currently approved
investment spend
Source: Meridian
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
1
including historical adjustments for IFRS 16 and software as a service
92
93
101
9898
94
102
107
111
186
195
208
209
0
50
100
150
200
250
300
20182019202020212022
$M
Financial Year ended 30 June
NZ Operating costs
1
InterimFinal half-yearTotal
220
↑
215
122
↑
117
11
Below EBITDAF
1
Net profit before tax
2
Net profit after tax adjusted for the effects of non-cash fair value movements and other one-off items. A reconciliation of Underlying NPAT is on page 46
5% increase in depreciation
$68M decrease in NPBT
1
from fair value of
electricity hedges from falling forward electricity
prices ($73M increase in 1H FY21)
$58M increase in NPBT from fair value of treasury
instruments from rising interest rates ($25M
increase in 1H FY21)
Resulted in significant 1H FY22 decrease in NPAT (-
36%)
3% decrease in Underlying NPAT
2
largely from
higher depreciation and amortisation
Net Debt to EBITDAF at 2.4 times at 31 December
2021
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
12
Markets and regulation
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
13
New Zealand wholesale prices
Above average inflows during 1H FY22
Record low January 2022 inflows
Factors outside hydrology continue to put upward
pressure on wholesale prices
Rising thermal costs, concern around availability and
higher carbon prices are resulting in wholesale prices
above long-term averages
Market is responding to these price signals
$2B in new generation investment now under
construction
Delivered into the market from 2023
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
70
90
110
130
150
170
Q1
2022
Q2
2022
Q3
2022
Q4
2022
Q1
2023
Q2
2023
Q3
2023
Q4
2023
Q1
2024
Q2
2024
Q3
2024
Q4
2024
Q1
2025
Q2
2025
Q3
2025
Q4
2025
$/MWh
BENMORE ASX FUTURES SETTLEMENT PRICE
30 June 202129 October 202130 November 2021
31 December 202131 January 202218 February 2022
Source: ASX
14
New Zealand policy and regulation
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
EA review of competition in the wholesale market (2018-2021)
Confirms that high wholesale electricity prices over the last three
years, reflect tight supply and demand conditions, and natural gas
scarcity for electricity generation
Consultation closed December 2021 where Meridian expressed
concerns with some of the other findings
Further consultation on recommendations may take place in early
2022
9 August 2021 power outage reviews
Multiple reviews commissioned by MBIE, the EA and Transpower
Common theme centres around Transpower’s communication and process issues that exacerbated the situation
The MBIE review (headed by Pete Hodgson) found fault with Transpower’s demand allocation and that
disconnections were not needed
That review made 18 recommendations that Meridian believes will help avoid a similar situation in the future
15
New Zealand policy and regulation
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
116
82
67
0
20
40
60
80
100
120
140
FY20 actualFY21 actualnew TPM
(FY24)
$M
Meridian's NZ transmission costs
Transmission Pricing Methodology (TPM)
EA published final TPM guidelines in June 2020
Replaces current HVDC and RCPD charges with
benefit-based and residual charges
Transpower released its proposed new TPM in
August 2021
EA consultation on the full proposed TPM closed in
December 2021
With the aim for a new TPM to take effect for
prices from 1 April 2023
Trustpower’s judicial review was heard in the High
Court in October 2021, decision has been
reserved, expected before end of March 2022
Meridian actual
Meridian actual
Transpower
estimate
assuming 1 April 2023
implementation
Source: Meridian, Transpower
16
New Zealand policy and regulation
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
Decarbonisation
Government deadline to set:
the first three emissions budgets out to 2035
and release the country’s first emissions
reduction plan
both pushed out to May 2022 (previously
December 2021)
Price of NZU’s trading near $85 (spot)
Clean car discount in place since mid 2021, has
seen a tripling in monthly EV purchases
Legislation to introduce levy on high emitting
vehicles delayed to likely April 2022
April 2021 Government commitment to ban new low and medium temperature coal boilers and phase out
coal in existing low and medium temperature boilers by 2037 has not yet been implemented, and delays
have been signalled
17
Business update
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
Site enabling and mobilisation works completed in
September 2021
Bulk earthworks commenced that month
Main access road has required increased scope in soil
nailing works to improve slope stability
Project was shut down during the Alert Level 4 period
(August 2021) and access restricted during Alert Level 3
RAT testing is being used extensively
A wet spring and early summer has impacted
earthworks and slowed progress
Initiatives being undertaken to mitigate the wet
weather impacts
Site switchyard platform handed over to Transpower
and Meridian’s electrical contractor for substation
construction
Offshore procurement items are on schedule
18
Harapaki construction
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
Project metrics
41 turbines x 4.3 MW
176 MW
542 GWh p.a. (P50 yield)
$395m capital investment
36months construction time
~$35m EBITDAF p.a.
(assuming ~$67/MWh received for generation)
145m
tip
height
Certified Renewable Energy
60 customers now with Meridian’s Certified Renewable
Energy product
Net proceeds of the product will be reinvested back into
decarbonisation projects
Energy hardship
Developing a new and more comprehensive energy
hardship solution
To be trialled this year, scaled up in 2023
EV charging network
148 chargers contracted
Includes 80 DC and AC chargers across the Wellington
and Hutt Valley region
19
Retail initiatives
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
Utility scale solar development announced to
complement battery at Ruākākā Energy Park
Assessments continuing on additional solar sites,
land option acquired at Bunnythorpe
2.3 GW (5,700 GWh) of development options, 1 GW
of that secured
Decision made not to proceed with Central Wind
development ($1.4M impairment expected in 2H
FY22)
20
Renewable development pipeline
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
21
NZAS contract termination
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
Revised NZAS contract
400MW
172MW
14 Jan
2021
1 Jan
2022
1 Jan
2023
1 Jan
2024
31 Dec
2024
no termination right (except terminal force majeure)
NZAS termination right with 6 months notice (terminal FM also applies)
2 month termination right
Source: Meridian, HARBOR Aluminium
1,400
1,900
2,400
2,900
3,400
Jan
20
Mar
20
May
20
Jul
20
Sep
20
Nov
20
Jan
21
Mar
21
May
21
Jul
21
Sep
21
Nov
21
Jan
22
Mar
22
May
22
Jul
22
Sep
22
Nov
22
USD
LME prices and 12 month forward forecasts
actual priceforecast Jan 21forecast Jul 21forecast Jan 22
Existing 4
th
potline contract
50MW
27 Jan 22 – 31 May 22current suspension period
26 May 22latest date recommencement notice can be given
1 Jun 22contract volume falls to zero if recommencement
notice not given
1 Jun 22 – 31 Jul 21unconditional recommencement possible
31 Dec 22contract ends
Current swaption
Meridian selling Nova 235 GWh NI and SI CfDs
Meridian buying call option for 235 GWh NI CfD’s
(minimum 10-hour call period)
17 MW Ngāwhā geothermal PPA from 2024
Clutha Upper Waitaki Lines Project
Final section (Naseby – Livingstone) commenced
1,180 MW expected all in service transfer limit
Expected project completion in May 2022
22
NZAS contract termination - mitigation
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
Source: Transpower
North Island battery
105 hectares of land adjacent to Marsden Point for the Ruākākā Energy Park
100 MW power capacity battery (100-200 MWh energy capacity), mid-2023 commissioning
Construction of a utility scale solar farm will follow (indicatively 55-85 MW, ~$120m)
Process heat
278 GWh in MOUs, 14 GWh contracted
Includes A2 Milk’s Mataura plant coal conversion
Round 3 GIDI funding closed, future funding unclear,
EECA announcement in early 2022
Data centre
43-hectare Southland site acquired by datagrid, OIO
approval now received
Datagrid expected to commence construction in 2H
2022
Initial build of 1 of 10 potential modules (150 MW)
23
NZAS contract termination - mitigation
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
Green hydrogen
ROI closed; short listed parties received RFP in December 2021, seeking responses by April 2022
Draft dry year flexibility pricing structure developed and incorporated into RFP
Parallel discussions with several other parties and Mafic Partners engaged as financial advisors
24
NZAS contract termination - mitigation
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
NZAS contract
14 Jan
2021
1 Jan
2022
1 Jan
2023
1 Jan
2024
31 Dec
2024
Meridian portfolio response
Current swaption
CUWLP
NI battery
Process heat
Data centre
Green hydrogen
on
schedule
exploring
options
31 GWh in
MoU’s
review of
sites
review of
sites
ROI pre
work
May 21
investor
day
Feasibility
and ROI
completion
battery
go live
design &
consents
module 1
construction
600 GWh
contracted
ECCA
funded
projects 2
ECCA
funded
projects 1
design &
consents
construction
NTP
Aug 21
annual
results
171 GWh
MoU’s or
contract
review of
sites
on
schedule
options
discussions
ECCA
funded
projects 3
site
acquisition
Feb 22
interim
results
site
acquisition
Nova call
option
292 GWh
MoU’s or
contract
1,180 MW
capacity
solar farm
construction
RFP
issued
further
options
RFP
submissions
review of
sites
solar farm
go live tbc
trans-Tasman
cable in service
global cable in
service (2025)
further
modules
business model
resolved
FID tbc
fast tracked
development
or form
consortium
25
Closing comments
Flat EBITDAF performance a sound outcome
given impact of lower NZAS pricing
Bulk of the MEA sale proceeds are earmarked
for future NZ investment
Ruākākā and Mt Munro are the current
development focus
Sound progress on development of new South
Island demand
There are no current discussions with NZAS
on a new electricity contract
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
26
Additional information
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
42%
2%
22%
2%
24%
8%
Sources of Funding - 31 December 2021
NZ$ bank facilities drawn/undrawn
EKF - Danish export credit
Retail Bonds
Floating rate notes
US private placement
Commercial paper
27
Debt and funding
2022 INTERIM RESULTS PRESENTATION
December 2021 total borrowings of $1,799M
Committed bank facilities of $955M, of which
$377M were undrawn
$192M of commercial paper issued on an
uncommitted basis
Net debt to EBITDAF at 2.4x
23 FEBRUARY 2022
210
520
219
210
121
439
280
8
116
0
100
200
300
400
500
600
CY22CY23CY24CY25CY26CY27+
$M
Calendar Year ended 31 December
Debt maturity profile as at 31 December 2021
Drawn debt maturing (face value)Available facilities maturing
28
Discontinued operations
2022 INTERIM RESULTS PRESENTATION
Investment in MEA classified as held for sale and a discontinued operation at 31 December 2021
23 FEBRUARY 2022
29
Capital expenditure
2022 INTERIM RESULTS PRESENTATION
Consistent level of stay in business capex
Largely consists of system and generation asset
enhancement spend
NZ operations capex of $92M in 1H FY22
Expecting FY22 NZ operations capex of between
$165M and $175M
$45M to $50M of stay in business capex
$120M to $125M of currently approved
investment spend
23 FEBRUARY 2022
17
22
23
19
21
4
6
7
21
71
21
28
30
40
92
0
20
40
60
80
100
20172018201920202021
$M
Six Month ended 31 December
New Zealand operations capital expenditure
Stay in businessGrowthTotal
30
Segment results
Flux Federation included in ‘other and unallocated’ segment
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
31
NZ operations results
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
106
109
115
119
120
119
119
120
122
123
66
74
89
106
115
0
100
200
300
400
500
Jun-18Jun-19Jun-20Jun-21Dec-21
ICP (000)
New Zealand customer connections
Meridian North IslandMeridian South IslandPowershop
32
New Zealand retail
Customers
3% increase in customers since June 2021
Mass market segment
14% increase in residential volumes
20% increase in small business volumes
8% decrease in large business volumes
13% decrease in agri volumes
3% increase in average sales price
Corporate segment
12% increase in volumes
7% increase in average sales price
Total
291
302
324
347
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
358
2,027
1,936
2,187
2,435
2,569
1,114
1,063
1,474
1,684
1,883
3,141
2,999
3,661
4,119
4,452
0
1,000
2,000
3,000
4,000
5,000
20172018201920202021
GWH
Six Months ended 31 December
New Zealand retail sales volume
Residential, SMB, AgriCorporateTotal
0
500
1,000
1,500
2,000
2,500
3,000
1-Jan1-Feb1-Mar1-Apr1-May1-Jun1-Jul1-Aug1-Sep1-Oct1-Nov1-Dec
GWH
Meridian’s Waitaki storage
Average 1979-201620172018201920202021
33
New Zealand hydrology
Inflows
1H FY22 inflows were 122% of average
January 2022 inflows were 41% of average
Storage
Meridian’s Waitaki storage as of 31 December
2021 was 132% of average
By 31 January 2022, this position was 99% of
average
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
1- Jan
0
2,000
4,000
6,000
8,000
10,000
200820092010201120122013201420152016201720182019202020212022
GWH
Financial
year
Meridian’s combined catchment inflows
December YTD88 year average
34
New Zealand generation
Volume
1H FY22 generation was 7% higher than 1H FY21,
with higher hydro and lower wind generation
Price
1H FY22 average price Meridian received for its
generation was 18% lower than 1H FY21
1H FY21 average price Meridian paid to supply
customers was 15% lower than 1H FY21
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
5,289
5,925
6,408
5,911
6,402
648
621
779
765
709
5,937
6,546
7,187
6,676
7,111
0
2,000
4,000
6,000
8,000
20172018201920202021
GWH
Six Months ended 31 December
New Zealand generation
HydroWindTotal
93
124
101
113
93
0
20
40
60
80
100
120
140
20172018201920202021
$/MWh
Six Months ended 31 December
NZ average generation price
35
Australian retail
Customers
1% decrease in electricity customers since June
2021
8% growth in gas customers since June 2021
Sales volume
6% growth in electricity sales volume in 1H FY22
7% growth in gas sales volume in 1H FY22
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
97
110
136
142
141
38
44
48
0
50
100
150
200
Jun-18Jun-19Jun-20Jun-21Dec-21
Australian customer connections
ElectricityGas
289
280
329
404
431
0
50
100
150
200
250
300
350
400
450
500
20172018201920202021
GWH
Six Months ended 31 December
Australian retail sales volume
36
Australian generation
Volume
1H FY22 wind generation was 2% higher than 1H
FY21
1H FY22 hydro generation was 95% higher than 1H
FY21
Price
1H FY22 average price Meridian received for its
wind generation was 10% lower than 1H FY21
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
305
296
290
278
285
123
77
113
221
305
419
367
391
506
0
100
200
300
400
500
600
20172018201920202021
GWH
Six Months ended 31 December
Australian generation
WindHydroTotal
170
144
118
75
68
0
30
60
90
120
150
180
20172018201920202021
$A/MWh
Six Months ended 31 December
Australian average wind generation price
394
395
+58
+14
-94
+46
-28
+2
-4
+3
+3
-1
0
0
100
200
300
400
500
EBITDAF 31 Dec
2020
Retail
contracted
sales
Wholesale
contracted
sales
Generation
spot revenue
Cost to supply
customers
Net cost of
hedges
Virtual asset
swaps
Other market
costs
Other revenueTransmission
expenses
Metering
expenses
Employee &
other operating
expenses
EBITDAF 31 Dec
2021
$M
Movement in EBITDAF
37
1H FY22 EBITDAF
New Zealand energy margin -$6M
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
38
EBITDAF to NPAT
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
145145
394
-144
-10
-39
-56
-10
0
+10
0
100
150
200
250
300
350
400
EBITDAFDepreciation and
amortisation
Premiums paid on
electricity options net of
interest
Net finance costsTaxUnderlying
NPAT
Net change in fair value
of hedges/instruments
Loss on sale of
assets/impairments
Premiums paid on
electricity options net of
interest
TaxNPAT
$M
1H FY22 EBITDAF TO NPAT RECONCILIATION
39
Energy margin
A non-GAAP financial measure representing
energy sales revenue less energy related
expenses and energy distribution expenses
Used to measure the vertically integrated
performance of the retail and wholesale
businesses
Used in place of statutory reporting which
requires gross sales and costs to be reported
separately, therefore not accounting for the
variability of the wholesale spot market and
the broadly offsetting impact of wholesale
prices on the cost of retail electricity purchases
Defined as
Revenues received from sales to customers net of distribution
costs (fees to distribution network companies that cover the costs
of distribution of electricity to customers), sales to large industrial
customers and fixed price revenues from financial contracts sold
(contract sales revenue)
The volume of electricity purchased to cover contracted customer
sales and financial contracts sold (cost to supply customers)
The fixed cost of derivatives used to manage market risks, net of
spot revenue received from those derivatives (net cost hedging)
Revenue from the volume of electricity that Meridian generates
(generation spot revenue)
The net margin position of virtual asset swaps with Genesis Energy
and Mercury New Zealand
Other associated market revenues and costs including Electricity
Authority levies and ancillary generation revenues, such as
frequency keeping
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
40
New Zealand energy margin
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
537
320
198
270
661
-747
-158
-220
217
-1
3
-6
0
300
600
900
1,200
1,500
Mass market
sales
C&I salesFinancial
contract sales
(incl NZAS)
Generation
spot revenue
Cost to supply
customers
Cost to supply
financial
contracts
Hedging fixed
costs
Hedging spot
revenue
Contract close
outs
VAS marginsMarket costsEnergy Margin
$M
New Zealand energy margin
41
New Zealand energy margin
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
537
543
+25
+33
+14
-94
+86
-40
-49
+12
+9
+2
-4
0
200
400
600
800
Energy Margin
31 Dec 20
Mass market
sales
C&I salesFinancial
contract sales
(incl NZAS)
Generation
spot revenue
Cost to supply
customers
Cost to supply
financial
contracts
Hedging fixed
costs
Hedging spot
revenue
Contract close
outs
VAS marginsMarket costsEnergy Margin
31 Dec 21
$M
New Zealand energy margin movement
42
New Zealand energy margin
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
43
Australian energy margin (AUD)
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
44
Fair value movements
Meridian uses derivative instruments to manage
interest rate, foreign exchange and electricity
price risk
As forward prices and rates on these instruments
move, non-cash changes to their carrying value
are reflected in NPAT
Accounting standards only allow hedge accounting
if specific conditions are met, which creates NPAT
volatility
$68M decrease in NPBT from fair value of
electricity hedges from changing forward
electricity prices ($73M increase in 1H FY21)
$58M increase in NPBT from fair value of treasury
instruments ($25M increase in 1H FY21)
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
-26
-5
-161
248
-10
-300
-200
-100
0
100
200
300
FY18FY19FY20FY211H FY22
$M
Change in fair value of financial instruments
45
Income statement
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
46
Underlying NPAT reconciliation
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
47
Cash flow statement
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
48
Balance sheet
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
49
Glossary
Hedging volumesbuy-side electricity derivativesexcludingthe buy-side of virtual asset swaps
Average generation pricethe volume weighted average price received for Meridian’s physical generation
Average retail contracted sales pricevolume weighted average electricity price received from retail customers, less distribution costs
Average wholesale contracted sales pricevolume weighted average electricity price received from wholesale customers(including NZAS) and financial contracts
Combined catchment inflowscombined water inflows into Meridian’s Waitaki and Waiau hydro storage lakes
Cost of hedgesvolume weighted average price Meridian pays for derivatives acquired
Cost to supply contracted salesvolume weighted average price Meridian pays to supply contracted customer sales and financial contracts
Contracts for Difference (CFDs)an agreement betweenparties to pay the difference between the wholesale electricity price and an agreed fixed price for a specified volume of
electricity. CFDs do not result in the physical supply of electricity
Customer connections (NZ)number of installation control points, excluding vacants
FRMPfinancially responsible market participant
GWhgigawatt hour. Enough electricity for 125 average New Zealand households for one year
Historic average inflowsthe historic average combined water inflows into Meridian’s Waitaki and Waiau hydro storage lakes over the last 84 years
Historic average storagethe historic average level of storage in Meridian’s Waitaki catchment since 1979
HVDChigh voltage direct current link between the North and South Islands of New Zealand
ICPNew Zealand installation control points, excluding vacants
ICP switchingthe number of installation control points changing retailer supplier in New Zealand, recorded in the month the switch was initiated
MWhmegawatt hour. Enough electricity for one average New Zealand household for 46 days
National demandElectricity Authority’s reconciled grid demand
www.emi.ea.govt.nz
NZASNew Zealand Aluminium SmeltersLimited
Retail sales volumescontract sales volumes to retail customers, including both non half hourly and half hourly metered customers
Financial contract salessell-side electricity derivatives excluding thesell-side of virtual asset swaps
TJTerajoules
Virtual Asset Swaps(VAS)CFDs Meridian has with Genesis Energy and Mercury New Zealand. They do not result in the physical supply of electricity
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
50
Disclaimer
The information in this presentation was prepared by Meridian Energy with
due care and attention. However, the information is supplied in summary
form and is therefore not necessarily complete, and no representation is
made as to the accuracy, completeness or reliability of the information. In
addition, neither the company nor any of its directors, employees,
shareholders nor any other person shall have liability whatsoever to any
person for any loss (including, without limitation, arising from any fault or
negligence) arising from this presentation or any information supplied in
connection with it.
This presentation may contain forward-looking statements and projections.
These reflect Meridian’s current expectations, based on what it thinks are
reasonable assumptions. Meridian gives no warranty or representation as to
its future financial performance or any future matter. Except as required by
law or NZX or ASX listing rules, Meridian is not obliged to update this
presentation after its release, even if things change materially.
This presentation does not constitute financial advice. Further, this
presentation is not and should not be construed as an offer to sell or a
solicitation of an offer to buy Meridian Energy securities and may not be
relied upon in connection with any purchase of Meridian Energy securities.
This presentation contains a number of non-GAAP financial measures,
including Energy Margin, EBITDAF, Underlying NPAT and gearing. Because
they are not defined by GAAP or IFRS, Meridian's calculation of these
measures may differ from similarly titled measures presented by other
companies and they should not be considered in isolation from, or construed
as an alternative to, other financial measures determined in accordance with
GAAP. Although Meridian believes they provide useful information in
measuring the financial performance and condition of Meridian's business,
readers are cautioned not to place undue reliance on these non-GAAP
financial measures.
The information contained in this presentation should be considered in
conjunction with the company’s condensed financial statements for the six
months ended 31 December 2021, available at:
www.meridianenergy.co.nz/investors
All currency amounts are in New Zealand dollars unless stated otherwise.
2022 INTERIM RESULTS PRESENTATION23 FEBRUARY 2022
---
For the six months ended
31 December 2021.
Investor
Let ter.
Investor Letter 1For the six months ended 31 December 2021
Financial results
Meridian Energy has reported
$145 million of net profit after tax
from continuing operations for the
six months ended 31 December
2021, 36% lower than the same
period last year, mainly reflecting
negative changes in the value of
hedge instruments. Excluding these
hedge value movements, Meridian’s
underlying net profit after tax reduced
by $4 million. Meridian also reported
a $1 million decrease in EBITDAF
1
.
In November 2021, Meridian announced
it had reached agreement for the sale
of Meridian Energy Australia (MEA).
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 the sale in the order of $240 million
in its full-year accounts for the financial
year ended 30 June 2024.
The Board has announced an interim
ordinary dividend of 5.85 cents per
share, 2.6% higher than last year’s
interim dividend. The interim ordinary
dividend will be 86% imputed and
Meridian’s Dividend Reinvestment
Plan will apply to this interim ordinary
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.
The Board also approved changes
to Meridian’s dividend policy. More
information is available here:
www.meridianenergy.co.nz/
investors/dividend
Meridian’s balance sheet remains in
a strong position, with the company
maintaining a BBB+ credit rating as
defined by the agency Standard &
Poor’s. See the interim results financial
commentary for more of Meridian’s
results: www.meridianenergy.co.nz/
investors/reports-and-presentations/
interim- results-and-reports
New Zealand wholesale prices
Meridian’s hydro catchments
experienced above-average inflows
during the six months to 31 December
2021. And while January 2022 was
notably dry, February 2022 has seen
rainfall, although Meridian’s Waiau
catchment storage is currently low.
Factors outside of hydrology
continue to put upward pressure on
wholesale prices. Rising thermal fuel
costs and ongoing concerns around
its availability, and higher carbon
prices are resulting in wholesale
prices above long-term averages.
The electricity market is reacting to
these price signals with significant
new capacity commitments. Around
$2 billion of generation investment
is currently under construction and
expected to be delivered into the
market from 2023.
MEA sale
In November last year, Meridian’s
Board agreed to the sale of
Meridian’s Australian business
(MEA) to a consortium of Shell
Energy Operations Pty Limited,
a wholly owned subsidiary of
Shell (“Shell”) and Infrastructure
Capital Group (“ICG”).
The sale was completed on 31 January
2022, with a sale price of A$740 million
including interest and intercompany
funding movements since 1 July 2021.
We believe that the 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.
The transaction represents an exciting
opportunity for the future of the
Meridian Energy Australia business,
given Shell’s and ICG’s intentions to
grow their respective renewable energy
and retail presences in Australia.
The sale includes a minimum three-year
agreement with Flux for retail software
services and for call centre services.
Transactional services will also be
provided by Meridian Energy Limited
for up to 12 months.
Shell is now the owner of the retail
business, Powershop Australia, while ICG
is the owner of the infrastructure assets
(Mt Mercer and Mt Millar wind farms,
Hume, Burrinjuck and Keepit hydro
power stations and development assets).
Lazard Australia acted as Meridian’s
financial advisor in respect of this
transaction.
1. EBITDAF is a non-GAAP financial measure of
earnings before interest, tax, depreciation,
amortisation, changes in fair value of hedges,
impairment and gains or losses on sales of assets.
Forever Forests is a Meridian programme to plant up to 1.5 million
permanent native and hardwood trees across 1100ha of land
Investor Letter 2For the six months ended 31 December 2021
New renewable development
(Harapaki and Ruākākā)
The construction of Meridian’s
Harapaki wind farm in Hawke’s Bay
began last year, with enabling works
underway since June 2021.
Harapaki is located within the
Maungaharuru Range in Hawke’s
Bay, approximately 35km northwest
of Napier. When complete, it will be
New Zealand’s second-largest wind
farm, with 41 turbines generating 176MW
of renewable energy, enough to power
over 70,000 average households. The
construction will take around three years
and during its building is expected to
create 260 new jobs.
Bulk earthworks commenced in
September 2021 and faced challenging
wet weather during spring and early
summer. COVID-19 responses saw the
project shut down during Alert Level 4
(August 2021) and access restricted
during Alert Level 3.
Pleasingly, the switchyard platform has
now been handed over to Transpower
and Meridian’s electrical contractor for
construction of the site substation.
Meridian continues to focus on
enabling Aotearoa to transition to a
net-zero emissions future, which is why
late last year we also announced the
development of Ruākākā Energy Park,
north of Auckland.
Ruākākā Energy Park will consist of a
grid-connected battery and solar farm
with the intent to improve the stability
of the national grid, reduce the chance
of network outages and allow more
electricity to flow north from South
Island generators.
Meridian has purchased 105ha of
land at Marsden Point for the Ruākākā
Energy Park, which will house a battery
energy storage system at least 100MW
in capacity, as well as a utility-scale
solar farm.
Aotearoa is moving to a fully
renewable electricity system, which
means generation will be made up
of more intermittent sources like wind
and solar. During periods of peak
demand when there is little sun or
wind, we will need stored energy
that can be dispatched quickly.
Meridian is currently talking to iwi
and other community stakeholders
about our plans for the site and
undertaking ecological and
geotechnical site assessments
as part of our due diligence.
We are actively working to increase
our renewable pipeline and currently
have 2.3GW (around 80% of Meridian’s
current generation capacity) as
potential new development options.
We have also made the decision to
not proceed with our Central Wind
development option.
Road construction at Meridian’s Harapaki wind farm, near Napier
Investor Letter 3For the six months ended 31 December 2021
Hydrogen
One of the biggest opportunities
from New Zealand’s Aluminium
Smelter’s exit is the introduction of
new industries that want to take
advantage of New Zealand’s unique
abundance of renewable energy.
Meridian has partnered with Contact
Energy to investigate the feasibility of
developing the world’s first large-scale
green hydrogen facility in Southland.
There has been strong interest from
both domestic and international
businesses and recently we announced
the four companies that we will be
looking to work with on this project.
There is a significant focus on using
green hydrogen produced from
renewable energy for export and
also to decarbonise carbon-intensive
sectors including heavy transport,
aviation, shipping and agriculture
in New Zealand.
There is a growing appetite for
green hydrogen to replace fossil
fuels throughout the global economy.
Green hydrogen has the potential to
abate Aotearoa’s long-life greenhouse
gas emissions by more than 20%. It’s
exciting to see so much interest in
domestic applications alongside the
export opportunities. This interest
suggests that the domestic uptake of
hydrogen as a clean fuel could happen
sooner and faster than we expect.
The Southern Green Hydrogen
project has now moved to a “request
for proposals” stage, with shortlisted
parties invited to provide submissions
by April 2022. To read more about
Southern Green Hydrogen, visit
southerngreenhydrogen.co.nz
Meridian continues to progress other
initiatives in response to the contract
termination with the New Zealand’s
Aluminium Smelter in December
2024. In addition to our battery
and solar plans at Ruākākā, we have
announced new financial contract
arrangements with Nova Energy
and an offtake agreement from the
Ngāwhā geothermal power station.
Meridian now has agreements with
seven customers under our Process
Heat Electrification Programme,
amounting to 292GWh of annual
demand, to support conversion away
from fossil-fuel-based heat processes.
Datagrid’s hyperscale data centre
plans will move forward with the
acquisition of a 43ha site in Southland.
Overseas Investment Office approval
for the purchase was granted at the
end of January 2022.
Transpower’s project to double
the capacity on transmission lines
between Clutha and Upper Waitaki
has commenced its final phase, with
completion expected in May 2022.
Regulatory
(wholesale market review
and 9 August investigations)
On 9 August 2021, in an unfortunate
series of events, about 35,000
households lost power on one
of the coldest nights of the year.
Multiple reviews have been
commissioned by the Ministry
for Business, Innovation and
Employment (MBIE), the Electricity
Authority and Transpower.
The MBIE review is now complete
and its recommendations have
been published at www.mbie.
govt.nz/building-and-energy/
energy-and-natural-resources/
energy-consultations-and-reviews/
nvestigation-electricity-supply-
interruptions-9-august-2021
The MBIE review found fault with
Transpower’s demand allocation
processes, and the company has largely
accepted all the recommendations and
will be making changes to its processes
and communications to avoid another
incident like this in the future.
The Electricity Authority review of
competition in the wholesale market
(2018–2021) is ongoing. Late last year
it released an initial report that
confirmed that high wholesale
electricity prices in the past three years
have largely reflected the tight supply
and demand conditions, and natural
gas scarcity for electricity generation.
Consultations closed in December 2021,
with Meridian expressing concerns
with some of the review’s preliminary
findings. Further consultation on
recommendations is expected in
early 2022.
Meridian’s West Wind farm, near Wellington
Investor Letter 4For the six months ended 31 December 2021
Retail performance
Meridian continues to deliver strong
sales momentum in its retail business,
particularly in the residential, small/
medium business and industrial
segments. Sales volumes in those
segments in the six months to
December 2021 grew by 14%,
20% and 12% respectively.
Agricultural volumes were 13%
lower than last year, reflecting the
wet spring conditions much of the
country experienced. With the
country’s ongoing restrictions in
response to COVID-19, corporate
and large business sales volumes
were 8% lower.
Meridian now has more than 60
customers for our Certified Renewable
Energy (Certified) product. Certified
enables our business customers
to match the amount of electricity
they use on an annual basis with an
equivalent amount of electricity put
into the national grid from one of
Meridian’s hydro stations or wind
farms – reporting their Scope 2
electricity emissions as zero
2
.
We are pleased to help our customers
achieve their sustainability goals.
People changes
At Meridian we’re privileged to have
a strong talent pool of dedicated and
committed people. In the past few
months we have had some of these
people step into new roles, and our
Executive and Board teams have
gone from strength to strength.
In August last year we confirmed
the appointment of Tania Simpson
as a non-executive director to the
Meridian Board.
Ms Simpson will complement and
add to the Board’s skills and expertise
on the retirement of two longstanding
directors, Peter Wilson and Anake
Goodall, whose terms concluded at
the company’s Annual Shareholders’
Meeting in October 2021. Meridian
Chair, Mark Verbiest, acknowledges
the significant contributions that
Mr Wilson and Mr Goodall have
made in the previous ten years.
Ms Simpson is a distinguished,
well-respected Māori leader who has
served on a range of iwi, commercial
and public entities. She is affiliated
to Ngāi Tahu, Tainui and Ngā Puhi.
She has extensive corporate
governance experience, having served
as a director of Mighty River Power
Limited for 13 years from 2001. She also
holds the distinction of being the first
Māori director on the Reserve Bank
of New Zealand Board, where she
is currently the Deputy Chair.
We also appointed a new General
Manager of Generation, Tania Palmer.
Ms Palmer took over the role effective
6 December 2021. Tania stood out
among high-quality candidates
because of her passion for and
deep expertise in building positive,
resilient cultures founded on safety
and wellbeing and constructive
leadership behaviours.
Tania has worked in asset-intensive,
operational businesses for most of
her 30-year career, including 12 years
at Contact Energy. She has a deep
understanding of the operational
generation environment, having led a
transformational safety culture change
and provided governance leadership
for a Process Safety programme, and
a major procurement/supplier review
at Contact.
Tania was previously Meridian’s
Chief People Officer, and a process to
appoint her replacement is underway.
While we look for a replacement,
Jason Stein, previously Chief Executive
of Meridian Energy Australia, will be
acting Chief People Officer.
Guy Waipara, General Manager
Generation, has been appointed
to a newly created permanent position
of General Manager Development,
leading the transformational aspects
of Meridian’s strategy to utilise
renewable electricity to decarbonise
the electricity sector and the
wider economy.
2. Using the market-based reporting
methodology as per the Greenhouse
Gas Protocol’s Scope 2 Guidance.
Meridian’s Benmore power station
LINZ Data Service and licensed by Environment Canterbury, CC BY 4.0
Investor Letter 5For the six months ended 31 December 2021
At Meridian, we believe we are in
for an exciting and challenging few
years as we look to invest in our
business and support New Zealand’s
efforts to reduce carbon emissions
while maintaining high standards
of living for us all. Our successful
sale of our Australian business has
given us a greater ability to deliver
these outcomes.
On behalf of the Board and the
executive team, we would like to
thank our shareholders, our customers
and our stakeholders for their
continued support in helping
Meridian to deliver clean energy
for a fairer and healthier world.
o
ne of Meridian’s 100% fully electric light passenger vehicle fleet at the company’s West Wind farm
---
1
Financial Commentary
Meridian Energy Limited
Financial
Commentary.
Five-year performance
Interim
Final half-year
Total
225
187
431
244
162
266
262
427
265
604
338
635
373
Operating cash flows
Financial year ended 30 June
800
700
600
500
400
300
200
100
0
2018$M2019202020212022
Interim dividend declared
Six months ended 31 December
10
8
6
4
2
0
Ordinary dividend
Special dividend
Total
5.85
5.38
5.70
7. 8 2
2.44
8.14
2.44
8.14
2.44
5.705.70
2018CPS2019202020212022
394
EBITDAF
1
(NZ operations)
Financial year ended 30 June
Interim
Final half-year
Total
1,000
800
600
400
200
0
293
348
329
426
622
774
787
361
426
691
296
395
2018$M2019202020212022
92
Capital expenditure (NZ operations)
Financial year ended 30 June
61
40
2018$M2019202020212022
Interim
Final half-year
Total
150
100
50
0
21
28
30
53
59
58
101
32
31
28
145
Net profit after tax (continuing operations)
Financial year ended 30 June
2018$M2019202020212022
Interim
Final half-year
Total
400
300
200
100
0
152
191
227
201
339
109
200
91
49
148
-51
176
1. EBITDAF is a non-GAAP financial measure of
earnings before interest, tax, depreciation,
amortisation, changes in fair value of hedges,
impairment and gains or losses on sales of assets.
2
Financial Commentary
Meridian Energy Limited
537
543
38
41
98
394
145145
225
151
146
187
98
395
227
149
The six months ended 31 December
2021 saw a 36% decrease in net profit
from continuing operations, mostly
because of negative changes in the
net value of hedge instruments.
In November 2021, Meridian
announced it had reached
agreement for the sale of Meridian
Energy Australia (MEA). 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 has reported a $1 million
decrease in EBITDAF from its
New Zealand operations compared
to the prior corresponding period.
Higher retail and wholesale contracted
sales and higher generation volumes
helped to offset the impacts of
lower pricing on the contract with
New Zealand’s Aluminium Smelter.
The Board has announced an interim
ordinary dividend of 5.85 cents per
share, 2.6% higher than last year’s
interim dividend. The interim ordinary
dividend will be 86% imputed and
Meridian’s Dividend Reinvestment
Plan will apply to this interim ordinary
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.
The Board has also approved
changes to Meridian’s dividend policy.
More information is available here:
www.meridianenergy.co.nz/
investors/dividend
Financial performance against prior year
Six months ended 31 December 2021
Six months ended 31 December 2020
Energy
margin
Transmission
costs
Operating
expendidure
NPATUnderlying
NPAT
Operating
cash flow
Dividend
declared
EBITDAF
600
500
400
300
200
100
0
$M
Overview
1H FY22
2
1H FY21
3
cents
per share
imputationcents
per share
imputation
Ordinary dividends5.8586%5.7086%
Dividends declared
Meridian’s balance sheet remains in a strong position, with the company
maintaining a BBB+ credit rating as defined by rating agency Standard & Poor’s.
Jun-18Jun-19Jun-20Jun-21Dec-21
Net debt/EBITDAF
3
2
1
0
1.7
1.8
2.32.3
Times
2.4
2. The six months ended 31 December 2021
3. The six months ended 31 December 2020
3
Financial Commentary
Meridian Energy Limited
Earnings
EBITDAF from New Zealand operations was $394 million in 1H FY2022, $1 million (0%) lower than the same period last year.
Movement in EBITDAF
New Zealand energy margin -$6m
500
400
300
200
100
0
EBITDAF
31 Dec
2020
Retail
contracted
sales
Wholesale
contracted
sales
Generation
spot
revenue
Cost to
supply
customers
Net cost
of hedges
Virtual
asset
swaps
Other
market
costs
EBITDAF
31 Dec
2021
Employee
& other
operating
expenses
Metering
expenses
Trans-
mission
expenses
Other
revenue
+58
+14
394
$M
+2
+3
+3
-1
0
+46
-28
-94
-4
395
Cash flows
Operating cash flows were $225
million for 1H FY2022, $38 million
(20%) higher than for 1H FY2021,
largely as a result of lower income
tax paid.
Capital expenditure
4
in 1H FY2022
was $92 million, of which $21 million
was stay-in-business capital
expenditure. Growth capital
expenditure largely reflects
Meridian’s Harapaki wind farm
development in Hawke’s Bay, which
began construction in June 2021.
4. For New Zealand operations
4
Financial Commentary
Meridian Energy Limited
New Zealand energy margin was
$537 million in 1H FY2022, $6 million
(1%) lower than the same period
last year. Meridian continues to
deliver strong sales momentum in
its retail business, particularly in the
residential, small/medium business and
industrial segments. Sales volumes in
those segments in the six months to
December 2021 grew by 14%, 20%
and 12% respectively.
Agricultural volumes were 13% lower
than last year, reflecting the wet
spring conditions much of the country
experienced. With the country’s
ongoing restrictions in response
to COVID-19, corporate and large
business sales volumes were 8% lower.
Overall, the mass market sales price
increased by 3% and the average
corporate and industrial sales price
increased by 7%.
Wholesale contracted sales revenue
was $14 million (5%) higher in 1H
FY2022. Wholesale derivative sales
volumes were 59% higher at higher
average prices than the same period
last year. Sales to New Zealand’s
Aluminium Smelter reflected the
impacts of lower pricing agreed in
January 2021.
The costs to supply customers
decreased $46 million (5%) in 1H
FY2022, with higher customer sales
volumes in 1H FY2021 more than
offset by the 15% lower average price
Meridian paid to supply customers.
The net cost of hedging was $28 million
higher in 1H FY2022 from a lower
average net cost and 15% higher
hedging volumes compared to the
same period last year.
Energy margin is a measure of the combined financial performance of Meridian’s retail and wholesale businesses.
$M1H FY20221H FY2021
Retail contracted
sales revenue
Revenue received from sales to retail customers net of distribution costs
(fees to distribution network companies that cover the costs of the
distribution of electricity to customers)
518460
Wholesale contracted
sales revenue
Sales to large industrial customers and fixed-price revenue from derivatives sold270256
Costs to supply customersThe volume of electricity purchased to cover contracted customer sales-905-951
Net hedging positionThe fixed cost of derivatives used to manage market risk, net of the spot revenue
recovered from those derivatives
-424
Generation spot revenueRevenue from the volume of electricity that Meridian generates661755
Net VAS revenueThe net revenue position of virtual asset swaps (VAS) with Genesis Energy and
Mercury New Zealand
31
OtherAuthority levies and ancillary generation revenue (such as frequency keeping)-6-2
Total New Zealand energy margin537543
New Zealand energy margin
Hydro
Wind
Total
With inflows above average across the
1H FY2022, generation volumes were 7%
higher than the same period last year.
Average generation prices were 18%
lower than the same period last year,
resulting in generation revenue in 1H
FY2022 being 12% lower than last year.
2017GWH2018201920202021
New Zealand generation
8,000
6,000
4,000
2,000
0
Six months ended 31 December
5,937
5,289
5,925
648
6,546
621
6,408
7,1 87
779
5,911
6,676
765
6,402
7,111
709
Lake Manapōuri, Fiordland
5
Meridian Energy Limited
Financial Commentary
Australian
energy margin
Australian energy margin was
$52 million in 1H FY2022, $7 million
(12%) lower than the same period
last year. Powershop Australia’s retail
electricity sales volumes increased
7%, however lower average prices
reduced retail contracted sales 8%.
With higher generation volumes in
1H FY2022, generation spot revenue
increased 33%.
The Australia segment is now
classified as held for sale and treated
as a discontinued operation as at
31 December 2021.
Meridian expects to recognise a gain
on sale in the order of $240 million in
its full year accounts for FY2022.
Expenses
1H FY2022 saw small changes in
transmission and metering costs, while
employee and other operating costs
were $98 million in 1H FY2022, consistent
with the same period last year.
Net profit
after tax
NPAT from continuing operations
was $145 million in 1H FY2022,
$82 million (36%) lower than the
same period last year. 1H FY2022
saw higher depreciation and
amortisation ($7 million higher),
with net negative movements in
the fair value of electricity hedges
and treasury instruments.
These fair value movements relate
to non-cash changes in the carrying
value of derivative instruments and
are influenced by changes in forward
prices and rates on these derivative
instruments.
Fair value movements in electricity
hedges decreased net profit before
tax by $68 million in 1H FY2022,
compared to a $73 million increase in
the same period last year, reflecting
changes in forward electricity prices.
Fair value movements in treasury
instruments increased net profit
before tax by $58 million in 1H FY2022,
compared to a $25 million increase in
the same period last year.
Net financing costs decreased 5%
compared to the same period last
year. Meridian maintained its BBB+
(stable outlook) credit rating from
Standard & Poor’s.
Income tax expense was $56 million
in 1H FY2022, $32 million (36%) lower
than the same period last year,
reflecting lower net profit before tax.
After removing the impact of
fair value movements and other
one-off or infrequently occurring
events, Meridian’s underlying NPAT
(reconciliation on page 6) was
$145 million in 1H FY2022. This
was $4 million (3%) lower than
the same period last year.
6
Financial Commentary
Meridian Energy Limited
Income statement
Six months ended 31 December
$M2021
2020
New Zealand energy margin537543
Other revenue1411
Energy transmission expense(38)(41)
Energy metering expenses(21)(20)
Employee and other operating expenses(98)(98)
EBITDAF394395
Depreciation and amortisation(144)(137)
Impairment of assets––
Gain/(loss) on sale of assets––
Net change in fair value of electricity and other hedges(68)73
Net finance costs(39)(41)
Net change in fair value of treasury instruments5825
Net profit before tax201315
Income tax expense(56)(88)
Net profit after tax from continuing operations145227
Underlying net profit after tax
Six months ended 31 December
$M2021
2020
Net profit after tax145227
Underlying adjustments
Hedging instruments
Net change in fair value of energy hedges68(73)
Net change in fair value of treasury instruments(58)(25)
Premiums paid on electricity options net of interest(10)(10)
Assets
(Gain)/loss on sale of assets––
Impairment of assets––
Total adjustments before tax–(108)
Taxation
Tax effect of above adjustments–30
Underlying net profit after tax145149
---
Results announcement
Results for announcement to the market
Name of issuer Meridian Energy Limited
Reporting Period 6 months to 31 December 2021
Previous Reporting Period 6 months to 31 December 2020
Currency NZD
Amount (NZ$m) Percentage change
Revenue from continuing
operations
$1,672 -1%
Total Revenue $1,672 -1%
Net profit/(loss) from
continuing operations
$145 -36%
Total net profit/(loss) $133 -41%
Interim/Final Dividend
Amount per Quoted Equity
Security
NZ $0.05850000 Final Ordinary Dividend
Imputed amount per Quoted
Equity Security
NZ $0.01956500
Record Date 18/03/2022
Dividend Payment Date 8/04/2022
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$1.90 $1.87
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
For commentary on the operational results please refer to the
media announcement and interim results presentation.
This announcement should be read in conjunction with the
attached Condensed Interim Financial Statements for the six
months ended 31 December 2021.
Authority for this announcement
Name of person
authorised
to make this announcement
Jason Woolley
Contact person for this
announcement
Jason Woolley
Contact phone number +64 4 381 1206
Contact email address Jason.Woolley@meridianenergy.co.nz
Date of release through MAP
23/02/2022
Audited financial statements accompany this announcement.
---
Distribution Notice
Section 1: Issuer information
Name of issuer Meridian Energy Limited
Financial product name/description Ordinary Shares
NZX ticker code MEL
ISIN (If unknown, check on NZX
website)
NZMELE0002S7
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year Quarterly
Half Year X Special
DRP applies X
Record date Close of trading on 18/3/2022
Ex-Date (one business day before the
Record Date)
17/03/2022
Payment date (and allotment date for
DRP)
8/4/2022
Total monies associated with the
distribution
1
$150,643,109
Source of distribution (for example,
retained earnings)
Retained Earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.07806500
Gross taxable amount
3
$0.07806500
Total cash distribution
4
$0.05850000
Excluded amount (applicable to listed
PIEs)
$0.00000000
Supplementary distribution amount $0.00887824
Section 3: Imputation credits and Resident Withholding Tax
5
Is the distribution imputed Partial imputation
If fully or partially imputed, please
state imputation rate as % applied
6
86%
Imputation tax credits per financial
product
$0.01956500
1
Continuous issuers should indicate that this is based on the number of units on issue at the date of the form
2
“Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction of
Resident Withholding Tax (RWT).
3
“Gross taxable amount” is the gross distribution minus any excluded income.
4
“Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT.
This should include any excluded amounts, where applicable to listed PIEs.
5
The imputation credits plus the RWT amount is 33% of the gross taxable amount for the purposes of this form. If the distribution is
fully imputed the imputation credits will be 28% of the gross taxable amount with remaining 5% being RWT. This does not constitute
advice as to whether or not RWT needs to be withheld.
6
Calculated as (imputation credits/gross taxable amount) x 100. Fully imputed dividends will be 28% as a % rate applied.
Resident Withholding Tax per
financial product
$0.00619645
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
0.0% - no discount
Start date and end date for
determining market price for DRP
17 March 2022 23 March 2022
Date strike price to be announced (if
not available at this time)
24 March 2022
Specify source of financial products to
be issued under DRP programme
(new issue or to be bought on market)
New Issue
DRP strike price per financial product
$TBC
Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
21 March 2022
Section 5: Authority for this announcement
Name of person
authorised to make
this announcement
Jason Woolley
Contact person for this
announcement
Jason Woolley
Contact phone number +64 4 381 1206
Contact email address jason.woolley@meridianenergy.co.nz
Date of release through MAP
23/02/2022
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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