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Extended Tekapo hydro outage a 'crying shame', says Meridian CFO

Wednesday 21st February 2018

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Genesis Energy has been forced to extend its outage at the Tekapo-B hydro power station until June, cutting off a supply of water that would otherwise run through three of Meridian Energy's hydro power stations on the multi-station Waitaki hydro scheme operated jointly by the two companies.

After an initially dry summer, Lake Tekapo is now full after recent heavy rainfall and water that would otherwise have been available for hydro generation downstream is being spilled into Lake Benmore, bypassing Lake Pukaki and some 476 Megawatts of generating capacity at the Ohau A, B and C stations owned by Meridian. 

Benmore, at 540MW, is the single largest unit on the Waitaki system, which has total generating capacity of 1527MW from eight hydro dams, six of which Meridian operates.

"It's crying shame," said Meridian chief financial officer Paul Chambers told analysts and media at a briefing on the company's half-year result, which coincided with Genesis informing the operator of the wholesale electricity market that the outage at Tekapo-B, announced just before Christmas and expected to end early next month, would now extend to June 20.

However, it was a scheduled maintenance outage against which Meridian could not insure, he said.

Tekapo A and one of the two units at Tekapo B are operating as normal, but "recent rainfall and restricted generation capacity at Tekapo B has pushed Lake Tekapo level above its maximum control level and spill is now occurring (since Feb. 3)," said Genesis's executive general manager for generation and wholesale, Tracey Hickman. "Spill flow to the Tekapo River will cease when the level of Lake Tekapo falls to below the maximum control level."

Genesis had been repairing existing stator coils on the Tekapo-B unit, but it had become apparent last week that a replacement set would be required.

Chief executive Neal Barclay said the situation was "not an ideal outcome" while Chambers said: "We know what stations are being bypassed and the volumes being spilled. It's just a crying shame."

Meridian reported reduced earnings for the half-year to Dec. 31, largely reflecting reduced hydro generation caused by an extended period of dry weather that only broke when large rain dumps arrived in the southern lakes during Cyclone Fehi, which hit New Zealand in late January.

Earnings before interest, tax, depreciation, amortisation and changes in fair value hedges and other significant items fell to $329 million in the six months to Dec. 31, from $354 million in the year-earlier period, the Wellington-based company said in a statement. Net profit fell 13 percent to $109 million.

"Despite the persistently low South Island hydro inflows which have characterised the New Zealand market over the past six months, it was pleasing to see the company has also achieved strong customer-led growth across our multiple segments and geographies," said Barclay, fronting the NZX-listed, majority government-owned company's financial results for the first time since the retirement last year of Mark Binns.

The company announced a 1 percent increase in total interim dividends, at 7.82 cents per share, comprising a 5.38 cent ordinary interim dividend imputed to 88 percent of its value, and a special dividend of 2.44 cents under its capital management programme.

Today's announcement included no forward earnings guidance but announced the introduction of a new 20 percent discounted tariff for electric vehicle owners and a one year subsidy to "cover the cost of charging (an) electric car for a year". 

Meridian shares closed at $2.87, up 0.9 percent, while Genesis Energy shares were down 0.4 percent to $2.33 in NZX trading today.


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