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FIRST CUT: Meridian Energy annual earnings up 5%; pays special dividend

Wednesday 24th August 2016

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Meridian Energy has followed its fellow part-privatised counterpart, Mercury NZ, by declaring a special dividend for shareholders in a sector where strong cashflows are not currently required for new investment.

Meridian declared a 5 percent increase in earnings before interest, tax, depreciation, amortisation, and changes in the value of financial instruments at $560 million for the year to June 30, reflecting a $39 million increase in New Zealand electricity sales to $939 million, and a lift from $54 million the previous year to $70 million in the latest year in international sales, mainly in Australia.

"It was pleasing to deliver another year of growth, with aggregate demand in the core New Zealand market remaining flat," said chief executive Mark Binns in a statement to the NZX. "The strong operational performance has been delivered by an improved retail performance in both New Zealand and Australia, higher generation prices in Australia and strong generation volumes in New Zealand resulting in higher wholesale sales and lower hedge costs."

Electricity companies tend to prefer the ebitdaf earnings measure because of the volatile impact of changes in the value of financial instruments, such as electricity hedge contracts, from year to year. However, it was a far larger tax bill that made the largest contribution to a fall in net profit after tax, which was down 25 percent at $185 million. Meridian declared $71 million in tax liabilities for the latest financial year, compared with $2 million the previous year.

Meridian directors declared a final dividend of 8.4 cents per share, 90 percent imputed, payable on Oct. 15, to deliver a near 5 percent increase in total ordinary dividends for the year of 13.5 cents per share. On top of that, a final special dividend of 2.44 cents per share was also declared "as part of the company's capital management programme". That follows a special dividend of the same size at the half-year and total special dividends in the previous year of 5.35 cents.

The latest special dividend carries no imputation credits and brings capital returns since August last year to $187.5 million. While all capital returns so far have been by special dividend, the company continues to consider share buybacks as an option.

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