New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Meridian Energy (MEL) May 2022 Operating Statistics</h2>
Meridian Energy (MEL) displayed improved performance in May 2022 and we calculate a monthly NZ Energy Margin of NZ$90m, +NZ$3m on May 2021. We calculate May 2022 EBITDAF was up +NZ$6m on May 2021 (after stripping out the sold Aussie business) to NZ$61m, due to lower than expected operating costs.
Key Points
<ul>
<li>Mass market sales were up +4.5% on May 20221, with a narrow -1% decline in residential sales volumes more than offset by increases in SME (+8%), agriculture (+12%) and large business (+9%). The average selling price increased +4%, lower than prior months as due to the rebasing effect from the +15% increase in May 2021.</li>
<li>May monthly inflows remained weak at only 81% of average. Both MEL’s Manapouri and Pukaki hydro storage catchments were also at 81% of average on 9 June 2022, before the recent South Island weather event.</li>
<li>Following a weak start to CY22, Manapouri generation volumes recovered, though still remained -14% below its historical average, forcing MEL to continue to use Waitaki stored water. Wind generation was again weak at -18% of average.</li>
</ul>
Current&nbsp;consensus&nbsp;FY22 EBITDAF&nbsp;forecasts&nbsp;are&nbsp;~NZ$725m, which would require MEL to achieve June 2022 EBITDAF of NZ$117m, something we view as unlikely and implies the risk to consensus expectations is to the downside.
Our target price is NZ$3.70 and our rating is UNDERPERFORM.
MEL May 2022 breakdown
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/280/812/original/image_7628764821655167338929.png?1655167340" class="editor-image img-responsive" data-smartkarma-image-id="280812"></figure>
Source: MEL, Forsyth Barr analysis
Historic NZ Energy Margin 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/280/813/original/image_10372842531655167358190.png?1655167358" class="editor-image img-responsive" data-smartkarma-image-id="280813"></figure>
Source: MEL, Forsyth Barr analysis
Rolling 12-month NZ Energy Margin
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/280/814/original/image_54406005241655167402335.png?1655167401" class="editor-image img-responsive" data-smartkarma-image-id="280814"></figure>
Source: MEL, Forsyth Barr analysis

Meridian Energy (MEL) May 2022 Operating Statistics
Meridian Energy (MEL) displayed improved performance in May 2022 and we calculate a monthly NZ Energy Margin of NZ$90m, +NZ$3m on May 2021. We calculate May 2022 EBITDAF was up +NZ$6m on May 2021 (after stripping out the sold Aussie business) to NZ$61m, due to lower than expected operating costs.
Key Points

Mass market sales were up +4.5% on May 20221, with a narrow -1% decline in residential sales volumes more than offset by increases in SME (+8%), agriculture (+12%) and large business (+9%). The average selling price increased +4%, lower than prior months as due to the rebasing effect from the +15% increase in May 2021.
May monthly inflows remained weak at only 81% of average. Both MEL’s Manapouri and Pukaki hydro storage catchments were also at 81% of average on 9 June 2022, before the recent South Island weather event.
Following a weak start to CY22, Manapouri generation volumes recovered, though still remained -14% below its historical average, forcing MEL to continue to use Waitaki stored water. Wind generation was again weak at -18% of average.

Current&nbsp;consensus&nbsp;FY22 EBITDAF&nbsp;forecasts&nbsp;are&nbsp;~NZ$725m, which would require MEL to achieve June 2022 EBITDAF of NZ$117m, something we view as unlikely and implies the risk to consensus expectations is to the downside.
Our target price is NZ$3.70 and our rating is UNDERPERFORM.
MEL May 2022 breakdown

Source: MEL, Forsyth Barr analysis
Historic NZ Energy Margin 

Source: MEL, Forsyth Barr analysis
Rolling 12-month NZ Energy Margin

Source: MEL, Forsyth Barr analysis

Meridian Energy (MEL): May 2022 Operating Statistics