Meridian
Energy
Limited.
Integrated
Report 2019.
Menu
We’re serious about
clean energy for a fairer
and healthier world.
We believe it’s the only
way forward. We want
people to feel positive
about their world and
our shared environment.
We want them to know
there is hope for our
future. And we want to
work together with them
to create a world we can
all be proud to be part of.
n The
Power
to Make
a Difference.
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MenuMeridian Annual Report 2019 04
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57
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72
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102
147
151
153
157
What we do
How we create value
Setting our course
Directors’ statement
Chair and CEO — – The difference we made this year
What drives us
Our climate action plan
Helping our customers make a difference now
The difference we made this year
A different tomorrow
Making the most of powerful forces
Our elements of success
Our powerful future
Rewarding strong performance
Further disclosures
Financial statements
Financial auditor’s report
GRI Standards assurance report
Global Reporting Initiative (GRI) Content index
Directory
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This is our business
5 Offices
840 Employees
(100 at our power stations)
NZ
Customers
302K
Customer connections
AU
1 Office
80 Employees
(10 at our power stations)
FLUX
1 Office
160 Employees
(3 in the UK)
132K
4
Customer connections (incl gas)
Clients (Software)
~15% national retail volume1
<1% National Energy Market retail volume
Retailing as:
Meridian Energy
Powershop
Generation
5
~30% national electricity generation
Retailing as:
Powershop, and providing energy services
to DC Power and Kogan Energy
Licensing the Flux platform
and the Powershop brand
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1 Excludes Tiwai Point Aluminium Smelter
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Meridian Annual Report 2019Menu
These are our customers
NZ
AU
FLUX
Meridian
Powershop NZ
Powershop Australia
Under licence
228K
Customer connections:
residential
business
corporate
agri-business
74K
Customer connections:
residential
business
110K
Electricity customer connections
22K
The Powershop brand and Flux
platform operate under licence to the
large UK electricity retailer nPower
75K
Carbon-neutral gas customer connections
nPower customer connections
Transitioning to the Flux platform
All on the Flux platform
All on the Flux platform
Now over 300,000 customer connections
on the Flux platform in total
NZAS
A large financial contract with
New Zealand Aluminium Smelter
(NZAS) at Tiwai Point, equivalent to
around 38% of Meridian’s generation
Now in South Australia
Powershop can now be found in
four Australian states, giving us
broad coverage in Australia
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Meridian Annual Report 2019Menu
This is what we generate
NZ
AU
FLUX
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6
New Zealand’s largest
electricity generator
Generating <1% of the
National Energy Market
~30% national electricity generation
Enough electricity for about 167k homes yearly
Waitaki and
Manapōuri
generate around
50% of NZ’s
total hydro
White Hill
West Wind
Mill Creek
Te Āpiti
Te Uku
1.7M
Equivalent to the
power needs of
around 1.7 million
New Zealand
homes yearly
200K
Equivalent to the power
needs of around
200,000 New Zealand
homes yearly
Hume
Burrinjuck
Keepit
Mt Millar
Mt Mercer
50K
Equivalent to the
power needs of
around 50,000
Australian
homes yearly
116K
Equivalent to the
power needs of
around 116,000
Australian
homes yearly
Meridian Annual Report 2019Menu
How we create value
We own hydro power stations
and wind farms that generate
the electricity we sell into the
wholesale market. We also
purchase back electricity from
the wholesale market to sell
directly to customers.
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How we create valueMeridian Annual Report 2019Menu Vertical integration
2
1
3
4
2 The wholesale market price
is affected by the dynamics
of supply and demand. If there is
too much electricity available, the
wholesale price goes down. If the
over supply persists, older, less
economic generation plant may
shut down in response. Alternatively,
if demand for electricity is rising
over time, the wholesale price will
generally track up. If there is not
enough generation to meet rising
demand, the price for the available
electricity goes up, improving the
business case for investment in
new power stations. The additional
generation made possible by the
investment in new plant restores
the supply-demand balance and
the price stabilises again.
3 There are a number of other
factors that can affect the
supply-demand balance. NZAS
closing the Tiwai Point aluminium
smelter, for example, would reduce
demand. Climate change also has
the potential to increase or reduce
supply, and to increase demand,
because climate action regulations
could increase electricity consumption
through electric vehicles and electric
boilers. Equally, the transition
required to respond to climate
change could lead to disruption
of emissions-intensive industries,
decreasing demand.
4 The ways in which we can sell
our electricity and determine a
price are controlled by the electricity
market, and by the Government and
regulators. As the main regulator in
New Zealand, the Electricity Authority
can also decide if our behaviour has
been fair to our competitors and
to our customers. We contribute to
conversations on public policy to help
ensure the markets we operate in are
open, fair and efficient. We believe
markets with these characteristics
benefit consumers and enable our
long-term success.
1 Wholesale market prices can
vary significantly in New Zealand
depending on what technologies
are able to generate electricity at
any point in time. Prices can be
significantly affected by rainfall, as
well as gas availability. In the short to
medium term, we manage this risk
for our physical supply customers by
offering fixed pricing. We also offer
financial contracts to businesses that
buy directly from the spot electricity
market to limit their exposure to price
variations. These contracts, plus a
range of other financial instruments
and forward contracts, also help
control our commercial risks around
price volatility and they smooth out
our earnings across the year.
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How we create valueMeridian Annual Report 2019Menu Great customer experience
1
1 Our customers are businesses,
households and other electricity
companies. We have three retail
brands: Meridian and Powershop
in New Zealand, and Powershop
in Australia. Because there are
so many retailers, we need to
differentiate ourselves from our
competitors with strong brands and
by marketing through traditional
media and digital channels.
2
3
Meridian and Powershop Australia
are attractive to customers because
of our positioning as a leader in
sustainability. This is demonstrated
by our Group commitment to
renewable electricity and climate
action. Powershop New Zealand
is attractive because it offers
customers control over their energy
usage and cost in a fun, irreverent
and engaging way.
2 All our energy retailing brands
have very short supply chains
because the physical assets used to
distribute electricity and meter its use
are managed by national and local
lines and metering companies. Our
retail operations’ requirements are
similar to those of many corporate
offices. They include physical facilities
and ICT, sales and marketing, billing
and governance functions.
3 In order for us to operate our
brands profitably in Australia
and New Zealand we need to keep
earning our customers’ loyalty by
providing excellent experiences
through our frontline service teams.
Those teams and our customers
rely on platforms like Flux to
ensure they can interact smoothly
and effectively. Flux also markets
its software platform and the
Powershop brand under licence
in the UK.
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How we create valueMeridian Annual Report 2019Menu Responsible generation
1
2
4
3
environmental impact, local
prosperity and long-term planning
and environmental management.
Without the buy-in of our people,
stakeholder groups, communities
and local government, we could not
operate our assets the way we do,
which would materially affect our
profitability and reduce the amount
of renewable electricity available
for Aotearoa’s power needs.
1 Our ability to generate electricity
safely and reliably is dependent
on the quality of our assets and ICT
systems, supported by highly skilled
employees, suppliers and contractors.
Our assets are maintained by
Meridian staff (with some of our
wind farms also maintained by third
parties) who contract with a range of
local and global suppliers to provide
us with the parts and components
needed to build and maintain our
generation assets, as well as a mix of
general engineering consumable and
specialist parts suppliers, and service
providers including ICT and facilities’
management providers.
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2 Because there are environmental
implications around how we use
our assets to generate renewable
energy, we are dependent on
securing and maintaining resource
consents. To do this we need
to win and maintain the trust
of stakeholders, ranging from
Ngāi Tahu and other iwi to water
users, local government and
communities. We achieve this by
making a long-term and deep
commitment to the communities
and areas in which we operate
through engagement, employment
and consultation on important
issues such as water, biodiversity,
3 Our ability to attract and
retain the right staff is central to
our competitiveness in all our business
activities, and is supported by a strong
employer brand grounded in our
purpose, values and behaviours, and
how successful we are in creating a
great place to work.
4 Finally, as a publicly listed
company we are dependent
on our investors having continued
faith in our performance.
How we create valueMeridian Annual Report 2019Menu Reliable returns
1
2
1 The money we make from the
electricity we generate on the
wholesale market, plus the margin
we receive from our business and
residential customers, combined
with our skill in managing trading
conditions, determines how much
revenue we make in a year. A portion
of that is then reinvested into our
business to support our ongoing
programme of work. The value
of our shares is what the market
perceives our company to be worth
at any given point in time.
2 Our shareholders, including
the Government (which holds
a 51% share), earn money from their
investments in us in two ways: from
the dividend payments we make
every year; and from the changes in
our share price, which allow them
to sell our shares when they are
more valuable and potentially buy
more shares when prices dip. No
guarantee of our current or future
share price is given or implied. We
also have other investors in long-term
funding arrangements with us.
All our investors decide to invest
based on their own knowledge,
the information we share with them,
and their own understanding of
the markets. And investors want
us to be able to tell them a strong
and compelling story around our
management of all the components
that make up how we create value –
our financial reserves, physical assets,
technology platforms, our people, the
relationships we have with a variety
of stakeholders, and natural resources
(particularly water) – hence this
integrated report.
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How we create valueMeridian Annual Report 2019Menu Setting
our
course
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Directors’ statementMeridian Annual Report 2019Menu Directors’ statement
We are one of the largest
companies on the New Zealand
Stock Exchange.
Focused on governance
The Meridian Group2 is listed
on both the New Zealand Stock
Exchange (NZX) and the Australian
Stock Exchange (ASX), and we are
substantial in scale in a New Zealand
context, with operating revenue
this year of $3,491 million, EBITDAF3
of $838 million and net assets of
$5,457 million, although we have a
modestly sized workforce of around
1,080 people4 who are directly
employed by or contracted to us,
and third parties who provide us
with ICT, facilities’ management
and meter-reading services.
This year, we became New Zealand’s
largest company on the NZX, with
a total market capitalisation in excess
of $12 billion. The New Zealand
Government is our majority share-
holder, and we are precluded by
legislation from having any other
significant shareholders (i.e. more
than 10% holding).
As a business with a significant
retail shareholder base, Meridian is
constantly looking for ways to be
as accessible and open as possible.
We engage with investors and the
Crown through reports like this,
our disclosures to the markets,
and meetings and briefings with
a range of groups and officials.
The Board has a policy of rotating
the location of the annual shareholder
meeting between Auckland,
Wellington and Christchurch, and
our 2019 meeting will be held in
Christchurch. We’ll provide you with
more information closer to the time
in the Notice of Meeting. If you
can’t attend, you’ll find a link to a live
webcast on the Meridian website.
2 For FY19 the Meridian Group included the parent
company Meridian Energy Limited and all its
operational subsidiaries (note the Group structure
in the financial statements). Throughout the report,
non-financial data and commentary pertain to the
Meridian Group as much as possible. References
to ‘Meridian’ (the parent company), ‘Powershop
New Zealand’, ‘Powershop Australia’ and ‘Flux’
are used when only specific parts of the Group
are being discussed (‘Powershop Australia’ refers to
our retailing operations in Australia; the generation
activities in Australia are included in discussions of
Meridian’s generation activities). In both the data and
commentary. Dam Safety Intelligence is included in
the parent company and Flux-UK Limited employees
are included in ‘Flux’, unless specifically mentioned.
3 Earnings before interest, tax, depreciation,
amortisation and changes in fair value of hedges
and other significant items.
4 See page 101 for a detailed breakdown
of our workforce.
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Directors’ statementMeridian Annual Report 2019Menu Welcome to this report
This integrated report is a review
of our financial, economic, social
and environmental performance
for FY19 and has been prepared
using the International Integrated
Reporting Council’s Integrated
Reporting Framework. It reflects the
Board’s view that the way in which
Meridian takes care of its customers,
its people, its local communities,
iwi and the environment supports
our ability to continue delivering
shareholder returns.
The Board has established
processes to ensure the quality and
integrity of this integrated report
and has entrusted Management
with preparing and presenting it
accordingly, and our policy is to
seek assurance of both our financial
and non-financial information.
The financial information in this
report has been prepared in
accordance with appropriate
standards, details of which can
be found on page 109, and has
been audited by Deloitte Limited
on behalf of the Auditor-General
(see the Independent Auditor’s Report
on page 147). The non-financial
information in this report has been
prepared in accordance with
the Core requirements of the
Global Reporting Initiative’s
Sustainability Reporting Standards
(the GRI Standards) and has also
been assured by Deloitte Limited
(see the Independent Accountant’s
Assurance Report on page 151).
The Board sets Meridian’s overall
appetite for risk and its approach to
risk management. A list of Meridian’s
key risks can be found in the FY19
Corporate Governance Statement
and they are discussed throughout
this report. The remainder of the risks
and how we manage them are also
detailed where relevant throughout
this report.
View Corporate
Governance Statement
This year we have prepared a
report specifically on the risks and
opportunities of climate change,
based on guidance from the Task
Force for Climate-related Financial
Disclosures (TCFD). These matters are
included throughout this report.
View TCFD Report
Our Meridian Group Greenhouse Gas
Inventory Report has been assured
by Deloitte Limited and a summary is
provided in this report.
View Greenhouse Gas
Inventory Report
In addition, we have again been
assessed for inclusion into the
Dow Jones Sustainability Index and
responded to the Carbon Disclosure
Project (CDP). The CDP is a not-for-
profit charity that runs a global
disclosure system for investors,
companies, cities, states and regions
to manage their environmental
impacts. We use feedback from
these and our assurance processes to
continually improve our disclosures.
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Directors’ statementMeridian Annual Report 2019Menu Focusing on what’s important
In deciding what to report, our
objective is to report openly
and responsibly on how all
our interdependencies relate
and collectively contribute to
the positive change we look to
make in the world.
Management select topics for
reporting that reflect the decisions
we’ve made in terms of our
sustainability priorities, and tailor
them according to what has been
important to our stakeholders in
the reporting year. This process
also allows us to re-evaluate if
our sustainability priorities require
adjusting to reflect trends or
changes in emphasis.
First, a broad list of topics is generated
from the GRI Standards, the United
Nations Sustainable Development
Goals (SDGs), electricity-sector-
specific issues, topics that have
come up in the media, Meridian’s
risk register, Board discussions and
other sources. We also use regular
interactions with our stakeholders
to canvass them on their priorities.
Using internal workshops, this list of
topics is evaluated by Management for
relevance to our business, importance
in terms of scale and significance of
impact on our stakeholders and the
natural environment, and impacts on
our ability to create value (in other
words their impacts on the resources
upon which we rely). Topics are rated
high, medium and low, with the
first two categories prioritised for
reporting (see our GRI Index on page
153 for a full list of reported topics).
A variety of other topics are considered
relevant and are actively managed by
the business, but are not considered
significant enough to be included
in this report.
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Directors’ statementMeridian Annual Report 2019Menu Thank you
The Board and people of Meridian
would like to acknowledge the
considerable and skilful leadership
and experience that Chris Moller
has brought to the role of Chair.
Chris joined the board in 2008 and
has been our Chair since 2011. He
has been a strong hand at the helm
as the company evolved through
the mixed-ownership-model to
become New Zealand’s largest
listed company and the most
successful company in the electricity
sector in New Zealand and Australia
in terms of total shareholder return.
He will retire this year, and we wish
to take this opportunity to thank
him for his service and for the
guidance he has provided.
Mark Verbiest
Chair Elect
Our Board structure
Meridian recruits Board members
with a range of skills and experience.
Biographies of our directors and the
Executive Team are available on our
website at meridianenergy.co.nz. All
directors are independent directors.
While the company’s constitution
does not require it, this Board has
a collective view that Ngāi Tahu,
who have mana whenua (authority)
over the majority of the South Island
where most of Meridian’s assets are,
is such an important stakeholder
that a position on the Board should
always be considered. This role
is currently undertaken by Anake
Goodall, a former Chief Executive
of Te Rūnanga o Ngāi Tahu
(Ngāi Tahu’s governing body).
Chris Moller, a Board member from
2008 and our Chair since 2011, will
retire this year.
following the announcement
in March that she has taken up
the role of Managing Director,
Hallenstein Glasson Holdings Limited.
Mary has been a director for nine
years, including time as Chair of our
Remuneration and Human Resources
Committee. Mary has brought
deep knowledge of marketing and
brand to the Board and has been
instrumental in building the strong
collaborative culture that we have
today. We thank her for her energy
and her relentless customer focus
during her time with us.
In August 2018, the Board farewelled
Steve Reindler. Steve had a passion
for Meridian, particularly in the fields
of engineering, sustainability and
health and safety and Chaired the
Safety and Sustainability Committee.
We are grateful for Steve’s significant
contribution during the decade he
was a director.
Mark Verbiest will take over the role
of Chair from October 2019. Mark
was appointed to the Meridian Board
in 2017 and is an experienced company
director with years of involvement in
the energy sector. We welcome Mark
to his new role and look forward to
his insights and energy.
The Board also bids farewell to
Mary Devine, who will step down
as a director after the 2019 Annual
Shareholder Meeting in October,
In August 2019, Meridian announced
three new directors will join the
Meridian Board. Michelle Henderson
and Julia Hoare will commence as
directors prior to Meridian’s Annual
Shareholders’ Meeting in October 2019
and both will retire and seek formal
shareholder approval for their election
at that meeting. Nagaja Sanatkumar
will also seek formal shareholder
approval for her election at the Annual
Shareholders’ Meeting and, if elected,
will commence her role as a Director
on 1 January 2020.
The role of our Board
Boards have an important
role in overseeing companies’
activities. Strategy days and
regular meetings allow our
Board to share their thoughts,
and challenge Management,
on the direction in which they
wish to take the business and
how they’re managing the
various long-term drivers of
value (such as retaining access
to water, building employee
engagement, investing in
new assets, enhancing
environmental performance,
satisfying customers, and
building the company’s
reputation and brand).
Meridian complies with all the
recommendations of the NZX
Corporate Governance Code
(other than Recommendation
3.6 (Takeover Protocol), which
is a result of our 51% Crown
ownership) and has also adopted
the corporate governance
principles of the New Zealand
Financial Markets Authority and
the ASX. You can read about
how we have fulfilled those
recommendations and applied
those principles in our FY19
Corporate Governance Statement.
View Corporate
Governance Statement
6
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Directors’ statementMeridian Annual Report 2019Menu Chris Moller
Chair
Peter Wilson
Deputy Chair
Mary Devine
Director
Mark Verbiest
Director
Our Board
Diversity of perspective
is important. Meridian
recruits Board members
with a range of skills
and experience.
View Director Biographies
Anake Goodall
Director
Jan Dawson
Director
Mark Cairns
Director
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Directors’ statementMeridian Annual Report 2019Menu Resources
Board oversight
Financial and manufactured capital
(our cash and assets)
Audit and Risk Committee
Technology
Human capital
Full Board
— Our people and expertise
Remuneration and Human Resources Committee
— Health and safety
Safety and Sustainability Committee
Relationships and reputation
— Our people
Remuneration and Human Resources Committee
— All other groups
Safety and Sustainability Committee and full Board
Natural resources
Safety and Sustainability Committee
Significant risks around resources
Audit and Risk Committee
The role of people and culture
None of our strategic goals, policies
or processes would be achievable
if it weren’t for Meridian’s people,
who are our most important
resource. They work hard to create
value for our shareholders, so it’s
essential that they are aligned
with the company’s strategy and
are well supported and rewarded
appropriately for their efforts.
Our approach to remunerating
our people is on page 77.
The Board has approved a wide
range of policies that Management
are required to adhere to and
incorporate in the company’s
operations, including a Code of
Conduct, the content of which all
employees agree to honour. The
Code provides guidance to staff on
the behaviours that are expected
and how to handle the issues and
challenges they may face.
The roles of Committees
Committees support the Board
by providing detail on specific
issues and having subject matter
experts offer insights and advice.
The Committees, and the Board
as a whole, cover the spectrum
of resources on which we depend
for our business success, and
feed into the company’s overall
strategy and direction. They also
keep the Board well informed of
day-to-day operations.
The Board and Committees also
oversee progress on the UN SDGs
we have chosen to focus on. The
Safety and Sustainability Committee
has responsibility for our progress
on SDG7 (Affordable and Clean
Energy) and SDG13 (Climate Action).
The Board as a whole oversees our
progress as a responsible generator,
particularly as it pertains to the
Waitaki reconsenting process. Our
Remuneration and Human Resources
Committee oversees our efforts to
be a great place to work. Our Audit
and Risk Committee assists the Board
in fulfilling its responsibilities in matters
related to risk management, financial
accounting and reporting.
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Directors’ statementMeridian Annual Report 2019Menu
Our Executive Team
is proud of the record
result achieved this year.
Neal Barclay
Guy Waipara
Julian Smith
Nic Kennedy
Jason Stein
Tania Palmer
Mike Roan
Ed McManus
Chief Executive
General Manager, Generation and Natural Resources
Chief Customer Officer
Chief Executive, Flux Federation Limited
General Counsel and Company Secretary
Chief People Officer
Chief Financial Officer
Chief Executive, Meridian Energy Australia Pty Limited,
Powershop Australia Pty Limited
9
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Directors’ statementMeridian Annual Report 2019Menu Further information
If you are a shareholder, please
feel free to ask questions, request
information or comment on this report
via Meridian’s website or by directly
contacting the Investor Relations
Manager at
investors@meridianenergy.co.nz
Our Executive Team
There were changes in the
Executive Team in the second
half of the year.
after nearly 10 years with the
company. We thank Paul for his
massive contribution and wish him
all the best for the future.
In June 2019, Tania Palmer joined
as Chief People Officer, following
the resignation of Jacqui Cleland,
General Manager Human Resources
in October 2018. Jacqui played
a significant role in developing
the human resources function at
Meridian in the six years she was
with us and we thank her for her
contribution to the business.
Tania adds further skills to the
team in leadership development
and health and safety from her
previous roles in the energy
and banking industries.
At the end of April, Mike Roan, who
was in the role of General Manager
Wholesale, was appointed Chief
Financial Officer, responsible for our
finance, strategy and ICT functions.
He replaced Paul Chambers, who
left us to pursue other opportunities
Nic Kennedy joined Flux as Chief
Executive following the resignation
of Ari Sargent in May. Ari resigned
after 20 years with the Meridian
Group, leading the development of
both Powershop New Zealand and
Flux. Ari, regarded as an industry
renegade, made a significant
contribution to the sector by always
putting the customer first. We thank
him for his many achievements.
Nic was previously Chair of the Flux
board and has a strong background
in business and technology. She is a
valuable addition to the Meridian
Executive team.
Our Chief Customer Officer, Julian
Smith, and our Chief Executive of
Meridian Australia, Ed McManus,
have signalled their intentions to step
down later this year. We thank them
for their enthusiasm and contribution
to our business and wish them both
success in their next endeavours.
Chris Moller
Peter Wilson
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Directors’ statementMeridian Annual Report 2019Menu Chair and CEO Report
—– The difference
we made this year
This year we’ve successfully
pursued our commercial intentions
and the advancement of our
purpose. We strive for clean energy
for a fairer and healthier world
in ways that align with our social
commitments and the needs of
our customers and shareholders.
1
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Chair and CEO Report Meridian Annual Report 2019Menu Chris Moller
Chair
Neal Barclay
Chief Executive
2
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Chair and CEO Report Meridian Annual Report 2019Menu Success driven by principles
Our commercial performance is
driven by principles: the unique
values we hold, the way we work,
our genuine care for our people
and customers, and our staunch
advocacy as a sustainability leader.
Underpinned by our world class
assets, these principles define
and guide every action we take
as a business.
Everything we’ve achieved this year
is a proof point. We’ve put fairness
first, removing prompt payment
discounts which have disadvantaged
vulnerable Kiwi households for
years. We’ve taken climate action –
offsetting our carbon emissions
now and committing to reduce our
emissions in line with a 1.5 degree
warmer world. We’ve made a real
difference in Australia, offering
a carbon-neutral alternative in
a country dominated by fossil-
fuel energy. We’ve leveraged the
value and opportunities of greater
diversity, inclusion and engagement
among our workforce.
These factors point to an organisation
where decision making at all levels
is consistent, purposeful, responsible
and profitable – as demonstrated
by this year’s outstanding
financial results.
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Chair and CEO Report Meridian Annual Report 2019Menu What drives us
Our values:
Putting customers first.
Sustainability leadership.
Great place to work.
Our behaviours:
Be in the waka.
Be a good human.
Be gutsy.
Our key sustainability goals:
SDG13 Climate Action.
SDG7 Affordable and
Clean Energy.
Our purpose:
Clean energy for a fairer and healthier world.
Our strategy:
Champion
the benefits
of competitive
markets.
• Competing vigorously
• Leadership in sustainability
in New Zealand and Australia
• Supporting wholesale liquidity.
4
2
Grow
New Zealand
retail.
• Simpler systems
• Reduced cost
• Faster adaptation
• Relentless focus on
customer experience
• Deployment of
New Zealand’s most
loved energy brands.
Grow overseas
earnings.
• Grow customer numbers
in Australia, maintaining our
vertically integrated position
• Flux global growth.
Support retail
growth and protect
our generation
legacy.
Demonstrating the contribution
of hydro to New Zealand’s 100%
renewable aspiration, maintaining
a best-in-class generation
portfolio (safety, efficiency and
cost), best-placed renewable
energy pipeline.
Chair and CEO Report Meridian Annual Report 2019Menu Putting customers first
A bold new identity
The refresh of our Meridian brand
and visual identity, one of our three
retail brands, towards the end of
this financial year is perhaps the
most visible sign of our intention
to make our mark through what
we stand for, what we value, how
we behave and how we perform.
Through the change, we wanted
to present the market a crisper
and bolder articulation of what
we stand for: taking climate action
through generating 100% renewable
energy, made of nothing but
wind, water and sun, while actively
making a difference to people
and the environment.
Our other brands, Powershop in
New Zealand and Powershop in
Australia, continue to grow in both
markets. It’s encouraging, for example,
to see our Powershop Australia brand
making a real name for itself as a
challenger in a market dominated
by much larger companies that
operate predominantly coal-
based generation.
We were also very proud of
Powershop New Zealand who
were awarded Consumer NZ
Energy Retailer of the Year at
the 2019 Deloitte Energy Awards.
The successful migration of thousands
of our Meridian customers to the
new Flux platform means we are
well on course to deliver exceptional
customer experiences. Our success in
growing our customer base markedly
in both New Zealand and Australia is
significant given the high number of
competitive retail offers, particularly in
Australia, where we have been able to
move into new states and expand our
product offering to include certified-
carbon-neutral reticulated gas.
Supporting retail growth and
protecting our generation legacy
is all part of advancing our purpose
of ‘Clean energy for a fairer and
healthier world’. This year we
undertook important maintenance
work at several of our generation
sites in accordance with our 20-year
rolling generation asset management
strategy. At the same time, we’re
actively working on our three existing
consents for new generation projects
to get them amended to allow for
larger, more efficient wind turbines
to inject greater wind capacity into
the New Zealand market. Our hope
is that we can start construction of
our project to the north of Napier at
the beginning of 2020, subject to
final Meridian Board approval.
1
2
3
Significant increase
in customers
Outstanding
customer service
Flux continues
to grow
We’ve defied industry trends by
increasing our customer base in
New Zealand by 4% to more than
300,000 customer connections.
Our customer connections in
Australia have increased by
36% to around 132,000.
This year we maintained our
market-leading performance
in NPS5 for both the Powershop
and Meridian brands — Powershop
New Zealand the highest in the
industry, Meridian the highest
of the big five retailers.
5 Net Promoter Score (NPS) is a measure
of customer satisfaction.
There are now over 300,000
customer connections on our
Flux platform globally. We aim
to migrate another 50,000
Meridian customer connections
this year.
5
2
Chair and CEO Report Meridian Annual Report 2019Menu Engagement remains steady
Our annual Meridian Group
engagement survey took place
during the first two weeks of May.
Overall our employee engagement
results for the year are steady,
showing that we have continued to
take our people with us through a
busy and, at times, challenging year.
While there was a mix of upward
and downward trends in individual
business units, participation rates
continued to be extremely high
at over 90%, with our overall
engagement score of 77% down
just one point from 78% in 2018.
This result is positive against a
range of external benchmarks,
and positions us close to the 78%
overall engagement score achieved
by the top 25% of all global survey
participants (we use the Culture
Amp tool).
Health and safety
No members of public were seriously
injured at any of our sites this year,
however five staff members and
three contractors received injuries
that required time off work. Another
contractor sustained an injury on
one of our sites in July this year,
also requiring time off work.
Three of these incidents were
significant. Whilst we’re not happy
with this level of performance, we’re
confident that the business hasn’t
taken a step backwards either
culturally, or in our systems and
processes. We are currently taking
a fresh look at our approach to
understand whether there is a
root cause behind these incidents.
In addition to our people’s physical
safety, we continue to focus on
mental health and wellbeing. Our
Healthy Minds Programme, featuring
Mike King, has been well received
with a third of our staff reaching
out for further support following the
sessions run by Mike. We consider
this a sign of the stresses most
of us are under in society today,
and it is encouraging that people
are more open to improving their
mental wellbeing.
6
2
Chair and CEO Report Meridian Annual Report 2019Menu Sustainable businesses
will be the most successful
businesses over time.
Sustainable business
We continue to hold the view
that sustainable businesses will
be the most successful businesses
over time. We want to make a
meaningful contribution to both
human impact on the planet
and a more equitable society.
As we noted last year, our business
plays an essential role within
New Zealand society and we know
that it is through creating value for
others that we create value for our
organisation. In addition to our
efforts on creating a great place
to work and being a responsible
generator, we have again this year
focused on sustainability, aligning
our efforts with UN SDG13 Climate
Action and SDG7 Affordable and
Clean Energy.
Prompt Payment Discount
In alignment with our commitment
to keeping energy affordable and
protecting vulnerable customers,
we became the first major energy
retailer to stop using Prompt Payment
Discounts which impacts those who
most struggle to pay their bill and,
instead, replacing it with new
lower rates.
A real need for climate action
There’s a deepening sense amongst
many of us that things can’t go
on as they are – this year has seen
school students go on strike in
the name of climate action, and a
new Intergovernmental Panel on
Climate Change (IPCC) assessment
of what global warming of 1.5oC
will actually mean.
7
2
Meridian Annual Report 2019MenuChair and CEO Report Our most significant climate action is
our commitment to 100% renewable
energy generation, both here and in
Australia. This is our commitment in
our own business, but also a long-
term aspiration for the electricity
systems we are a part of.
As we work together as an industry
to reach that goal, there is a
valuable and necessary contribution
renewable electricity can make to
the decarbonisation of the rest of
the economy – in both transport
and industrial heat. Our ambition
is to accelerate the pace of this
transition, for example, by supporting
the uptake of electric vehicles,
providing leadership for other
businesses to do the same. Our efforts
were recognised at the 2019 Deloitte
Energy Awards where we won the
Low Carbon Future Award.
At Meridian, we’re motivated to be
part of the solution. At the same
time we recognise that change
must be managed justly. Our people,
our customers, our investors and
communities are all groups who
must be supported through the
upcoming transition.
We will halve our operational
emissions by 2030.
As of the release of this report, we are
now net Zero Carbon for our Group
operational emissions through the
purchase of certified carbon offsets.
And we’ve started work on our forestry
project to grow our own carbon offsets
in the medium- to long-term.
But we wanted to go a step further,
so we’ve also set a meaningful and
significant reduction target of “Half
by 2030” — halving our operational
greenhouse gas emissions across
the Group — which will reduce the
amount we offset in future years.
This won’t be easy given our
ambitious plans for growth in our
Australian business and with Flux
globally, but we know it is the right
thing to do, and it brings us into
alignment with a 1.5 degree
warmer world.
An increasing appetite to decarbonise
the economy will challenge businesses
to think more deeply about how
they mitigate their environmental
impacts, both directly and within
their dispersed supply chains. Almost
certainly the work of the Taskforce on
Climate-related Financial Disclosures
(TCFD) will see the calls for voluntary
climate-related financial disclosures
become louder, especially for publicly
traded companies.
We are very proud to be the
first company in Aotearoa to
publish a report using the TCFD’s
recommendations and we look
forward to other companies analysing
and disclosing their risks and
opportunities, so investors can make
sound decisions in light of the climate
challenge we are facing globally.
Meridian Group greenhouse gas emissions FY19
tCO2e
Scope 1
Scope 2
Scope 3 operational
Total Group operational emissions
Scope 3 energy purchased and onsold6
New Zealand electricity
Australian electricity and gas
Scope 3 one-time construction and upgrades
Total Group value chain emissions
Emissions
Offsets7
Balance after offsetting
1,099
2,318
33,566
36,983
–
611,822
68
648,873
1,099
2,318
33,566
36,983
–
611,822
–
648,805
–
–
–
–
–
68
68
6 Emissions from our electricity purchased and on
sold calculated using market-based methodologies.
In New Zealand we use the annual netting off
methodology. In Australia we use the National
Carbon Offset Standard (NCOS) administered by
the Australian government.
7 Offsets include credits surrendered to the
New Zealand government for SF6 gas, credits
cancelled by suppliers against their own emissions,
credits purchased by Powershop Australia as part
of NCOS, and Gold Standard Voluntary Emissions
Reductions (GS VERs)
8
2
Chair and CEO Report Meridian Annual Report 2019Menu
u
n
e
M
Our climate action plan
100%
Renewable
We’re a 100% renewable
energy generator.
Wind. Water. Sun.
Offsetting
1,000ha
FY18 offset
Scopes 1 and 2
FY19 offsetting our operational
value chain (Scopes 1, 2 and 3)
Planting 1,000ha of forest
to grow our own offsets
Reducing Impact
Measuring and auditing
our carbon footprint
since 2006
Our reduction goal
is half by 2030
Investigating an
electric boat and
other big ideas
Encouraging
suppliers to set
science-based
targets
Working
Together
We’re engaging
our suppliers
Incorporating
sustainable
design and
procurement
into our large
projects
We’ve done the work to analyse how
climate change affects our business
and we’re happy to share
100%
The goal for renewable
electricity in New Zealand
Increasing renewable
electricity in Australia
Understanding
Climate Change
Creating Action
We want to accelerate the pace of change
in the systems we’re a part of
9
2
Workshops
for our staff
Supplier Code
of Conduct
Electrification of transport
Electrification of industrial heat
Chair and CEO Report Meridian Annual Report 2019Menu Our best financial result yet
Up
Up
17% 26% 11% 52%
Up
Up
NZ Energy Margin
EBITDAF
Total Dividend
Share Price
During the year the New Zealand
wholesale electricity market
saw periods of sustained higher
spot prices in response to supply
interruptions from the country’s
largest offshore gas field.
This gas scarcity coincided with
periods of low national hydro inflows
and some thermal generation plant
outages. Meridian maintained relatively
good hydro storage through these
periods and as a result New Zealand
generation spot revenue was 61%
higher than last year. While higher
spot prices meant Meridian paid
57% more to supply its New Zealand
customers, higher sales to those
customers, the higher generation
revenue, prudent market hedging
and a 45% uplift in the contribution
from our Australian business helped
achieve a record EBITDAF result in
FY19, 26% above FY18.
Despite a reduction to profit from
the net fair value of financial
instruments, and increases in
depreciation, amortisation, interest
costs and tax expense, the higher
EBITDAF in FY19 translated into
higher NPAT (+69%) and higher
underlying NPAT (+62%).
Healthy total return to
shareholders (TSR)
Total dividends paid during the
year amounted to 19.52 cents per
share. Combined with the 52%
increase in the share price during
FY19, this amounts to a TSR of 59%
in the year to 30 June 2019. Low
interest rates continue to provide
good support for the share prices
of New Zealand electricity stocks,
including Meridian. This is also
reflected in the wider share market,
where the yield characteristics of
New Zealand utility and property
companies have helped support a
17% increase in the NZX 50 index
in the year to June 2019.
MyShare scheme
50% of Meridian parent permanent
employees now own shares in the
company. Employees still at the
company holding FY17 shares have
this year been awarded extra shares
under the terms of the scheme.
0
3
Meridian Annual Report 2019MenuChair and CEO Report
Value for our shareholders
Five-Year Performance
Financial Year Ended 30 June
EBITDAF
Net profit after tax (NPAT)
Underlying NPAT
838
618
650
657
666
1,000
800
600
400
200
0
339
247
200
201
185
400
300
200
100
0
333
233
221
209
206
400
300
200
100
0
$M FY15
FY16
FY17
FY18
FY19
$M FY15
FY16
FY17
FY18
FY19
$M FY15
FY16
FY17
FY18
FY19
Cash flow from operating activities
Dividends declared
Total shareholder return
635
440
452
470
427
700
600
500
400
300
200
100
0
3
2
.
8
1
5
3
.
5
8
8
.
2
1
8
3
.
8
1
8
8
.
4
0
5
.
3
1
.
1
9
8
1
8
8
.
4
3
0
4
1
.
0
2
9
1
.
8
8
.
4
2
3
.
4
1
0
3
.
1
2
8
8
.
4
2
4
.
6
1
25
20
15
10
5
0
59%
33%
31%
17%
14%
60
50
40
30
20
10
0
$M FY15
FY16
FY17
FY18
FY19
CPS
FY15
FY16
FY17
FY18
FY19
% FY15
FY16
FY17
FY18
FY19
Ordinary dividends
Special dividends
Total
Meridian
Peer group median
1
3
Meridian Annual Report 2019MenuChair and CEO Report
The record level of EBITDAF in FY19
supported a similarly high level of free
cash flow. The Board has declared a
final ordinary dividend of 10.72 cents
per share, 20% higher than last year.
This brings total ordinary dividends
declared in FY19 to 16.42 cents per
share, 15% higher than last year and
represents a 75% payout of FY19
free cash flow.
Meridian has also declared a final
special dividend of 2.44 cents
per share ($62.5 million) under
the company’s existing capital
management programme to return
$825 million to shareholders over
the seven year period to February
2022. This final special dividend
brings the capital management
special dividend declared in FY19
to 4.88 cents per share, with $562.5
million now distributed since the
capital management programme
commenced in August 2015.
The Board has declared total
dividends in FY19 of 21.30 cents
per share, 11% higher than FY18.
In February 2019, our third United
States Private Placement (USPP)
transaction raised US$300 million in
long term funding across 10, 12 and
15-year maturities. The placement
was settled in April. We received
circa NZ$439 million which was
used to refinance an existing USPP
maturity and for general corporate
purposes. Meridian’s balance sheet
remains in a strong position, with the
company credit metrics well within
the bounds used by rating agency
Standard & Poor’s.
Net debt/EBITDAF
Financial year ended 30 June
Dividends for the financial year ended 30 June
2.3
1.8
1.9
1.7
1.7
2.5
2.0
1.5
1.0
0.5
0.0
Times
2015
2016
2017
2018
2019
Dividend declared
(cents per share)
Ordinary
dividends
Capital
management
special dividends
Other special
dividends
2019
2018
2017
2016
2015
16.42
14.32
14.03
13.50
12.88
4.88
4.88
4.88
4.88
2.44
2.91
Total
21.30
19.20
18.91
18.38
18.23
Regulatory outlook
There is lot going on in the regulatory
world at the moment. While we are
of the opinion that the New Zealand
electricity market is on the whole well
designed, where consumers have
genuine choice, there are always
improvements that could be made.
The Electricity Price Review has been
positive to date. We are broadly
supportive of draft recommendations
that seek to enhance the market’s
efficiency and competitiveness, while
keeping a focus on affordability and
fairness. We note that in response
to this review, and the recent Interim
Climate Change Committee (ICCC)
report, the Minister of Energy and
Resources is looking to develop
strategies on renewable energy
and RMA reform that will help
increase the amount of renewable
electricity produced.
It is great to see this recognition
of the role New Zealand’s high
level of renewable electricity can
play in decarbonising the rest of
the economy and this presents
an exciting opportunity for the
years ahead. We also are keeping
a keen eye on the review of the
Transmission Pricing Methodology –
we continue to believe that reforms
will significantly benefit consumers.
2
3
Chair and CEO Report Meridian Annual Report 2019Menu
We end the year in good heart
The 2020 financial year will
no doubt throw up some
challenges and opportunities,
but we approach the year
from a position of strength.
Our water position is good
thanks to plenty of rainfall in
the second half of the year.
And we have strong momentum
on both sides of the Tasman
in our customer businesses.
On behalf of the Board and
the Executive Team, a sincere
thank you to our shareholders,
our customers, communities
and partners; and lastly, to
the Meridian teams who have
delivered you a company to be
proud of, and an outstanding
financial result.
Chris Moller
Neal Barclay
3
3
Chair and CEO Report Meridian Annual Report 2019Menu Helping
our
customers
make a
difference
now
4
3
Meridian Annual Report 2019MenuHelping our customers make a difference now The difference
we made this year
Our customers are on the journey
with us. We offer them opportunities
to make choices about their power
providers that they feel good
about. That’s a key reason for their
choosing us: they want to know they
are part of something meaningful,
that climate action is happening now.
5
3
Helping our customers make a difference nowMeridian Annual Report 2019Menu Customer connections8 (ICPs9)
Customer sales volume
6
4
4
,
6
7
2
0
2
9
4
7
2
,
7
6
7
,
6
7
2
,
6
5
7
0
9
2
7
7
2
,
2
0
3
0
7
9
7
7
,
8
0
2
,
8
4
4
2
5
0
0
1
,
5
4
5
0
0
1
,
74,422
21,705
206,150
109,80410
350
300
250
200
150
100
50
0
000’s
NZ AU
FY15
NZ AU
FY16
NZ AU
FY17
NZ AU
FY18
NZ AU
FY19
8 Excludes the Tiwai Point Aluminium Smelter; <10 of the above ICPs are connected
to the transmission network; Around 4,700 customer connections have distributed
generation metering .
Installation control points (ICPs).
9
10 Also 22,612 gas customer connections in Australia, with a total of 364TJ in volume.
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
GWH
p
o
h
s
r
e
w
o
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e
t
a
r
o
p
r
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c
n
a
d
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r
e
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i
s
s
e
n
i
s
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b
m
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d
e
m
d
n
a
i
l
l
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,
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,
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a
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r
e
M
i
0
4
2
,
6
779
2,338
3,123
3
5
5
7
6
9
5
,
9
6
9
5
,
7
2
7
,
5
1
8
9
5
,
7
6
1
5
4
3
3
9
4
9
4
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NZ AU
FY15
NZ AU
FY16
NZ AU
FY17
NZ AU
FY18
NZ AU
FY19
Retail success is all about focusing
on the things our customers tell us
they value and delivering them in
the most efficient ways possible.
We want to help grow New Zealand
retail through simpler systems,
reduced costs, faster adaptation
and a relentless focus on creating
an easy customer experience. Our
key project to improve our Meridian
customer experience is driven by
the transition of our customers
to the Flux Federation software
platform alongside offering market-
leading customer experiences
and engagement.
For Meridian and Powershop
Australia, we want to be chosen for
our leadership in sustainability. For
Powershop in New Zealand, we offer
control with an irreverent sense of
humour. And across all our operations
we want to contribute to smooth and
efficient markets that work within the
frameworks set by our regulators.
6
3
Meridian Annual Report 2019MenuHelping our customers make a difference now
Competition works for consumers
There is intense competition in
the retail market. New Zealand’s
residential electricity prices are
around 20% lower than the OECD
average11, and these lower prices have
been achieved despite New Zealand’s
low population density and relatively
high network costs (due to our
geography), and a lack of subsidies.
Part of what keeps prices low
in New Zealand is competitor
behaviour, but this also represents
a key risk to Meridian’s business.
Aggressive pricing campaigns
and the entry of new competitors
may put downward pressure on
retail electricity prices and reduce
Meridian’s market share, or require
Meridian to increase its sales
and marketing costs to maintain
sales volumes.
7
3
11
International Energy Electricity Information 2018
shows New Zealand household electricity costs
at 194.97 US dollars per megawatt hour (USD/
MWh) (converted with purchasing power parity).
The mathematical average is 244.66 USD/MWh for
the OECD countries for which data was available.
Helping our customers make a difference nowMeridian Annual Report 2019Menu Bill breakdown
32%
generation
27%
distribution
10.5%
transmission
13%
retail
13%
GST
3.5%
metering
1%
market
governance
34%
generation
40%
distribution
and transmission
8.5%
retail
13%
GST
39%
generation
As you can see from the bill breakdown,
about 75% of the price of power is from
generation, transmission, distribution
and metering (creating the power
and getting it to the customer).
32%
distribution
and transmission
15%
retail
3.5%
metering
1%
market
governance
9%
GST
4%
metering
1%
market
governance
n
a
i
d
i
r
e
M
d
n
a
l
a
e
Z
w
e
N
p
o
h
s
r
e
w
o
P
a
i
l
a
r
t
s
u
A
p
o
h
s
r
e
w
o
P
8
3
Meridian Annual Report 2019MenuHelping our customers make a difference now
Switching rates12
Powershop New Zealand
Meridian
New Zealand combined
New Zealand industry average
FY17
33.9%
19.1%
22.3%
20.4%
FY18
33.7%
17.9%
21.4%
21.0%
FY19
29.6%
16.9%
19.9%
20.5%
12 Data from the Electricity Authority (emi.ea.govt.nz)
and Meridian analysis. Switching rates are not
published by the market operator in Australia.
Just as consumer behaviour can
shape how we and our competitors
act, so our behaviour and that of
our competitors can be affected by
changes in customer behaviour.
Such changes can include reductions
in demand (for example, a reduction
in consumption by the Tiwai Point
aluminium smelter), the displacement
of demand by technology change,
and large business customers
choosing to buy electricity directly
on the wholesale spot market
rather than enter fixed contracts.
High customer switching levels affect
the cost of acquiring and maintaining
Meridian’s customer base, and they
are a good reminder that both
Australia and New Zealand have
very competitive markets where
keeping customers is challenging.
Since 2011 in New Zealand there
has been no real price increase
for consumers arising from the
competitive parts of the electricity
supply chain (generation and retail).
Changing our pricing structure
Despite the high level of competition
creating positive price outcomes
for New Zealand and Australian
customers, past research has
revealed that around 103,000
New Zealand households spent
more than 10% of their incomes
on their household energy bills13.
Meridian’s switching rate in the past
12 months has continued to drop.
This year it was 16.9% (down from
17.9% last year), which is the lowest
among the major electricity retailers.
Switching rates for Powershop in both
New Zealand and Australia remain
higher, but Meridian and Powershop
New Zealand’s combined switching
rate of 19.9% (down from 21.4% last
year) is now lower than the industry
average of 20.5%.
There are multiple reasons for
this. We know that people with
low incomes are more likely than
others to live in housing that is not
energy efficient or well insulated,
meaning they often need more
power to stay warm. These homes
are also linked with higher rates
of respiratory and other illnesses,
which in turn affects health, energy
levels, mobility and income.
9
3
13 Electricity Price Review Hikohiko Te Uira
First Report 30 August 2018, page 4.
Helping our customers make a difference nowMeridian Annual Report 2019Menu Part of being a great provider
of electricity is making sure that
our most vulnerable customers
are treated fairly.
This year we have restructured
our rates and replaced the Prompt
Payment Discount. Instead we are
now offering a new lower rate for
all our customers. We view prompt
payment discounts as unfair to
customers who struggle to pay their
energy bills from time to time. Our
new lower rates ensure that everyone
gets the same benefit without being
hurt if they’re late on their payment
dates. The Government’s Electricity
Price Review panel found that
vulnerable households were
disproportionately affected by
not receiving their Prompt Payment
Discount and that the discount was
the biggest single cause of price
disparities between vulnerable
and non-vulnerable households.
This gave us comfort that we had
made the right move in committing
to removing the Prompt Payment
Discount shortly before the panel’s
findings were announced.
0
4
Meridian Annual Report 2019MenuHelping our customers make a difference now New Zealand disconnections14
i
n
a
d
i
r
e
M
t
e
k
r
a
m
l
a
t
o
T
Z
N
p
o
h
s
r
e
w
o
P
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
%
.
4
0
.
3
0
.
3
0
.
3
0
.
2
0
.
2
0
.
3
0
.
2
0
1
.
0
.
4
0
.
3
0
1
.
0
.
5
0
.
2
0
1
.
0
FY15
FY16
FY17
FY18
FY19
14 Data from the Electricity Authority
(emi.ea.govt.nz/Datasets/Retail/Disconnections).
FY19 only includes three quarters of data.
So far, Meridian is the first – and
only – major energy retailer to
replace the Prompt Payment Discount
with a lower overall pricing structure.
The initiative is expected to cost us
$5 million per year. We look forward
to other retailers following suit.
The company also has a number
of ways of assisting low-income
households to pay their power bills,
including tailored payment plans,
a LevelPay product that keeps monthly
bills the same throughout the year,
and options to pay for power weekly,
fortnightly or monthly. Meridian’s
customer disconnection rates are
among the lowest in our industry. We
employ a Hardship Consultant to help
customers in difficulty manage their
current and future bills. We also work
with government support agencies
such as Work and Income.
Another initiative, which we were
involved with from the start, is
EnergyMate, a free in-home coaching
service by the Electricity Retailers’
Association of New Zealand (ERANZ),
that involves a number of electricity
retailers, lines companies, community
organisations and the Government.
It’s being trialled with 150 families. The
coaches support families at highest risk
of energy hardship by helping them
talk to their retailers (about payment
plans, the right pricing plans, etc),
doing high-level assessments of how
warm and healthy their homes are,
and working with them to access
services like curtain banks or talk to
their landlords about insulation.
Concern for affordability is also
why we strongly support distribution
pricing reform. Currently distribution
or network charges are not reflective
of the actual costs of supplying
consumers. This can result in poorer
customers paying more than
their fair share of network costs.
A particularly unfair example is the
Low Fixed Charge (LFC) regulations.
These cap the fixed charge that
households on low user plans pay
to around $9 a month but require
those households in return to pay a
higher variable or per-kilowatt-hour
charge. The regulations assume
poorer households are able to use
less power, but many have high
electricity use for a wide range of
reasons that are outside their control –
poorly insulated homes, illness, being
at home during the day, or having
many family members under the
same roof. These households
are actively disadvantaged by
the LFC model, and can end up
spending a significant portion of
their household incomes on their
power bills. Most concerningly
they are cross-subsidising many
high-income households who are
comfortably able to reduce power
usage and take advantage of LFC
rates by having modern homes with
good insulation, the latest energy
efficient appliances and alternative
sources of heating besides electricity.
If network charges were more
reflective of actual costs, it would
help ensure that all consumers paid
their fair share.
1
4
Helping our customers make a difference nowMeridian Annual Report 2019Menu
Our three brands meet
different customer needs
With three distinctive and well-
established customer brands
in two markets, we offer our
customers choice and options
that appeal to different
emotional and rational drivers.
Despite the intense competition
(as at 30 June 2019 there were
40 retail brands in New Zealand
and 33 retailers Australia), we
are growing in both markets.
Our New Zealand retail customer
growth this year bucked the trend
of the other large retailers. We
continued to grow our customer
base, up 4% from last year – mostly
as a result of gains by Powershop,
which reached 74,400 customer
connections by 30 June 2019. At
year end the Group passed the
300,000 customer connections
threshold in New Zealand for the
first time. We also enjoyed strong
customer growth in Australia,
supported by the introduction of
our certified-carbon-neutral
household gas product.
Our Meridian brand serves customers
who are looking for a renewable
energy generator that cares deeply
about the environment and the
people of New Zealand. Around
one-fifth of Meridian customers
deliberately choose our brand in
alignment with their environmental
values. They are part of a growing
group of conscientious consumers
who filter their brand choices
based on the contribution they
perceive brands are making to
future generations.
Our Powershop brand in New Zealand
suits consumers who want to have
control over their energy usage
and cost, in a fun, irreverent and
engaging way.
In Australia, our Powershop Australia
brand focuses on sustainability,
offering a deliberate contrast to the
country’s high reliance on coal and
lack of clarity on environmental policy.
While our Australian business still
represents less than 10% of our Group
annual revenue and is a relatively
small player in that market overall,
it continues to grow rapidly as more
and more Australian consumers look
for cleaner options.
This year, Powershop Australia entered
into an arrangement to provide retail
services on a white-label basis to DC
Power Co, a solar-focused energy
retailer. We provide their customers
with their energy and all retail-related
services. DC Power Co targets the
residential solar market specifically, and
provides a range of additional services
on top. In June, Powershop Australia
also signed a white-label agreement
with Kogan to launch Kogan Energy
before the end of the calendar year.
It will be a mass market offering with
a digital and low cost approach.
We launched a carbon-neutral
retail gas product in Victoria, Australia
at the beginning of this financial year.
That product has been well received.
We now have 22,000 customer
connections, with customers who were
either electricity customers and added
gas, or new customers who signed
up for dual fuel. Managing gas risk
is new for us, but we’ve been able to
secure long-term contracts for supply
and use a range of mechanisms to
manage the wholesale price risk.
Flux will help us deliver
better customer experiences
As customer expectations around
experiences rise, we recognise that
improving what we offer is vital
to differentiating ourselves from
others in a very crowded market.
We want the people who buy from
us to be able to engage with us
easily, on their terms and through the
communication channels they prefer.
This year we continued to transition
our Meridian customers to the
Flux Federation software platform
(year two of a $30 million three-
year programme). Both Powershop
brands are already using this
software, so alignment of our
customer experience technology
will improve the experiences we
offer all our customers, allowing
us to respond to customers’ needs,
deliver products to market faster and
lower our overall cost to serve. The
transformation of our retail business is
tracking well. By the end of the 2019
calendar year, up to 50,000 Meridian
customer connections will be on our
Flux platform.
2
4
Helping our customers make a difference nowMeridian Annual Report 2019Menu
Our ability to offer competitive
customer service and experience
is strongly linked to our ability
to be an employer of choice.
People are the critical component
Just as Flux depends on people
with software design and
development talent to develop the
platform needed for our ambitious
transformation programme, our
ability to offer competitive customer
service and experience is strongly
linked to our ability to be an
employer of choice. We continue
to develop our call centre, sales
and account management staff to
meet the needs of our customers
and resolve issues in areas ranging
from energy efficiency to pricing.
The transformation of Meridian’s
ICT infrastructure to better align with
Flux is much more than a change
in technology. It is also driving a
change of culture and approach, as
we evolve the wider business to more
agile ways of working. We’re seeing
teams take greater responsibility
for solving problems. We’re also
seeing projects deliberately reduce
in scope, particularly those that are
of low value to our customers. There
are changes also in the customer
team, where functions that we once
would have considered ‘back office’
have been shifted to the purview of
our frontline teams, allowing people
dealing with customers to solve their
problems much more quickly. That
shift has seen us support our people
in these frontline roles to focus on
their empathy and problem-solving
capabilities.
Looking ahead, meeting our
customers’ and stakeholders’
expectations will require diversified
teams made up of people who are
motivated, well equipped, highly
skilled and empowered to help
us perform.
3
4
Meridian Annual Report 2019MenuHelping our customers make a difference now Encouraging
openness and diversity
Meridian’s diversity and
inclusion programme
centres on four key pillars,
each led by a member of
the Executive Team who is
accountable for ensuring
the goals are achieved:
Gender.
To increase the number of
women in people leadership
and senior specialist positions
below Executive Team level to
40% by the end of 2020.
Ethnicity.
To increase ethnic diversity
across the workforce to be
more representative of the
New Zealand population
and build cultural awareness.
Inclusion.
To be the most inclusive
company in New Zealand,
to allow our people to bring
their whole selves to work.
Flexibility.
To enhance workplace
flexibility as and where
appropriate.
4
4
Meridian Annual Report 2019MenuHelping our customers make a difference now
Diversity by age (headcount)
0
5
–
0
3
0
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0
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Diversity by gender (headcount) for the group
%
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E
15 Includes Dam Safety and Intelligence.
16 Includes Flux UK staff.
Group % ratio female salary to male salary
By salary band17
K–L
I–J
G–H
E–F
C–D
A–B
FY18
93.0%
97.4%
99.1%
96.1%
103.9%
100.4%
98.3%
FY19
91.5%
98.1%
95.4%
99.2%
105.9%
100.3%
98.4%
Overall
45% female
We’re committed to pay equity for
all employees in similarly sized roles,
with similar skills, experience and
accountabilities, but the average salary
across the organisation for men is
higher than the average salary for
women because there are still more
men than women at senior levels.
5
4
Average of average
17 K & L are our highest salary bands and A & B are our lowest.
Meridian Annual Report 2019MenuHelping our customers make a difference now
A more balanced approach
Pay equity has been a focus for
Meridian since 2013 when a review
highlighted that gender imbalance at
senior levels was making the biggest
difference to pay inequality.
In all ways we try to incorporate
fairness into our remuneration
approach – as a minimum,
Meridian pays the Living Wage
for all permanent employees
in New Zealand.
We have embedded a transparent
culture around pay equity from the
Board to every manager. This year
we won the Progressive Organisation
award at the YWCA Equal Pay Awards
for our continued commitment
to equal pay as part of our overall
commitment to being an employer
of choice in New Zealand. We were
also awarded the 2018 YWCA Equal
Pay Compact for our initiatives
and focus on equal pay. We also
achieved the Gender Tick, a unique
New Zealand-based accreditation
programme for businesses to
demonstrate their commitment
to gender equity in the workplace.
Meridian is one of just seven
organisations to achieve this so far.
Gender and age balances are still
a work in progress. We are making
good inroads in recruiting young
women to work in traditionally
male-dominated areas like
generation, but we know this will
take time because of low staff
turnover. Women are also under-
represented in leadership and
senior-level roles throughout the
business, and we have an ongoing
focus on addressing this.
We currently have 35.2% women
in people leadership and senior
specialist positions below Executive
Team level against a target of 40%
by 30 June 2020.
Percentage of women by salary band18
K–L
I–J
G–H
E–F
C–D
A–B
18 K & L are our highest salary bands and A & B are our lowest.
FY18
FY19
16.7%
18.5%
28.6%
27.1%
31.2%
30.8%
43.7%
43.2%
54.7%
49.7%
65.4%
72.2%
Percentage of women in senior roles at 30 June19
FY17
FY18
FY19
32.8%
33.5%
35.2%
19 Parent company only, women in people leadership
and senior specialist roles, below Executive Team level.
Female representation (%)
Female share of total workforce
Females on the Board
Females in management positions
(as % of total management workforce)
Females in junior management positions, i.e. first level of
management (as % of total junior management positions)
Females in top management positions, i.e. maximum
two levels away from the Chief Executive or comparable positions
(as a % of total top management positions)
Females in management positions in revenue-generating
functions (e.g. sales) as a % of all such managers
(i.e. excluding support functions such as HR, IT, legal, etc.)
FY18
FY19
41.8%
45.3%
25.0%
28.6%
33.6%
37.2%
36.3%
40.8%
30.7%
33.6%
29.4%
33.7%
6
4
Meridian Annual Report 2019MenuHelping our customers make a difference now Helping people to feel included
Part of getting our skills mix right
is making sure we incorporate
different viewpoints, backgrounds
and languages into our culture.
We want our make-up as a business
to reflect the markets we compete in
and the changing ethnic make-up
of our countries.
In Aotearoa, we continue to train
our Meridian people in tikanga
and proper pronunciation of te reo
because protocol and language
are key expressions of respect.
We also encourage our people to
explore the many other cultures
that are part of our workforce.
Cultural openness is part of a wider
initiative to encourage tolerance
and inclusion, to encourage people
to mix their skills with others' and to
engage in design thinking to solve
problems. Our intention is to widen
our problem-solving capabilities to
resolve complex situations.
This year we undertook our first
diversity and inclusion survey
since 2015. Participation rates
were up significantly, with 61%
of our people completing the
survey. Our commitment to
diversity and inclusion seems to
be making a positive contribution
to our workplace, with our people
especially positive about Meridian
building diverse teams, and feeling
that their opinions are valued.
We won the Diversity & Inclusion
Award at the 2019 NZ HR Awards
for the work we are doing in all
aspects of diversity and inclusion.
We also won the HR Specialist Award.
In May, as part of signalling our
commitment to diversity and
inclusion publicly, we took part in
the 2019 Wellington International
Pride Parade. Our participation in
this colourful celebration is part
of what we do to bring to life the
Rainbow Tick Meridian received
last year, recognising our support
for the LGBT+ community both within
and beyond our organisation.
Committed to a more
flexible workplace
We have been building greater
flexibility into our working style
across the whole business for some
time, recognising that we need to
provide a work environment and
conditions that encourage and
reward people to work to their best.
As an example, in February this year,
at our Manapōuri power station in
West Arm on Lake Manapōuri, we
began trialling a nine-day-fortnight
roster. The station is only accessible
by boat, meaning the team’s daily
work programme is dictated by two
scheduled 45-minute sailings. The
nature of the work also means they
need to be physically present on site.
For the trial, we scheduled longer
working days to fit ten days into nine,
giving all team members an extra day
off each fortnight. The trial was not
without its operational challenges,
but in addition to the benefits to
our people, the change to the boat
schedule could save us more than
60,000 litres of fuel per year.
Increased costs
Alongside supporting our people
to feel included and to do their
best work, we want to make sure
we always have the right people
in the right roles to deliver the
right outcomes.
We maintain a strong focus on
managing headcount, and fill roles
from within the business where we
can to meet the changing needs
of the business rather than simply
increasing staff numbers. However,
we’re also not afraid to invest where
we need to in order for the business
to flourish. Employee and other
operating costs were $282 million
in FY19, $23 million (9%) higher than
last year, reflecting an ongoing
investment to support expansion
of the Powershop Australia (including
a retail gas offering) and Flux
businesses, and continued customer
acquisition pressure in the highly
competitive New Zealand market.
Costs also include refurbishment work
that Meridian has been undertaking at
the Ōhau hydro stations and Te Āpiti
wind farm.
7
4
Helping our customers make a difference nowMeridian Annual Report 2019Menu
Customer satisfaction — Net Promoter Score (NPS)20
FY17
FY18
FY19
Powershop Australia21
Australian industry average22
Powershop New Zealand
Meridian
New Zealand industry average22
45
48
53
(14)
55
16
14
53
(18)
51
24
18
20 Calculated from a survey asking customers using a 0–10 scale “How likely is it that you
would recommend Meridian/Powershop to a friend or colleague?” and then subtracting
the percentage of detractors from the percentage of promoters. A positive value
indicates that more customers are promoters versus detractors (and vice versa).
21 FY17 data not a full year.
22 Perceptive Group Limited: New Zealand & Australia NPS Industry Benchmarks.
Enduring partnerships
Proof for our customers and our
staff that we are a company worth
choosing comes in part through
the social and environmental
partnerships we support.
View KidsCan
View Kākāpō Recovery
Our relationships with KidsCan and
the Kākāpō Recovery Programme
(this year we committed to an
additional three years of funding)
are an important way of showing
we are a trustworthy company
that takes meaningful actions to
enhance our environmental and
social responsibility credentials, as
are our Power Up community funds
(see page 69). Other sponsorships
include Meridian’s support for South
Island Rowing, and Powershop
New Zealand's support of the life-
saving work of the Neonatal Trust.
And in Australia our key partnerships
are with Museums Victoria and the
Sydney Gay and Lesbian Mardi Gras.
Better understanding our customers
Identifying the customer segments
that are most valuable to our
business, and building a deeper
understanding of their needs, are
goals for both our customer service
technology projects with Flux and
the training we invest in for our
sales staff.
Our marketing strategies also play
their part, enabling us to use the
data we collect to better understand
the priorities and triggers for each
group. We use integrated marketing
campaigns to grow general brand
awareness, and marketing and sales
campaigns to reach prospective
customers through a variety of
channels and partnerships (an
investment of $12.8 million across
the Group in FY19). Three-quarters
of Meridian customers receive
communications via email and
around a third use our online portal.
Our Powershop businesses rely heavily
on digital channels, communicating
with customers largely through email
and the Powershop mobile app.
To help us assess our relationship with
our customers, the Meridian Group
uses the Net Promoter Score (NPS). All
three brands continue to score much
higher than the industry average in
their respective markets, reflecting
the hard work we put in to excellent
customer experiences and fair pricing.
8
4
Helping our customers make a difference nowMeridian Annual Report 2019Menu Growing Flux’s customer base
The ongoing success of our businesses
beyond New Zealand aligns with our
intention to grow overseas earnings
through expansion of our Powershop
challenger brand in the Australian
market and the ongoing expansion
of Flux Federation’s portfolio
of customers.
Flux has now been operating as a
separate Meridian entity for more
than two years, successfully scaling
its development capability to improve
functionality for our brands and for
nPower in the UK (which retails the
Powershop brand under licence).
New people and teams have seen
Flux Federation grow to around
160 software developers, designers,
testers and product experts,
making them one of the biggest
of the Wellington-headquartered
software development teams.
9
4
Helping our customers make a difference nowMeridian Annual Report 2019Menu
A different tomorrow
The New Zealand and Australian
markets have very different
characteristics. The New Zealand
market revolves around water
and wind. The Australian market
in contrast depends on fossil fuels.
These characteristics influence how
we do business in each country.
0
5
A different tomorrowMeridian Annual Report 2019Menu Working with regulators
Changes to public policy that lead to
changes to legislation or regulation
in either New Zealand or Australia
(including electricity regulation,
changes in policies to support
renewable energy, and new or
changed environmental regulations)
have the potential to affect our
business significantly.
Such changes could adversely
affect our sales, costs, relative
competitive position, development
initiatives or other aspects of
our financial and operational
performance, or force undesired
changes to our business model.
Regulators in both New Zealand
and Australia are focused on
supporting open, fair and efficient
markets. As a key member of the
energy sector, we have a responsibility
as a good corporate citizen to
advocate for a market environment
and a wider regulatory environment
that are conducive to achieving our
commercial and sustainability goals.
We are committed
to affordable energy
As part of that, we champion the
benefits of competitive markets
through competing vigorously,
leading in sustainability in
New Zealand and Australia, and
supporting wholesale liquidity.
We advocate for value for our
New Zealand customers through
our membership of ERANZ, and
we engage with both regulators
and government agencies through
regular meetings and submissions.
This year in particular we have
engaged in the Electricity Price
Review process. This has provided us
with an opportunity to make further
improvements to a market that is
already one of the most efficient
and effective in the world. We’d like
to congratulate the Electricity Price
Review Panel on the work they have
done in assessing the state of the
electricity sector in New Zealand.
We have supported this review for
some time because we believe that
the New Zealand electricity market
is for the most part delivering fair,
efficient, reliable and sustainable
outcomes for New Zealand consumers.
The panel delivered a final report to
the Minister of Energy and Resources
at the end of May this year, with 32
recommendations. We look forward
to the release of the report. Delivering
on the recommendations is likely to
be a significant workload and we are
pleased with the panel’s indication
that the recommendations will be
prioritised so that the sector knows
where to focus.
Other reforms could be considered
But as we pointed out in last year’s
report, we believe that distribution
pricing reform should be accelerated
to encourage appropriate investment
in new technologies such as rooftop
solar and electric vehicles and to
avoid the risk that those who can
least afford them end up paying for
more than their share.
Also, in looking to remedy wider
social and affordability issues, we
believe the Government, and those
reviewing the industry on its behalf,
need to tread carefully to ensure that
competition and the investments
required to maintain security of supply
are not compromised or impeded.
As the owner of long-term assets,
we value the stability and certainty
of the current regulatory environment
and support the work of our key
regulatory body, the Electricity
Authority. Even as its work continues,
we are expecting important changes
in climate policy in the next year. The
Interim Climate Change Committee
will be superseded by an independent
Climate Change Commission enabled
by the Climate Change Response
(Zero Carbon) Amendment Bill. That
Bill is expected to pass into law in late
2019. It accompanies further changes
to the Emissions Trading Scheme
that we expect to be announced
in the new financial year. Because
New Zealand’s high proportion of
renewable electricity is recognised as
a key enabler of decarbonisation in the
wider economy, we expect electricity
demand to rise in the years ahead.
1
5
A different tomorrowMeridian Annual Report 2019Menu Australian regulatory
reform continues
In Australia, our biggest challenge is
the lack of a stable, bipartisan federal
energy (and related carbon) policy.
A number of regulatory changes are
being rolled out at both state and
federal level, to improve customer
outcomes in the retail market. We
continue to work with governments
and regulators on these policies.
A change in demand
could hurt our business
In addition to how regulation
could affect our business in the
future, there is a potential impact
if demand significantly falls for
any reason.
As discussed earlier in this report,
market dynamics ensure that the
level of customer demand relative
to supply from generators is a key
determinant of electricity prices
for the long term. A fall in demand
or generation oversupply may
adversely affect prices, potentially
for a sustained period.
Demand can be affected by a
number of factors, including
activity levels in the industrial
sector, competitor behaviour,
regulatory changes, population
growth, economic conditions,
technological advances in the more
efficient use and generation of
electricity (including by customers,
potentially as a consequence
of regulatory subsidisation of
competing technologies), weather
and catastrophic events. All of these
could in turn affect electricity prices.
Policy changes to achieve strong
climate action could also cause a
significant reduction in demand
from disruption to emissions-
intensive industries.
2
5
A different tomorrowMeridian Annual Report 2019Menu The physical impacts of climate
change could also increase demand.
Higher temperatures are likely to
have a direct impact on electricity
demand for heating and air
conditioning. Agriculture could be
affected due to increased drought
leading to an increase in irrigation
(and therefore electricity demand).
It is also possible that climate change
will lead to large-scale international
migration as globally regions become
uninhabitable, which could increase
New Zealand’s population and
therefore electricity demand.
We do expect demand to increase
While we openly acknowledge the
risks of demand reducing, our overall
view is that demand will increase.
We believe the key driver of that
rise will be climate action policy –
and particularly the Climate
Change Response (Zero Carbon)
Amendment Bill, upcoming
changes to the Emissions Trading
Scheme, and the recently proposed
Clean Car Standard and Clean Car
Discount – which will likely lead to
increased decarbonisation in the
transport sector as electric vehicles
become more prevalent and also
the electrification of industrial heat
processes that currently rely on gas
and coal. Our initiatives to support our
customers to take up electric vehicles
in greater numbers and adopt new
technologies also align with our
commitments to UN SDG13 Climate
Action and SDG7 Affordable and
Clean Energy.
NZAS is an important
part of our business
Last year we successfully negotiated
a financial contract to hedge NZAS's
wholesale market price exposure
on a further 50MW of base-load
power, enabling the company to
restart its fourth potline from
October 2018.
The new contract represents a 9%
increase in the plant’s production
capacity and a 1% growth in New
Zealand’s total electricity demand.
It sits separately from Meridian’s main
hedge agreement with NZAS that
provides price certainty for about
5,000GWh of electricity per year
to 2030.
NZAS’s commitment has important
impacts not just for our business
but also for the Southland economy
in terms of jobs and investment.
The aluminium produced by NZAS
continues to be among some of the
most environmentally friendly and
purest in the world. The benefits
reach beyond our shores. The
aluminium produced here means
less is made elsewhere in the world
using coal-fired generation.
We acknowledge, though, that if
NZAS were to close its Tiwai Point
smelter or reduce its electricity
consumption significantly, whether
or not it also terminated or breached
its agreement with us, we may be
adversely affected. This is because
such a closure or reduction would
likely result, in the near term, in a
decline in revenue, largely caused
by lower electricity prices (both
wholesale and retail).
NZAS consumes the equivalent of
around 38% of Meridian’s generation
output in any year, depending on
generation output and demand.
The size of any reductions and
associated losses, and therefore
the severity of the impacts on
Meridian, would depend on a
number of variables, including
the volume of NZAS’s reduction,
the period in which the reduction
occurs, transmission constraints,
the rate of residual New Zealand
electricity demand growth and
the response by generators and
electricity market participants.
For example, other electricity
generators with thermal generation
plant could choose to mothball
or retire their plant, which could in
turn reduce the supply of electricity
and moderate any reduction in
wholesale electricity prices.
3
5
A different tomorrowMeridian Annual Report 2019Menu Encouraging electric vehicle uptake
Meridian supports a shift to more
electric vehicles on our roads because
they have such potential to help
decarbonise New Zealand’s transport
sector, which currently accounts
for around 20% of the country’s
emissions. Of course, more electric
vehicles will also increase demand
for electricity.
We want to accelerate the uptake
of electric vehicles in New Zealand.
Clearly, one of our goals as a leader
in sustainability is to be the first
choice for customers who have
electric vehicles. We introduced an
Electric Car pricing plan that rewards
consumers who purchase electric
cars with cheaper overnight electricity
rates for charging their vehicles.
In partnership with our business
customers, and at times with
Energy Efficiency and Conservation
Authority (EECA) funding, we are
also installing charging stations for
the public, such as at Aoraki/
Mt Cook. Despite this growing
charging infrastructure network,
New Zealand’s rate of fossil fuel to
electric conversion will have to grow
dramatically to meet the national
target of 64,000 electric vehicles on
the road by 2021. To help understand
how we can accelerate uptake, we
brought Christina Bu, Secretary
General of the Norwegian Electric
Vehicle Association, to New Zealand
in November to share her insights on
what New Zealand can learn from
Norway’s world-leading conversion
to electric vehicles. Norway’s electric
car transition is currently sitting at
over 40% converted.
Meridian’s Procurement and
Property Manager Nick Robilliard
was then invited to attend the global
EV Summit in Norway. In April, he
joined an international panel to
share the New Zealand story and
the key elements that are enabling
Meridian to make the shift. He
brought back insights on what is
possible next, the massive scale, and
the timeline for introducing electric
vehicles and the electrification of
other vehicles, including trucks,
marine and aviation vehicles.
Meridian’s own passenger vehicle
fleet is now almost 80% battery electric
vehicles (as distinct from hybrids that
still have petrol engines) and we are
on track to grow that to 90% by the
end of 2020. We’ve also succeeded in
converting 15% of our utility vehicles
(commercial light vehicles) used on
our operational worksites to electric,
and we are looking forward to new
models becoming available in the
next few years to enable us to meet
our EV100 commitment of 100%
electric vehicles by 2030.
In the year ahead we will continue
to promote a wider use of electric
vehicles, through our website and
advertising, our membership of
Drive Electric and the Climate Leaders
Coalition, participation in EVWorld and
EV100, and continuing to help other
businesses to electrify their fleets.
We know that the electrification of
our transport sector is one of the
most significant ways that Aotearoa
can combat climate change and we’re
committed to using our expertise
to successfully enable our country’s
transition to a net zero carbon
economy by 2050.
4
5
A different tomorrowMeridian Annual Report 2019Menu Supporting the adoption
of solar in New Zealand
As the electricity sector continues
to evolve, we’re encouraging our
customers to adopt new technologies.
Many of our residential customers
who are motivated to switch to
new technologies want to play
their part in combating climate
change. While in New Zealand
residential solar installations are not
a powerful climate action (given that
New Zealand’s electricity supply is
around 85% renewable already), our
customers see it as a way to live their
values and take greater responsibility
for their own power generation and
consumption. Currently, over 4,000
households across our Powershop
New Zealand and Meridian brands
use solar as part of, or, for all their
residential energy.
Commercial solar programmes have
the potential for far-reaching benefits,
as they use previously untapped
locations to generate renewable
energy, and commercial energy use
tends to be during the day when
solar generation is most effective.
We have partnered with Kiwi
Property to install almost 2,500
rooftop solar panels on shopping
centres in Christchurch, Palmerston
North, Hamilton and Auckland.
The programme will help make Kiwi
Property, the country’s largest listed
property company, New Zealand’s
biggest user of solar power. In June
the first of four installations was
switched on by Minister of Energy
and Resources, Hon. Dr Megan
Woods, at Northlands Shopping
Centre. The 672 panels generate over
200,000kWh of electricity per year,
enough to power the equivalent of
30 households or nearly 100 electric
vehicles for a year. As part of the
power purchase agreement model,
we installed and covered the upfront
system cost, and Kiwi Property now
purchases the electricity produced
for a fixed cost.
We also switched on New Zealand’s
largest rooftop solar array at
Mainfreight’s state-of-the-art
Auckland distribution centre. The
422kWp system features 1,408 high-
spec panels tilted at 10 degrees
to maximise efficiency and was
delivered by Meridian’s commercial
solar partner Reid Technology.
Here comes the sun in Australia
Installing solar panels is a very
important climate and bill
reduction action that Australian
households can take, and we
are building our customer base
around a strong sustainability
platform and amplifying our
brand credentials in that space.
We currently have over 22,000
customers in Australia who have
solar installations. Powershop has
successfully introduced initiatives
like Grid Impact, which offers
customers with solar and batteries
the opportunity to become part
of a Virtual Power Plant. Alongside
our partner Reposit, we activate
customers’ battery systems when
the cost of electricity spikes. This
takes pressure off the wider grid
and customers receive rewards for
opting to do this that help them
save on their power bills.
Up until recently, Australian
landlords and tenants have not
had good incentives to invest in
solar energy. We have worked with
the Australian company Stoddart to
develop SunYield®. This allows both
the landlords and tenants to benefit
from solar on new homes. An investor
can use the SunYield® solar power
system to sell solar power produced
on an investment property's roof
back to the tenants who occupy the
property. The investor has another
income stream, and the tenants get
a discounted rate for their power.
This is an innovative solution that
is a win for all parties involved.
Powershop Australia’s Your
Community Energy programme
has now raised over $500,000. The
programme works where customers
choose the Your Community Energy
Powerpack when they pay their bills –
this has a premium attached that
Powershop then distributes to not-
for-profit organisations to install small-
scale renewable energy solutions.
5
5
A different tomorrowMeridian Annual Report 2019Menu Helping farmers measure carbon
For the agriculture sector in
New Zealand, the pressure to
understand and contain carbon
footprints will only intensify in
coming years, particularly for
the farming sector.
Replacing coal and gas boilers
For major users of energy like
industrial consumers, there are
opportunities to replace and
convert their existing coal and
gas boilers with plant that is
powered by electricity.
We partnered with Westpac
New Zealand to support a new
carbon calculator that gives farmers
a guide to the size of their carbon
footprints. The tool, developed by
Lincoln University’s Agribusiness
and Economics Research Unit
and Agrilink NZ, gives a farmer a
quick approximation of their farm’s
carbon footprint and compares it to
the distance travelled in a car or the
area that could be planted in forest
to offset their emissions. While the
new tool is not intended to replace
detailed greenhouse gas modelling
tools, it does provide a measure that
rural communities can use to act.
In Aotearoa this is a powerful climate
action and would increase demand
for electricity. These are not quick
fixes. They involve sometimes
complex considerations around
what is feasible commercially and
financially. For many big energy
users though, sustainability is driving
important and wider conversations
around efficiencies and more
responsible and effective supply
chains. We continue to investigate
how we can contribute, although
our current analysis shows that the
commercial gap between current
and alternative technologies
remains significant.
New options for curbing power use
Our customers in Australia can
act to reduce their electricity
consumption at peak times, saving
money as well as carbon emissions
from electricity generation, by
taking part in Curb Your Power,
our demand response programme.
This programme is available to
Powershop customers in Victoria
with smart meters. When there is
a peak demand event, Powershop
sends participants an SMS or app
notification asking them to curtail
their usage voluntarily for a set period
of time – no more than four hours.
If they successfully hit their Curb
targets, they automatically receive
discounts on their next energy bills.
This programme allows us to manage
overall electricity demand, while our
customers are able to make positive
contributions to the environment
by reducing their energy usage and
being rewarded for doing so.
6
5
A different tomorrowMeridian Annual Report 2019Menu Making
the
most
of
powerful
forces
7
5
Making the most of powerful forcesMeridian Annual Report 2019Menu •
Our elements of success
Our business is made of wind,
water and sun. We’re excited about
clean energy and the benefits it
brings. We approach generation
responsibly and with integrity, in
alignment with generating 100%
from renewable sources.
8
5
Making the most of powerful forcesMeridian Annual Report 2019Menu
Generation (GWh23)
Capacity (MW24)
1
5
8
,
3
1
6
2
2
,
4
1
5
2
8
,
3
1
9
0
1
,
3
1
8
9
2
,
4
1
203
525
1,244
12,326
15,000
12,000
900
600
300
0
5
5
9
2
,
5
5
9
2
,
5
5
9
2
,
7
4
0
3
,
7
4
0
3
,
92
201
416
2,338
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Z
N
o
r
d
y
H
Z
N
d
n
W
i
U
A
d
n
W
i
U
A
o
r
d
y
H
23 Gigawatt hours:
measure of generating
output (energy).
24 Megawatts: measure
of generating capacity
(power).
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
The flexibility of hydro to deal
with shifts in demand and supply
is one of its great advantages
and is therefore the backbone of
New Zealand’s high percentage
of renewable energy. Hydro has
enabled the seamless integration
of large amounts of wind and
other intermittent renewable
energy generation to our energy
system and will continue to do
so in years to come.
However, the variability of water
inflows and the relatively low storage
capacity available create an energy
market that is one of the most
changeable commodity markets
in the world.
A key risk for Meridian’s New Zealand
hydro generation is the availability of,
and access to, water. The Waitaki and
Manapōuri hydro systems are heavily
influenced by seasonal hydrological
conditions. Adverse hydrological
conditions, resulting from dry
periods or drought conditions in
those catchments, may reduce
water levels and significantly affect
our generation capability.
Electricity retailers buy all their
electricity from the wholesale market
and these prices can vary significantly.
When we have low storage levels
resulting from low inflows, we may
be forced to spend more money
on purchasing electricity from
the wholesale market to meet our
customer commitments than we are
making from selling electricity we have
generated into the wholesale market.
This is a risk that could be
exacerbated by climate change,
however our modelling indicates
that average annual rainfall into
Meridian’s catchments could
increase by approximately 5–15%
by 2055. Seasonal rainfall changes
are projected, with winter rainfall
in Meridian’s hydro catchments
predicted to increase more than
summer rainfall. While this may
improve our ability to match electricity
demand, it will mean we need to
manage inflow volatility carefully.
9
5
Meridian Annual Report 2019MenuMaking the most of powerful forces
Operating cash flows
800
600
400
200
0
$M
635
440
452
470
427
FY15
FY16
FY17
FY18
FY19
Stable cash flows
Changeable weather conditions,
and the volatility they create in
wholesale prices and electricity
demand, are part and parcel of
our business and we adjust our risk
management practices to manage
different trading conditions.
Our vertically integrated business
model is one way in which we
manage changeable commercial
risks. In New Zealand we also have
agreements with stakeholders
and resource consents that give us
some flexibility in how we use lake
water storage, and we employ what
amounts to ‘dry-year insurance’
through a range of financial
instruments with counterparties
that shield us from higher wholesale
market prices that can accompany
prolonged dry conditions. The
biggest of these financial instruments
is a hedge contract or ‘swaption’ with
Genesis Energy, which we also use
to manage transmission constraints.
Together, these mechanisms help
us achieve greater price certainty
for our customers and more reliable
returns for our investors.
As a result, the business continues to
generate relatively stable, strong cash
flows despite the weather – and has
done so for some years. Operating
cash flows were $635 million in FY19,
$208 million (49%) higher than last
year, mainly due to the record level
of operating earnings. Total capital
expenditure in FY19 was $64 million,
$48 million of which was in business
capital expenditure.
The conditions we reported at half
year continued into the second
part of the year, with unplanned
gas supply constraints followed by
planned outages at the Pohokura gas
field. These shortages reduced gas
power station output, and the resulting
uncertainty put upward pressure on
wholesale prices. The impact of this
was compounded by below-average
hydro storage at Lake Taupō (leading
to lower hydro generation in the
North Island) and higher demand in
part due to increased production
at the Tiwai Point smelter.
0
6
Making the most of powerful forcesMeridian Annual Report 2019Menu All of these factors meant wholesale
prices were significantly higher in
FY19 than the FY18 average. These
higher prices incentivised us to
generate at higher capacity and
encouraged thermal generation to
operate, including Genesis Energy’s
'Rankine units' at Huntly power
station. At the same time though,
we needed to keep an eye on hydro
levels to make sure we had enough
water for our traditionally lower inflow
period (winter). There were also times
when the transmission link between
the islands was not able to transmit all
of our power north, which limited our
ability to generate. Such conditions
can also cause wholesale market
price separation between the North
and South Islands.
During the gas supply events, we
made calls on our financial contract
with Genesis to manage our
commercial exposure to the high
spot market prices, as we eased back
on hydro generation when our hydro
storage was dropping below average,
and we entered our low-inflow
period. A large inflow event in March
(the same event that caused the West
Coast flooding) boosted our hydro
storage at the start of winter. We
finished the year in very good shape
and with a record financial result.
More transparency needed
Because wholesale prices were high
in the second half, the market was
much more unsettled for some of this
year and that led four small retailers
and a lines company to claim the
existence of an Undesirable Trading
Situation (UTS).
The Electricity Authority investigated
the matters in the claim and
concluded there was no UTS. It did
point out that spot prices in spring
2018 set new records but that these
prices reflected underlying supply
and demand constrained by low
hydro storage and gas production
outages. The regulator also
concluded there was no evidence
that the high spot prices were caused
by collusion or other undesirable
behaviour.
What this matter highlights for
us is the ongoing lack of visibility
of changes and developments in
the New Zealand gas market. The
lack of in-depth information not
only makes it harder for retailers to
compete efficiently, because they
don’t know what they’re planning for,
but also makes pricing potentially more
volatile because of perceived risks. Our
view is that the gas industry should
be required by regulators to deliver a
level of visibility in their activities that
is comparable with the requirements
of other energy sector participants.
1
6
Making the most of powerful forcesMeridian Annual Report 2019Menu Retail contracted
sales revenue
Revenues received from sales to retail customers
net of distribution costs (fees to distribution
network companies that cover the costs of
distribution of electricity to customers)
2019
$M
2018
$M
654
629
Wholesale contracted
sales revenue
Sales to large industrial customers and fixed
price revenues from derivatives sold
524
435
Costs to supply customers
The volume of electricity purchased to cover
contracted customer sales
(1,874)
(1,194)
Net hedging position
The fixed cost of derivatives used to manage
market risk, net of the spot revenue received
from those derivatives
126
41
Generation spot revenue
Revenue from the volume of electricity that
Meridian generates
1,672
1,039
Net VAS revenue
Other
The net revenue position of virtual asset
swaps (VAS) 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
11
(5)
(2)
(4)
Total New Zealand energy margin
1,108
944
Our energy margin
Our energy margin is a measure of
the combined financial performance
of Meridian’s retail and wholesale
businesses and is a good indicator
of the success of our vertically
integrated model.
With high wholesale spot market
prices prevailing in the market
during much of FY19, New Zealand
generation spot revenue was 61%
higher than last year. An increase
of 8% in physical generation volumes
also contributed to this increase,
which was supported by inflows
of 104% of historical average.
While the higher spot prices meant
Meridian paid 57% more to supply
its New Zealand customers, higher
sales to those customers, the higher
generation revenue and prudent
market hedging saw New Zealand
energy margin increase 17%
above FY18.
2
6
Making the most of powerful forcesMeridian Annual Report 2019Menu
Movement in EBITDAF
1,500
1,400
1,300
1,200
1,100
1,000
900
800
700
600
M
New Zealand Energy Margin +$164M
633
In FY19, energy margin was the
significant driver behind the
increase in Group EBITDAF.
+89
666
+25
-680
+85
+13
-1
+32
+3
838
-4
-23
EBITAF
30 June
2018
Retail
contracted
sales
Wholesale
contracted
sales
Generation
spot
revenue
Cost to
supply
customers
Net cost
of hedges
Virtual
asset
swaps
Other
market
costs
AUS
energy
margin
Other
revenue
Trans-
mission
expenses
Employee
and other
operating
expenses
EBITDAF
30 June
2019
Australian energy margin was 37%
higher than FY18, with a full calendar
year of the seasonal generation from
our Australian hydro assets. However
hydro generation was impacted by
dry conditions in New South Wales
and lower wind volumes and plant
availability at Meridian Australia’s
two wind farms.
Powershop Australia grew its
electricity customer base 13%
during the year, with a 1% increase
in contracted electricity sales. With
the launch of a retail gas offer in
Victoria, Powershop Australia had
22,600 gas customers by the end
of FY19, with sales of 364 TJ.
With the three hydro power stations
we own in Australia, we physically
control the release of the water,
but the local water authority has
control over how the available
volumes of water are partitioned for
various users. The amount we can
generate depends on the amount
of water we are instructed to release
from the dam for downstream
cultural, irrigation, environmental
or recreational purposes. At Hume,
we’ve been working with the Murray-
Darling Basin Authority to trial a
change programme that allows us to
'shape' the water released from the
dam to coincide with peak electricity
demand. The Hume power station
has also undergone an automation
programme to allow operators to
remotely control the output from the
station and where the electricity flows
into (Victoria or New South Wales).
Both of these measures have enabled
us to make the most of higher
wholesale prices during the day.
3
6
Making the most of powerful forcesMeridian Annual Report 2019Menu Comprehensive asset management
Our ability to generate electricity
depends on the continued efficient
operation of our power stations.
The risk of a catastrophic event such
as a major earthquake, landslide,
fire, flood, cyclone, explosion or act
of terrorism could adversely affect
or cause a failure of any or all of our
power stations or other operations, or
a failure of the national high-voltage
transmission grid. Such an event could
also affect major electricity consumers
(including our own customers),
which in turn could have an adverse
effect on the markets in which
Meridian operates and third-party
property owners. One of these risks
is extreme flood events damaging
our generation assets. Our modelling
of climate change impacts indicates
that we may experience these events
more frequently, and that they may
be more severe.
We have confidence in the location
of our hydro assets, our Dam Safety
Policy and Dam Safety Assurance
Programme, and our 20-year strategic
asset management plan, which
identifies and prioritises remedial
or enhancement work on both our
hydro and wind generation assets.
This year Meridian invested $60 million
towards the ongoing maintenance
and improvement of our generation
assets across the Group.
We also have insurance for up to
$1 billion to cover material damage
and business interruption losses.
However, it is possible that this
won’t be enough should a single
catastrophic event occur or multiple
catastrophic events occur in
succession, or where insurers contest
or delay paying insurance claims.
Our infrastructure risks extend to
our information systems – there is
a risk that the security of our critical
information technology systems will be
compromised. If such a compromise
did occur, it could interrupt or disable
our critical systems or damage
operating assets. We could incur costs
to stop the attack, repair the systems,
potentially repair damaged assets,
and manage any subsequent business
interruption. Our reputation would
likely suffer due to reduced service,
potential environmental damage,
potential risks to public safety and
perceptions of poor security, and
the company could be exposed to
subsequent fines and penalties.
We mitigate such risks by following
industry standard practices and having
appropriate security measures in place.
This includes identifying and resolving
information security risks, raising
user awareness and having robust
governance. In addition, we hold
cyber-insurance cover as part of
our overall insurance contracts.
4
6
Making the most of powerful forcesMeridian Annual Report 2019Menu Strength of our asset maintenance – plant availability
%
Wind Australia
Wind New Zealand
Hydro New Zealand
Hydro Australia
FY15
FY16
FY17
FY18
FY19
95.5
92.8
88.4
91.0
88.9
93.4
92.6
85.4
91.3
93.4
83.9
90.4
85.8
88.6
83.3
91.6
80.1
Looking after our plant
We rely on various pieces of
equipment and technology at
our power stations. If any critical
equipment or technology, including,
for example, generating plant,
transformers, switchgear, control
gates and canal civil structures,
or control systems were to suffer
failures (through issues such as
asset condition or human error)
requiring unplanned power station
outages, replacement or repair,
our generation production may
be reduced.
We counter these risks through
our ongoing improvement and
upgrade programmes. We have a
very capable reliability engineering
team that provides on-the-ground
expertise in reviewing the current
condition of assets and escalating
issues quickly. Our long-term
programme of asset management
works is prioritised based on a full and
detailed understanding of risk. A key
achievement for our generation team
this year has been the successful
replacement of all seven main
unit transformers at Manapōuri.
That project has taken most of this
financial year and means a significant
disruption risk has now been
removed. We have also completed
a major upgrade of the local service
systems at Aviemore power station
and we are in the middle of a multi-
year cooling water upgrade at
Benmore power station to replace the
current system and improve reliability,
redundancy and efficiency. Over the
next few years we will be replacing
and refurbishing key components at
Ōhau A, Ōhau B and Ōhau C as part of
keeping those three stations up to date.
Wind farms generally use the same
plant throughout one site. For the
larger components, serial defects
may therefore have an adverse effect
on the reliability and operation of
a particular wind farm if they are
not covered by warranties or other
remediation. In addition to a well-
defined regular maintenance regime,
we manage this risk by ongoing
monitoring of critical components
within the wind turbines so that
we have the ability to predict asset
failures and prevent consequential
impacts on other components.
Despite this risk management process,
significant failures can still occur. At
Te Āpiti wind farm, mechanical issues
with our machines have meant we’ve
been working at half capacity for
some time. A refurbishment is well
in hand and we expect the work
to be two-thirds completed by the
end of this calendar year.
5
6
Making the most of powerful forcesMeridian Annual Report 2019Menu Responsible use of water and wind
Water use in New Zealand and
Australia continues to be an emotive
and important issue, with a wide
range of parties concerned about
everything from availability to
quality to use.
effects of turbines on the places
in which they live. Both hydro and
wind, however, are vital ingredients
in helping both countries to achieve
a diverse and resilient energy system
capable of meeting climate action
goals and targets.
Because water is so central to our own
business, we remain highly aware of
both the value and the role of water
and waterways and actively look to
collaborate with and reach agreements
with as many parties as we can.
Wind energy too can be an emotive
issue, with local communities often
voicing strong opinions about the
Nationally, we have worked with
officials from the Ministry for the
Environment and the Ministry of
Business, Innovation and Employment
on water policy issues that are
relevant to both hydro operation
and climate change. We have
also developed an environmental
policy for biodiversity through the
Biodiversity Collaborative Group.
Hydro generation itself doesn’t alter
quality; however, water quality on
the Waiau and Waitaki river systems
can be compromised by others’
activities, potentially boosting the
chances of algal growth and weeds.
While we can help mitigate any
change in water quality by releasing
more water into waterways to dilute
the effects of these contaminants,
such actions affect on our profitability
and the amount of renewable energy
we can deliver to meet New Zealand’s
power needs. The best solution for
us therefore would be if the water
in these catchments were as clean
as possible.
Water consumption25
New Zealand
FY15
Mm3
FY16
Mm3
FY17
Mm3
FY18
Mm3
FY19
Mm3
Fresh surface water (lakes, rivers)
73,883
70,610
72,946
65,562
74,183
Water returned to the source of extraction with similar quality
62,518
56,481
61,499
53,823
61,832
Total net freshwater consumption26
11,365
14,130
11,447
11,739
12,351
Australia
Fresh surface water (lakes, rivers)
Water returned to the source of extraction with similar quality
3,696
3,696
25 Municipal water consumption not reported
(minimal and not metered). While in New Zealand
we have no exposure to water stressed areas, in
Australia our power stations are operating in areas
that can suffer from drought. Note that we only hold
the right to generate electricity from water passing
through the dams associated with our Australian
hydro power stations. We do not hold the water
rights themselves.
26 Fresh water taken from Lake Manapōuri is released
into Doubtful Sound, a marine environment, and is
not altered in terms of water quality.
6
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Making the most of powerful forcesMeridian Annual Report 2019Menu Notwithstanding its positive
contribution to climate action, hydro
generation does have impacts on
the wider environment, and we
have a responsibility to manage
these. Hydro generation affects
the landscape by creating lakes
and canals that divert the water
and affect the timing and volume
of river flows, as well as the natural
movements of native fish.
To address these impacts, we fund
or support projects such as eel
‘trap and transfer’ at the Waitaki
dam and Manapōuri Lake Control
structure, Project River Recovery
and the Waiau Fisheries and Wildlife
Habitat Enhancement Trust (the
“Waiau Trust”). These projects are
concentrated on lessening the
impacts on eel (tuna) and braided
river habitats and are part of the
collaboration with local authorities
and other interested parties that we
agreed to when our consents were
originally granted.
Adult eels have to migrate to the sea
from freshwater to complete their
life cycle and to spawn in the Tonga
trench. Juvenile eels need to return
to freshwater up-river as small elvers
to grow to adulthood. Our structures
impede that movement so we use
trap and transfer to move both elvers
and adults. Every year we move a
large number of elvers and adult
eels at Manapōuri, and a smaller
amount in the Waitaki catchment.
Once released, they can migrate
successfully to and from the sea.
In Manapōuri, there’s still a large
self-sustaining population of eels
because it’s a national park and there
is no commercial catch pressure. In
the Waitaki catchment, the population
is much smaller. This is consistent with
what is happening in the South Island
east coast catchments that have lost
a lot of habitat through land use
change and commercial fishing
pressure, and have smaller numbers
of juvenile elvers trying to migrate
up the river. Currently, a Ministry for
Primary Industries group is looking
into possible causes and responses.
We move all the elvers that turn
up, and all of the adults that are in
migration condition. This year we’ve
moved around 700kg of elvers and
eels at Manapōuri, down on last year’s
exceptionally high catch numbers.
At Waitaki, we’ve caught just over
37kg of elvers and eels, equating to
thousands of elvers and 72 adult eels.
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Making the most of powerful forcesMeridian Annual Report 2019Menu Project River Recovery has been
in place since 1991 in the Waitaki
catchment and is perhaps
New Zealand’s longest-running
conservation/business partnership.
Funded by Meridian, the Department
of Conservation works to preserve
and restore braided river habitats
in the Waitaki catchment through
weed control of the riverbed and
pest eradication to protect black-
fronted tern/tarapirohe colonies
and help kakī or black stilt recover
their populations. The partnership
has created over 100 hectares
of new wetlands. To put that
into perspective, the Ministry for
the Environment has estimated
that roughly 90% of the original
New Zealand wetlands have been
drained27, so this is an important
project and contribution. The Waiau
Trust has also restored significant
areas of wetlands.
All our hydro operations are
governed by agreements with
groups connected with the
waterways. For example, we work
closely with local government bodies,
particularly during consenting and
through the submissions process, and
we report regularly on our compliance
with resource consent conditions.
In the past year there were no
prosecutions and our public safety as
a generator was recertified, allowing
us to continue to operate. While we
did record four plant-related breaches
of environmental compliance, none
were serious. We are confident that
we acted as a responsible generator
in our day-to-day operations.
.
Retaining access to
the water we need
Depending on how policy settings
evolve over time, the Government,
local authorities and other regulatory
bodies may impose restrictions,
conditions and additional costs on
our ability to access or use hydro
sources that we may or may not be
able to pass on to our customers.
Those could include imposing
minimum flow or maximum nutrient
levels in rivers that have hydro
generation, and imposing charges
or royalty payments on water
users. Plan changes could also
adversely affect activities that are
currently permitted without resource
consents. National and regional water
policies could be changed to allocate
more water to agricultural users or
to meet specified iwi interests or for
other purposes, reducing the available
flow from the Waitaki or Manapōuri
catchment for Meridian.
Regulatory issues could also be
exacerbated by climate change as
weather becomes more variable,
and water more unpredictable for
the needs of other users. This could
reduce Meridian’s access to water
either through direct government
policy change (e.g. imposition of
environmental taxes or through
forms of water charging) or from
local Resource Management Act
(RMA) processes going through to
the Environment Court.
It’s important therefore that we
continue to engage with RMA
processes and other stakeholders
who have strong interests in water
issues in Aotearoa, on how we can all
work together to pursue responsible
use and access to water.
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27 Environment Aotearoa Report 2019
www.mfe.govt.nz/Environment-Aotearoa-2019-Summary
Making the most of powerful forcesMeridian Annual Report 2019Menu We are committed
to our relationships
Our continued access to water,
and therefore our continued
financial success, depends
on strong relationships with
government agencies and local
communities and our long-term
relationship with te rūnanga.
We recognise the mana whenua
of Ngāi Tahu, particularly in relation
to our hydro schemes in the
Ngāi Tahu takiwā, and engage
with them and other iwi in several
ways. We recognise and respond
to the kaupapa of ki uta ki tai (from
the mountains to the sea) and
work closely with local rūnanga
(Arowhenua, Awarua, Hokonui,
Moeraki, Ōraka Aparima, Waihao
and Waihōpai) through Te Ao Marama
and the Waitaki Governance Group
as well as trusts to enhance mahinga
kai and native fish in the Waitaki and
Waiau catchments. In the past year
we have worked closely with Ngāi
Tahu to develop signage at key sites
around our catchment areas. We
helped develop the Punatahi Visitor
Centre at the bottom of Lake Pūkaki,
and unveiled other signage across
the district, because it’s important
that Ngāi Tahu’s history is shared
with all visitors so we can all better
appreciate and understand the
area’s importance.
We also hold meetings in specific
communities around our wind assets
regarding consents. We want people,
groups and communities to feel
included and consulted in relation
to our operations.
Powering up local communities
Local employment helps small local
communities to flourish and attracts
people back to smaller towns.
By building good relationships
with and doing good by locals, we
demonstrate that we want to be locally
involved and supportive and it helps us
build strong, mutual relationships with
the local communities in which we
operate. For 12 years, our community
fund Power Up has been supporting
local projects in Te Āpiti, Mill Creek,
Manapōuri, West Wind, White Hill,
Te Uku and Waitaki. In that time we’ve
been able to undertake a range of
projects that are important to locals
and invested over $7.5 million through
1,000 projects back into these
local communities.
9
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Making the most of powerful forcesMeridian Annual Report 2019Menu
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Total recordable injury frequency rate (TRIFR28)
Lost time injury frequency rate (LTIFR30)
1
1
.
3
6
8
.
1
7
6
.
1
8
6
.
2
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5
.
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14.0
12.0
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FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
28 TRIFR is calculated per 200,000 hours and includes all lost time, medical treatment and
restricted work injuries. While we have incident numbers for Powershop New Zealand,
Powershop Australia and off-site contractors, the TRIFR cannot be calculated as the
number of hours worked for those periods has not been recorded.
29 Includes Meridian Australia generation staff.
30 LTIFR is calculated per 1,000,000 hours and includes all lost time work injuries.
While we have incident numbers for Powershop New Zealand, Powershop Australia
and off-site contractors, the TRIFR cannot be calculated as the number of hours
worked for those periods has not been recorded.
Looking after our people
Keeping our people safe is critical
to the responsible operation of our
generation assets, and we want
none of our people to have their
lives and what they value in their
lives put at risk from their work. We
operate in technically challenging
environments, with extremely large
electrical and mechanical assets.
Our people work in a variety of
locations – underground, inside
large structures, on tall wind and
hydro structures and close to large
volumes of water. There is a risk
that an incident will lead to the
fatality of or serious injury to a staff
member, a contractor, a customer
or a member of the public. Our staff
and contractors are also exposed
to hazards on operating assets, on
construction sites, in remote locations
requiring a lot of on-road and off-
road driving, and at customer sites
when connecting and disconnecting
power. These activities have been
identified through our Fatal Risk
Framework as posing a risk of high-
consequences injuries and have
controls in place following analysis
using the Bow Tie approach.
identification and controls and
are supported by dedicated safety
specialists in each of our business
units, who assist with regular
reviews of the hazards presented
by our operations.
Site-specific health and safety
committees represent all employees
on our sites, including contractors.
These committees meet monthly
to identify hazards and review
incidents that have occurred. The
representatives on these committees
receive regular training in risk
Our wind farms in Australia are fully
embedded into our safety approach,
and we’ve worked hard in the past
year to integrate management of
safety at the Australian hydro stations
as well.
0
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Meridian Annual Report 2019MenuMaking the most of powerful forces
Generation and wholesale staff approaching retirement age
FY17
10.2% 22.7%
In five years
In ten years
FY18
9.1% 20.3%
FY19
10.9% 22.5%
In five years
In ten years
In five years
In ten years
The skills required to manage,
maintain and upgrade our assets
are changing. The assets require
broader expertise to run, particularly
as we look to use technology to
make efficiency and accuracy
gains. We invest continuously
in training programmes to raise
safety and health awareness and
encourage consistent behaviour
and attitudes towards safety at
work. Our engagement extends
to our suppliers and contractors
in the generation part of our
business and beyond through direct
engagement, tender processes and
performance management meetings.
Our approach goes beyond just our
people’s physical safety. We also
have several programmes, including
our Healthy Minds programme, that
focuses on our employees’ overall
wellbeing and mental health.
Our employees and contractors are
required to report any hazards or
incidents through Meridian’s electronic
safety management system Safety
Manager, a dedicated 0800 number,
or one of our organisations elected
health and safety representatives
or site managers.
This year there were eight lost time
injury incidents: three involving
contractors; and five employees.
Two of these incidents were
serious. One involved a fingertip
loss at Te Āpiti, where a contractor
who had been working at the site
for two years was involved in an
incident with a complex web of
causes. The other serious incident
was a finger injury to a contractor
working with a winch at Gate 22
on the Waitaki chain.
In the case of the fingertip loss,
because Meridian had not had
an incident like this for a long
time, we engaged psychologist
Dr Phil Voss to work with our people
at Te Āpiti and look at whether
we had any culture problems that
could have caused it. We also
did a refresher on Zero Induction
Process (ZIP) training – a course that
teaches personal responsibility and
accountability for safety behaviour
and results, looking at the 'why' we
want to stay safe versus the 'how'.
The rest of the incidents were minor,
involving slips, back pain and minor
mishaps. While no-one wants to
see anyone injured at work, we are
pleased that these matters have
been reported and that people
are looking after themselves rather
than soldiering on.
Overall, we are confident that our
safety culture is robust and that we
have honest reporting of unsafe
behaviour (and positive reporting
behaviour, including of hazards).
We invest a considerable amount
every year on safety and health
training, helping our people to
protect themselves. Our senior
leaders engage with people on
a regular basis and encourage
them to speak up if work is unsafe,
as is their right.
We’re also an active member of
Stay Live, an electricity industry
forum focussing on working together
across the sector to improve safety.
We have several Meridian people
involved – as chair of the forum and
on multiple working groups. Later
this year the Stay Live group will
proudly launch a specific training and
competency tool, an industry first,
including a database detailing all
contractors current state of training.
From one generation to the next
Gender balance is only one part of
the people puzzle in the generation
part of our business (see page 45).
A significant percentage of our
experienced staff may soon be
considering retirement. To help
ensure that their skills are passed
on, we have actively encouraged
young professionals (often graduates)
to join our teams and offered
opportunities for people to complete
their trade apprenticeships with
us. Our goal is to ensure that as our
older people consider retirement they
are supported to transition out of
work smoothly (for example through
part-time arrangements) and that
there is a clear succession plan for
their areas of expertise.
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Making the most of powerful forcesMeridian Annual Report 2019Menu Our powerful future
In New Zealand, wind and solar
generation is becoming more viable
as the country looks for ways to
hit its renewable energy targets.
In Australia, the opportunities for
renewables are exciting but there
is less commitment from federal
and state governments.
2
7
Our powerful futureMeridian Annual Report 2019Menu for more wind generation now is
that the cost has reduced significantly
and the machinery is becoming
more efficient. Solar generation too
is coming down in price, and within
10 years a continuing decline in the
cost of utility-scale solar installations
may well represent an unsubsidised
way to make significant amounts of
renewable energy alongside wind,
geothermal and hydro. Another key
advantage in Aotearoa in terms
of integration is that our hydro
backbone enables much easier and
cheaper integration of intermittent
generation like wind and solar into the
overall network than in virtually any
other country in the world.
Wind generation
pipeline in New Zealand
At year end, we have a portfolio
of generation options that
are either consented or being
investigated further. Together these
represent important opportunities
to increase renewable generation
in New Zealand significantly, with
1,148GWh of consents, options
on 1,135GWh and investigations
underway for a further 390GWh.
By way of context, we are forecasting
an overall increase in demand of at
least 0.5–1% per year for the next few
years, which equates to an additional
2,000 to 4,000GWh of demand
over the next decade (accelerated
decarbonisation efforts in the wider
economy may add to this).
Preliminary work continues with our
consented wind farm in Hawke’s Bay,
including applying for a variation
to the consent to accommodate
larger wind turbines. Should we be
granted the variation, we intend to
start physical works at the beginning
of 2020, subject to final Meridian
Board approval.
Meanwhile, at our Te Āpiti wind farm,
the New Zealand Transport Agency
(NZTA) have proposed a replacement
route for the Manawatū Gorge
section of State Highway 3 that will
go directly through our site. This could
affect us financially, and reduce the
amount of renewable generation
available to New Zealand. Our goal in
working this through with NZTA is to
ensure the continued operation of the
wind farm during construction, and
avoid the removal of turbines. To date
NZTA has appointed a consortium
to manage construction, and we
remain hopeful that any impacts
can be minimised.
to us, we have entered into early
conversations with most of our
stakeholders, with scientific studies
either planned or underway. We
expect to lodge our application
around 2022/23.
Removing the barriers
We continue to investigate several
new wind sites in New Zealand,
making good progress in building
a portfolio of options. Consenting
remains our biggest hurdle.
Conversations around
Waitaki reconsenting underway
Our consents for the Waitaki Power
Scheme, which plays a critical role
in providing renewable energy for
New Zealand, expire in 2025.
We have begun work on re-
consenting the scheme on a like-
for-like basis, meaning we are not
asking for any more water (which
could increase environmental
impacts) or any less (which would
decrease the amount of renewable
energy generated for the country).
Any changes to our access to water
do, however, represent a significant
financial risk. If we have less water
to generate from, our ability to
provide a steady return to our
shareholders could be affected.
Because this matter is so important
The current Resource Management
Act does not in our view allow for a
fair and balanced conversation on
consents for renewable electricity
generation. Our hope is that, with
the expected passing of the Climate
Change Response (Zero Carbon)
Amendment Bill later this year, we will
be able to engage the Government to
make the Resource Management Act
framework more streamlined while
still creating opportunities for us to
work with communities in a way that
provides co-benefits and meaningful
connections for both.
Globally, the costs involved in
building wind infrastructure and then
integrating it into standard energy
networks have been significant
barriers. That is changing for the
better. One of the major attractions
3
7
Our powerful futureMeridian Annual Report 2019Menu of increased carbon pricing through
the Emissions Trading Scheme will
create the investment incentives
needed for Aotearoa to reach at
least 95% renewable energy within
the next 10–15 years (once larger
scale thermal plants are retired).
As we discussed in last year’s report,
though, the last 5% will be more
difficult and expensive because the
country still needs thermal fuel to
make up for longer-term climatic
events such as extended dry spells.
Stored thermal generation capacity
is useful in that it can be activated
to handle the 3,000–5,000GWh
energy deficits that occur in some
years. We are investigating how the
system could meet those deficits in
non-fossil-fuel dependent ways.
Our determination for New Zealand
electricity to be zero carbon
New Zealand currently generates
around 85% renewable electricity,
primarily through water, wind and
geothermal. This is significantly
more than most other countries.
In addition, we already have many
of the features that are necessary
for a very low carbon electricity
future, including a mature wholesale
market, a robust regulatory
framework and a significant volume
of flexible hydro generation.
We’re confident that our market
is one of the best in the world,
environmentally and from a
regulatory perspective. Everything
points to geothermal and wind
generation being the cheapest
and most viable option for building
additional capacity and to replace
fossil-fuel power stations as they
retire, particularly as the cost of wind
technology continues to fall and the
price of carbon continues to rise. So
we remain confident that the current
market structure and the introduction
Opportunities and challenges
for renewables in Australia
Things are more complicated in
Australia, where fossil-fuel-based
generation still makes up the
majority of electricity production.
The challenge is to decarbonise
the sector while maintaining
acceptable price and reliability.
As part of our commitment to
SDG13 Climate Action and SDG7
Affordable and Clean Energy, we
continue to investigate how we
can support a faster conversion
of the Australian electricity system
to renewable energy.
In Australia, our annual renewable
generation is sitting at around
728GWh, which represents around
5% of our overall Group generation
volume. Our medium- to long-
term plan is to continue to invest in
renewable energy as this has three
key advantages: it is increasingly
attractive to consumers in the
Australian market; it’s good for the
country; and it supports continued
customer growth for us through
the Powershop brand.
4
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Our powerful futureMeridian Annual Report 2019Menu Rewarding
strong
performance
5
7
Meridian Annual Report 2019MenuRewarding strong performance As a business
We depend heavily on our people
to deliver strong returns for our
shareholders. We have structured
our remuneration to attract the best
people we can, to retain them in our
business and to remunerate them
competitively for their contributions.
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Rewarding strong performanceMeridian Annual Report 2019Menu Our approach to
remunerating our people
Attracting, retaining and
motivating talented people, and
rewarding them for delivering
desired business performance
and long-term shareholder value,
is key to Meridian’s success.
Our remuneration philosophy
is guided by the principles that
remuneration will
• be clearly aligned with our
company values, culture
and strategy
• support us to attract, retain
and engage employees
• be fair, equitable and flexible
• appropriately reflect
market conditions and the
organisational context
• recognise and reward high
performance
• align with creating
shareholder value.
The Remuneration and Human
Resources Committee regularly
reviews remuneration policy
and practice and provides
recommendations to the Board. The
Board approves executive balanced
scorecard objectives, company
financial performance targets and
outcomes on an annual basis.
Fixed remuneration is benchmarked
to market remuneration data
and permanent employees may
participate in a short-term incentive
(STI) scheme at the discretion and
invitation of the Board. As a minimum,
Meridian pays the Living Wage for
all permanent employees. A range
of benefits is provided, including
employee insurance, enhanced
parental leave provisions, the ability
to purchase additional leave, and
access to purchasing discounts. The
Executive Team and Chief Executive
(CE) also have the opportunity to
participate in a long-term incentive
(LTI) plan. Both the STI scheme and the
LTI plan are variable, performance-
based incentives, awarded only if
specific financial and non-financial
performance hurdles are met, and
at the discretion of the Board.
Fixed remuneration
Fixed remuneration includes base
salary and matched KiwiSaver
contributions of up to 4%. Salaries
are reviewed annually.
Short-term incentive (STI)
The STI is an at-risk incentive, which
may be offered for a specific year by
invitation from the Board. Potential
STI payments reflect the achievement
of predetermined company profit
levels and individual performance
objectives aligned to business
strategy and goals, and are wholly
discretionary. An STI may be paid
subject to a behaviour gate and
company financial performance
hurdles, and at the discretion of
the Board.
The STI opportunity within total
remuneration reflects the complexity
and levels of the roles. The CE
had an STI opportunity of 40% of
salary, and the Executive Team STI
opportunity was 30%.
Long-term incentive (LTI)
An LTI plan is offered at the discretion
of the Board to the New Zealand
Executive Team, to align executives’
and shareholders’ interests and
optimise long-term shareholder returns.
The LTI opportunity is 40% of salary
for the CE and 30% of salary for the
Executive Team. Vesting of the LTI is
contingent on meeting both absolute
and relative TSR performance hurdles
at the conclusion of a three-year
period. Further details of the LTI plan
are provided on page 84.
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Rewarding strong performanceMeridian Annual Report 2019Menu
Employee share ownership
Employees are invited to join
Meridian’s employee share ownership
plan, MyShare. Under MyShare,
Meridian shares are purchased for
participating employees, funded by
monthly pay deductions of between
$500 and $5,000 per annum. After
three years, participants may be
eligible for award shares subject
to ongoing employment (Tenure
Award Shares) and the company
TSR outperforming a peer group of
competitors (Performance Award
Shares). In FY19, 50% of employees
participated in MyShare.
Employee remuneration range
The number of employees and
former employees of Meridian
and its subsidiaries (not including
directors) who during the year
ended 30 June 2019 received
cash remuneration and other
benefits (including at-risk
performance incentives, KiwiSaver
contributions and redundancy
compensation) exceeding
$100,000 is outlined opposite:
8
7
Remuneration
Band
Number of
employees
$100,000–109,999
$110,000–119,999
$120,000–129,999
$130,000–139,999
$140,000–149,999
$150,000–159,999
$160,000–169,999
$170,000–179,999
$180,000–189,999
$190,000–199,999
$200,000–209,999
$210,000–219,999
$220,000–229,999
$230,000–239,999
$240,000–249,999
$250,000–259,999
$260,000–269,999
66
75
57
46
37
31
18
21
12
9
10
10
4
7
3
3
3
$270,000–279,999
$280,000–289,999
$290,000–299,999
$300,000–309,999
$310,000–319,999
$320,000–329,999
$330,000–339,999
$360,000–369,999
$380,000–389,999
$470,000–479,999
$490,000–499,999
$520,000–529,999
$610,000–619,999
$670,000–679,999
$690,000–699,999
$730,000–739,999
$760,000–769,999
$1,030,000–1,039,999
$1,490,000–1,499,999
2
4
4
2
3
4
3
1
2
1
1
1
2
1
1
1
1
1
1
44831
31. This includes 29 employees who are
no longer employed by Meridian
Energy Limited and its subsidiaries.
Rewarding strong performanceMeridian Annual Report 2019Menu
Chief Executive remuneration
Chief Executive remuneration for performance period ending 30 June 2019
Year
Base
salary
Taxable
benefits32
Fixed
rem33 MyShare34
Pay for performance
STI35
LTI36
Subtotal
Total
rem
Notes
• MyShare is the $2,500 award shares
related to participation in the FY17
MyShare plan.
FY19 Neal Barclay
$973,750
$38,950
$1,012,700
$2,500
$431,086
$248,909
$679,995
$1,695,195
Chief Executive remuneration for performance period ending 30 June 2018
Year
Base
salary
Taxable
benefits32
Fixed
rem33 MyShare34
Pay for performance
Total
rem
STI35
LTI36
Subtotal
FY18 CE Total
$1,120,545
$44,822
$1,165,367
$4,274
$384,919
$601,924
$986,843
$2,156,484
FY18 CE1
Mark Binns
FY18 CE2
Neal Barclay
$645,545
$25,822
$671,367
$1,774
$216,999
$357,901
$574,900
$1,248,041
$475,000
$19,000
$494,000
$2,500
$167,920
$244,023
$411,943
$908,443
• The LTI figure is payment relating
to the full vesting of the FY17 LTI
scheme, from when Neal Barclay
was in a previous management role.
KiwiSaver
As a member of KiwiSaver, the
CE is entitled to receive a matching
employer contribution of 4% of
gross taxable earnings (including
both the STI and the LTI). In FY19 the
company’s KiwiSaver contributions
were $57,608 for Neal Barclay.
Five year remuneration summary
Year
FY19
FY18
FY17
FY16
FY15
9
7
Single figure
rem
% STI
against maximum
% vested LTIs
against maximum37
Span of LTI
performance period
$1,695,195
$2,156,484
$2,379,768
$2,370,556
$1,909,121
90.91%
72.8%
79.29%
86.34%
82.93%
100%
75%
100%
100%
n/a
FY17–FY19
32 Taxable benefits are 4% company KiwiSaver
FY16–FY18
FY15–FY17
FY14–FY16
contributions on salary.
33 Fixed remuneration is salary plus company
KiwiSaver contributions.
34 MyShare is gross value of award shares received
in the applicable period.
35 STI is the potential payment based on
performance achieved for the applicable period
and includes 4% company KiwiSaver contributions.
36 LTI is grossed up for PAYE and includes 4% company
KiwiSaver contributions.
37 The LTI plan was introduced in FY14 and the first plan
vested in FY16. Prior to that no LTI was offered.
Rewarding strong performanceMeridian Annual Report 2019Menu Breakdown of Chief Executive pay for performance (FY19)
Description
STI
40% of base salary. Combination
of company result and a scorecard
of financial and non-financial
company measures.
Performance measures
60% weighting on company performance (company profit,
which comprises Group EBITDAF minus capital charge).
40% weighting on performance against a Board-approved
scorecard comprising financial and non-financial objectives,
as shown in the table below.
LTI
Conditional awards of shares under
LTI plan. 40% of base salary.
Absolute TSR over the relevant assessment period:
• must be positive; and > 50th percentile/median
TSR of the peer group38.
Relative TSR—if positive and:
• > 50th percentile TSR of peer group, at least 50% vests
• ≥ 75th percentile TSR, 100% vests
• between the 50th and 75th percentile TSRs of peer group,
progressively vests on a straight-line basis.
% achieved
126.7%
76%
Hurdle met
100%
Pay for Performance Scorecard Measures for FY19
38 Peer group comprises AGL Energy,
Origin Energy, Contact Energy, Mercury NZ,
Trustpower and Genesis Energy.
Performance area
Financial/Stewardship
Customer
Measures
Weighting
• Total Shareholder Return
• Delivery of consenting milestones
• New Zealand retail netback
• Australian customer numbers
• Net Promoter Score – measurement for each
brand
25%
25%
20%
15%
15%
Future Development
• Wind development pipeline
Employees
• Engagement
• Safety Culture
• Diversity & Inclusion progress
Environment
• Progress against sustainability initiatives
0
8
Rewarding strong performanceMeridian Annual Report 2019Menu
Five-year summary – performance
(Meridian Energy vs peer group39)
Chief Executive remuneration performance pay for FY19
59%
43%
i
n
a
d
i
r
e
M
i
n
a
d
e
m
p
u
o
r
g
r
e
e
P
33%
9%
31%
11%
17%
18%
14%
9%
FY15
FY16
FY17
FY18
FY19
60
50
40
30
20
10
0
%
39 Peer group comprises AGL Energy, Origin Energy, Contact Energy,
Mercury NZ, Trustpower and Genesis Energy.
The TSR summary above illustrates
the performance of Meridian’s
shares against a peer group of
companies between 30 June 2015
and 30 June 2019. TSR performance
outcomes are independently
validated by external experts.
2,500
2,000
1,500
1,000
500
0
$000
I
T
L
l
e
b
a
i
r
a
V
l
a
u
n
n
A
n
o
i
t
a
r
e
n
u
m
e
r
d
e
x
i
F
29%
23%
48%
18%
22%
60%
100%
Fixed remuneration Meets expectations Maximum
The chart above depicts elements
of the CE’s remuneration design
under various scenarios for the year
ended 30 June 2019 as a proportion
of total remuneration.
1
8
Meridian Annual Report 2019MenuRewarding strong performance
Approved director remuneration for FY19
Director remuneration is paid from the total director fee pool that was approved
by shareholders at the Annual Shareholder Meeting of 28 October 2016.
Board fees
Committee fees
Total pool
Individual Board – approved annual fee breakdown
Position held
Chair
Deputy Chair
Director
FY18
FY19
$1,000,000
$1,000,000
$100,000
$100,000
$1,100,000
$1,100,000
FY18
FY19
$200,000
$200,000
$140,000
$140,000
$110,000
$110,000
Audit & Risk Committee Chair
$22,500
$22,500
Audit & Risk Committee member
$10,000
$10,000
Safety & Sustainability Committee Chair
$15,000
$15,000
Safety & Sustainability Committee member
$9,200
$9,200
Remuneration & Human Resources Committee Chair
$15,000
$15,000
Remuneration & Human Resources Committee member
$9,100
$9,100
2
8
Rewarding strong performanceMeridian Annual Report 2019Menu Director remuneration received in FY19
Remuneration paid to non-executive directors in their capacity as directors
of subsidiaries of Meridian during the year ended 30 June 2019 was:
Name of
director
Chris Moller40
(Chair)
Peter Wilson
(Deputy Chair)41
Board
fees
Audit & Risk
Committee
$200,000
–
$140,000
$10,000
Mark Cairns
$110,000
$10,000
Jan Dawson
$110,000
$22,500
(Chair)
Mary Devine
$110,000
Anake Goodall
$110,000
Stephen
Reindler42
$17,142
Mark Verbiest
$110,000
–
–
–
–
Remuneration
& Human
Resources
Committee
Safety &
Sustainability
Committee
Total
remuneration
Name of director
Subsidiary
Fees
Nicola Kennedy (independent Chair)
Flux Federation Limited
$66,668
–
–
–
–
$15,000
(Chair)
–
$200,000
Catherine Reynolds (independent director)
Flux Federation Limited
Michael Koziarski (independent director)
Flux Federation Limited
$46,667
$25,833
$14,033
$164,033
–
–
–
$120,000
$132,500
$125,000
Meridian employees appointed as directors of Meridian subsidiaries
do not receive any directorship fees.
$9,200
$119,200
–
$2,337
(Chair)
$19,479
$9,100
–
$119,100
Total
$907,142
$42,500
$24,100
$25,570
$999,312
Directors are reimbursed for all reasonable and properly documented expenses
incurred in performing their duties as Meridian directors. No additional
payments or benefits were received by directors in FY19.
40 Chris Moller does not receive additional fees for committee membership.
41 Peter Wilson became Chair of the safety and Sustainability Committee from September 2018.
42 Steve Reindler resigned from the Board effective 27 August 2018, so fees do not represent a full year.
3
8
Rewarding strong performanceMeridian Annual Report 2019Menu Other remuneration
report components
Long-term incentive (LTI) plan
The LTI plan is a share loan and cash
bonus scheme, where executives
purchase Meridian shares via an
interest-free loan from the company,
with the shares held on trust by the
LTI plan trustee. Any shares awarded
depend on whether the following
performance hurdles are met over
a three-year period:
• The company’s absolute TSR must
be positive; and
• The company’s TSR compared
to a benchmark peer group.
If the performance hurdles have
been achieved, a progressive vesting
scale is applied to determine how
many shares vest:
• If the company’s TSR over the
three-year period exceeds the 50th
percentile TSR of the benchmark
peer group, at least 50% of an
executive’s shares will vest.
• 100% shares will vest on meeting
the 75th percentile TSR of the peer
group, with vesting on a straight-line
basis between these two points.
• No shares will vest if the company’s
TSR is less than the 50th percentile
TSR of the peer group.
Once the vesting level has been
confirmed, a cash amount (after
the deduction of tax, but before
other applicable salary deductions)
is used to repay the executive’s
outstanding loan balance.
For each three-year plan, an
independent external expert
measures the TSR of Meridian and
the peer group of companies along
with the outcome on the progressive
vesting scale. If the TSR is not positive
(i.e. in absolute terms is less than
zero) or if the TSR does not meet
the peer group relative TSR hurdle
of the 50th percentile, the shares
are forfeited to the trustee and the
relevant executive receives no benefits
under the LTI plan. Where the TSR is
greater than the 50th percentile of the
benchmark peer group, but below the
75th percentile, shares that have not
vested will also be forfeited.
For the LTI plan that vested at the
end of FY19, the level of vesting was
100%. Therefore, the outstanding
balance of the interest-free loans
at 30 June 2019 of $555,162 has
now been repaid. A total of 223,623
shares has been transferred to the
eligible participants.
Other information provided in
Corporate Governance Statement
Meridian has a policy to ensure that
the participants of the Executive
LTI plan are not permitted to enter
into transactions (whether through
the use of derivatives or otherwise)
that limit the economic risk of
participating in the plan.
Meridian has written agreements
with executives setting out the terms
of their employment.
Mr Barclay will be employed as CE
until his employment is terminated
in accordance with his employment
agreement. Pursuant to the
employment agreement, the CE
and Meridian have mutual rights of
termination on the provision of six
months’ written notice. Meridian may
also terminate the CE’s employment
on the grounds of redundancy or
serious misconduct or where an act
of bankruptcy is committed. The CE
will be entitled to receive certain
termination payments following the
termination of his employment.
4
8
Rewarding strong performanceMeridian Annual Report 2019Menu Further disclosures
Further disclosures required
by the NZX Listing Rules, the
Companies Act 1993 and
other legislation or rules.
5
8
Further disclosuresMeridian Annual Report 2019Menu Meridian Energy
The table opposite outlines
changes among the people
who held office as directors
of Meridian Energy Limited.
The Board has determined that
as at 30 June 2019, all directors
are independent having regard
to the NZX Listing Rules and
the factors set out in the NZX
Corporate Governance Code.
Current Board and Executive
team gender composition
In accordance with the NZX Listing
Rules, the gender make-up of
Meridian’s directors and officers
as at 30 June 2019 is:
Company name
Directors
Meridian Energy Limited
Anake Goodall, Chris Moller, Jan Dawson, Mark Cairns,
Mark Verbiest, Mary Devine, Peter Wilson, Steve Reindler
(ceased 27 August 2018)
Company name
As at 30 June 2019
As at 30 June 2018
Female
Male
Female
Male
Number of directors
2
5
2
6
Percentage of directors
28.6%
71.4%
25.0%
75.0%
Number of officers43
2
7
1
7
Percentage of officers
22.2%
77.8%
12.5%
87.5%
43 Includes positions where there is a person acting in a role pending an appointment process.
6
8
Further disclosuresMeridian Annual Report 2019Menu Meridian subsidiaries
The following tables list the
subsidiaries of Meridian Energy
Limited during the accounting period,
and any changes to those subsidiaries
and among the people who held
office as directors. Alternate directors
are indicated with an (A):
New Zealand subsidiaries
Company name
Directors
Further information
Dam Safety Intelligence Limited
Neal Barclay, Jason Stein
Flux Federation Limited
Jason Stein, Michael Roan (appointed 5 June 2019),
Neal Barclay (appointed 5 June 2019), Gillian Blythe (A)
Paul Chambers (ceased 12 April 2019),
Nicola Kennedy (ceased 5 June 2019),
Catherine Reynolds (Gould) (ceased 5
June 2019), Michael Koziarski (appointed
19 February 2019, ceased 5 June 2019)
Meridian Energy Captive Insurance
Neal Barclay, Michael Roan (appointed 28 May 2019),
Jason Stein
Paul Chambers (ceased 12 April 2019)
Meridian Energy International Limited
Neal Barclay, Michael Roan (appointed 28 May 2019),
Jason Stein
Paul Chambers (ceased 12 April 2019)
Meridian Limited
Neal Barclay, Michael Roan (appointed 28 May 2019),
Jason Stein
Paul Chambers (ceased 12 April 2019)
Meridian LTI Trustee Limited
Mary Devine, Anake Goodall
Powershop New Zealand Limited
Neal Barclay, Michael Roan (appointed 28 May 2019),
Jason Stein (appointed 12 April 2019)
Paul Chambers (ceased 12 April 2019)
Three River Holdings No. 1 Limited
Neal Barclay, Michael Roan (appointed 28 May 2019),
Jason Stein
Paul Chambers (ceased 12 April 2019),
Kelvin Mason (A) (ceased 12 April 2019)
Three River Holdings No. 2 Limited
Neal Barclay, Michael Roan (appointed 28 May 2019),
Jason Stein
Paul Chambers (ceased 12 April 2019),
Kelvin Mason (A) (ceased 12 April 2019)
7
8
Further disclosuresMeridian Annual Report 2019Menu Australian subsidiaries
Company name
Directors
Further information
Meridian Australia Holdings Pty Limited
Neal Barclay, Michael Roan (appointed 12 June 2019),
Ed McManus, Gillian Blythe (appointed 24 July 2018)
Paul Chambers (ceased 12 April 2019)
Meridian Energy Australia Pty Limited
Neal Barclay, Michael Roan (appointed 12 June 2019),
Ed McManus, Gillian Blythe (appointed 24 July 2018)
Paul Chambers (ceased 12 April 2019)
Meridian Energy Markets Pty Limited
Neal Barclay, Michael Roan (appointed 12 June 2019),
Ed McManus, Gillian Blythe (appointed 24 July 2018)
Paul Chambers (ceased 12 April 2019)
Meridian Finco Pty Limited
Neal Barclay, Michael Roan (appointed 12 June 2019),
Ed McManus, Gillian Blythe (appointed 24 July 2018)
Paul Chambers (ceased 12 April 2019)
Meridian Wind Australia Holdings Pty Limited Neal Barclay, Michael Roan (appointed 12 June 2019),
Paul Chambers (ceased 12 April 2019)
Ed McManus, Gillian Blythe (appointed 24 July 2018)
Meridian Wind Monaro Range
Holdings Pty Limited
Neal Barclay, Michael Roan (appointed 12 June 2019),
Ed McManus, Gillian Blythe (appointed 24 July 2018)
Paul Chambers (ceased 12 April 2019)
Meridian Wind Monaro Range Pty Limited
Neal Barclay, Michael Roan (appointed 12 June 2019),
Ed McManus, Gillian Blythe (appointed 24 July 2018)
Paul Chambers (ceased 12 April 2019)
Mt Millar Wind Farm Pty Limited
Neal Barclay, Michael Roan (appointed 12 June 2019),
Ed McManus, Gillian Blythe (appointed 24 July 2018)
Paul Chambers (ceased 12 April 2019)
Mt Mercer Wind Farm Pty Limited
Neal Barclay, Michael Roan (appointed 12 June 2019),
Ed McManus, Gillian Blythe (appointed 24 July 2018)
Paul Chambers (ceased 12 April 2019)
Powershop Australia Pty Limited
Neal Barclay, Michael Roan (appointed 12 June 2019),
Ed McManus, Gillian Blythe (appointed 24 July 2018)
Paul Chambers (ceased 12 April 2019)
GSP Energy Pty Limited
Neal Barclay, Michael Roan (appointed 12 June 2019),
Ed McManus, Gillian Blythe (appointed 24 July 2018)
Paul Chambers (ceased 12 April 2019)
8
8
Further disclosuresMeridian Annual Report 2019Menu Particulars of entries in the
interests register made during
the accounting period
Shareholders can review
Meridian Energy Limited’s full
interests register on request.
In accordance with sections 140
and 211(e) of the Companies Act
1993, the table opposite lists the
general disclosures of interest
by directors of Meridian Energy
Limited and its subsidiaries:
UK subsidiary
Company name
Flux-UK Limited
Directors
Further information
Neal Barclay, Jim Barrett
Paul Chambers (ceased 12 April 2019)
Ari Sargent (ceased 3 May 2019)
Name
Position
Disclosures
Mark Cairns
Director, Meridian Energy Limited
Jan Dawson
Director, Meridian Energy Limited
Mary Devine
Director, Meridian Energy Limited
and Meridian LTI Trustee Limited
Coda GP Limited—Director
Port of Tauranga Limited—Employee
Port of Tauranga Trustee Company Limited—Director
Quality Marshalling Limited—Chair
Northport Limited—Director
AIG Insurance New Zealand Limited—Director
Air New Zealand Limited—Director, Shareholder and Bondholder
Beca Group Limited—Director44
Mercury NZ Limited—Shareholder
Westpac New Zealand Limited—Director (Chair from March 2015)
Briscoe Group—Director44
Christchurch City Holdings Limited—Director44
Foodstuffs (New Zealand) Limited—Director
Foodstuffs South Island Limited—Director
Hallenstein Glasson Holdings Limited—Director
(Managing Director from 1 April 2019)45
IAG New Zealand Limited—Director44
IAG (NZ) Holdings Limited—Director44
Anake Goodall
Director, Meridian Energy Limited
and Meridian LTI Trustee Limited
Impax Environmental Markets—Shareholder
Moreton Resources Limited (formerly Cougar Energy Limited)—Shareholder
Seed The Change – He Kākano Hāpai—Chair45
Chris Moller
Chair, Meridian Energy Limited
Contact Energy Limited—Shareholder
Trustpower Limited—Bondholder
Westpac New Zealand Limited—Director
9
8
Further disclosuresMeridian Annual Report 2019Menu Name
Position
Disclosures
Peter Wilson
Director, Meridian Energy Limited
Mark Verbiest
Director, Meridian Energy Limited
Arvida Group—Chair
Contact Energy Limited–Shareholder
Farmlands Trading Society Limited—Director44
Genesis Energy Limited–Bondholder
Genesis Energy Limited—Shareholder
Infratil Limited—Shareholder45
Mercury NZ Limited—Bondholder
Mercury NZ Limited—Shareholder
ANZ Bank New Zealand Limited—Director
Aspiring Foundation Trust—Trustee44
Bear Fund NZ Limited—Director44
Freightways Limited—Chair and Shareholder
Infratil Limited—Shareholder
Mycare Limited—Chair and Shareholder
New Zealand Treasury Advisory Board
New Zealand Treasury Commercial Operations Advisory Board—Member44
NZ Council of Women—Advisory panel member44
Southern Lakes Arts Festival Trust—Trustee
Southern Alps Rescue Trust—Trustee
Spark New Zealand—Shareholder44
UDC Finance Limited—Chair45 (ceasing 30 September 2019)
Willis Bond Capital Partners Limited—Chair and Shareholder
Willis Bond General Partner Limited—Chair
44 Entries removed by notices given by directors during the year ended 30 June 2019.
45 Entries added by notices given by directors during the year ended 30 June 2019.
0
9
Further disclosuresMeridian Annual Report 2019Menu As at 30 June 2019 one director
of Meridian Energy Limited had
disclosed, in accordance with section
148 of the Companies Act 1993,
the acquisition of relevant interests
in Meridian Energy Limited Securities
during the financial year.
Director Indemnity
Pursuant to section 162 of the
Companies Act 1993, as permitted
by Meridian’s constitution, Deeds
of Indemnity have been given to
directors for potential liabilities and
costs they might incur for actions
or omissions in their capacity
as directors. From 1 May 2019,
Meridian’s directors’ and officers’
liability insurance was renewed
to cover risks normally covered
by such policies. Insurance is not
provided for dishonest, fraudulent,
malicious or wilful acts or omissions.
Nature of
relevant interest
Date
Acquisition/
Disposal
Class
# acquired or
(disposed)
Consideration paid
or received per share
Mark Cairns
Beneficial interest
2 April 2019
Acquisition
Shares
35,000
$4.174
Senior managers’ equity holdings
As at 30 June 2019, the following
senior managers had relevant
interests in Meridian Energy
Limited equity:
Neal Barclay
Mike Roan
Julian Smith
Guy Waipara
Number of shares
444,618
226,932
41,873
327,517
Donations
The Meridian Energy Group made
donations totalling $250,000 during
FY19. Meridian does not make
donations to political parties.
All donations must be approved
by the Board.
Interests in Meridian Securities
In accordance with NZX Listing
Rule 3.7.1(d), as at 30 June 2019
Meridian Energy Limited directors
had the following relevant interests
in Meridian Energy Limited Quoted
Financial Products:
Director
Mark Cairns
Jan Dawson
Mary Devine
Anake Goodall
Chris Moller
Peter Wilson
Mark Verbiest
Auditor
The Auditor-General has appointed
Trevor Deed of Deloitte Limited
as auditor of the company.
Mr Deed has been the auditor of the
company since FY16. Meridian and
its subsidiaries paid $0.8 million
(2018: $0.7 million) to Deloitte
Limited as audit fees in FY19.
The fees for other services
undertaken by Deloitte Limited
during FY19 totalled $0.1 million
(2018: $0.1 million). These related to
other assurance activities including
reviews of carbon emissions,
securities registers, vesting of the
executive LTI plan, solvency return of
Meridian Energy Captive Insurance
Limited and trustee reporting.
Number
of shares
235,000
51,300
51,510
60,000
92,880
99,170
35,000
1
9
Further disclosuresMeridian Annual Report 2019Menu Twenty largest registered
holders of Quoted Financial
Products as at the balance date
The table opposite lists the
company’s 20 largest registered
shareholders as at 30 June 2019:
Names
Her Majesty The Queen In Right of New Zealand Acting by
and Through Her Minister of Finance and Minister for SOEs
HSBC Nominees (New Zealand) Limited46
HSBC Nominees (New Zealand) Limited46
J.P. Morgan Chase Bank Na NZ Branch-Segregated Clients Acct46
Citibank Nominees (New Zealand) Limited46
Accident Compensation Corporation46
Custodial Services Limited
HSBC Nominees A/C NZ Superannuation Fund Nominees Limited46
National Nominees New Zealand Limited46
Forsyth Barr Custodians Limited
TEA Custodians Limited Client Property Trust Account46
Custodial Services Limited
JBWere (NZ) Nominees Limited
HSBC Custody Nominees (Australia) Limited
FNZ Custodians Limited
BNP Paribas Nominees (NZ) Limited46
Custodial Services Limited
ANZ Wholesale Australasian Share Fund46
BNP Paribas Nominees (NZ) Limited46
Citicorp Nominees Pty Limited
Number of shares
% of issued shares
1,307,586,374
51.02
132,003,558
105,368,302
92,929,558
73,813,643
39,779,307
29,878,669
29,273,158
28,009,446
27,335,668
25,542,437
24,591,171
24,083,397
21,626,958
18,825,645
18,292,610
17,396,036
15,307,568
14,869,829
10,628,541
5.15
4.00
3.63
2.88
1.55
1.17
1.14
1.09
1.07
1.00
0.96
0.94
0.84
0.74
0.71
0.68
0.60
0.58
0.42
2
9
As at 30 June 2019, 608,582,499 Meridian ordinary shares (or 23.74% of the ordinary shares on issue) were held through NZCSD.
46 Held through New Zealand Central Securities Depository Limited (NZCSD). NZCSD provides a custodial service that allows electronic trading of securities by its members.
Further disclosuresMeridian Annual Report 2019Menu The table opposite lists the
company’s 20 largest registered
holders of MEL030 retail fixed-rate
bonds as at 30 June 2019:
Names
Number of bonds
% of issued shares
BNP Paribas Nominees (NZ) Limited46
BNP Paribas Nominees (NZ) Limited46
Citibank Nominees (New Zealand) Limited46
FNZ Custodians Limited
Forsyth Barr Custodians Limited
TEA Custodians Limited Client Property Trust Account46
Investment Custodial Services Limited
Mt Nominees Limited46
Ning Gao
Custodial Services Limited
ANZ Custodial Services New Zealand Limited46
Custodial Services Limited
FNZ Custodians Limited
Custodial Services Limited
J.P. Morgan Chase Bank Na NZ Branch-Segregated Clients Acct46
Custodial Services Limited
University Of Otago Foundation Trust
FNZ Custodians Limited
Forsyth Barr Custodians Limited
Forsyth Barr Custodians Limited
22,087,000
16,800,000
13,300,000
13,041,000
12,444,000
5,335,000
5,048,000
4,000,000
3,331,000
2,992,000
2,657,000
2,612,000
2,493,000
2,327,000
2,220,000
1,752,000
1,400,000
1,132,000
1,105,000
1,100,000
14.72
11.20
8.87
8.69
8.30
3.56
3.37
2.67
2.22
1.99
1.77
1.74
1.66
1.55
1.48
1.17
0.93
0.75
0.74
0.73
46 Held through New Zealand Central Securities Depository Limited (NZCSD). NZCSD provides a custodial service that allows electronic trading of securities by its members.
3
9
Further disclosuresMeridian Annual Report 2019Menu The table opposite lists the
company’s 20 largest registered
holders of MEL040 retail fixed-rate
bonds as at 30 June 2019:
Names
Number of bonds
% of issued shares
BNP Paribas Nominees (NZ) Limited46
Citibank Nominees (New Zealand) Limited46
BNP Paribas Nominees (NZ) Limited46
Custodial Services Limited
FNZ Custodians Limited
Custodial Services Limited
Investment Custodial Services Limited
HSBC Nominees (New Zealand) Limited46
Forsyth Barr Custodians Limited
Custodial Services Limited
Custodial Services Limited
TEA Custodians Limited Client Property Trust Account46
J.P. Morgan Chase Bank Na NZ Branch46
National Nominees New Zealand Limited46
NZPT Custodians (Grosvenor) Limited
Custodial Services Limited
New Zealand Methodist Trust Association
Forsyth Barr Custodians Limited
JBWere (NZ) Nominees Limited
Woolf Fisher Trust Incorporated
19,718,000
16,430,000
11,050,000
7,725,000
7,382,000
7,064,000
5,917,000
5,060,000
4,740,000
4,381,000
3,663,000
3,446,000
3,000,000
3,000,000
3,000,000
2,843,000
2,357,000
2,060,000
1,317,000
1,300,000
13.15
10.95
7.37
5.15
4.92
4.71
3.94
3.37
3.16
2.92
2.44
2.30
2.00
2.00
2.00
1.90
1.57
1.37
0.88
0.87
46 Held through New Zealand Central Securities Depository Limited (NZCSD). NZCSD provides a custodial service that allows electronic trading of securities by its members.
4
9
Further disclosuresMeridian Annual Report 2019Menu The table opposite lists the
company’s 20 largest registered
holders of MEL050 retail fixed-rate
bonds as at 30 June 2019:
Names
Number of bonds
% of issued shares
ANZ Custodial Services New Zealand Limited46
52,890,000
26.45
FNZ Custodians Limited
Forsyth Barr Custodians Limited
Investment Custodial Services Limited
HSBC Nominees (New Zealand) Limited
BNP Paribas Nominees (NZ) Limited46
Custodial Services Limited
Custodial Services Limited
Custodial Services Limited
Citibank Nominees (New Zealand) Limited46
Mt Nominees Limited46
Mint Nominees Limited46
HSBC Nominees (New Zealand) Limited46
Custodial Services Limited
JBWere (NZ) Nominees Limited
NZPT Custodians (Grosvenor) Limited46
TEA Custodians Limited Client Property Trust Account46
Custodial Services Limited
Risk Reinsurance Limited
Forsyth Barr Custodians Limited
16,526,000
15,443,000
13,703,000
11,900,000
7,397,000
7,105,000
6,228,000
4,426,000
4,400,000
4,000,000
3,980,000
3,700,000
3,380,000
2,918,000
2,720,000
2,420,000
1,737,000
1,600,000
1,292,000
8.26
7.72
6.85
5.95
3.70
3.55
3.11
2.21
2.20
2.00
1.99
1.85
1.69
1.46
1.36
1.21
0.87
0.80
0.65
46 Held through New Zealand Central Securities Depository Limited (NZCSD). NZCSD provides a custodial service that allows electronic trading of securities by its members.
5
9
Further disclosuresMeridian Annual Report 2019Menu Substantial security holder
In accordance with the Financial
Markets Conduct Act 2013, as at
30 June 2019 the total number of
Meridian Energy Limited voting
securities was 2,563,000,000. The
shareholder with the greatest number
of voting securities is listed opposite:
Distribution of security holders
and holdings as at 30 June 2019
The table opposite sets out the
distribution of security holders and
holdings of Meridian Energy Limited
ordinary shares as at 30 June 2019:
Name
Shares
Relevant interest
in number of shares
% of shares held
at the date of notice
Date of notice
Her Majesty the Queen in Right of New Zealand
1,307,586,374
51.02
21 May 2016
Size of holding
1–1,000
1,001–5,000
5,001–10,000
10,001–50,000
50,001–100,000
100,001–500,000
500,001 and over
Total
Number of holders
%
Number of shares
Holding quantity %
7,515
22,265
9,122
6,928
477
222
76
46,605
16.12
47.77
19.57
14.87
1.02
0.48
0.16
100
6,662,680
65,194,757
72,051,243
141,242,728
33,868,592
41,953,272
2,202,026,728
2,563,000,000
0.26
2.54
2.81
5.51
1.32
1.64
85.92
100
6
9
Further disclosuresMeridian Annual Report 2019Menu Bondholder statistics
as at 30 June 2019
The table opposite provides
information on the distribution
of MEL030 retail fixed-rate
bonds as at 30 June 2019:
The table opposite provides
information on the distribution
of MEL040 retail fixed-rate
bonds as at 30 June 2019:
Size of holding
1,001–5,000
5,001–10,000
10,001–50,000
50,001–100,000
100,001–500,000
500,001 and over
Total
Size of holding
1,001–5,000
5,001–10,000
10,001–50,000
50,001–100,000
100,001–500,000
500,001 and over
Total
Number of bondholders
% of bondholders
Number of bonds
% of bonds
78
188
413
49
46
26
800
9.75
23.5
51.63
6.13
5.75
3.25
100
390,000
1,788,000
11,393,000
4,083,000
9,510,000
122,836,000
150,000,000
0.26
1.19
7.60
2.72
6.34
81.89
100
Number of bondholders
% of bondholders
Number of bonds
% of bonds
39
113
455
71
37
27
742
5.26
15.23
61.32
9.57
4.99
3.64
100
195,000
1,058,000
12,441,000
5,430,000
9,231,000
121,645,000
150,000,000
0.13
0.71
8.29
3.62
6.15
81.10
100
7
9
Further disclosuresMeridian Annual Report 2019Menu The table opposite provides
information on the distribution
of MEL050 retail fixed-rate
bonds as at 30 June 2019:
Size of holding
1,001–5,000
5,001–10,000
10,001–50,000
50,001–100,000
100,001–500,000
500,001 and over
Total
Number of bondholders
% of bondholders
Number of bonds
% of bonds
30
103
392
89
29
29
672
4.46
15.33
58.33
13.24
4.32
4.32
100
146,000
966,000
10,943,000
6,954,000
6,423,000
174,568,000
200,000,000
0.07
0.48
5.47
3.48
3.21
87.28
100
Waivers from NZX
No waivers were granted and
published by NZX during FY19.
Details of the waivers relied on by
Meridian Energy Limited during FY19
are available on Meridian’s website.
View waivers
Non-standard designation
In New Zealand, Meridian Energy
Limited has a ‘non-standard’ (NS)
designation on the NZX Main Board.
This is due to particular provisions of
the company’s constitution, including
requirements that regulate the
ownership and transfer of Meridian
securities. The NS designation is also
required as a condition of any NZX
waivers and approvals.
Credit rating as at 30 June 2019
Meridian Energy Limited had a
Standard & Poor’s corporate credit
rating of BBB+/Stable/A-2 in FY19.
Registration as a foreign company
Meridian has registered with the
Australian Securities and Investments
Commission as a foreign company
and has been issued with an
Australian Registered Body Number
of 151 800 396.
ASX disclosures
Meridian holds a foreign exempt
listing on the ASX. As a requirement
of admission Meridian must make the
following disclosures:
• Meridian’s place of incorporation is
New Zealand.
• Meridian is not subject to Chapters
6, 6A, 6B and 6C of the Australian
Corporations Act dealing with the
acquisition of shares (including
substantial holdings and takeovers).
Shareholding restrictions
The Public Finance Act was amended
in June 2012 to include restrictions
on the ownership of certain types
of security issued by each mixed-
ownership-model company (including
Meridian) and the consequences
of breaching those restrictions. The
constitution incorporates these
restrictions and mechanisms for
monitoring and enforcing them.
A summary of the restrictions on the
ownership of shares under the Public
Finance Act and the constitution is
set out below. If the company issues
any other class of shares, or other
securities confer voting rights, in the
future, the restrictions summarised
below will also apply to those other
classes of shares or voting securities.
8
9
Further disclosuresMeridian Annual Report 2019Menu 51% holding
The Crown must hold at least 51% of
the shares on issue.
The company must not issue, acquire
or redeem any shares if such issue,
acquisition or redemption would
result in the Crown falling below
this 51% holding.
10% limit
No person (other than the Crown)
may have a ‘relevant interest’47 in
more than 10% of the shares on
issue (10% Limit).
The company must not issue, acquire,
redeem or transfer any shares if it has
actual knowledge that such issue,
acquisition, redemption or transfer
will result in any person other than the
Crown exceeding the 10% Limit.
Ascertaining whether
a breach has occurred
If a holder of shares breaches the
10% Limit or knows or believes that
a person who has a relevant interest in
shares held by that holder may have
a relevant interest in shares in breach
of the 10% Limit, the holder must
notify the company of the breach
or potential breach.
Meridian may require a holder of
shares to provide the company with
a statutory declaration if the Board
knows or believes that a person is,
or is likely to be, in breach of the
10% Limit. That statutory declaration
is required to include, where
applicable, details of all persons who
have relevant interests in shares as
a result of the shares held by or on
behalf of that holder.
Determining whether
a breach has occurred
The company has the power to
determine whether a breach of the
10% Limit has occurred. In broad
terms, if:
• the company considers that a person
may be in breach of the 10% Limit; or
• a holder of shares fails to lodge a
statutory declaration when required
to do so or lodges a declaration
that has not been completed to
the reasonable satisfaction of
the company,
Meridian is required to determine
whether or not the 10% Limit has
been breached and, if so, whether
or not that breach was inadvertent.
The company must give the affected
shareholder the opportunity to make
representations to the company
before it makes a determination
on these matters.
Effect of exceeding the 10% Limit
A person who is in breach of the 10%
Limit must:
• comply with any notice that they
receive from the company requiring
them to dispose of shares or their
relevant interest in shares, or take
any other steps that are specified
in the notice, for the purpose of
remedying the breach and reducing
their holding below the 10% Limit
• ensure that they are no longer in
breach within 60 days after the
date on which they became aware,
or ought to have been aware, of
the breach. If the breach is not
remedied within that timeframe, the
company may arrange for the sale
of the relevant number of shares on
behalf of the relevant shareholder.
In those circumstances the company
will pay the net proceeds of sale,
after the deduction of any other
costs incurred in connection with
the sale (including brokerage and
the costs of investigating the breach
of the 10% Limit), to the relevant
shareholder as soon as practicable
after the sale has been completed.
47 In broad terms, a person has a ‘relevant interest’ in
a share if the person (a) is the registered holder or
beneficial owner of the share; or (b) has the power
to exercise, or control the exercise of, a right to vote
attached to the share or has the power to acquire or
dispose of, or to control the acquisition or disposal
of, that share. A person may also have a ‘relevant
interest’ in a share in which another person has a
‘relevant interest’ depending on the nature of the
relationship between them.
9
9
Further disclosuresMeridian Annual Report 2019Menu If a relevant interest is held in any
shares in breach of the 10% Limit then,
for as long as that breach continues:
• no votes may be cast directly by a
shareholder in respect of any of the
shares in which a relevant interest
is held in excess of the 10% Limit
• a registered holder of shares in
which a relevant interest is held in
breach of the 10% Limit will not be
entitled to receive, in respect of the
shares in which a relevant interest
is held in excess of the 10% Limit,
any dividend or other distribution
authorised by the Board in respect
of the shares.
However, if the Board determines
that a breach of the 10% Limit was
not inadvertent, or that it does
not have sufficient information to
determine that the breach was not
inadvertent, the restrictions on voting
and entitlement to receive dividends
and other distributions described
in the preceding paragraphs will
apply in respect of all of the shares
(as applicable) held by the relevant
shareholder or holder (and not just
the shares in which a relevant interest
is held in excess of the 10% Limit).
The Board may refuse to register
a transfer of shares if it knows or
believes that the transfer will result
in a breach of the 10% Limit or where
the transferee has failed to lodge a
statutory declaration requested from
it by the Board within 14 days of the
date on which the company gave
notice to the transferee to provide
such statutory declaration.
Crown directions
The Crown has the power to direct
the Board to exercise certain of
the powers conferred on it under
the constitution. For example,
where the Crown suspects that
the 10% Limit has been breached
but the Board has not taken steps
to investigate the suspected
breach, the Crown may require
the company to investigate
whether a breach of the 10% Limit
has occurred or to exercise a power
of sale of the relevant share that
has arisen as described under the
heading ‘Effect of exceeding the
10% Limit’ above.
Trustee corporations
and nominee companies
Trustee corporations and nominee
companies (that hold securities on
behalf of a large number of separate
underlying beneficial holders) are
exempt from the 10% Limit provided
that certain conditions are satisfied.
Share cancellation
In certain circumstances shares can
be cancelled by Meridian through a
reduction of capital, share buyback
or other form of capital reconstruction
approved by the Board and, where
applicable, shareholders.
NZX Corporate Governance Code
Meridian has a separate Corporate
Governance Statement, which
outlines our compliance with the
NZX Corporate Governance Code
and is available on our website.
View Corporate
Governance Statement
The Corporate Governance Code
is current as at 26 August 2019.
0
0
1
Further disclosuresMeridian Annual Report 2019Menu Meridian Group Workforce
Permanent employees
Female
Male
Female
Male
Total
New Zealand49
Australia50
Permanent full time48
Permanent part time
Temp/Fixed term employees
Temp/fixed term full time
Temp/fixed term part time
Total
418
18
16
17
469
501
4
18
10
533
19
1
–
–
20
51
1
3
2
57
989
24
37
29
1,079
48 3 of these employees are based in the UK (all male).
49 143 of these employees work for Powershop New Zealand. 158 of these employees work for Flux Federation New Zealand.
50 7.79% of these staff are covered by collective bargaining agreements.
Membership of associations
Total spent (NZD)
$162,365
$242,513
$246,463
$211,927
FY16
FY17
FY18
FY19
Largest contributions
Value to electricity customers
(ERANZ, Australian Energy Council)
Sustainable business (SBC, SBN)
Clean energy advocacy
(CEC, NZWEA, NZ Hydrogen, Drive Electric)
$52,365
$167,763
$167,763
$122,077
$21,000
$7,000
$18,500
$21,750
$22,450
$24,250
$22,450
$35,400
Other Large Expenditures (Business NZ)
$82,000
$34,500
$32,000
$32,000
1
0
1
Further disclosuresMeridian Annual Report 2019Menu Financial
performance
2
0
1
MenuMeridian Annual Report 2019Financials And as a result...
This year we achieved our best
ever financial result by generating
strongly into favourable wholesale
market conditions, by focusing on
growing our customer base and
by encouraging our retail brands
in Australia and New Zealand to
build customer loyalty.
3
0
1
Meridian Annual Report 2019MenuFinancials Group financial statements
Notes to the Group financial statements
Income Statement
The income earned and operating
expenditure incurred by the Meridian
Group during the financial year.
Comprehensive Income Statement
Items of income and operating expense,
that are not recognised in the income
statement and hence taken to reserves
in equity.
Balance Sheet
A summary of the Meridian Group
assets and liabilities at the end of
the financial year.
Statement of Changes in Equity
Components that make up the capital
and reserves of the Meridian Group and
the changes of each component during
the financial year.
Statement of Cash Flows
Cash generated and used by the
Meridian Group.
105
105
106
107
108
Key
109
111
112
About this report
Significant matters in the financial year
A. Financial performance
A1. Segment performance
A2. Income
A3. Expenses
A4. Taxation
118
B. Assets used to generate and sell electricity
B1. Property, plant and equipment
B2. Intangible assets
B3. Customer contract assets
123
C. Managing funding
131
143
144
C1. Capital management
C2. Share capital
C3. Earnings per share
C4. Dividends
C5. Cash and cash equivalents
C6. Trade receivables
C7. Borrowings
C8. Finance lease payable
C9. Commitments
D. Financial instruments used to manage risk
D1. Financial risk management
E. Group structure
E1. Subsidiaries
F. Other
F1. Share-based payments
F2. Related parties
F3. Auditors remuneration
F4. Contingent assets and liabilities
F5. Subsequent events
F6. Changes in financial
reporting standards
Subsequent
event
Key judgements
and estimates
Risks
147
Signed report
Independent auditor’s report
4
0
1
MenuMeridian Annual Report 2019Financials Income Statement
Comprehensive Income Statement
Note
A2
A3
A3
A3
A3
D1
A3
A2
D1
A4
Operating revenue
Operating expenses
Earnings before interest, tax, depreciation,
amortisation, changes in fair value of hedges
and other significant items (EBITDAF)
Depreciation and amortisation
Impairment of assets
Gain on sale of assets
Net change in fair value of electricity and other hedges
Operating profit
Finance costs
Interest income
Net change in fair value of treasury instruments
Net profit before tax
Tax expense
Net profit after tax attributed to the shareholders of the
parent company
Earnings per share (EPS) attributed to
ordinary equity holders of the parent
2019
$M
2018
$M
3,491
2,762
(2,653)
(2,096)
838
(276)
(5)
3
58
618
(84)
1
(63)
472
(133)
666
(268)
(2)
7
(22)
381
(82)
1
(4)
296
(95)
339
201
Cents
Cents
Basic and diluted earnings per share
C3
13.2
7.8
Net profit after tax
Other comprehensive income
Items that will not be reclassified to profit or loss:
Asset revaluation
Deferred tax on the above item
Items that may be reclassified to profit or loss:
Net (loss)/gain on cash flow hedges
Exchange differences arising from translation
of foreign operations
Income tax on the above items
Other comprehensive income for the year, net of tax
Total comprehensive income for the year, net of tax
attributed to shareholders of the parent company
Note
2019
$M
339
2018
$M
201
B1
A4
A4
1,139
(320)
819
(5)
(21)
1
(25)
794
–
–
–
2
11
–
13
13
1,133
214
5
0
1
The notes to the Group financial statements form an integral part of these financial statements.
Meridian Annual Report 2019MenuFinancials Balance Sheet
Current assets
Cash and cash equivalents
Trade receivables
Customer contract assets
Financial instruments
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax
Financial instruments
Total non-current assets
Total assets
Note
C5
C6
B3
D1
B1
B2
A4
D1
2019
$M
78
292
20
118
34
542
2018
$M
60
261
19
77
32
449
8,825
7,941
59
40
191
9,115
9,657
60
46
136
8,183
8,632
For and on behalf of the Board of Directors who authorised the issue of the financial statements
on 23 August 2019.
Current liabilities
Payables and accruals
Employee entitlements
Customer contract liabilities
Current portion of term borrowings
Finance lease payable
Financial instruments
Current tax payable
Total current liabilities
Non-current liabilities
Term borrowings
Deferred tax
Provisions
Finance lease payables
Financial instruments
Term payables
Total non-current liabilities
Total liabilities
Shareholders’ equity
Share capital
Reserves
Total shareholders’ equity
Chris Moller,
Chair, 23 August 2019
Jan Dawson,
Chair, Audit and Risk Committee, 23 August 2019
Total liabilities and shareholders’ equity
Note
C7
C8
D1
C7
A4
C8
D1
C2
2019
$M
303
17
16
167
1
36
80
2018
$M
267
16
14
450
1
52
43
620
843
1,303
1,968
9
31
209
60
3,580
4,200
1,599
3,858
5,457
9,657
1,023
1,683
9
47
129
75
2,966
3,809
1,598
3,225
4,823
8,632
6
0
1
The notes to the Group financial statements form an integral part of these financial statements.
Meridian Annual Report 2019MenuFinancials Statement of Changes in Equity
$M
Balance at 1 July 2017
Net profit for the 2018 financial year
Other comprehensive income
Net gain on cash flow hedges
Exchange differences from translation of foreign operations
Total other comprehensive income, net of tax
Total comprehensive income for the year, net of tax
Share-based transactions
Dividends paid
Balance at 30 June 2018 and 1 July 2018
Net profit for the 2019 financial year
Other comprehensive income
Asset revaluation
Net loss on cash flow hedges
Exchange differences from translation of foreign operations
Income tax relating to other comprehensive income
Total other comprehensive income, net of tax
Total comprehensive income for the year, net of tax
Share-based transactions
Dividends paid
Balance at 30 June 2019
Note
C2,F1
C4
B1
A4
C2,F1
C4
Share option
reserve
Revaluation
reserve
Foreign
currency
translation
reserve
Cash flow
hedge
reserve
1
–
–
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
1
4,249
(27)
–
–
–
–
–
–
–
4,249
–
1,139
–
–
(320)
819
819
–
–
–
–
11
11
11
–
–
(16)
–
–
–
(21)
–
(21)
(21)
–
–
5,068
(37)
(1)
–
2
–
2
2
–
–
1
–
–
(5)
–
1
(4)
(4)
–
–
(3)
Share
capital
1,598
–
–
–
–
–
–
–
1,598
–
–
–
–
–
–
–
1
–
1,599
Retained
earnings
Total equity
(725)
5,095
201
201
–
–
–
201
–
(486)
2
11
13
214
–
(486)
(1,010)
4,823
339
339
–
–
–
–
–
339
–
(500)
1,139
(5)
(21)
(319)
794
1,133
1
(500)
(1,171)
5,457
7
0
1
The notes to the Group financial statements form an integral part of these financial statements.
Meridian Annual Report 2019MenuFinancials Statement of Cash Flows
Operating activities
Receipts from customers
Interest received
Payments to suppliers and employees
Interest paid
Income tax paid
Operating cash flows
Investing activities
Sale of property, plant and equipment
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of subsidiary
Australian stamp duty paid
Investing cash flows
Financing activities
Term borrowings drawn
Term borrowings repaid
Finance lease paid
Dividends paid
Financing cash flows
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate changes on net cash
Cash and cash equivalents at end of year
Note
2019
$M
2018
$M
3,463
2,765
1
1
(2,628)
(2,152)
(77)
(124)
635
–
(45)
(24)
–
–
(69)
439
(484)
(1)
(500)
(546)
20
60
(2)
78
(79)
(108)
427
23
(33)
(22)
(182)
(10)
(224)
462
(200)
(1)
(486)
(225)
(22)
80
2
60
C5
C4
C5
8
0
1
The notes to the Group financial statements form an integral part of these financial statements.
Meridian Annual Report 2019MenuFinancials About this report
In this section.
The notes to the 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.
Meridian Energy Limited is a for-profit
entity domiciled and registered
under the Companies Act 1993
in New Zealand. It is an FMC
reporting entity for the purposes
of the Financial Markets Conduct
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 Level 2, 55 Lady Elizabeth Lane,
Wellington. Meridian Energy Limited
is dual listed on the New Zealand
Stock Exchange (NZX) and the
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 financial statements have been
prepared:
• in accordance with Generally
Accepted Accounting Practice
(GAAP) in New Zealand and
comply with International Financial
Reporting Standards (IFRS) and
the New Zealand equivalents
(NZ IFRS), 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;
• in New Zealand dollars (NZD),
with all values rounded to millions
($M) unless otherwise stated; and
• using accounting policies as
provided throughout the notes
to the financial statements.
9
0
1
Key judgements and estimates.
In the process of applying the Group's accounting
policies and application of accounting standards,
Meridian has made a number of judgements
and estimates. The estimates and underlying
assumptions are based on historical experience
and various other factors that are considered to
be appropriate under the circumstances. Actual
results may differ from these estimates.
Judgements and estimates which are considered
material to understanding the performance of
Meridian are found in the following notes:
Note
A2 Income
B1
Property, plant + equipment
B3 Customer contract assets
D1
Financial risk management
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 Basis of consolidation
The Group financial statements
comprise the financial statements
of Meridian Energy Limited and its
subsidiaries and controlled entities,
as contained in note E1 Subsidiaries.
The financial statements of members
of the Group are prepared for
the same reporting period as the
parent company, using consistent
accounting policies.
In preparing the Group financial
statements, all material intra-group
transactions, balances, income and
expenses have been eliminated.
Subsidiaries are consolidated from the
date on which control is obtained to
the date on which control is lost.
Foreign currency
Transactions denominated in
foreign currencies are converted at
the exchange rates at the date of
the transactions. Foreign currency
monetary assets and liabilities are
translated at the rate prevailing at
balance date, 30 June 2019.
The assets and liabilities of international
subsidiaries are translated to NZD
at the closing rate at balance date.
The revenue and expenses of these
subsidiaries are translated at rates
approximating the exchange rates
at the dates of the transactions.
When the financial statements of
subsidiaries are translated into NZD,
exchange differences can arise. These
are recorded in the foreign currency
translation reserve (within equity). If
an international subsidiary is disposed
of, these cumulative translation
differences are recognised in the
income statement in the period in
which that occurs.
The principal functional currency of
international subsidiaries is Australian
dollars; the closing rate at 30 June
2019 was 0.9571 (30 June 2018:
0.9138). A full list of international
subsidiary functional currencies is
provided in note E1 Subsidiaries.
0
1
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 Significant matters in
the financial year
In this section.
Significant matters which have
impacted Meridian's financial
performance and an explanation of
non-GAAP measures used within the
notes to the financial statements.
Hydro inflows
Good hydro storage existed at
the beginning of this financial
year but conditions became drier
in spring and national storage
declined. This combined with
gas pipeline issues resulted in
periods of high spot prices over an
average of $300 in October. These
high prices dropped slightly but
remained above average in the
latter half of the financial year. Hydro
inflows and storage also improved
in the latter half of the year and as a
result Meridian was able to generate
strongly into the market to meet
customer demand, ultimately
increasing revenues.
Adoption of NZ IFRS 9:
Financial Instruments
Meridian Group retrospectively
adopted NZ IFRS 9 during the
financial year. The implementation
of the new standard has not resulted
in any material impacts to the
primary financial statements. The
prior period has therefore not been
restated as a result of the adoption.
There have been several additions to
Meridian's note disclosures due to the
implementation of both NZ IFRS 9 and
the associated reporting requirements
in NZ IFRS 7. As such, users will note
both additions and amendments have
been made in the following areas:
• Section C: Provision for Credit Losses
• Section D: Key Financial Risks & Risk
Management
• Section D: Hedging Instruments
• Section D: Hedge Accounting
The changes provide additional
information compared to prior
periods, or amended presentation
style compared to prior periods.
Generation structures
and plant revaluation
At 30 June 2019 a valuation of
Meridian’s generation structures and
plant assets has been undertaken,
to determine the fair value of the
assets as at this date. Meridian uses
an independent valuer to determine
a valuation range on which the
Board's ultimate valuation decision
is based. The valuation range is set
using an income approach based
primarily on capitalisation of earnings
with additional consideration of
discounted cashflows (DCFs).
The valuation has resulted in a
net increase of $819 million from
30 June 2018 (net of deferred tax).
Key factors that influenced the
valuation were:
• higher market multiples for
Meridian and its sector peers;
and
• the current low interest rate
environment in New Zealand
and Australia.
For more information refer to Note B1
Property plant and equipment.
Non-GAAP measures
Meridian refers to non-GAAP financial
measures within these 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 note
references for reconciliations to
the financial statements.
EBITDAF
Earnings before interest, tax,
depreciation, amortisation, change
in fair value of hedges, impairments
and gains or losses on sale of assets.
EBITDAF is reported in the income
statement, allowing the evaluation
of Meridian's operating performance
without the non-cash impacts 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
that include these items.
Energy margin
Energy margin provides a measure of
financial performance that, unlike total
revenue, accounts for the variability
of the wholesale electricity market
and the broadly offsetting impact
of wholesale prices on the cost of
Meridian's retail electricity purchases
and revenue from generation.
Meridian uses the measure of energy
margin within Meridian's 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.
1
1
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 A
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 year by
reference to key areas including:
performance by operating
segment, revenue, expenses
and taxation.
A1 Segment performance
The Chief Executive (the chief
operating decision-maker) 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 NZ Retail segment and to
large industrial customers, including
New Zealand Aluminium Smelter
(NZAS) representing the equivalent
of 39% (30 June 2018: 40%) of
Meridian's New Zealand generation
production.
• Development of renewable
electricity generation opportunities
in New Zealand.
New Zealand retail
• Retailing of electricity and
Australia
• Generation of electricity from
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 $74–$79
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".
The transfer price is set in a similar
manner to transactions with
third parties.
• Powershop New Zealand provide
front line customer and back office
services for Powershop Australia.
Revenue of $3 million has been
recorded in 'other revenue' and is
eliminated on Group consolidation.
Meridian's two wind farms and
three hydro power stations, and
sale into the Australian wholesale
electricity market.
• Retailing of electricity mainly
through the Powershop brand
in Australia.
• Development of renewable
electricity generation options
in Australia.
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
(a definition of these measures is
included within significant matters in
the financial year) before unallocated
central corporate expenses. Balance
sheet items are not reported to the
Chief Executive at an operating
segment level.
2
1
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
A
A1 Segment performance continued
Contracted sales, net of distribution costs
Cost to supply customers
Net cost of hedging
Generation spot revenue
Inter-segment electricity sales
Virtual asset swap margins
Other market revenue/(costs)
Energy margin
Other revenue
Dividend revenue
Energy transmission expense
Gross margin
Employee expenses
Electricity metering expenses
Other operating expenses
EBITDAF
Depreciation and amortisation
Impairment of assets
Gain/(Loss) on sale of assets
Net change in fair value of electricity and other hedges
Operating profit
Finance costs
Interest income
Net change in fair value of treasury instruments
Net profit before tax
Tax expense
Net profit after tax
Reconciliation of energy margin
Electricity sales revenue, net of hedging
Electricity expenses, net of hedging
Electricity distribution expenses
Energy margin
3
1
1
NZ Wholesale
NZ Retail
Australia
2019
$M
524
2018
$M
435
2019
$M
654
(1,985)
(1,259)
(502)
126
1,672
613
11
(7)
41
1,039
535
(2)
(6)
–
–
–
–
2
2018
$M
629
(470)
–
–
–
–
2
954
783
154
161
2
–
(125)
831
(28)
–
(63)
740
–
–
–
–
–
–
–
–
–
2
–
(122)
663
(28)
–
(56)
579
–
–
–
–
–
–
–
–
–
12
–
–
166
(31)
(33)
(35)
67
–
–
–
–
–
–
–
–
–
12
–
–
173
(31)
(31)
(34)
77
–
–
–
–
–
–
–
–
–
2019
$M
152
(150)
4
113
–
–
(1)
118
2
–
(6)
114
(13)
–
(37)
64
–
–
–
–
–
–
–
–
–
2018
$M
124
(99)
(25)
87
–
–
(1)
86
1
–
(5)
82
(9)
–
(29)
44
–
–
–
–
–
–
–
–
–
2,492
(1,538)
–
954
1,825
(1,042)
–
783
1,297
(630)
(513)
154
1,201
(553)
(487)
161
290
(107)
(65)
118
249
(100)
(63)
86
Other and Unallocated
2018
$M
2019
$M
–
–
–
–
–
–
–
–
29
41
–
70
(30)
–
(22)
18
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20
46
–
66
(27)
–
(22)
17
–
–
–
–
–
–
–
–
–
–
–
–
–
2019
$M
–
613
–
–
–
–
–
(20)
(41)
–
(61)
–
–
10
(51)
–
–
–
–
–
–
–
–
–
(613)
613
–
–
Inter-segment
Total
2018
$M
2019
$M
–
1,330
2018
$M
1,188
535
(2,024)
(1,293)
(613)
(535)
–
–
–
–
–
(13)
(46)
–
(59)
–
–
8
(51)
–
–
–
–
–
–
–
–
–
130
1,785
–
11
(6)
16
1,126
–
(2)
(5)
1,226
1,030
25
–
(131)
1,120
(102)
(33)
(147)
838
(276)
(5)
3
58
618
(84)
1
(63)
472
(133)
339
22
–
(127)
925
(95)
(31)
(133)
666
(268)
(2)
7
(22)
381
(82)
1
(4)
296
(95)
201
(535)
535
–
–
3,466
(1,662)
(578)
1,226
2,740
(1,160)
(550)
1,030
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 A
A2 Income
Operating revenue
Electricity sales to customers
Electricity generation, net of hedging
Electricity related services revenue
Other revenue
Total revenue by geographic area
New Zealand
Australia
United Kingdom
Interest income
Operating revenue
Electricity 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 electricity.
2019
$M
1,773
1,693
8
17
2018
$M
1,652
1,088
7
15
3,491
2,762
2019
$M
2018
$M
3,187
2,502
292
12
249
11
3,491
2,762
2019
$M
1
2018
$M
1
Electricity generation, net of hedging
Revenue received from:
• electricity generated and sold
into the wholesale markets; and
• net settlement of electricity hedges
sold on electricity 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.
4
1
1
Key judgements and estimates – Revenue.
Electricity consumption
Meridian exercises judgement in
estimating retail electricity sales,
where customer electricity meters
are unread at balance date. These
estimates of customer electricity
usage in the unread period are
based on the customers' historical
consumption patterns.
Revenue is recognised at the time of
supply and customer consumption.
Elements of the sale price such
as discounts and credits given to
customers and any incremental
costs incurred obtaining or retaining
a customer contract are deferred
to customer contract assets on the
balance sheet on a portfolio basis
and released to the income statement
over the contract tenure.
Electricity supply with NZAS
The agreement with New Zealand
Aluminium Smelters (NZAS) has
been recognised in these financial
statements in a manner consistent
with fixed price supply agreements
with other industrial customers.
Revenue is recognised as electricity
sales revenue in the income statement
and the estimated future cash flows
are included in the fair value of
generation structures and plant
assets on the balance sheet.
Discounts and payment terms
Where a discount is offered
revenue is initially recognised net
of estimated discount based on
accumulated experience used to
estimate the amount of discounts
taken by customers.
There are no significant differences
between the payment terms and
this policy.
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 A
A3 Expenses
Operating expenses
Electricity expenses, net of hedging
Electricity distribution expenses
Electricity transmission expenses
Employee expenses
Electricity metering expense
Other expenses
Operating expenses
Electricity expenses, net of hedging
The cost of:
• electricity purchased from
wholesale markets to supply
customers;
• net settlement of buy-side
electricity hedges; and
• related charges and services.
Electricity expenses are influenced
by quantity and timing of customer
consumption and the wholesale
spot price.
Electricity distribution expenses
The cost of distribution companies
transporting electricity between
the national grid and customers'
properties.
Electricity 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.
5
1
1
2019
$M
1,662
578
131
102
33
147
2018
$M
1,160
550
127
95
31
133
2,653
2,096
Employee expenses
Provisions are 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.
Contributions to defined contribution
plans (largely KiwiSaver) were
$5 million in 2019 (30 June 2018:
$4 million).
Electricity metering expenses
The cost of electricity meters, meter
reading and data gathering of retail
customer electricity consumption in
New Zealand. Metering expenses in
Australia are bundled with electricity
distribution costs.
Depreciation and amortisation
Depreciation
Amortisation of intangibles
Finance costs
Interest on borrowings
Interest on electricity option premium
Interest on finance lease payable
Impairment and gain on sale of assets
Impairment of property, plant and equipment
(Gain) on sale on disposal of assets
Note
B1
B2
Note
C8
Note
B1
2019
$M
250
26
276
2019
$M
78
2
4
84
2019
$M
5
(3)
2018
$M
247
21
268
2018
$M
74
2
6
82
2018
$M
2
(7)
Impairment of non-financial assets
Meridian reviews the recoverable
amount of its tangible and intangible
assets at each balance date. They
are grouped into cash-generating
units with separately identifiable cash
flows. The recoverable amount is the
higher of an asset’s fair value less costs
to sell, and present value of future
cash flows expected to be generated
by the assets (also known as value in
use). If the carrying value of an asset
exceeds the recoverable amount, an
impairment expense is recognised in
the income statement. For assets that
are revalued refer to note B1 PP&E for
specific treatment.
The impairment in 2019 is a result
of the revaluation of our generation
structures and plant and relates
specifically to our Australian
generation assets. Refer to note
B1 PP&E for further detail.
In 2019 $2 million of the gain on
sale on disposal of assets relates to
the derecognition of the Mt Mercer
Finance lease (refer to note C8 Finance
lease payable for further detail).
A $13 million gain was recorded in
the income statement due to the
derecognition of the finance lease
liability which was largely offset by
an $11 million loss on disposal of
the corresponding asset.
During the 2018 financial year the
book value of Central Wind consent
was impaired as development is
unlikely to occur under the terms
of the existing resource consent.
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 A
A4 Taxation
Tax expense
Current income tax expense
Adjustments to tax of prior years
Total current tax expense
Deferred tax
Stamp duty paid on asset acquisition
Total tax
Reconciliation to profit before tax
Profit before tax
Income tax at applicable rates
Expenditure not deductible for tax
Income tax (over)/under provided in prior year
Stamp duty paid on asset acquisition
Tax expense
2019
$M
161
–
161
(28)
–
133
472
133
–
–
–
133
2018
$M
121
(1)
120
(35)
10
95
296
83
3
(1)
10
95
Current tax expense
Tax expense components are current
income tax, deferred tax and stamp
duty in 2018.
Current income tax expense is the
income tax assessed on taxable profit
for the year. 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 years,
and also excludes items that will never
be taxable or deductible. Meridian’s
liability for current tax is calculated
using tax rates enacted at balance
date, being 28% for New Zealand
and 30% for Australia.
6
1
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 A
A4 Taxation continued
Deferred tax assets and liabilities
Balance at beginning of year
Temporary differences in income statement:
Depreciation/amortisation
Term payables
Financial instruments
Australia tax losses utilised
Customer contract assets
Deferred income
Other – payables & receivables
Temporary differences in other comprehensive income:
Revaluation reserve movements
Other
Balance at end of year
Made up of:
Property, Plant and Equipment
Term payables
Financial instruments
Customer contract assets
Other – payables & receivables
Deferred tax liability
Carried forward unused tax losses
Deferred income
Deferred tax asset
Total deferred tax
2019
$M
1,637
2018
$M
1,672
(38)
(31)
9
(1)
6
–
(2)
(2)
(28)
320
(1)
2
(6)
–
1
–
(1)
(35)
–
–
1,928
1,637
2,009
1,731
(27)
(19)
6
(1)
(37)
(18)
6
1
1,968
1,683
(38)
(2)
(40)
(46)
–
(46)
1,928
1,637
7
1
1
Unused tax losses
The deferred tax asset relates to
unused tax losses from our Australian
operations and will be utilised against
future taxable income from retail and
generation activities in that country.
Deferred tax asset is recognised to
the extent it is probable that future
taxable profit will be available to use
the asset. This is reviewed at each
balance date and reduced to the
extent that it is no longer probable
that sufficient taxable profits will
be available in the future to utilise
the deferred tax asset.
Offsetting deferred tax balances
Deferred tax assets and liabilities
are offset only if there are legally
enforceable rights to set off current tax
assets against current tax liabilities and
when they relate to the same taxable
entity and taxation authority.
Deferred tax assets and liabilities
Deferred tax is income tax which
is expected to be payable or
recoverable in the future as a result
of the unwinding of temporary
differences. These arise from
differences in the recognition of
assets and liabilities for financial
reporting and from the filing of
income tax returns. Deferred tax
is recognised on all temporary
differences, other than those arising:
• from goodwill; and
• from the initial recognition of
assets and liabilities in a transaction
(other than in a business combination)
that affects neither the accounting
nor taxable profit or loss.
The majority of Meridian's deferred
tax balance is made up of temporary
differences on the revaluation of
property, plant and equipment. This
balance will only reverse if the fair
value of these assets declines back
to their original historical cost.
Deferred tax is calculated at the tax
rates that are expected to apply to the
year when the liability is settled or the
asset realised, based on tax rates and
tax laws that have been enacted or
substantively enacted at balance date.
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
B
Assets used to
generate and
sell electricity
In this section.
This section shows the assets
Meridian uses in the production
and sale of electricity to generate
operating revenue. In this section
of the notes there is information
about:
a. property, plant and equipment;
b. intangible assets; and
c. customer contract assets
B1 Property, plant and equipment
$M
Cost or fair value
Less accumulated depreciation
Net book value at 30 June 2017
Additions
Transfers – work in progress
Transfers – intangible assets
Transfers – Other assets
Disposals
Purchase of subsidiary
Foreign currency exchange rate movements51
Depreciation expense
Net book value at 30 June 2018
Cost or fair value
Less accumulated depreciation
Net book value at 30 June 2018
Additions
Transfers – work in progress
Derecognition of Mt Mercer finance
lease assets
Foreign currency exchange rate movements51
Generation structures and plant revaluation:
Increase taken to revaluation reserve
Decrease taken to income statement
Depreciation expense
Net book value at 30 June 2019
Cost or fair value
Less accumulated depreciation52
Net book value at 30 June 2019
Generation
structures and
plant at fair value
Land and
buildings
at cost
Other plant
and equipment
at cost
Work in
progress
at cost
7,774
–
7,774
–
32
–
9
–
181
17
(237)
7,776
8,013
(237)
7,776
–
8
–
(26)
1,139
(5)
(238)
8,654
8,655
(1)
8,654
30
(5)
25
–
–
–
–
(10)
–
–
–
15
20
(5)
15
–
–
–
–
–
15
20
(5)
15
169
(82)
87
–
11
–
(9)
–
–
2
(11)
80
171
(91)
80
–
6
(11)
(2)
(10)
63
160
(97)
63
77
(2)
75
36
(43)
(2)
–
–
3
–
1
70
71
(1)
70
39
(14)
–
–
(2)
93
96
(3)
93
Total
8,050
(89)
7,961
36
–
(2)
–
(10)
184
19
(247)
7,941
8,275
(334)
7,941
39
–
(11)
(28)
1,139
(5)
(250)
8,825
8,931
(106)
8,825
8
1
1
At 30 June 2019, had the generation structures and plant been
carried at historical cost less accumulated depreciation and
accumulated impairment losses, their carrying amount would
have been approximately $2.5 billion (30 June 2018: $2.6 billion).
51 Through the foreign currency translation reserve in
other comprehensive income.
52 Includes the reversal of accumulated depreciation on
generation structures and plant at revaluation date.
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 B
B1 Property, plant and equipment continued
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.
Fair value and revaluation of
generation structures and plant
Revaluations are performed with
sufficient regularity to ensure that
the carrying amount does not differ
materially from that which would
be determined using fair values
at balance date.
Meridian uses an independent
valuer, who uses an income
valuation approach based primarily
on the capitalisation of earnings
with additional consideration of
the discounted cash flows (DCFs)
to establish a valuation range on
which the Board's ultimate valuation
decision is based.
Any increase arising on revaluation is
credited to the revaluation reserve,
except to the extent that it reverses
a revaluation decrease for the
same asset previously recognised
in the income statement. In that
case the increase is credited to the
income statement to the extent of
the decrease previously charged.
A decrease in carrying amount arising
on revaluation is charged to the
income statement to the extent that
it exceeds the balance, if any, held
in the revaluation reserve relating to
a previous revaluation of that asset.
Accumulated depreciation at
revaluation date is eliminated
against the gross carrying amount
so that the carrying amount
after revaluation represents the
revalued amount.
Subsequent additions to generation
structures and plant assets are
recorded at cost, which is considered
fair value, including costs directly
attributable to bringing the asset to
the location and condition necessary
for its intended purpose, and
financing costs where appropriate.
Useful lives
Meridian uses its judgement in
determining the remaining useful lives
and residual value of assets, which are:
• generation structures and plant –
up to 80 years;
• buildings – up to 67 years; and
• other plant and equipment –
up to 20 years.
The residual value and useful lives are
reviewed, and if appropriate adjusted,
at each balance date.
Disposals or retirement
The gain or loss arising on the disposal
or retirement of an item of property,
plant and equipment is determined
as the difference between the sale
proceeds and the carrying amount
of the asset and is recognised in
the income statement. Any balance
attributable to the disposed asset
in the asset revaluation reserve is
transferred to retained earnings.
Revaluation of generation
structures and plant
Meridian revalued its generation
structures and plant assets at
30 June 2019. An independent
valuer assessed values using
capitalisation of earnings and DCFs
when determining a valuation range.
This revaluation resulted in a net
increase of $657 million (30 June 2018:
nil) (after the reversal of depreciation)
in the carrying value of generation
structures and plant assets. The impact
of the revaluation is recognised
as an increase of $819 million
(30 June 2018: nil) (net of deferred
tax) in the revaluation reserve and
as a $5 million (30 June 2018 : nil)
impairment of Australian generation
assets recognised in the income
statement.
As a consequence of this revaluation,
accumulated depreciation on these
assets is reset to nil. There was no
depreciation impact of this revaluation
in the income statement.
Depreciation
Depreciation of property, plant and
equipment assets, other than freehold
land, is calculated on a straight-line
basis. This allocates the cost or fair
value amount of an asset, less any
residual value, over its estimated
remaining useful life.
9
1
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 B
Key judgements and estimates –
Generation structures and plant
valuation techniques and key inputs.
The Meridian Board uses its
judgement to decide on the
appropriateness of key valuation
techniques and inputs for fair value
measurement. Judgement is also
used in determining the estimated
remaining useful lives of assets.
As the valuation of generation
structures and plant does not fully use
observable market data, it continues
to be classified as a level 3 fair value
financial instrument (a definition
of the other levels is included in D1
Financial risk management).
As discussed above, the independent
valuer uses an income approach
which involves incorporating two
techniques in establishing a valuation
range being capitalisation of earnings
and DCF. This methodology calculates
value by reference to an assessment
of future maintainable earnings and
capitalisation multiples as observed
from market prices of listed companies
with broadly comparable operations
to Meridian. In preparing the
capitalisation of earnings valuation,
an EBITDAF multiple range at which
to capitalise Meridian’s historical
and forecast earnings is determined.
In determining the maintainable
earnings, observable wholesale
electricity prices extracted from
the ASX have been used.
It is assumed in this valuation that
the contract with NZAS runs to full
term, under existing contractual
arrangements.
Key input to
measure fair value
New Zealand
generation volume
Australian
generation volume
Description
Range of
unobservable inputs
Sensitivity
Impact on
valuation
Annual generation production
13,520GWh p.a. to
15,500GWh p.a.
+ 250GWh
– 250GWh
$240M
($240M)
Annual generation production
890GWh p.a.
Operating expenditure
Meridian’s cost of operations
$291M p.a.
(excluding electricity related
expenditure – refer note A3)
EBITDAF earnings
multiple
Valuation multiple (including
control premium of 20%) derived
from earnings and valuations of
comparable companies
12.6 x EBITDAF
+5%
–5%
+ $10M
– $10M
+0.5x
–0.5x
A$35M
(A$35M)
($153M)
$153M
$395M
($395M)
0
2
1
Sensitivities show the movement in fair value as a result of a change in each input (keeping all other inputs constant).
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
Software
211
(153)
58
21
2
(21)
60
150
(90)
60
25
(26)
59
173
(114)
59
Useful lives
Meridian uses its judgement in
determining the remaining useful
lives and residual value of intangible
assets, which are:
• electricity and gas retail platform –
up to 5 years;
• generation control – up to 10 years;
and
• other software – up to 3 years.
These are reviewed, and, if
appropriate, adjusted at each
balance date.
Software
Acquired computer software licences
(that are not considered an integral
part of related hardware) are
capitalised on the basis of the costs
incurred to acquire and bring to use
the specific software. Additionally,
costs directly associated with the
production of identifiable and
unique software products that will
generate economic benefits beyond
one year are also recognised as
intangible assets.
All these costs are amortised over their
useful lives on a straight-line basis.
Costs associated with maintaining
computer software programs are
recognised as an expense as incurred.
B
B2 Intangible assets
$M
Cost or fair value
Less accumulated amortisation
Net book value at 30 June 2017
Additions
Transfers – property, plant and equipment
Amortisation expenses
Net book value at 30 June 2018
Cost or fair value
Less accumulated amortisation
Net book value at 30 June 2018
Additions
Amortisation expenses
Net book value at 30 June 2019
Cost or fair value
Less accumulated amortisation
Net book value at 30 June 2019
1
2
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 B
B3 Customer Contract Assets
Opening balance
Deferred during the period
Upfront discounts and credits to customers
Sales costs
Total deferred during the period
Released to the income statement during the period
Electricity sales to customers
Employee expenses
Other expenses
Total released to the income statement during the period
Closing balance
2019
$M
19
2018
$M
18
11
5
16
(10)
(1)
(4)
(15)
20
11
3
14
(9)
(1)
(3)
(13)
19
2
2
1
Key judgements and estimates –
Customer Contract Assets
Customer contract tenure
Meridian exercises judgement in estimating
customer contract tenures where contracts do
not have a fixed term. These estimations are
based upon the average rate of customer churn
for groups of customers with similar attributes.
The following estimates of customer contract
tenure have been used to spread variable
components of the sale price and incremental
costs of acquiring a customer:
New Zealand – residential and business between
2 and 3 years.
Australian – residential and business between
2 and 3 years.
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
C
Managing
funding
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 notes there is
information about:
a. equity and dividends;
b. net debt;
c. receivables and payables; and
d. leases and commitments.
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.
Share capital
Retained earnings
Other reserves
Drawn borrowings
Finance lease payable
Less: cash and cash equivalents
Capital is defined as the combination
of shareholders' equity, reserves and
net debt.
Net capital
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
which consider debt facility financial
covenants and credit ratings. The key
measures are 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.
Net debt to EBITDAF
Drawn borrowings
Finance lease payable
Operating lease commitments
Less: cash and cash equivalents
Add back: restricted cash
Add back: cash buffer53
Net debt (A)
EBITDAF (B)
Net debt to EBITDAF (times) (A/B)
EBITDAF Interest cover
EBITDAF (B)
Interest on borrowings
Interest on finance lease
Interest (C)
EBITDAF interest cover (times) (B/C)
Note
C2
C7
C8
C5
2019
$M
1,599
(1,171)
5,029
5,457
2018
$M
1,598
(1,010)
4,235
4,823
1,376
1,428
32
(78)
1,330
6,787
48
(60)
1,416
6,239
Note
2019
$M
2018
$M
C7
C8
C9
C5
C5
Note
A3
A3
1,376
1,428
32
91
(78)
27
13
48
76
(60)
29
8
1,461
1,529
838
1.7
2019
$M
666
2.3
2018
$M
838
666
78
4
82
10.2
74
6
80
8.3
3
2
1
Standard & Poor’s rating
BBB+
BBB+
53 The cash buffer is calculated as 25% of unrestricted cash and cash equivalents.
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
C
C2 Share Capital
Shares issued
Treasury shares held
Share capital
Shares
2019
$M
Shares
2018
$M
2,563,000,000
1,600 2,563,000,000
1,600
Dividends declared and paid
C4 Dividends
(681,881)
(1)
(570,607)
(2)
2,562,318,119
1,599 2,562,429,393
1,598
All shares issued are fully paid and have equal voting rights. All shares
participate equally in any dividend distribution or any surplus on the
winding up of the company.
The movement in Treasury shares relates to the purchase of shares by
participants and held on trust as part of a long-term equity settled
incentive plan for New Zealand-based senior executives (refer note
F1 Share-based payments).
C3 Earnings per share
Basic and diluted earnings per share (EPS)
Profit after tax attributable to shareholders of
the parent company ($M)
Weighted average number of shares used
in the calculation of EPS
2019
339
2018
201
2,563,000,000
2,563,000,000
Basic and diluted EPS (cents per share)
13.2
7.8
4
2
1
2019
$M
2018
$M
208
292
500
275
63
200
286
486
229
63
Interim ordinary and special dividend 2019: 8.14cps (cents per share)
(2018: 7.82cps)
Final ordinary and special dividend 2018: 11.38cps (2017: 11.14cps)
Total dividends paid
Dividends declared and not recognised as a liability
Final ordinary dividend 2019: 10.72cps (2018:8.94cps)
Special dividend 2019: 2.44cps (2018:2.44cps)
Imputation credit balance
Imputation credits available for future use
64
29
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.
Imputation credit balance
Imputation credits allow Meridian to
pass on to its shareholders the benefit
of the New Zealand income tax it has
paid by attaching imputation credits
to the dividends it pays, reducing the
shareholders' net tax obligations.
The imputation credits available
for future use reflect the balance
available on 23 August 2019,
therefore recognising any tax
payments between balance date
and 23 August 2019.
Subsequent event –
dividend declared
On 23 August 2019 the
Board declared a partially
imputed final ordinary
dividend of 10.72 cents
per share. Additionally
the Board declared an
un-imputed special dividend
of 2.44 cents per share.
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 C
C5 Cash and cash equivalents
Cash and cash equivalents
Current account
Cash and cash equivalents
2019
$M
78
78
2018
$M
60
60
Cash and cash equivalents are made up of cash on hand, on-demand deposits
and other short-term, highly liquid investments that are readily convertible to a
known amount of cash and are not subject to a significant risk of change in value.
Restricted cash
Meridian trades electricity hedges on the ASX using J.P. Morgan as a broker.
As a result, a proportion of the funds it holds on deposit is pledged as margin
which varies depending on market movements and contracts held.
At 30 June 2019, this collateral was $27 million (30 June 2018: $29 million).
All other cash and cash equivalent balances are available for use.
5
2
1
Reconciliation of net profit after tax
to cash flows from operating activities
Net profit after tax
Adjustments for operating activities’ non-cash items:
Depreciation and amortisation
Movement in deferred tax
Net change in fair value of financial instruments
Electricity option premiums
Share-based payments
Items classified as investing activities:
Impairment of assets
(Gain)/Loss on sale of assets
Australian stamp duty paid
Changes in working capital items:
(Increase) in accounts receivable
(Increase) in customer contract assets
(Increase) in other assets
Increase/(decrease) in payables and accruals/employee entitlements
Increase in customer contract liabilities
Increase in current tax payable
Working capital items in investing activities
Working capital items in financing activities and other non-cash items
2019
$M
339
2018
$M
201
276
268
(28)
5
(19)
1
(35)
26
(15)
1
235
245
5
(3)
–
2
(31)
(1)
(2)
37
2
37
5
12
59
2
(7)
10
5
(1)
(1)
–
(20)
6
13
(14)
(7)
(24)
Cash flow from operating activities
635
427
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
C
C6 Trade receivables
Trade receivables
Accrued receivables
Current billed
Past due 1 to 30 days
Past due 31 to 60 days
Past due 61 to 90 days
Past due greater than 90 days
Less: credit loss allowance
Total trade receivables
2019
$M
223
57
11
2
2
2
(5)
292
2018
$M
197
57
7
2
1
2
(5)
261
Accounts receivable past due but not impaired
12
7
Movement in provision for credit loss allowance
Opening provision
Provision created in the year
Provision used in the year
Closing provision for credit loss allowance
(5)
(4)
4
(5)
(6)
(5)
6
(5)
Trade receivables,
measurement and recognition
Trade receivables are measured
on initial recognition at fair value,
and are subsequently carried
at amortised cost. The overdue
amounts are largely related to
electricity sales to retail customers
in New Zealand and Australia.
Trade receivables written off
during the year were $4 million
(30 June 2018 : $6 million).
Receivables are written off at the
point where Meridian believe
there is no reasonable expectation
of recovery, which is typically a
combination of an overdue amount,
no communication or response
from the debtor, and no payments
received. Receivables written off
are handed to collection agencies
for enforcement.
Credit losses
The allowance for credit losses are
an estimate of the Group's expected
credit losses over the lifetime of the
current amounts receivable. Or rather,
it is the difference between the
face value of trade receivables and
the future cash flows we expect to
receive. Additions to the provision are
recognised in the income statement.
We estimate collective future cash
flows by considering customer
credit history, historical recovery
performance and trends, through
which we build default matrices that
apply a probability of default given
the ageing of debtors. Forward-
looking employment statistics are
also monitored for both New Zealand
and Australia, with a large rise in
forecast unemployment acting as
a trigger for us to reconsider the
probability rates in our matrices.
6
2
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 C
C7 Borrowings
Current borrowings
Unsecured borrowings
Unsecured borrowings
Total current borrowings
Non-current borrowings
Unsecured borrowings
Unsecured borrowings
Total non-current borrowings
Total borrowings
Currency
borrowed in
Drawn facility
amount
Transaction
costs paid
Fair value
adjustment
Carrying
amount
Drawn facility
amount
Transaction
costs paid
Fair value
adjustment
Carrying
amount
2019
2018
NZD
USD
NZD
USD
168
–
168
610
598
1,208
1,376
(1)
–
(1)
(2)
(1)
(3)
(4)
–
–
–
–
98
98
98
167
–
167
608
695
1,303
1,470
169
272
441
821
166
987
1,428
(1)
–
(1)
(3)
–
(3)
(4)
–
10
10
–
39
39
49
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 held 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 – please
refer to D1 Hedge Accounting
section for further detail on this. 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 table, along with any
amounts relating to fair value hedge
adjustments.
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.
More information on Meridian's risk
management and hedge accounting
practices can be found in section
D "Financial Instruments used to
Manage Risk".
7
2
1
Fair value of items held
at amortised cost
Retail bonds
Floating Rate Notes
Unsecured term loan (EKF facility)
2019
$M
2019
$M
2018
$M
Carrying
value
Fair
value
Carrying
value
500
100
70
542
101
75
500
100
80
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.
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
D1 Financial instruments).
Fair value is calculated using a
discounted cash flow calculation
and the resultant values are
classified as Level 2 within the fair
Carrying value approximates fair
value for all other instruments
within term borrowings.
168
282
450
818
205
1,023
1,473
2018
$M
Fair
value
514
102
86
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 C
C7 Borrowings continued
Reconciliation of liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes.
NZ$M
Unsecured borrowings – NZD
Unsecured borrowings – USD
Finance lease
Total
NZ$M
Unsecured borrowings – NZD
Unsecured borrowings – USD
Finance lease
Total
Sources of funding – NZ$M
Bank facilities
New Zealand bank funding54
EKF funding55
Total bank facilities
Other sources of borrowing
Retail bonds56
Floating rate notes54
Fixed rate bonds57
Commercial paper58
Total other sources of borrowing
Total sources of funding
8
2
1
2019
Balance at
1 July 2018
Term
borrowings
drawn
Term
borrowings
repaid
Fair
value
adjustments
Foreign
Exchange
Transaction
costs paid
& accrued
Finance
lease paid
Lease
Derecognition
Balance at
30 June 2019
986
487
48
1,521
–
439
–
439
(212)
(272)
–
(484)
–
37
–
37
–
5
(2)
3
1
(1)
–
–
–
–
(1)
(1)
–
–
(13)
(13)
775
695
32
1,502
2018
Balance at
1 July 2017
Term
borrowings
drawn
Term
borrowings
repaid
Fair
value
adjustments
Foreign
Exchange
Transaction
costs paid
& accrued
Finance
lease paid
Lease
Derecognition
Balance at
1 July 2018
725
467
47
462
(200)
–
–
–
–
1,239
462
(200)
–
12
–
12
–
7
2
9
(1)
1
–
–
–
–
(1)
(1)
–
–
–
–
986
487
48
1,521
Currency
borrowed in
Facility
amount
Drawn facility
amount
Undrawn
facility amount
Facility amount
Drawn
facility amount
Undrawn
facility amount
2019
2018
NZD
NZD
NZD
NZD
USD
NZD
600
70
670
500
100
598
80
1,278
1,948
28
70
98
500
100
598
80
1,278
1,376
572
–
572
–
–
–
–
–
572
650
80
730
500
100
439
145
1,184
1,914
164
80
244
500
100
439
145
1,184
1,428
486
–
486
–
–
–
–
–
486
54 Funding bears interest at the relevant market floating
rate plus a margin.
55 EKF facility is an unsecured amortising term loan,
provided by the official export credit agency of
Denmark, for the construction of Te Uku wind farm.
56 Retail Bonds are senior unsecured retail bonds
bearing interest rates of 4.53%, 4.88% and 4.21%.
57 USD fixed rate bonds are unsecured fixed rate bonds
issued in the United States Private Placement Market.
58 NZD commercial paper comprises senior
unsecured short-term debt obligations paying
a fixed rate of return over a set period of time.
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
2019
$M
2018
$M
5
9
9
56
79
(47)
32
1
2
2
27
32
1
31
32
7
14
13
89
123
(75)
48
1
2
2
43
48
1
47
48
Finance lease payable,
measurement and recognition
A finance lease transfers substantially
all the risks and rewards of ownership
to the lessee. Meridian recognises
the present value of minimum
lease payments under finance lease
arrangements as a finance lease
payable. Resulting repayments are
split between principal and interest
expense. The interest reflects a
constant periodic charge over the
term of the lease. Finance lease
payables are classified as financial
liabilities at amortised cost.
Finance lease details
Meridian's finance leases relate
to certain transmission connection
assets that connect wind farms at
Mill Creek and Mt Mercer to the
transmission network.
In 2019 it was determined that a
portion of the finance lease in relation
to Mt Mercer no longer met the
definition due to loss of control,
as a result this portion has been
derecognised in 2019.
Meridian reported a finance
lease interest expense of $4 million
(30 June 2018: $6 million) in finance
costs in the income statement.
The net book value of assets subject
to a finance lease and included in note
B1 Property, plant and equipment is
$27 million (30 June 2018: $42 million).
All assets are classified as other plant
and equipment.
C
C8 Finance lease payable
Finance lease payable analysis
Minimum lease payments
Not later than 1 year
Later than 1 year and not later than 3 years
Later than 3 years and not later than 5 years
Later than 5 years
Gross investment in finance lease
Less future finance costs
Present value of minimum lease payments
Analysed as:
Not later than 1 year
Later than 1 year and not later than 3 years
Later than 3 years and not later than 5 years
Later than 5 years
Gross investment in finance lease
Comprising:
Current
Non-current
9
2
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 Capital expenditure commitments
Property, plant and equipment
Software
Total capital expenditure commitments
Group
2019
$M
2018
$M
8
–
8
4
1
5
Guarantees
Various entities within the Group provide guarantees to external
counterparties, with these mostly relating to security for energy market
clearing and lines companies. The maximum liability under these guarantees
is $35 million (30 June 2018: $79 million).
In addition to the above Meridian Energy Limited has provided parent
guarantees for various construction and grid connection obligations of
Mt Mercer Windfarm Pty Limited. The maximum liability under these
guarantees is $32 million (30 June 2018: $36 million).
C
C9 Commitments
Non-cancellable operating lease commitments
Less than 1 year
Later than 1 year and not later than 3 years
Later than 3 years and not later than 5 years
More than 5 years
Total operating lease commitments
Group
2019
$M
6
12
11
62
91
2018
$M
7
12
12
45
76
Operating leases, measurement and recognition
Operating leases are leases where the lessor effectively retains substantially
all the risks and benefits of ownership of the leased items.
Operating lease payments are recognised in other operating expenses
on a straight-line basis over the term of the lease. Lease payments were
$7 million in 2019 (30 June 2018: $6 million).
In Australia, Meridian has entered into lease agreements for land when
developing wind farms. These leases range up to 25 years with options
to renew.
Meridian also leases office space with terms of the leases ranging from
1 to 12 years, with options to extend up to 10 years. Lease contracts contain
rent review clauses, including Consumer Price Index increases and market
rental reviews, in the event Meridian exercises its options to renew.
0
3
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 D
Financial
instruments used
to manage risk
In this section.
This section explains the financial
risks Meridian faces, how these risks
affect Meridian's financial position
and performance, and how Meridian
manages these risks. In this section of
the notes there is information:
a. outlining Meridian's approach to
financial risk management; and
b. analysing financial (hedging)
instruments used to manage risk.
D1 Financial risk management
Meridian’s activities expose it to a
variety of financial risks. Its financial
risk management framework
focuses on the unpredictability of
financial markets and wholesale
electricity markets. The Board
approves policies including Group
Treasury, Electricity Hedging and
Credit Policies which set appropriate
principles and risk tolerance levels to
guide management in carrying out
financial risk management activities
to minimise potential adverse effects
on the financial performance and
economic value of the Group. The
key risks managed are discussed
further below.
In order to help balance certain
risk exposures, Meridian uses a
variety of financial instruments
(hedges). Hedges are categorised
as either "Treasury" or "Electricity-
related". A small number of Treasury
hedges are designated in hedge
accounting relationships (refer
to Hedge accounting section for
further detail). Meridian does not
enter into speculative trades.
Calculation of fair value
for financial instruments
Meridian uses quoted prices and/
or a discounted cash flows approach
in order to calculate fair values for
financial instruments. Fair value
measurements are grouped within a
three-level fair value hierarchy based
on the observability of inputs to the
valuation process:
• Level 1 Inputs: quoted prices
(unadjusted) in active markets for
identical assets or liabilities that the
entity can access at reporting 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 that are not
based on observable market data
(i.e. unobservable inputs).
Meridian has a number of
electricity-related hedges that
require management estimation
and judgement in order to generate
a fair value at each reporting date.
These estimates can have a significant
risk of material adjustment in future
periods. This is discussed in more
detail later in this section.
Financial instrument recognition
Meridian designates or classifies
financial hedging instruments as:
• fair value hedge, hedges of the
fair value of recognised assets or
liabilities or a firm commitment; or
• cash flow hedge, hedges of a
particular cash flow associated
with a recognised asset or liability
or a highly probable forecast
transaction; or
• held for trading, financial
instruments which have not
been designated in a hedging
relationship.
Meridian accounts for derivative
and certain designated financial
instruments as fair value through
the income statement.
Hedges are initially recognised at
fair value on the dates the contracts
are agreed, and are subsequently
remeasured on a periodic basis.
Remeasurement is recognised in
the income statement.
Realised flows on hedges are
recognised in the income statement
within EBITDAF, in the same line as
the underlying business/transactions
being hedged.
Fair value (or unrealised) changes are
recognised in "Net change in the fair
value of electricity and other hedges"
or "Net change in fair value of treasury
hedges", depending on the underlying
business nature of the hedge.
1
3
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
In addition to borrowings, Meridian
has entered into a number of letters
of credit and guarantee arrangements
which provide credit support of
$67 million for Meridian's general
operations (30 June 2018: $115 million).
Meridian indemnifies the obligations
of the bank in respect of the letters of
credit and performance guarantees
issued by the bank to counterparties
of Meridian.
D
D1 Financial risk management continued
For wholesale customers, individual
credit limits are set based on
internal or external credit ratings
in accordance with limits set by
the Board. Where customers are
not independently credit rated,
an assessment of credit quality is
made, taking into account financial
position, past experience and other
relevant factors. If appropriate,
letters of credit/guarantees are
obtained from counterparties to
reduce credit risk to acceptable
levels. These assessments and the
utilisation of credit limits and security
provided by wholesale customers
are reviewed and monitored by
the Chief Financial Officer.
The carrying amounts of financial
assets recognised on the balance
sheet best represent Meridian’s
maximum likely exposure to credit
risk at the date of this report. Refer
to Note C6 for a description of how
we provide for any expected credit
losses. Meridian does not have any
significant credit risk concentrations.
Credit risk
Meridian is exposed to the
risk of default in relation to:
electricity sales to wholesale
and retail customers, hedging
instruments, guarantees and
deposits held with banks and
other financial institutions.
For retail customers, credit checks
are carried out before new customers
are accepted. The credit team
oversees the collection of receivables
and works with customers to
minimise the chances of bad debts
occurring. Management monitors
the size and nature of retail customer
exposures on a regular basis and
acts to mitigate the risk if deemed
to exceed acceptable levels.
For banks and financial institutions, only
independently related parties with a
minimum rating of 'A' are accepted.
Liquidity risk
Meridian is exposed to
the dynamic nature of the
electricity market and weather
patterns, which can affect
liquidity.
Meridian ensures flexibility in funding
by maintaining committed surplus
credit lines available of at least
$200 million (see C7 Borrowings for
details of undrawn facilities). This
helps ensure Meridian has sufficient
headroom under both normal and
abnormal hydrological conditions.
Meridian manages its term debt
requirements on a portfolio basis.
To reduce concentration risk on any
one lender or funding type, Meridian
uses a range of different funding
sources and currencies. Meridian
also monitors contractual maturities
and ensures these are well spaced
(or laddered) so that refinancing
risks are manageable.
2
3
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 D
D1 Financial risk management continued
Liquidity Risk –
Contractual maturities
The following tables are an analysis
of the contractual undiscounted cash
flows (settlements expected under
the contracts) relating to financial
liabilities and a reconciliation from
total undiscounted cash flows to
carrying amounts.
Meridian expects to meet its future
obligations from operating cash
flows and debt financing.
2019
$M
Borrowings
Finance leases
Payables, accruals, provisions and option premiums
IRS
Electricity hedges
2018
$M
Borrowings
Finance leases
Payables, accruals, provisions and option premiums
IRS
Electricity hedges
LGCs
Due
within
1 year
223
5
336
29
9
602
Due
within
1 year
501
7
295
29
20
6
858
Due in
1 to 2 years
Due in
3 to 5 years
Due after
5 years
Total
undiscounted
cash flows
Impact of
other
non-cash
items
62
9
35
32
4
142
572
9
30
77
26
714
953
1,810
56
25
64
29
79
426
202
68
1,127
2,585
(4)
–
–
–
(1)
(5)
Due in
1 to 2 years
Due in
3 to 5 years
Due after
5 years
Total
undiscounted
cash flows
Impact of
other
non-cash
items
101
14
30
25
8
–
538
571
1,711
13
53
51
25
–
89
32
28
10
–
123
410
133
63
6
178
680
730
2,446
(4)
–
–
–
3
–
(1)
Impact of
interest/FX
discounting
2019
carrying
value
(336)
1,470
(47)
(21)
(18)
(6)
32
405
184
61
(428)
2,152
Impact of
interest/FX
discounting
2018
carrying
value
(234)
1,473
(75)
(29)
(19)
(5)
–
48
381
114
61
6
(362)
2,083
3
3
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 D
4
3
1
Market risk
Meridian is involved in both the
electricity and financial markets and
as such is exposed to rises and falls in
those markets and the subsequent
income statement volatility this can
cause. The main sub-types of market
risk that we are exposed to are
discussed below.
Commodity price risk
Meridian trades in the wholesale
electricity market and so is exposed
to volatility in forward electricity prices.
Being both a generator and a retailer
of electricity means that Meridian
has a natural hedge for most of the
exposure to future energy prices.
Meridian also uses electricity
derivatives to help manage its
net energy position, some of
which are traded on the Australian
Stock Exchange, and some of
which are traded directly with
other energy market participants.
Energy hedges are not placed in
hedge accounting relationships.
Foreign exchange risk
Meridian is exposed to foreign
exchange risk arising from sales
and procurement of goods and
services denominated in foreign
currencies and also from term
debt raised in foreign currencies.
For exposures resulting from
Meridian's general operations,
we use foreign exchange spot or
forward contracts to fix the value in
reporting currency terms. Material
items may be placed in hedge
accounting relationships and can be
either fair value hedges or cash flow
hedges, depending on the nature of
the transaction/underlying exposure.
For term debt raised in US Dollars,
cross currency interest rate swaps
(CCIRS) are used to convert the
proceeds back to functional currency.
These derivatives minimise foreign
exchange risk on both the notional
and the coupon flows over the life
of the debt. CCIRS are placed in
both fair value and cash flow
hedge accounting relationships.
Interest Rate risk
Meridian is exposed to interest rate
risk arising from its funding portfolio,
which is a mix of fixed and floating
rate debt.
Meridian issues debt on both a
fixed and a floating basis and is
thus exposed to changes in interest
rates over time.
A portfolio of interest rate swaps
(IRS) is then used to manage the
net exposure to interest rate risk, in
line with a Board approved hedging
policy and profile. Please also refer
to the Foreign Exchange section
for derivatives used for term debt
raised in foreign currencies.
Meridian swaps a significant portion
of its borrowings to floating rates
at loan inception, and hedges the
resulting interest rate exposure over
a tenure based profile of fixed IRS.
This is achieved using a combination
of CCIRS and IRS hedges. Where
Meridian borrows in foreign currency
it uses CCIRSs to swap all foreign
currency denominated interest and
principal repayments to the reporting
currency. This results in floating rate
borrowings in the entity’s reporting
currency. Meridian uses IRS hedges
to fix floating interest rates in line
with the Board approved hedging
policy and profile.
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
D
D1 Financial risk management continued
Meridian groups its financial instrument into two categories –
Treasury hedges and Electricity-related hedges.
Treasury Hedges
Electricity-Related Hedges
of which
Current
Non Current
Fair value on the balance sheet
2019
2018
Assets
Liabilities
Assets
Liabilities
114
195
309
118
191
309
(184)
(61)
(245)
(36)
(209)
(245)
61
152
213
77
136
213
(114)
(67)
(181)
(52)
(129)
(181)
Further disclosure and analysis of these two categories are noted
on the following pages.
5
3
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
Note that in the opposite table, fair value movements in the income statement
are shown net of any related hedge accounting adjustments and retranslation
of foreign currency borrowings. Please refer to the Hedge Accounting section
of note D1 Financial risk management for further detail on the fair value and
cash flow hedge relationships that the CCIRS are designated in.
Treasury Hedges – Sensitivity Analysis
The table below summarises the impact of changes in significant inputs
(assuming all other variables are held constant) on the valuation of Treasury
Hedges and therefore on Meridian’s after tax profit and equity.
Note that changes in the fair value of the CCIRS are fully offset by opposite
impacts from hedge accounting entries and the FX retranslation of the USD
debt. Therefore the CCIRS P&L sensitivity is nil and is not shown in the below
table. Due to the small size of the FX portfolio, changes in spot exchanges
rates result in very little change to fair values and therefore these are not
shown in the table.
Interest rates
New Zealand benchmark bill rate
-100 basis points (bps)
Sensitivity
Australian benchmark bill rate
+100 bps
-100 bps
+100 bps
Impact on after tax
profit & equity
2019
$M
2018
$M
(39)
42
(4)
4
(37)
36
(4)
4
Treasury Hedges
Hedges in the Treasury category generally relate to management of
the interest rate risk and foreign exchange risks that arise from Meridian's
funding activities and from general Group operations.
The instruments used are CCIRS, IRS and forward exchange contracts (FX).
Fair value on the balance sheet
Fair value
movements
in the income
statement
Outstanding
aggregate
notional
principals63
2019
$M
2018
$M
2019
$M
2018
$M
2019
$M
2018
$M
Treasury Hedges
Level Assets Liabilities Assets Liabilities
CCIRS
– Interest Rate Risk59
– Basis and Margin Risk60
– Foreign Exchange Risk61
IRS62
FX62
40
(6)
58
92
–
–
–
–
22
(184)
–
–
4
(1)
44
47
14
–
2
2
2
–
–
–
–
(1)
–
–
(1)
–
–
–
–
598
439
(114)
(62)
(3)
1,492
1,837
–
–
14
13
(1)
(4)
Treasury hedges
114
(184)
61
(114)
(63)
Meridian uses CCIRS to hedge risks involved with long term debt issued in USD.
In the above table the CCIRS are separated into component parts as follows:
59 Interest rate risk: this is the movement in value of the CCIRS due to changes in benchmark interest rates.
The other side of this movement is recorded in the income statement in the "Net change in fair value of
treasury instruments", together with changes in the fair value hedge adjustments on the designated
USD borrowings.
60 Basis and margin risk: this is the movement in the value of the CCIRS due to changes in basis (excluding
foreign exchange) and credit margin. The other side of this movement is recorded in the income statement
in the "Net change in fair value of treasury instruments", together with cash flow hedge accounting
adjustments that transfer effective hedge portions to the Cash Flow Hedge Reserve within Equity.
61 Foreign Exchange Risk: this is the movement in value of the CCIRS due to changes in spot foreign exchange
rates. The impact of retranslation is recorded in the income statement in "Net change in fair value of treasury
instruments" and is offset by equal and opposite retranslation effects on the related borrowings.
62 Changes in fair value of the IRS and FX portfolios are recognised in the income statement within “Net change
in fair value of treasury instruments”.
63 These cover multiple legs including offsetting legs and maturities out to 2034.
6
3
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
D
D1 Financial risk management continued
Electricity Related Hedges
Hedges in this category relate to Meridian's management of risk arising
from the generation, purchase and sale of electricity.
Meridian is exposed to changes in the spot price of electricity it receives
for electricity generated, or pays to buy electricity to supply customers.
Additionally, inflows into Meridian's storage lakes are variable, therefore
the volume of electricity required to supply customers may exceed (or
fall short of) generation production.
Meridian's hedging strategy focuses on its net exposure by estimating both
expected generation and electricity purchases required to support contracted
sales. Execution of this strategy is guided by Board approved parameters.
Changes in the fair value of electricity related hedges are recognised in the
income statement within "Net change in fair value of electricity and other
hedges". Hedge accounting is not applied to Electricity Related Hedges.
Fair value on the balance sheet
2019
$M
2018
$M
Level
Assets
Liabilities
Assets
Liabilities
Fair value movements in
the income statement
Electricity Related Hedges
Market traded electricity hedges:
Other electricity hedges:
Electricity options:
LGCs:
– LGC – Holdings created from wind farm generation
– LGC – Hedges
1
3
3
1
2
Electricity related hedges
64 These cover multiple legs including offsetting legs and maturities out to 2030
52
51
70
6
16
22
195
(3)
(58)
–
–
–
–
(61)
30
13
87
17
5
22
152
(9)
(52)
–
–
(6)
(6)
(67)
Outstanding aggregate
notional volumes64
2019
2018
14,613 GWh
10,422 GWh
24,589 GWh
26,667 GWh
3,990 GWh
5,123 GWh
2018
$M
24
(51)
(11)
–
0.1 million
0.2 million
1.0 million
1.4 million
16
16
(22)
2019
$M
21
35
(17)
2
17
19
58
The "Market traded electricity hedges" category contains those instruments
that are traded on various exchange based markets.
The "Other Electricity Hedges" category contains over the counter derivatives,
where the counterparties include customers, other energy market participants
or financial institutions.
These hedges are generally long-term, large volume contracts that manage
specific risks that can not be managed through futures markets.
Meridian trades electricity options with other generators. These are used to
support the management of inflow and storage variability in the catchments
where it generates electricity.
7
3
1
The LGC category has two sub-components. The first represents the
Renewable Energy Certificates (RECs) that Meridian's Australian wind farms
earn in the form of Large Scale Generation Certificates (LGCs). Additionally,
Powershop Australia is required to purchase and surrender RECs. The second
represents the derivatives used to firm prices received for LGCs generated
and consequently reduce the profit volatility of each wind farm. At the time of
generation, LGCs are recognised as income in energy margin at the prevailing
spot price. LGC holdings and hedges are all recognised as financial instruments
on the balance sheet at their fair value.
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
Movements in recalibration differences
arising from electricity hedges and options
2019
$M
2018
$M
Opening difference
Initial differences on new hedges and options
Volumes expired and amortised
Recalibration for future price estimates and time
Closing difference
5
(7)
(1)
–
(3)
6
–
(1)
–
5
Initial recognition difference
An initial recognition difference arises when the modelled value of an electricity
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.
D
D1 Financial risk management continued
Electricity Related Hedges – Sensitivity Analysis
The table below summarises the impact of changes in significant inputs
(assuming all other variables are held constant) on the valuation of Electricity
Related Hedges and therefore on Meridian’s after tax profit and equity.
Electricity hedges & options
Electricity prices
Discount rates
Call volumes
LGC prices
Sensitivity
–10%
+10%
–100 bps
+100 bps
–10%
+10%
–10%
+10%
Impact on after tax
profit & equity
2019
$M
2018
$M
(57)
57
(1)
1
(5)
5
1
(1)
(48)
48
1
(1)
(6)
6
4
(4)
Settlements of Electricity Related Hedges
The following provides a summary of the settlements through EBITDAF for
Electricity Related Hedges:
2019
2018
Electricity
Hedges
Electricity
Options
LGCs
Total
Electricity
Hedges
Electricity
Options
LGCs
Total
Operating
revenue
Operating
expenses
Total
settlements
in EBITDAF
(92)
29
–
(63)
(41)
35
176
(12)
18
182
27
(12)
–
6
(6)
21
84
17
18
119
(14)
23
6
15
8
3
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
D
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.
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 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.
The table below describes the
additional key inputs and techniques
used in the valuation of level 2 and 3
electricity related hedges.
Financial asset
or liability
Description
of input
Range of significant
unobservable inputs
Relationship of
input to fair value
Electricity hedges,
valued using DCFs
$47/MWh to $77/MWh
(in real terms), excludes
observable ASX prices.
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.
LGC Forward Contracts
& 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$11 to A$43
9
3
1
Other factors, include
• Calibration factor applied
to forward price curves as
a consequence of initial
recognition differences.
An increase in the forward
wholesale electricity
price increases the fair
value of buy hedges and
decreases the fair value of
sell hedges. A decrease
in the forward wholesale
electricity price has the
opposite effect.
An increase in the
forward LGC price
decreases the fair value
of sell hedges and
increases the fair value
of buy hedges. A decrease
in the forward LGC prices
has the opposite effect.
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019 D
D1 Financial risk management continued
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:
2019
2018
Reconciliation of level 3 fair value movements $M
Electricity
Hedges
Electricity
Options
Total
Electricity
Hedges
Electricity
Options
Total
Electricity and other hedges settled in EBITDAF:
Operating revenue
Operating expenses
Total settlements in EBITDAF
Net change in fair value of electricity and other hedges:
Remeasurement
Hedges settled
Total realised and unrealised losses on electricity
and other hedges
Balance at the beginning of the period
Fair value movements
Balance at the end of the year
(65)
182
117
152
(117)
35
(39)
35
(4)
–
18
18
1
(18)
(17)
87
(17)
70
(65)
200
135
153
(135)
18
48
18
66
(18)
53
35
(16)
(35)
–
6
6
(5)
(6)
(18)
59
41
(21)
(41)
(51)
(11)
(62)
12
(51)
(39)
98
(11)
87
110
(62)
48
Fair value movements of level 3 electricity hedges in 2019 which are held at balance date total $18 million
(30 June 2018: $(44) million).
0
4
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
D
D1 Financial risk management continued
Hedge Accounting
Meridian makes limited use of
hedge accounting, doing so only
for USD borrowings and the CCIRS
financial instruments that are used to
economically hedge these exposures.
Please refer to the start of the Risk
Management section for a description
of the key risks Meridian manages.
This means that:
• the carrying value of the USD
borrowings are adjusted for changes
in the fair value of the hedged
risk – noted as "hedge accounting
adjustments" in Note C7
• the CCIRS are revalued to the
income statement for this same risk
Meridian only designates hedge
accounting relationships where the
underlying exposure and the hedge
are eligible for hedge accounting and
are an economic match, where credit
risk is not expected to dominate the
fair value of the hedge, and where
we expect the hedge relationship
to remain effective over its life.
The USD borrowings (hedged items)
and the CCIRS (hedging instruments)
present Meridian with risks which
we account for in the following ways:
Interest Rate Risk
The USD borrowings are fixed rate
liabilities and thus present interest
rate risk, should benchmark interest
rates change. This risk is neutralised
by receiving the same fixed rate on
the USD leg of the matching CCIRS.
Meridian designates the interest rate
risk on USD borrowings in fair value
hedge accounting relationships.
As long as the hedge accounting
relationships remain effective, the
revaluations of both the hedged item
and hedging instrument should net
to a minimal amount in the income
statement. This residual difference is
referred to as hedge ineffectiveness.
Note that the accumulated life to
date hedge accounting adjustments
on the USD borrowing total $34m
(2018: $3m).
Basis and Margin Risk
The combination of USD borrowings
and CCIRS economically results in
Meridian having floating rate NZD
borrowings. This presents a risk of
variability in future cash flows. As
such, Meridian designates basis risk
(excluding FX) and margin risk into
cash flow hedge relationships.
This means that:
• the CCIRS are revalued to the
income statement for basis risk
and margin risk
• the effective portions of the
hedge are moved from the income
statement to the Cash Flow Hedge
Reserve within Equity
As noted earlier, there may be small
differences between the above entries
which result in hedge ineffectiveness
in the income statement.
Please refer to:
• Note C7 Borrowings for the
carrying value of the hedged
items (USD borrowings)
• Note D1 Treasury Hedges for
further information on the
hedging instruments (CCIRS),
including notionals and changes
in fair value during the period
• the Statement of Changes in
Equity for the balance of the
Cash Flow Hedge Reserve and
movements during the period
Hedge Ineffectiveness
The below table summarises hedge
ineffectiveness. This is included within
"Net change in fair value of Treasury
Hedges" in the income statement.
Impact on income statement
Hedge
Ineffectiveness
2019
$M
2018
$M
1
–
Ineffectiveness is primarily caused
by credit counterparty risk on CCIRS.
This risk is part of the CCIRS fair value
but is not included in the hedge
accounting entries.
Hedge ineffectiveness will net to
zero over the life of the hedge
relationships.
Hedge ineffectiveness is higher this
period than it has been in previous
years. This is due to the issue of
new USD borrowings in the current
financial year.
Note that on the balance sheet,
USD borrowings are included within
Term Borrowings and CCIRS are
included within Financial Instruments.
Ineffectiveness has increased due
to the long term nature (10, 12 and 15
year borrowings) and size of the new
liabilities (NZ$438m equivalent).
1
4
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
D
D1 Financial risk management continued
Future Cash Flows
The below table estimates the contractual undiscounted future cash flows that we expect on both the USD borrowings and the hedging CCIRS.
Amounts noted include coupons and repayment/exchange of notionals on maturity.
Currency as indicated below
USD Borrowings (shown in USD)
CCIRS
2019
$M
2018
$M
Due within
1 year
Due within
1–2 years
Due within
2–5 years
Due after
5 years
Due within
1 year
Due within
1–2 years
Due within
2–5 years
Due after
5 years
(17)
(17)
(87)
(486)
(201)
(5)
(53)
(112)
– USD leg (coupons and maturity flow – shown in USD)
17
17
87
486
201
– Functional currency leg (coupons and maturity flow –
shown in NZD)
(19)
(19)
(96)
(671)
(284)
5
(6)
53
112
(63)
(136)
Functional currency coupons are set quarterly based on NZ and AU benchmark rates. They are shown in this table based on market forward
interest rates and translated to NZD equivalent using spot AUD/NZD exchange rates at reporting date.
Financial instruments which are offset
In certain circumstances Meridian offsets the fair value of financial instruments where it has legal agreements in place that permit netting
of positions and net settlement.
2019
$M
2018
$M
Gross Value
Value Offset
Carrying Value
Gross Value
Value Offset
Carrying Value
253
114
367
(119)
(184)
(303)
64
(58)
–
(58)
58
–
58
–
195
114
309
(61)
(184)
(245)
64
197
61
258
(112)
(114)
(226)
32
(45)
–
(45)
45
–
45
–
152
61
213
(67)
(114)
(181)
32
Financial instrument assets
– Electricity and other hedges
– Treasury hedges
Total financial instrument assets
Financial instrument liabilities
– Electricity and other hedges
– Treasury hedges
Total financial instrument liabilities
Net financial instruments
2
4
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
E
Group
structure
In this section
This section provides information to
help readers understand the Meridian
Group structure and how it affects the
financial position and performance
of the Group. In this section of the
notes there is information about
Meridian's Subsidiaries.
E1 Subsidiaries
The consolidated financial statements
include the financial statements of
Meridian Energy Limited and the
subsidiaries listed opposite.
They all have share capital consisting
solely of ordinary shares that the Group
holds directly, and the proportion of
ownership interests held equals the
Group's voting rights.
Meridian Energy Limited provides
support to its subsidiaries where
necessary in order to ensure they meet
their obligations as they fall due.
On 1 July 2017, Powershop New Zealand
Limited sold the electricity and gas
retail platform and supporting business
assets as well as its full shareholding in
Flux-UK Limited (previously Powershop
UK Limited) to Flux Federation
Limited (a wholly owned subsidiary of
Meridian). Powershop New Zealand
Limited continues to retail electricity
in New Zealand and provide front-line
customer and back office services to
Powershop Australia Pty Limited.
Interest held
by the group
Name of entity
Principal activity
Functional Currency
2019
2018
Meridian Energy Limited66
Powershop New Zealand Limited
Electricity retailing
New Zealand dollar
100%
100%
Flux Federation Limited
Software development
New Zealand dollar
100%
100%
Flux-UK Limited65
Licence holder
British pounds
100%
100%
Three River Holdings No. 1 Limited66
Holding company
New Zealand dollar
100%
100%
Three River Holdings No. 2 Limited66
Holding company
New Zealand dollar
100%
100%
Meridian Energy Australia Pty Limited66
Management services
Australian dollar
100%
100%
GSP Energy Pty Limited
Electricity generation
Australian dollar
100%
100%
Meridian Finco Pty Limited66
Financing
Australian dollar
100%
100%
Meridian Energy Markets Pty Limited66
Non-trading entity
Australian dollar
100%
100%
Meridian Wind Monaro Range Holdings Pty Limited66
Holding company
Australian dollar
100%
100%
Meridian Wind Monaro Range Pty Limited66
Holding company
Australian dollar
100%
100%
Mt Millar Wind Farm Pty Limited66
Electricity generation
Australian dollar
100%
100%
Meridian Australia Holdings Pty Limited66
Holding company
Australian dollar
100%
100%
Meridian Wind Australia Holdings Pty Limited66
Holding company
Australian dollar
100%
100%
Mt Mercer Windfarm Pty Limited66
Electricity generation
Australian dollar
100%
100%
Powershop Australia Pty Limited
Electricity retailing
Australian dollar
100%
100%
Dam Safety Intelligence Limited
Professional services
New Zealand dollar
100%
100%
Meridian LTI Trustee Limited
Trustee
New Zealand dollar
100%
100%
Meridian Energy Captive Insurance Limited
Insurance
New Zealand dollar
100%
100%
Meridian Limited
Non-trading entity
New Zealand dollar
100%
100%
Meridian Energy International Limited
Non-trading entity
New Zealand dollar
100%
100%
65 On 4 June 2018, Powershop UK Limited changed its name to Flux-UK Limited.
66 Members of guaranteeing group.
3
4
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
F
Other
In this section.
This section includes the remaining
information relating to Meridian’s
financial statements which is
required to comply with financial
reporting standards.
F1 Share-based payments
Long term incentive (LTI)
The LTI is a share loan and cash
bonus scheme, where executives
purchase Meridian shares via an
interest-free loan from the company,
with the shares held on trust by the
LTI plan trustee. Any shares awarded
depend on whether the following
performance hurdles are met over
a three-year period:
• The company’s absolute total
shareholder return (TSR) must
be positive; and
• The company’s TSR compared
to a benchmark peer group.
If the performance hurdles have been
achieved, a progressive vesting scale
is applied to determine how many
shares vest:
• If the company’s TSR over the
three-year period exceeds the
50th percentile TSR of the
benchmark peer group, at least
50% of an executive’s shares
will vest.
• 100% shares will vest on meeting
the 75th percentile TSR of the
peer group, with vesting on a
straight-line basis between these
two points.
• No shares will vest if the company’s
TSR is less than the 50th percentile
TSR of the peer group.
Once the vesting level has been
confirmed, a cash amount (after
the deduction of tax), but before
other applicable salary deductions,
is used to repay the executive’s
outstanding loan balance.
For each three-year plan, an
independent external expert
measures TSR of Meridian and
the peer group of companies along
with the outcome on the progressive
vesting scale. If TSR is not positive
(i.e. in absolute terms is less than
zero), or if TSR does not meet the
peer group relative TSR hurdle of
50th percentile, all of the shares
are forfeited to the trustee and
the relevant executive receives
no benefits under the LTI. Where
the TSR is greater than the 50th
percentile of the benchmark peer
group, but below the 75th percentile,
shares are allocated on a percentage
basis and any that have not vested
will also be forfeited.
For the LTI plan that vested at the
end of 2019, the level of vesting was
100%. Therefore, the outstanding
balance of the interest free loans at
30 June 2019 of $0.6m has now been
repaid. A total amount of 223,623
shares have been transferred to
the eligible participants, and 70,051
(30 June 2018: 10,011) shares forfeited
are now held in trust by Meridian LTI
Trustee Limited until reallocation.
4
4
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
F
F1 Share-based payments continued
Movement in zero-priced share options
Grant date
Vesting date
Weighted average
fair value of option
Balance at
start of the year
Granted
during the year
Vested
during the year
Forfeited during
the year
Balance at the
end of the year
Number of options
2019
22/08/2018
07/09/2017
04/08/2016
Total
2018
07/09/2017
04/08/2016
03/09/2015
Total
30/06/2021
30/06/2020
30/06/2019
30/06/2020
30/06/2019
30/06/2018
F2 Related parties
$1.78
$1.61
$1.63
$1.61
$1.63
$1.20
–
334,897
302,533
258,063
560,596
–
–
334,897
–
344,016
456,205
544,848
1,001,053
–
–
344,016
–
–
(223,623)
(223,623)
–
–
(439,565)
(439,565)
–
(35,611)
(34,440)
(70,051)
(41,483)
(198,142)
(105,283)
(344,908)
334,897
266,922
–
601,819
302,533
258,063
–
560,596
Meridian transacts with other Government-owned or related entities
independently and on an arm’s-length basis. Transactions cover a variety
of services including trading energy, transmission, postal, travel and tax.
Compensation of key management personnel
The remuneration of directors and other members of key management
during the year was as follows:
Directors of the Group may be directors or officers of other companies or
organisations with which members of the Group may transact.
Directors’ Fees
Group
2019
$M
1
2018
$M
1
Chief executive officer, senior management team and subsidiary chief executives
Salaries and short–term benefits
Post–employment benefits
Redundancy benefits
Long–term benefits
7
–
–
1
8
7
–
–
1
8
5
4
1
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
F3 Auditors remuneration
F5 Subsequent events
Auditors remuneration to Deloitte Limited for:
Audit and review of New Zealand-based
companies’ financial statements
Audit of overseas-based companies’ financial statements
Total audit fees
Other assurance fees
Total auditor remuneration
Group
2019
$M
2018
$M
0.6
0.2
0.8
0.1
0.9
0.5
0.2
0.7
0.1
0.8
The Board has adopted a policy to maintain the independence of the
Company's external auditor, including a review of all other services performed
by Deloitte Limited and recommending to the Office of the Auditor-General
that there be lead partner rotation after a maximum of five years. The Auditor-
General has appointed Trevor Deed of Deloitte Limited as auditor of the
company. He has been auditor of the company since 2016.
The audit fee includes Office of the Auditor-General overhead contribution
of $30,500 (30 June 2018: $29,500).
Other services undertaken by Deloitte Limited during the year included
other assurance activities including reviews of greenhouse gas inventory and
sustainability reporting assurance, review of the interim financial statements,
audit of the securities register, vesting of the executive long-term incentive
plan, the solvency return of Meridian Energy Captive Insurance Limited and
supervisor reporting.
F4 Contingent assets and liabilities
The Ministry of Business, Innovation and Employment (MBIE) is currently
reviewing Meridian's approach to the application of amounts under the
Holidays Act (2003). The review has identified a potential issue with a
specific point of law. Meridian and MBIE are intending to jointly seek legal
clarification and depending on the outcome, there is a potential underpayment
ranging between $3m and $4m.
Other than those referred to above, there were no other contingent assets
or liabilities at 30 June 2019 (30 June 2018: nil).
6
4
1
There are no subsequent events other than dividends declared on
23 August 2019 (refer to note C4 Dividends for further details).
F6 Changes in financial reporting standards
In the current year, Meridian has adopted all mandatory new and amended
standards. The application of these new and amended standards has impacted
on the amounts recognised or disclosed in the financial statements as set out
in the significant matters in the financial year.
Meridian is not aware of any standards issued but not yet effective (other
than those listed below) that would materially affect the amounts recognised
or disclosed in the financial statements.
The Group has chosen not to early adopt NZ IFRS 16 Leases (effective for
annual reporting periods beginning on or after 1 January 2019).
NZ IFRS 16 introduces a single lessee accounting model and requires a lessee
to recognise material assets and liabilities for all leases with a term of more
than 12 months. Accounting by lessors is unchanged under NZ IFRS 16.
When adopted, NZ IFRS 16 will impact the Group’s financial statements.
Based on leases held at 30 June 2019, it is estimated to:
• increase property, plant & equipment by $69m
• increase lease liabilities by $69m
In addition, the Group estimates that in the FY20 period, adoption will:
• decrease operating expenses by $6m
• increase finance costs by $2m
• increase depreciation expense by $5m
• decrease net profit before tax by $1m
Meridian Annual Report 2019MenuNotes to the Financials — for the year ended 30 June 2019
Independent auditor’s report
To the shareholders of Meridian Energy Limited
for the year ended 30 June 2019
The Auditor-General is the auditor
of Meridian Energy Limited and
its subsidiaries (the Group). The
Auditor-General has appointed me,
Trevor Deed, using the staff and
resources of Deloitte Limited, to carry
out the audit of the consolidated
financial statements on his behalf.
Opinion
We have audited the consolidated
financial statements of the Group
on pages 105 to 146, that comprise
the consolidated balance sheet as
at 30 June 2019, the consolidated
income statement, consolidated
comprehensive income statement,
consolidated statement of changes
in equity and consolidated statement
of cash flows for the year ended
on that date and the notes to the
consolidated financial statements
including a summary of significant
accounting policies and other
explanatory information.
In our opinion, the consolidated
financial statements present fairly,
in all material respects, the
consolidated financial position of
the Group as at 30 June 2019 and its
consolidated financial performance
and its consolidated cash flows for
the year then ended in accordance
with New Zealand equivalents to
International Financial Reporting
Standards and International
Financial Reporting Standards.
Basis for our opinion
We conducted our audit in
accordance with the Auditor-General’s
Auditing Standards, which incorporate
the Professional and Ethical Standards
and the International Standards
on Auditing (New Zealand) issued
by the New Zealand Auditing
and Assurance Standards Board.
Our responsibilities under those
standards are further described in
the Auditor’s responsibilities for the
audit of the consolidated financial
statements section of our report.
We are independent of the Group
in accordance with the Auditor-
General’s Auditing Standards, which
incorporate Professional and Ethical
Standard 1 (Revised) Code of Ethics for
Assurance Practitioners issued by the
New Zealand Auditing and Assurance
Standards Board, and we have fulfilled
our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence
we have obtained is sufficient and
appropriate to provide a basis for
our opinion.
Other than the audit, our firm carries
out other assurance assignments for
the Group in the areas of greenhouse
gas inventory and sustainability
reporting assurance, review of
the interim financial statements,
audit of the securities registers,
vesting of the executive long-term
incentive plan, the solvency return of
Meridian Energy Captive Insurance
Limited and supervisor reporting,
which are compatible with those
independence requirements.
In addition, principals and employees
of our firm deal with the Group
on arm’s length terms within the
ordinary course of trading activities
of the Group. These services have
not impaired our independence as
auditor of the Group. Other than
these engagements and arm’s
length transactions, and in our
capacity as auditor acting on behalf
of the Auditor-General, we have
no relationship with, or interests in,
the Group.
Audit materiality
We consider materiality primarily
in terms of the magnitude of
misstatement in the consolidated
financial statements of the Group
that in our judgement would make
it probable that the economic
decisions of a reasonably
knowledgeable person would
be changed or influenced (the
‘quantitative’ materiality). In addition,
we also assess whether other matters
that come to our attention during the
audit would in our judgement change
or influence the decisions of such a
person (the ‘qualitative’ materiality).
We use materiality both in planning
the scope of our audit work and in
evaluating the results of our work.
We determined materiality for
the Group consolidated financial
statements as a whole to be
$18 million.
Key audit matters
Key audit matters are those matters
that, in our professional judgement,
were of most significance in our
audit of the consolidated financial
statements of the current period.
These matters were addressed
in the context of our audit of the
consolidated financial statements as
a whole, and in forming our opinion
thereon, and we do not provide a
separate opinion on these matters.
7
4
1
Meridian Annual Report 2019MenuIndependent auditor’s report Key audit matters
How our audit addressed the key audit matters
Valuation of Generation Structures and Plant
As explained in note B1 in the Group financial statements, generation structures and plant
are carried at fair value less any subsequent accumulated depreciation and impairment
losses at balance sheet date.
The net book value of generation structures and plant as reflected in note B1 is $8,654
million (2018: $7,776 million).
Our audit procedures focused on:
• The reasonableness of the earnings multiple used and the adjustments for
non observable information considered relevant;
• The reasonableness of the forecasted future maintainable earnings; and
• The reasonableness of the allocations of the enterprise value to business
units/assets.
The Group obtains an independent valuation every year to ensure that the carrying value
does not differ significantly from the fair value at balance date.
Our procedures included:
• Evaluating the Group’s processes for the independent valuation of the generation
As a result of this independent valuation, generation structures and plant have been
revalued this year as at 30 June 2019 and have increased in value by $1,134 million. The
impact of the revaluation is recognised as an increase of $1,139 million in the revaluation
reserve and $5 million impairment in the income statement. No revaluation was recorded
during the year ended 30 June 2018.
The valuation methodology determines an enterprise value range by reference to
capitalisation multiples as well as the Group’s historical and forecasted future maintainable
earnings before interest, tax, depreciation, amortisation, changes in fair value of financial
instruments, impairments, gains or losses on sale of assets and joint venture equity
accounted earnings (‘EBITDAF’). These inputs do not fully use observable market data and
require significant judgement and estimates to be made by the valuer.
We include valuation of generation structures and plant as a key audit matter because of
the inherent technical and judgemental complexity associated with determining the fair
value. Specifically, the determination of the forecasted future maintainable earnings and
earnings multiple, and the forecast cash flows and discount rates.
Valuation of Level 3 Electricity Derivatives
As explained in note D1, the Group’s activities expose it to commodity price, foreign
exchange and interest rate risks which are managed using derivative financial instruments.
These instruments are carried at their fair value as at 30 June 2019.
At 30 June 2019, level 3 electricity derivative assets totalled $121 million (2018: $100 million)
and level 3 electricity derivative liabilities were $58 million (2018: $52 million). We include
valuation of level 3 electricity derivatives as a key audit matter for the following reasons:
• The price used in the valuation of electricity hedges is based on the Group’s best
estimate of the long-term forward wholesale electricity price, which involves
significant judgement and estimates regarding discount factors, expected demand,
cost of new supply, and other relevant market factors; and
• The complexity and judgement involved in the valuation techniques and the
judgement involved in evaluating the long-term expected call volumes and discount
factor used to determine the fair value of electricity options and swaps.
structures and plant;
• Reviewing the valuation methodology and the reasonableness of the significant
underlying assumptions;
• Assessing the competence, objectivity and integrity of the independent registered
valuer. We assessed their professional qualifications and experience. We also
obtained representation from them regarding their independence and the scope
of their work;
• Meeting with the valuer to understand the valuation process adopted to identify
and challenge the critical judgement areas in the valuation; and
• Utilising our in-house valuation specialist to assess the appropriateness of
the valuation methodology and the reasonableness of the valuation range
determined by the independent valuer.
Our audit procedures focused on:
• The appropriateness of the valuation techniques;
• The reasonableness of the wholesale electricity price path; and
• The reasonableness of the underlying assumptions and inputs in the
valuation models.
Our procedures included:
•
In conjunction with our internal experts, evaluating the appropriateness of the
methodology applied in the valuation models for these electricity hedges, options
and swaps and ensuring that the methodology has been consistently applied
with the prior year where appropriate;
•
•
Challenging the key assumptions applied, including the long-term forward
wholesale electricity price, long-term expected call volumes, day one adjustments
and discount rates; and
Agreeing underlying data to contract terms, specifically the contract term,
price and volumes.
8
4
1
Meridian Annual Report 2019MenuIndependent auditor’s report Auditor’s responsibilities for
the audit of the consolidated
financial statements
Our objectives are to obtain
reasonable assurance about whether
the consolidated financial statements,
as a whole, are free from material
misstatement, whether due to fraud
or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level
of assurance, but is not a guarantee
that an audit carried out in accordance
with the Auditor-General’s Auditing
Standards will always detect a
material misstatement when it exists.
Misstatements can arise from fraud
or error and are considered material
if, individually or in the aggregate,
they could reasonably be expected
to influence the economic decisions
of shareholders taken on the basis
of these consolidated financial
statements.
Other information
The Board of Directors is responsible
for the other information. The other
information comprises the information
included on pages 1 to 104, and
153 to 157, but does not include the
consolidated financial statements,
and our auditor’s report thereon.
Our opinion on the consolidated
financial statements does not cover
the other information and we do
not express any form of audit opinion
or assurance conclusion thereon.
In connection with our audit of the
consolidated financial statements,
our responsibility is to read the
other information and in doing so,
we consider whether the other
information is materially inconsistent
with the consolidated financial
statements or our knowledge
obtained in the audit, or otherwise
appears to be materially misstated.
If, based on the work we have
performed, we conclude that there is
a material misstatement of this other
information, we are required to report
that fact. We have nothing to report
in this regard.
Directors’ responsibilities
for the consolidated
financial statements
The Directors are responsible
on behalf of the Group for the
preparation and fair presentation
of the consolidated financial
statements in accordance with
New Zealand Equivalents to
International Financial Reporting
Standards and International
Financial Reporting Standards
and for such internal control as
the Directors determine is necessary
to enable the preparation of
consolidated financial statements
that are free from material
misstatement, whether due
to fraud or error.
In preparing the consolidated
financial statements, the Directors
are responsible on behalf of the
Group for assessing the Group’s
ability to continue as a going
concern, disclosing, as applicable,
matters related to going concern
and using the going concern basis
of accounting unless the Directors
either intend to liquidate the Group
or to cease operations, or have no
realistic alternative but to do so.
The Directors’ responsibilities
arise from the Financial Markets
Conduct Act 2013.
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Meridian Annual Report 2019MenuIndependent auditor’s report As part of an audit in accordance
with the Auditor-General’s Auditing
Standards, we exercise professional
judgement and maintain professional
scepticism throughout the audit.
We also:
• Identify and assess the risks of
material misstatement of the
consolidated financial statements,
whether due to fraud or error, design
and perform audit procedures
responsive to those risks, and obtain
audit evidence that is sufficient and
appropriate to provide a basis for
our opinion. The risk of not detecting
a material misstatement resulting
from fraud is higher than for one
resulting from error, as fraud may
involve collusion, forgery, intentional
omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal
control relevant to the audit in order
to design audit procedures that are
appropriate in the circumstances,
but not for the purpose of
expressing an opinion on the
effectiveness of the Group’s
internal control.
• Evaluate the appropriateness of
accounting policies used and the
reasonableness of accounting
estimates and related disclosures
made by management.
• Conclude on the appropriateness
of the use of the going concern
basis of accounting by the directors
and, based on the audit evidence
obtained, whether a material
uncertainty exists related to
events or conditions that may cast
significant doubt on the Group’s
ability to continue as a going
concern. If we conclude that a
material uncertainty exists, we
are required to draw attention in
our auditor’s report to the related
disclosures in the consolidated
financial statements or, if such
disclosures are inadequate,
to modify our opinion. Our
conclusions are based on the audit
evidence obtained up to the date
of our auditor’s report. However,
future events or conditions may
cause the Group to cease to
continue as a going concern.
• Evaluate the overall presentation,
structure and content of the
consolidated financial statements,
including the disclosures, and
whether the consolidated financial
statements represent the underlying
transactions and events in a manner
that achieves fair presentation.
• Obtain sufficient appropriate
audit evidence regarding the
financial information of the entities
or business activities within the
Group to express an opinion on the
consolidated financial statements.
We are responsible for the direction,
supervision and performance of
the group audit. We remain solely
responsible for our audit opinion.
We communicate with the Directors
regarding, among other matters,
the planned scope and timing of
the audit and significant audit
findings, including any significant
deficiencies in internal control that
we identify during our audit.
We also provide the Directors with
a statement that we have complied
with relevant ethical requirements
regarding independence, and
to communicate with them all
relationships and other matters that
may reasonably be thought to bear
on our independence, and where
applicable, related safeguards.
From the matters communicated
with the Directors, we determine
those matters that were of most
significance in the audit of the
consolidated financial statements of
the current period and are therefore
the key audit matters. We describe
these matters in our auditor’s
report unless law or regulation
precludes public disclosure about
the matter or when, in extremely rare
circumstances, we determine that a
matter should not be communicated
in our report because the adverse
consequences of doing so would
reasonably be expected to outweigh
the public interest benefits of such
communication.
Our responsibilities arise from the
Public Audit Act 2001.
Trevor Deed, Partner
for Deloitte Limited
On behalf of the Auditor-General
Wellington, New Zealand
23 August 2019
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Meridian Annual Report 2019MenuIndependent auditor’s report Independent accountant’s assurance report
To the directors of Meridian Energy Limited
Report on sustainability
content within the 2019
Integrated Report
Meridian Energy Limited’s
Integrated Report for the year
ended 30 June 2019 (the
‘Integrated Report’) contains
sustainability information which
includes information that is
prepared in accordance with
the Global Reporting Initiative
Sustainability Reporting Standards
(the ‘GRI Standards’): Core option.
The specific GRI Standards reported
against are set out in the Global
Reporting Initiative Index (the
‘GRI Index’) on pages 153 to 156.
The subject of our limited assurance
engagement is the ‘sustainability
content’ which consists of the
disclosures and indicators listed
in the GRI Index and included on
pages 4 to 74, 101 and 153 to 157 of
the Integrated Report but does not
cover forward looking statements
or online supplements.
Conclusion
This conclusion has been formed
on the basis of, and is subject to,
the inherent limitations outlined
elsewhere in this independent
assurance report.
Based on the evidence obtained
from the procedures we have
performed, nothing has come
to our attention that causes us to
believe that the sustainability content
has not been prepared, in all material
respects, in accordance with the GRI
Standards: Core option for the year
ended 30 June 2019.
Basis for Conclusion
Our engagement has been
conducted in accordance with
International Standard on Assurance
Engagements (New Zealand) 3000
(Revised): Assurance Engagements
Other than Audits or Reviews of
Historical Financial Information
(‘ISAE (NZ) 3000 (Revised)’) issued
by the New Zealand Auditing and
Assurance Standards Board.
We believe that the evidence we have
obtained is sufficient and appropriate
to provide a basis for our conclusion.
Board of Directors’ Responsibility
The Board of Directors is
responsible for:
• determining Meridian Energy
Limited’s objectives in respect of
sustainability reporting;
• selecting the material topics;
• ensuring that the sustainability
content is prepared in accordance
with the GRI Standards: Core option
and specifically those GRI Standards
set out in the GRI Index;
• establishing and maintaining
appropriate performance
management and internal control
systems in order to derive the
selected sustainability information.
Our Independence
and Quality Control
We have complied with the
independence and other ethical
requirements of Professional and
Ethical Standard 1 (Revised): Code
of Ethics for Assurance Practitioners
issued by the New Zealand Auditing
and Assurance Standards Board,
which is founded on fundamental
principles of integrity, objectivity,
professional competence and
due care, confidentiality and
professional behaviour.
Other than this engagement and
our role as auditor of the statutory
financial statements on behalf of the
Auditor-General, our firm carries out
other assignments for the Meridian
Energy Group in the areas of
greenhouse gas inventory assurance,
review of the interim financial
statements, audit of the securities
registers, vesting of the executive
long-term incentive plan, the solvency
return of Meridian Captive Insurance
Limited and supervisory reporting,
which are compatible with those
independence requirements.
In addition, principals and employees
of our firm deal with the Meridian
Energy Group on arm’s length terms
within the ordinary course of trading
activities of the Meridian Energy
Group. These services have not
impaired our independence for the
purposes of this engagement. Other
than these engagements and arm’s
length transactions, we have
no relationship with, or interests in,
the Meridian Energy Group.
The firm applies Professional and
Ethical Standard 3 (Amended): Quality
Control for Firms that Perform Audits
and Reviews of Financial Statements,
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issued by the New Zealand Auditing
and Assurance Standards Board,
and accordingly maintains a
comprehensive system of quality
control including documented
policies and procedures regarding
compliance with ethical requirements,
professional standards and applicable
legal and regulatory requirements.
Independent Accountant’s
Responsibility
Our responsibility is to conduct a
limited assurance engagement in
order to express an opinion whether,
based on the procedures performed,
anything has come to our attention
that causes us to believe that the
sustainability content has not been
prepared, in all material respects, in
accordance with the GRI Standards:
Core option.
We did not evaluate the security
and controls over the electronic
publication of the Integrated Report.
In a limited assurance engagement,
the assurance practitioner performs
procedures, primarily consisting
of discussion and enquiries of
management and others within the
entity, as appropriate, and observation
and walk-throughs, and evaluates the
evidence obtained. The procedures
selected depend on our judgement,
including identifying areas where the
risk of material non-compliance with
the GRI Standards is likely to arise.
Our procedures included:
• Obtaining an understanding of the
internal control environment, risk
assessment process and information
systems relevant to the sustainability
reporting process;
• A review of the materiality process
followed to determine the material
topics chosen for inclusion in the
Integrated Report;
• Analytical review and other test
checks of the information presented;
• Checking whether the appropriate
indicators have been reported in
accordance with the GRI Standards:
Core option;
• Evaluating whether the information
presented is consistent with our
overall knowledge and experience
of sustainability reporting processes
at Meridian Energy Limited.
The procedures performed in a
limited assurance engagement
vary in nature and timing from,
and are less in extent than for, a
reasonable assurance engagement.
Consequently, the level of assurance
obtained in a limited assurance
engagement is substantially lower
than the assurance that would have
been obtained had a reasonable
assurance engagement been
performed. Accordingly, we do not
express a reasonable assurance
opinion about whether Meridian
Energy Limited’s Integrated Report
has been prepared, in all material
respects, in accordance with the
GRI Standards: Core option.
Inherent Limitations
Because of the inherent limitations
of any limited assurance engagement,
it is possible that fraud, error or
non-compliance may occur and not
be detected. A limited assurance
engagement is not designed
to detect all instances of non-
compliance with the GRI Standards:
Core option as it generally comprises
making enquiries, primarily of the
responsible party, and applying
analytical and other review
procedures. The conclusion
expressed in this report has been
formed on the above basis.
A limited assurance engagement
does not provide assurance on
whether compliance with the GRI
Standards will continue in the future.
Use of Report
Our assurance report is made solely
to the directors of Meridian Energy
Limited in accordance with the terms
of our engagement. Our work has
been undertaken so that we might
state to the directors those matters
who have been engaged to state
in this assurance report and for no
other purpose. To the fullest extent
permitted by law, we do not accept
or assume responsibility to anyone
other than the directors of Meridian
Energy Limited for our work, for
this assurance report, or for the
conclusions we have reached.
Chartered Accountants
23 August 2019
Auckland, New Zealand
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GRI Standards Content Index
This report has been prepared in accordance with the GRI Standards:
Core option. The specific GRI Standards reported against are in italics below.
General disclosures
Ethics and integrity
Pg #
Comment
Pg #
Comment
102-16
Values, principles, standards,
and norms of behaviour
GRI 101: Foundation 2016
General disclosures
GRI 102: General Disclosures 2016
Organisational profile
Governance
102-18
Governance structure
Stakeholder Engagements
102-40
List of stakeholder groups
102-41
Collective bargaining agreements
102-42
Identifying and selecting stakeholders
18, 24
16–18
8–11
101
15
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102-1
Name of organisation
Front cover
102-2
Activities, brands, products, and services
102-3
Location of headquarters
102-4
Location of operations
102-5
Ownership and legal form
102-6
Markets served
4-11
157
4-6
13
5
102-7
Scale of the organisation
4–6, 13, 36, 59
102-8
Information on employees and other workers
9, 10, 101
102-9
Supply chain
9, 10
102-10
Significant changes
102-11
Precautionary principle or approach
102-12
External initiatives
102-13
Memberships of associations
EU165
Installed capacity
Net energy output
Number of customer accounts
Transmission and distribution lines
Allocation of CO2e emissions allowances
EU2
EU3
EU4
EU5
Strategy
101
59
59
36
n/a
n/a
102-14
Statement from senior decision-maker
21–33
No significant changes
Relevant legislation
takes a precautionary-
principle-based approach
Zero Harm pledge.
Climate Leaders Coalition.
Length insignificant
No emissions
allowances received
102-43
Approach to stakeholder engagement
13, 26, 47, 48, 51, 68, 69
102-44
Key topics and concerns raised
13, 26, 47, 48, 51, 68, 69
Reporting practice
102-45
Entities included in the consolidated
financial statements
142
102-46
Defining report content and topic Boundaries
15
102-47
List of material topics
102-48
Restatements of information
Refer to this GRI
Content Index
Discussed throughout the
report where relevant
102-49
Changes in reporting
None
102-50
Reporting period
102-51
Date of most recent report
102-52
Reporting cycle
102-53
102-54
Contact point for questions regarding
the report
Claims of reporting in accordance
with the GRI Standards
102-55
GRI content index
102-56
External assurance policy
14
14
14
20
153
153
14
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Annual
Meridian Annual Report 2019Menu
Material topics and associated disclosures
Pg #
Comment
Material topics and associated disclosures
Pg #
Comment
Also see our Meridian
Group Greenhouse Gas
Inventory Report FY19
on our website: www.
meridianenergy.co.nz/
about-us/sustainability/
green-house-gas-
emissions-reports
Economic
Financial performance67
GRI 103: Management Approach 201668
Non-GRI67 Various financial measures
Financial impacts of hydrology67
GRI 103: Management Approach 2016
Non-GRI
Financial implications of variability
in hydrology
Financial impacts of climate change
GRI 103: Management Approach 2016
GRI 201: Economic Performance 2016
201-2
Financial implications and other risks and
opportunities due to climate change
Pipeline of generation options67
GRI 103: Management Approach 2016
EU10
Planned capacity against demand
Environmental
Action on climate change67
GRI 103: Management Approach 2016
Non-GRI
Proportion of Meridian Group generation
from renewable resources
27–32
31–32
59–63
59–63
8
8
73
73
29
29
Non-GRI
Support for customers’ climate change
mitigation actions
53–56
Non-GRI
Funds raised for community energy projects
in Australia
55
Throughout the report.
Also refer to our Taskforce
for Climate-related
Financial Disclosures
(TCFD) Report at
www.meridianenergy.
co.nz/assets/Sustainability/
e93f942ead/Meridian-
Climate-Disclosures-TCFD-
Report-FY19.pdf
Operational carbon emissions
GRI 103: Management Approach 2016
GRI 305: Emissions 2016
305-1
Direct (Scope 1) GHG emissions
305-2
Energy indirect (Scope 2) GHG emissions
305-3
Other indirect (Scope 3) GHG emissions
28
28
28
28
Impact on water
GRI 103: Management Approach 2016
66–68
GRI 303: Water and Effluents 2018
303-1
Interactions with water as a shared resource
66–68
303-2
Management of water
discharge-related impacts
303-3
Water withdrawal
303-4
Water discharge
303-5
Water consumption
Impact on biodiversity
66–68
66
66
66
GRI 103: Management Approach 2016
66–68
GRI 304: Biodiversity 2016
304-2
Significant impacts of activities,
products, and services on biodiversity
66–68
Environmental compliance
GRI 103: Management Approach 2016
GRI 307: Environmental Compliance 2016
307-1
Non-compliance with environmental
laws and regulations
68
68
67 Non-GRI – some material topics and disclosures listed above are additional or alternatives to those
covered in the GRI Standards.
68 Each Disclosure of Management Approach includes “103-1 Explanation of the material topic and its boundaries”,
“103-2 The management approach and its components”, and “103-3 Evaluation of the management approach”,
in accordance with GRI 103: Management Approach 2016.
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Material topics and associated disclosures
Pg #
Comment
Material topics and associated disclosures
Pg #
Comment
Labour Practices
Employee engagement67
GRI 103: Management Approach 2016
Non-GRI
Employee engagement surveys
26
26
Occupational health and safety
GRI 103: Management Approach 2016
26, 70–71
GRI 403: Occupational Health and Safety 2018
403-1
403-2
Occupational health and safety
management system
Hazard identification, risk assessment,
and incident investigation
403-3
Occupational health services
403-4
Worker participation, consultation,
and communication on occupational
health and safety
403-5
Worker training on occupational
health and safety
403-6
Promotion of worker health
403-7
Prevention and mitigation of occupational
health and safety impacts directly linked
by business relationships
403-8
Workers covered by an occupational
health and safety management system
403-9
Work-related injuries
70–71
70–71
70–71
70–71
70–71
70–71
70–71
70–71
70
Non-GRI
Total recordable injury frequency rate (TRIFR)
70
Diversity and equal opportunity
GRI 103: Management Approach 2016
44–47
GRI 405: Diversity and Equal Opportunity 2016
405-1
405-2
Diversity of governance bodies
and employees
Ratio of basic salary and
remuneration of women to men
45, 46
45
67 Non-GRI – some material topics and disclosures listed above are additional or alternatives to those
covered in the GRI Standards.
Non-GRI
Women in people leadership
and senior specialist positions
Retaining expertise67
GRI 103: Management Approach 2016
EU15
Tenure by age
Society
Access to water67
GRI 103: Management Approach 2016
Non-GRI
Strength of relationships with
stakeholders interested in water
Contribution to local communities
46
71
71
68–69
68–69
GRI 103: Management Approach 2016
69
GRI 413: Local Communities 2016
413-1
Operations with local community
engagement, impact assessments,
and development programs
13 out of our 17 power
stations have local
community engagement
programmes (Mt Millar and
our Australian hydro power
stations don't) – 95% of
MW capacity
Non-GRI
Contribution to local communities
in New Zealand
Non-GRI Number of community fund grants
69
69
in New Zealand
Contribution to public policy
GRI 103: Management Approach 2016
32, 51–52
GRI 415: Public Policy 2016
415-1
Political contributions
Non-GRI
Expenditure on “lobbying” organisations
such as trade associations
Meridian does not donate
to any political parties
(as specified in our Code
of Conduct)
91
101
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Material topics and associated disclosures
Pg #
Comment
Non-GRI
Key regulatory issues
32, 51–52
Product Responsibility
Customer satisfaction67
GRI 103: Management Approach 2016
Non-GRI
Level of customer satisfaction
Non-GRI
Customer retention rates
Electricity pricing67
25, 48
25, 48
39
GRI 103: Management Approach 2016
27, 37–40
Non-GRI
Price of electricity in AU and NZ
compared to other OECD countries
37
Support for vulnerable customers
GRI 103: Management Approach 2016
40–41
EU27
Disconnections67
Plant performance67
GRI 103: Management Approach 2016
EU30
Plant availability factor
Process safety67
GRI 103: Management Approach 2016
Non-GRI Actions to improve process safety
41
65
65
64
64
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covered in the GRI Standards.
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Meridian Annual Report 2019Menu
Australian registered office
Meridian Energy
Australia Pty Limited
Level 15
357 Collins Street
Melbourne VIC 3000
Australia
T +61 3 8370 2100
F +61 3 9620 5235
Flux Federation offices
86 Customhouse Quay
Wellington Central
Wellington 6011
New Zealand
T +64 4 389 0859
9th Floor, Quayside Tower
252-260 Broad Street
Birmingham B1 2HF
United Kingdom
Powershop
Level 3
147 Tory Street
Wellington 6011
New Zealand
PO Box 7651
Newtown
Wellington 6242
New Zealand
T +64 0800 1000 60
Directory
Registered office
Meridian Energy Limited
55 Lady Elizabeth Lane
Wellington Central
Wellington 6011
New Zealand
PO Box 10840
The Terrace
Wellington 6143
New Zealand
T +64 4 381 1200
F +64 4 381 1201
Offices
Quad 7, Level 2
6 Leonard Isitt Drive
Auckland Airport
Auckland 2022
New Zealand
PO Box 107174
Auckland Airport
Auckland 2150
New Zealand
T +64 9 477 7800
287-293 Durham Street North
Christchurch Central
Christchurch 8013
New Zealand
PO Box 2146
Christchurch 8140
New Zealand
T +64 3 357 9700
Corner of Market Place
and Mackenzie Drive
Twizel 7901
New Zealand
Private Bag 950
Twizel 7944
New Zealand
T +64 3 435 9393
Banker
Westpac Wellington
New Zealand
Directors
Chris Moller, Chair
Peter Wilson, Deputy Chair
Mark Cairns
Jan Dawson
Mary Devine
Anake Goodall
Mark Verbiest
Executive Team
Neal Barclay, Chief Executive
Nic Kennedy
Ed McManus
Tania Palmer
Mike Roan
Julian Smith
Jason Stein
Guy Waipara
If you have any questions
or comments, please email
investors@meridianenergy.co.nz or
service@meridianenergy.co.nz
Share Registrar New Zealand
Computershare
Investor Services Limited
Level 2
159 Hurstmere Road
Takapuna
Auckland 0622
New Zealand
Private Bag 92119
Victoria Street West
Auckland 1142
New Zealand
T +64 9 488 8777
F +64 9 488 8787
enquiry@computershare.co.nz
investorcentre.com/nz
Share Registrar Australia
Computershare
Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford
VIC 3037
Australia
GPO Box 3329
Melbourne VIC 3001
Australia
T 1800 501 366 (within Australia)
T +61 3 9415 4083 (outside Australia)
F +61 3 9473 2500
enquiry@computershare.co.nz
Auditor
Trevor Deed, Partner
Financial audit on behalf of
the Office of the Auditor-General
Jason Stachurski Partner
GRI standards assurance
Deloitte Limited
PO Box 1990
Wellington 6140
New Zealand
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Meridian.co.nz
Integrated Report
for the year ended
30 June 2019.