Meridian Reports Annual Result

MEDIA RELEASE ­ MERIDIAN ANNUAL RESULT 2008

2nd October 2008

Meridian Reports Annual Result

State-owned 100 per cent renewables electricity generator and retailer Meridian has reported a full year after-tax profit of $128.6 million for the 12 months ended 30 June 2008. The result compares with an after-tax profit of $241.2 million the previous year.

Meridian paid a total dividend to shareholders of $235.9 million for the 2007/2008 year.

"The winter of 2008 was a difficult and complex situation for Meridian to manage," says Meridian Chief Executive Tim Lusk.

"Meridian anticipated well in advance the winter of 2008 might be difficult and put in place a number of strategies to ensure it would be able to meet demand, to ensure adequate reserve capacity in the South Island, and to minimise as far as possible the financial impact," he says.

"In addition to the effects of a prolonged drought in both the North and South Islands, a number of other factors created a situation which had a significant negative effect on our financial performance."

The other factors included the sudden and early close-down of Pole 1 of the HVDC link, the sudden closure of the New Plymouth power station, as well as prolonged thermal plant outages throughout late summer and autumn.

Market conditions were extreme, however, with the average wholesale electricity price in June reaching $356 per megawatt-hour, compared with $69 a year earlier.

"Meridian drew on the lessons learnt during the dry years of 2001, 2003, and 2005 to implement a prudent and responsible management plan, which has continued into the 2009 financial year as we await significant rainfall events and inflows," says Mr Lusk.

"We believe the extreme conditions, however, demonstrated the underlying strength and reliability of Meridian's generation facilities and systems, as well as the need for significant additional generation capacity."

"Our answer is to continue to develop a portfolio of geographically diverse renewable generation facilities, so that if adverse conditions occur in one area, they can be offset by favourable conditions in other areas."

"Meridian recorded a number of highlights during the year and is pushing ahead with an ambitious generation programme in New Zealand as well as looking to Australia for new opportunities. Transforming our retail customers' experience is also a major focus as we build on our initiatives of the past couple of years."

Construction of West Wind near Wellington began during the year and when completed by the end of 2009, this major wind farm will double Meridian's wind capacity and provide a major boost to lower North Island security of supply.

In Australia Meridian is in a joint venture with AGL to develop the 330MW MacArthur wind farm in Victoria, which is waiting planning and regulatory permission. In another overseas joint venture, Meridian announced during the year Spanish manufacturer Mondragon would begin production of the innovative New Zealand designed and developed WhisperGen unit, for the European market.

Meridian is also building a wind farm at Ross Island in Antarctica, in a joint venture with Antarctica New Zealand, to supply Scott Base and the nearby US-operated McMurdo Station, a project which will deliver significant sustainability benefits by reducing the amount of diesel generation required.

Project Hayes, New Zealand's largest wind farm proposal, received resource consents during the year, but was appealed to the Environment Court.

"Our retail operation launched a number of initiatives to help customers understand and plan their electricity use and become more energy efficient," says Mr Lusk.

This included the Right House subsidiary, targeted at householders, which provides a single source for energy advice and products. Right House provides an expert holistic view to help achieve the best efficiencies for homes.

For commercial customers the Energy for Industry subsidiary provides similar services.

Meridian is continuing the rollout of 112,000 smart meters in Christchurch and central Canterbury, which will provide significant benefits to customers in how they manage and use electricity.

"Our move to Meridian's new five green star Queens Wharf building, in Wellington, was a highlight for our staff and a demonstration of our commitment to sustainability principals," says Mr Lusk.

The Queens Wharf building was constructed using the best practice sustainability techniques and provides ongoing energy and water savings as a result of its innovative design.

"Meridian also remains committed to providing leadership in the developing carbon markets. This included during the year listing for sale, on the TradeMe website, Voluntary Emission Reduction credits from Meridian's Te Apiti wind farm. Meridian's electricity was recertified as carboNZero and the next goal is company-wide carbon-neutral status.

"Sustainability, with its three pillars of enduring relationships, environmental responsibility, and exceptional performance, remains an ongoing focus for us and is at the core of everything Meridian does," concludes Mr Lusk.

ENDS

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