Meridian Energy's 2015 Result Exceeds Expectations, Fair Value Estimate Unchanged

Meridian Energy's fiscal 2015 net profit increased 7% to NZD 247 million. The result exceeded our expectations, chiefly because of stronger demand growth in New Zealand, resilient retail pricing amid fierce competition, and a lower-than-expected tax expense. Free cash flow increased 6% to NZD 400 million. We expect free cash flow to continue to expand for the foreseeable future as growth capital expenditure slows. The board kicked off capital management with a final special dividend of NZD 0.04 per share. The rise in payout ratio from between 70% and 80% to between 75% and 90% of free cash flow fits with management's laudable endeavour to return NZD 625 million to shareholders by fiscal 2020.