Meridian Energy Earnings: Higher Electricity Prices Drive Growth

Narrow-moat-rated Meridian Energy reported a good fiscal 2024 result, with EBITDA increasing 16% to NZD 905 million on higher retail and wholesale electricity prices and completion of the Harapaki wind farm, partly offset by lower hydroelectric generation. Conditions have become more difficult in recent months because of very low rainfall, forcing the company to source some power from competitors at high prices. We downgrade our fiscal 2025 EBITDA forecast by 12% to NZD 1.02 billion. But weather will normalize, and our longer-term forecasts are largely unchanged. We forecast a five-year EBITDA CAGR of 10%, driven by the completion of developments and higher electricity prices. We maintain our NZD 5.50 per share fair value estimate and consider the stock slightly overvalued at current prices.