Meridian Energy's (NZSE:MEL) 39% Return: A Respectable Performance

Meridian Energy Limited (NZSE:MEL) has delivered a respectable 39% return to its investors over the last three years. This performance can be attributed to several key factors, which are likely to be sustainable in the long term. In this article, we will explore the reasons behind Meridian Energy's strong performance and discuss the opportunities for future growth.



1. Renewable Energy Transition: Meridian Energy is a renewable energy company, which has benefited from the global shift towards sustainable energy sources. As the demand for renewable energy increases, so does the potential for Meridian Energy to grow and profit. This trend is expected to continue in the long term, as governments and consumers worldwide prioritize clean energy.
2. Investment in New Generation Assets: Meridian Energy has invested heavily in new and existing generation assets, totaling NZD 349 million in the last financial year. This investment has allowed the company to expand its capacity and take advantage of the growing demand for renewable energy. As long as the company continues to invest in its infrastructure, it is likely to maintain its competitive edge in the market.
3. Strong Financial Performance: Meridian Energy has reported strong financial performance in recent years, with operating cash flows increasing to NZD 667 million and net profit after tax rising to NZD 429 million in the 2024 financial year. This growth was influenced by net gains on hedge instruments of NZD 249 million. The company's ability to generate significant profits and cash flows is a key factor in its long-term sustainability.
4. Dividend Payouts: Meridian Energy has consistently paid dividends to its shareholders, with the total ordinary dividends declared in FY24 being NZD 0.21 per share. The company's ability to maintain and increase its dividend payouts is an indication of its financial health and sustainability.
5. Expansion in Wind and Solar Energy Capacity: Meridian Energy is expanding its wind and solar energy capacity, which is set to boost revenue growth through increased electricity generation and enhanced portfolio. This expansion is a strategic move that is likely to pay off in the long term, as the demand for renewable energy continues to grow.

In conclusion, Meridian Energy's 39% return over the last three years can be attributed to several key factors, which are likely to be sustainable in the long term. The company's strong performance is driven by the renewable energy transition, investment in new generation assets, strong financial performance, dividend payouts, and expansion in wind and solar energy capacity. As Meridian Energy continues to invest in its infrastructure and capitalize on the growing demand for renewable energy, it is well-positioned to deliver strong returns to its investors in the long term.