As NZ schoolchildren gear up for a ‘strike’ against the approaching apocalypse precipitated by global warming, there is (slightly) more comforting news (though not perhaps to the children) from an outfit familiar with NZ weather patterns.
Meridian Energy reports that it has seen no significant change to catchment inflows over the last 100 years. There has been some seasonal shift in inflows , with drier autumns and wetter summers. It notes snowpack and glaciers are getting smaller.
Meridian, NZ’s largest electricity generator, reports it is projected to get wetter in its catchments, including in winter, with bigger individual rainstorms. But it will be drier in irrigation areas.
And warmer everywhere.
But is this bad news for a company that sells electricity?
On the contrary.
Meridian reckons with demands for action on climate change growing, electrification of existing fossil fuel energy use, (largely outside the electricity sector) could significantly lift electricity demand, meaning lots of new generation will be needed.
Unsubsidised renewables are likely to form the bulk of new generation (though investment timing is uncertain). Unit costs of newer technologies (wind, solar, batteries) will continue to decline. However increases in intermittent generation will create more volatile market prices.
Though consumer-led technology uptake will occur, it will supplement, rather than displace, grid-level power.
With wholesale prices reflecting gas supply concerns, Meridian says that, along with recent high inflows, has produced “very favourable” second half FY19 trading conditions.
So it’s not all bad news on the climate change front — at least for investors in companies like Meridian.
And that includes the government which, back when it partially privatised the state-owned enterprise, carried it at a book value of $5bn.
Now the market capitalisation of Meridian is $11.2bn, meaning the government’s 51% share is worth more than the full enterprise’s value at the time of the share float.
Maybe if the government sold down more of its shares, it could afford to pay the teachers (who are so helpful to children writing those apocalyptic placards) the higher salaries they are striking for.
Something for everyone, then?