Dividends from Mighty River Power, Meridian Energy and Genesis Energy: part 1 of 3

There was some public discussion earlier this year of dividends from the majority government-owned electricity companies Mighty River Power, Meridian Energy and Genesis Energy. In this article I will look at what those dividends have been, and how they have changed over time.

Later this week, part 2 will discuss some possible reasons for the changes in dividends.

Mighty River Power

The graph below shows the dividends paid to the Crown[1] by Mighty River Power.

Figure 1 - Dividends to the Crown from Mighty River Power

Source: own calculations

The red bars show special dividends, while the blue bars are ordinary dividends.

The graph shows that, following large ordinary and special dividends in 2009/10, Mighty River Power’s ordinary dividends to the Crown since 2010/11 have been broadly consistent, at between $90 million and $120 million a year, with two special dividends paid on top of this in the last two years.

This is surprising, as the Government sold 49% of the shares in Mighty River Power a couple of years ago, as part of the Government Share Offers (GSO) programme. You would expect this to show up as an obvious change in the graph, with dividends to the Crown roughly halving after the sale of the shares.

The reason you can’t see this in the graph is that Mighty River Power increased its dividends significantly at the time of the GSO programme. The graph below shows total dividends paid by Mighty River Power to all its shareholders. It is identical to the graph above until 2013/14, because before this year the Crown was the only shareholder. I have also marked the year when Mighty River Power was listed.

Figure 2 - Dividends from Mighty River Power

Source: own calculations

As a result of Mighty River Power increasing its dividends since it was listed, the Crown received $119 million from the company in 2015/16 – only slightly less than it received in 2011/12, and more than in 2012/13, both years when the Crown owned 100% of the company.

Genesis Energy

The graph below shows the dividends paid to the Crown by Genesis Energy since the 2000/01 financial year. There are no red bars as Genesis Energy has only paid ordinary dividends.

Figure 3 - Dividends to the Crown from Genesis Energy

Source: own calculations

The graph shows the same story as for Mighty River Power, and the reason is the same - Genesis Energy increased its dividends significantly, although this happened just before the Crown sold some of its shares, while Genesis Energy was preparing itself for being a listed company.

As a result of this increase in dividends, the Crown received more from Genesis Energy in 2015/16 than in any other year before the GSO programme, despite only owning 51% of the company.

The graph below shows total dividends paid by Genesis Energy to all shareholders, and clearly shows the step-change in dividends in 2013/14. Because Genesis Energy’s share offer occurred on 17 April 2014, the Crown received the full benefit of this increase in dividends in the 2013/14 year.

Figure 4 - Dividends from Genesis Energy

Source: own calculations

Meridian Energy

The graph below shows total dividends paid by Meridian Energy to all shareholders (not just the Crown) again with ordinary dividends in blue and special dividends in red.

The dividend history for Meridian Energy is more complicated, because:

• two large special dividends were paid by Meridian Energy, in 2005/06 and 2010/11, and
• historically, Meridian Energy’s dividends were more variable from year to year than the dividends from Mighty River Power and Genesis Energy.

Figure 5 - Dividends from Meridian Energy

Source: own calculations

The special dividend in 2005/06 was $600 million, and related to Meridian Energy’s sale of its Southern Hydro assets in Australia.

The special dividend in 2010/11 was $521 million, and related to Meridian Energy’s sale of its Tekapo A and B hydro stations to Genesis Energy. The Tekapo A and B sale was the result of Government reforms to the electricity market, and the Government issued directions to Meridian Energy requiring it to sell the stations and pay the special dividend, and directions to Genesis Energy requiring it to purchase the stations. On that basis, a better picture of how Meridian Energy’s dividends have changed over time is given by excluding it.

The Mighty River Power special dividends in 2004/05 and 2009/10 weren’t related to government policy changes, and weren’t directed by the Government, and so haven’t been excluded from the graphs above. The smaller special dividends in 2014/15 and 2015/16 from both Meridian Energy and Mighty River Power also do not need to be excluded.

The graph of dividends from Meridian Energy then becomes:

Figure 6 - Dividends from Meridian Energy

Source: own calculations

This more clearly shows the historical variability in Meridian Energy’s dividends from year to year, and it also shows an increase in dividends in recent years, similar to the increases from Mighty River Power and Genesis Energy.

So what does this all mean?

Why did the dividends from the companies increase significantly at around the time they were listed? Was it a result of the listing, or because of something else?

I’ll discuss that in part 2.

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