FIRST CUT: Mercury 1H earnings flat on reduced hydro generation

Tuesday 26th February 2019

Mercury NZ reported a slight decline in first-half operating earnings after reduced hydro generation and a lower energy margin took the gloss off record wholesale prices late last year.

Earnings before interest, tax, depreciation, amortisation and changes in the financial instruments fell to $302 million in the six months through December, from $304 million a year earlier.

Net profit fell to $104 million, from $131 million a year earlier. Revenue climbed 13 percent to $1.08 billion. Underlying profit was unchanged at $114 million.

The company will pay a 6.2 cent interim dividend on April 1, up from 6 cents a year ago.

Auckland-based Mercury is the country’s third-largest power retailer and makes most of its electricity at nine power stations on the Waikato River. It delivered record earnings last year after two years of unusually strong inflows.

But storage at Lake Taupo, at the head of the firm’s generation chain, has been below average for most of the past four months and earlier this week was at its lowest since May 2016.

Last month the company said lower hydro production left generation volumes for the six months through December at 3,901 GWh, down 5 percent from the record volumes a year earlier.

But a sharp jump in wholesale prices in October and November, due to dry conditions on both islands, plant outages and reduced gas supplies from the Pohokura field, lifted average prices for the six months to $138.15/MWh. That was 53 percent higher than a year earlier.

Mercury supplied about 381,000 customers at the end of December, down from 393,000 a year earlier.

Its average mass-market sale price rose almost 4 percent to $126.82/MWh while volume was down 1.8 percent at 1,703 GWh for the six months. The firm’s total purchases from the market were down about 4 percent at 2,850 GWh.

The firm today reiterated its September forecast for $515 million of operating earnings in the year through June, and its full-year hydro generation assumption at 4,150 GWh.

The shares last traded at $3.71, up 15 percent over the past 12 months.

(BusinessDesk)

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