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Mercury first half profit rises 17% as heavy North Island rain stokes generation

Tuesday 27th February 2018

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Mercury NZ lifted first-half profit 17 percent on the back of record total generation driven by favourable North Island rainfall.

The electricity generator and distributor, formerly known as MightyRiverPower, said net profit increased to $132 million in the six months ended Dec. 31 from $113 million in the prior period. Earnings before interest, tax, depreciation, amortisation and fair-value adjustments rose to a record $301 million from $270 million. 

Net profit was boosted by record total generation of 4,107 gigawatt hours, up 9 percent on the prior year. 

Chair Joan Withers said conditions coincided with lower-than-average output from South Island hydro generators playing to Mercury’s geographic advantage. Customer growth also continued, up 1,000 to 393,000 and relative churn was maintained at a lower rate than the market average. 

“Electricity demand has been higher across all sectors except the industrial sector. Drier weather conditions in many areas of the country contributed to increased demand from both dairy processing and irrigation relative to the prior period. This demand growth is supported by population growth in key regions offsetting per-household consumption decreases," chief executive Fraser Whineray said in a statement.

Operating costs rose $4 million to $59 million due to the completion of technology upgrade projects and the execution of geothermal maintenance plans. Through the period, high geothermal availability was maintained at 95 percent, it said.

The company declared an interim dividend of 6 cents per share to be paid April 3, up 3.4 percent on the prior period. 

Looking ahead, the Auckland-based generator reiterated guidance for full-year ebitdaf to be $530 million, subject to any material events, significant one-off expenses or other unforeseeable circumstances including hydrological conditions. It reported earnings of $523 million in 2017. Full-year stay-in-business capital expenditure guidance remains at $115 million.

Whineray said the company continues to invest in solar, battery storage and other customer-led home and transport technologies and continues to pursue growth. During the half year Mercury investigated the prospect of expanding its metering capabilities through an acquisition opportunity in Australia, he said. 

“While ultimately unsuccessful with the bid, the process helped refine our view of relevant businesses that could support growth. We will continue to explore other opportunities with a strong commercial lens,” Whineray said.

The full year ordinary dividend guidance remains at 15 cents per share, a 2.7 percent increase on the prior year.  

On another front, Whineray said the company welcomes the opportunity to contribute to the government's review into retail electricity pricing and looks forward to "constructive discussions." 

The stock last traded at $3.22 and is up 2.9 percent over the past year. 


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