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Mercury, Genesis signal weaker earnings on low lakes, gas shortage

Thursday 18th April 2019

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On-going dry weather on the North Island has prompted Mercury NZ and Genesis Energy to lower their full-year operating earnings forecasts.

Mercury, which makes most of its power at nine power stations on the Waikato River, today lowered its forecast earnings before interest, tax, depreciation, amortisation and changes in financial instruments to $495 million, from the $515 million it signalled in January.

Continued dry weather around Taupo means it expects only about 4,000 gigawatt-hours of hydro production for the full-year, 150 GWh less than it had expected in January.

Storage in Lake Taupo has been sliding steadily since January and is at its lowest in more than three years.

Genesis runs the Tekapo, Waikaremoana and Tongariro hydro schemes as well as gas and coal-fired plants at Huntly.

It says low storage and reduced gas supplies from the Pohokura field means its full-year ebitdaf will be at the lower end of the $360-$375 million range it had previously indicated. It has had to burn more expensive imported coal to help make up the shortfall.

“Genesis’s gas entitlements from the Pohokura field for the past quarter have been down 5 percent on the prior comparable period and are expected to continue to be down during parts of April and May as the well workovers are completed and the rig is demobilised from the platform.”

Wholesale electricity prices have been high all year due to low national hydro storage and reduced output during a workover programme OMV is wrapping up at the offshore Pohokura field. Storms on the South Island late last month restored lake levels there but dry weather has persisted on the North Island.

High power prices, and the potential for interest rate cuts, have pushed the share prices of most of the generators to records in recent weeks.

Genesis shares last traded at $3.16, a gain of about 14 percent this year. Mercury shares last traded at $3.93, a gain of about 12 percent the same time.

Data from Genesis today shows storage at Lake Tekapo rebounded with last month’s storms but had been below-average since early December. Storage at Waikaremoana on the North Island’s east coast has been below average since mid-October.

Contact Energy today noted that controlled storage on the North Island is about 40 percent below average.

Much of its gas-fired capacity has been out of the market this year due to a lack of gas. Today the company said its 377 MW Taranaki Combined Cycle plant will be available from today until the end of June if market conditions require it.

“The arrangement will see fuel diverted from less efficient thermal plant to Contact’s combined cycle plant. This effectively adds a small amount of additional generation capacity over peak periods due to the better efficiency of TCC. Contact is continuing to work on securing additional gas and will inform the market when contractual commitments are made.”

Contact shares last traded at $6.80 and have risen about 15 percent this year.

(BusinessDesk)

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