Mercury NZ lifts earnings outlook, wet weather boosts North Island hydro generation

Fraser Whineray, chief executive of Mercury Energy. Mercury has been a beneficiary from the wet weather in the North Island. Photo / Dean Purcell

Mercury NZ, the electricity generator-retailer formerly known as MightyRiverPower, raised its annual earnings guidance as the spell of wet weather boosted generation at its North Island hydro plants.

Earnings before interest, tax, depreciation, amortisation and fair value movements are expected to be $515 million in the year ending June 30, 2018, up from a previous forecast of $500m which was already an improvement on an initial forecast for ebitdaf of $495m, Auckland-based Mercury said in a statement. The company reported earnings of $523m in 2017.

"This is due to an expected 250 GWh (gigawatt hours) increase in full-year forecast hydro generation due to the recent wet weather in the Taupo area," it said. "Annual hydro generation is now forecast to be 4,400 GWh for the financial year or 400 GWh above average."

Mercury has been a beneficiary from the wet weather in the North Island while its southern competitors suffered a dry winter, freeing up the board to declare a special dividend at the 2017 result.

The company today said ordinary dividend and capital expenditure guidance was unchanged.

Mercury's hydro generation rose 21 per cent to 1,522 GWh in the September quarter from a year earlier, with the volume weighted average price at $93.40 per Megawatt hour compared to $60.32 in September 2016. Inflows into Mercury's Waikato catchment were the fourth highest on record, it said. Including geothermal Mercury's total generation rose 16 per cent to 2,258 GWh for an average price of $91.07/MWh, up from $58.32/MWh a year earlier.

The company's customer numbers rose to 393,000 in the September quarter from 381,000 a year earlier.

Meanwhile, Genesis Energy's total generation climbed 23 per cent 2,099 GWh in the quarter, driven by a 32 per cent increase in thermal generation in both gas and coal, according to the Auckland-based company's operating metrics, also out today. The average price received for generation was $97.31/MWh compared to $58.56 a year earlier.

Genesis said thermal generation was higher at the start of the quarter when hydro lake levels were low, and renewable generation picked up later in the period when storage returned to more normal levels.

Mercury shares last traded at $3.45 and have gained 18 per cent so far this year, while Genesis shares were last at $2.415, up 15 per cent in the year to date.