MCY’s Shares Fall After Signing Crown Participation Agreement

  • Dec 13, 2018 AEDT
  • Team Kalkine
MCY’s Shares Fall After Signing Crown Participation Agreement

Electricity generator and retailer, Mercury NZ Limited (ASX: MCY) has entered into an agreement with the New Zealand Government (Crown) under which Crown agrees to participate in any future dividend reinvestment plan or share buyback of the Company. Following this news, the share price of Mercury decreased by 2.286 percent as on 13 December 2018. With this announcement, the company has joined the other three Government majority-owned companies which are also having a similar agreement.  Currently, Crown is holding 51% shares of Mercury. 

In FY 2018, the company reported a 7% lift in operating earnings (EBITDAF) to $561 million as compared to the corresponding previous year. The company’s total hydro generation was 4,947GWh for 2018, which was 24% higher than the company’s average generation.

The Net profit after tax of the company increased by 27 percent to $234 million in FY 2018 as compared to last year, reflecting higher earnings partially offset by higher tax expense. Underlying earnings after tax of the company increased by 13 percent to $198 million (FY 2017 $176 million). The company reported the operating cost of $214 million in FY 2018. In FY 2018, the company also completed an on-market share buyback programme by acquiring around 15.6mn shares of Mercury for total consideration of NZ$50mn.

Recently, the credit rating agency Standard & Poor’s confirmed Mercury’s corporate credit rating as BBB+/Stable. In the month of September 2018, the company announced its successful bid into the Victorian Renewable Energy Auction Scheme to secure a 15-year off-take agreement with the Victorian State Government for around 37 percent of the output of Dundonnell Wind Farm.

The company also established a strategic relationship with Genesis to become a partner in the development of Tilt Renewable’s Waverley Wind Farm in South Taranaki. In the month of October 2018, the company revised its Underlying EBITDAF guidance from a range of A$120 – A$127 million to a new range of A$134 – A$138 million.

During the September quarter, the company’s strong starting storage position enabled hydro generation of 1,446GWh which has contributed to a total generation of 2,179GWh including stable geothermal output. In the September quarter, the average wholesale prices for the quarter were $87/MWh at Otahuhu and $77/MWh at Benmore.

In the last six months, the share price of the company increased by 12.54 percent as on 12 December 2018. MCY’s shares traded at $3.420 with a market capitalization of circa $ 4.77 billion as on 13 December 2018 (AEST 4:00 PM). The group pays a decent dividend (3.96 % yield) and the stock has earnings per share of 0.156 AUD with a high price to earnings ratio of 22.42x. This utility stock is under watchlist by many investors.


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