Mercury NZ Ltd (ASX: MCY) provides utility services. The Company generates and supplies electricity from hydro, geothermal, gas-fired, and wind power stations, as well as owns and manages bio-energy power plants. Mercury NZ serves customers throughout New Zealand.
The company has through the latest release on ASX disclosed its FY 2019 EBITDAF guidance & its Quarterly operational update. The company has confirmed its FY2019 EBITDAF guidance of $515 million. This reflects upon the following:
- The sale of the Metrix business from 1 March 2019 lowering EBITDAF by $10 million;
- An expected 50 GWh decrease in the full-year hydro generation to 4,150 GWh due to drier weather in the Taupo catchment in H1-FY2019; and
- Favourable trading conditions from higher spot prices in Q2-FY2019.
These guidelines may change and remain subject to any material events, significant one-off expenses or other unforeseeable circumstances including changes in hydrological conditions.
Spot prices rise due to national hydro conditions and thermal fuel constraints: Dry conditions coupled with the national hydro inflows at 86% of average, combined with constrained thermal fuel availability has led to the rise of the spot prices for the quarter. The average spot prices for the Quarter reached to $206/Megawatt hours at Otahuhu and $175/Megawatt hours at Benmore thermal projects; this has resulted in an increase of $113/Megawatt hours and $85/Megawatt hours, respectively when compared with the recorded priced for the FY2018 Q2.
Generation down from record levels; GWAP lift: The company's hydro generation during the quarter was 1,002-GigaWatt hours, 170-Gigawatt hours decrease from record levels in the prior comparable period, with Waikato catchment inflows at 84% of average. Company's full-year hydro generation forecast has been reduced by50GWh to 4,150 Gigawatt hours. The value of Mercury's generation witnessed an improvement as the Load Weighted Average Price/Generation Weighted Average Price ratio has moved favourably from 1.06 registered in Q2-FY2018 to 1.04 in the quarter ended 31 December, which was on account of the timely dispatch of available electricity generation. This was heavily on account of the higher hydro generation which was done in the month of October, the highest-priced month in the quarter, and illustrated through the positive movement in the hydro GWAP/TWAP ratio from 1.04 in the same quarter last year to 1.11.
Market churn remains high, rising from 21.1% at the end of Q1-FY2019 to 21.3% as at 31 December 2018. Mercury group churn increased to 20.4% at the for the Mercury brand also increasing to 17.6% (from 16.8% as at 30 September 2018). end of the quarter with churn.
Now let us quickly look at the company’s stock performance over the last few months. The stock last traded at $ 3.36, with a market capitalization of circa $4.58 Bn as on 23 Jan. 2019. The stock has delivered a YTD return of -5.35%. The company has posted returns of 10.16%, 12% and -1.47% over the last six months, three months and one-month period respectively, as on 22 January 2019. It has a 52-week high price of $3.69, with an average volume of 13,740 approximately.
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