Mercury NZ Lowers FY2019 EBITDAF Guidance; Releases Quarterly Operational Update

  • Apr 23, 2019 AEST
  • Team Kalkine
Mercury NZ Lowers FY2019 EBITDAF Guidance; Releases Quarterly Operational Update

Mercury NZ Limited (ASX: MCY), established in 1998 and based in Auckland, New Zealand, is engaged in the production, trading, and sale of electricity in the country. On April 18th, 2019, the company declared a revised FY2019 EBITDAF guidance which has now been decreased from $ 515 million to $ 495 million.

The revision has been executed due to an expected reduction of 150 GWh in the full-year forecast hydro generation amidst continued dry weather conditions in the Taupo area.

The decline of 150 GWh is speculated to most likely occur in the fourth quarter (Q4) of FY2019 as can be inferred from the hydro generation YTD and the current below-average Taupo lake level. As a result, the FY2019 annual hydro generation forecast has now been updated to 4,000 GWh in accord with the historical average. Moreover, Mercury NZ has also announced that the guidance may change in the future subject to any material events, major one-off expenses or other unpredictable situations such as varying hydrological conditions.

Mercury NZ has also announced its March Quarter Operational Update. During the period, the company witnessed record spot prices as the market responded to insufficient thermal fuel and plant availability along with below-average levels of national hydro storage tracking until the last week of the three months.

Besides, the average spot prices increased by $ 77 per MWh to $ 162 per MW relative to the previous corresponding period (pcp), and by $ 67 per MWh to $ 145 per MWh at Benmore.

The quarter also witnessed a rise in the national demand by 3% arising from advancements in industrial and irrigation sectors. The Waikato catchment inflows were reported to be 9th percentile (or 270 GWh below average) causing the hydro generation to decrease by 273 GWh from 1,035 GWh in the Q3 FY2018 to 762 GWh in the recent quarter.

Besides, the hydro GWAP/TWAP ratio was recorded at 1.10 in Q3 FY2019, which is higher than the 1.08 in the pcp as the company made the most of limited hydro generation. Moreover, Mercury recorded geothermal production of 710 GWh, which is 74 GWh higher relative to the pcp in FY2018 resulting from planned maintenance outages that allowed the geothermal fleet to provide reliable baseload generation at 98% availability (91% in pcp FY2018).

The report further included details on futures prices increase on thermal fuel uncertainty, retail market sales, increase in irrigation and rural demand due to dry conditions, and a rise in industrial application due to Tiwai Potline.

Mercury NZ had revenues of NZD 1,079,000 from ordinary activities in the recently released half year results for the period ended December 31st, 2018. The profit from ordinary activities for the period amounted to NZD 104,000. Besides, Mercury achieved stable first half earnings (EBITDAF) of NZD 302 million, close to the record NZD 304 million in the prior comparable period.

To date, Mercury NZ’s market valuation stands at AUD 4.97 billion with ~ 1.36 outstanding shares. On April 23rd, MCY stock price settled at AUD 3.950, up by 8.22%.


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