Rain boosts Mercury’s profit forecast

Mercury Energy’s Waikato River hydro stations are benefiting from increased flows from Lake Taupo...
Mercury Energy’s Waikato River hydro stations are benefiting from increased flows from Lake Taupo. Photo: Supplied
Mercury Energy has lifted its 2018 profit guidance  3% from $500 million to $515 million thanks to recent wet weather in the Taupo area.

The company, formerly known as Mighty River Power, is controlled by the Government, which has  a 51% share.

It  said its profit forecast was due to an expected 250GWh increase in full-year forecast hydro generation. Annual hydro generation was now forecast to be 4400GWh for the financial year, or 400GWh above average.

In a note to the NZX, Mercury said its focus on rewarding existing customers continued to produce below "market churn" — customers changing suppliers.

For the three months ending September, Mercury’s annualised churn for all brands was 7.9%, 1.6% below the market average of 9.5% based on Electricity Authority data.

Forsyth Barr broker Damian Foster said normal service had resumed in respect to  electricity customers switching suppliers, following a dry winter.

Genesis Energy recorded another month of customer number falls in September, dropping a further 1951 connections.

Mercury continued to be the best performer among the listed generator/retailers, reaping the benefits of its refreshed retail strategy.

It  added 604 customers in September but its gains were weighted down by the losses at its junior brands — GloBug and Bosco — which both recorded connection falls. Bosco was down 544, GloBug was down 62 and Mercury itself was up 1210 to give a net 604 gain.

Trustpower compounded on losses reported in July and August, losing another 700 customers during September.

Contact Energy also lost customers, down 522.

Among the smaller retailers, Flick Electric returned to growth, adding 878 customers, although it remained 1622 customers below its customer base peak of 23,323 reached in May.

Electric Kiwi added 828 customers, taking its 12-month gain to 11,865 customers, the best performing retailer.

"Overall, Genesis has its work cut out to stem its significant customer losses and Trustpower’s continued connection decline will also be a concern for it.

"Mercury continues to go from strength to strength and Meridian is holding up well," Mr Foster said.

In its market report, Mercury said it produced several records across its renewable generation assets. Total generation for the quarter was a record, up 313GWh to 2256GWh. Geothermal generation was up 47GWh with 98.2% availability achieved across all stations due to the timing of planned outages.

Within the quarter, records for peak output were achieved for the Waikato Hydro Scheme and at the Kawerau geothermal station. A record for peak instantaneous output was achieved for hydro generation when all 39 units simultaneously generated on the Waikato River.

National storage was 66% of average at June 30, due to earlier dry conditions in the South Island.

Mercury said it was able to achieve record generation in the highest-priced quarter since September 2014 as a result of inflows into the Waikato catchment being not correlated to hydrological conditions in the South Island.

Meanwhile, Genesis Energy’s total generation climbed 23% to 2099GWh in the quarter, driven by a 32% increase in thermal generation in both gas and coal, according to the Auckland company’s operating metrics. The average price received for generation was $97.31 per MWh,  compared  with $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 increased later in the period when storage returned to more normal levels.

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