Rain leaves Mercury NZ feeling flush

Mercury NZ has raised its full-year earnings guidance by $25 million thanks to rising storage in its Waikato catchment and sustained high wholesale electricity prices.

Storage in Lake Taupo¯ has climbed steadily since May. It is at a 19-month high and about 20 per cent above average for this time of year.

Recent “wetter than average” weather in the region should deliver about 50 gigawatthours more electricity, lifting the firm’s total expected hydro production for the year to June 30 to 4070GWh, the company said in a statement to NZX.

That extra production, coupled with higher wholesale prices and a shift towards more commercial and industrial load, means the company is now expecting Juneyear earnings before interest, tax, depreciation, amortisation and changes in financial instruments of about $510m. That is up from the firm’s August guidance of $485m.

The country’s third-largest electricity retailer typically makes two-thirds of its power at nine stations on the Waikato River and benefited from record inflows in 2017 and

2018. Dry conditions last year saw ebitdaf for the year through June fall 11 per cent to $505m. Hydro generation that year was

4006GWh. The company also operates five geothermal plants.

Spot electricity prices have remained high most of this year due to constrained gas supplies and low North Island hydro storage. Declining South Island lake levels left national storage 17 per cent below average at September 30, Mercury noted. National storage is currently about 9 per cent below average, according to NZX Energy data.