Mercury increases earnings guidance $25m

EV advocate Mercury has revised its FY2020 EBITDAF guidance from $485 million to $510 million – up $25m.

This is based on higher spot price expectations and more rain in the hydro catchments.

In a statement to the NZX, Mercury says higher spot price expectations for FY2020 with actual prices to-date and ASX electricity futures in Auckland (Otahuhu grid reference point) indicate a spot price for the year in excess of $130/MWh; and an expected 50GWh increase in full year forecast hydro generation to 4070GWh due to wetter than average weather in the Taupo region.

Mercury put in its quarterly operational update for the three months ended September 30 that the Otahuhu spot price is at a record as hydro storage declines with thermal cuts also on the horizon.

“Spot prices were elevated during the quarter, increasing post-winter as the market responded to below-average inflows and major thermal fuel and generation outages scheduled in Q2-FY2020,” Mercury says.

“This resulted in average spot prices for the quarter reaching a record $125/MWh at Otahuhu and $112/MWh at Benmore.

“National hydro storage fell from 106% to 83% of average over the quarter driven by South Island inflows being 102GWh below average. The uncorrelated nature of North Island inflows was demonstrated as Waikato catchment inflows were 72GWh above average. Consequently, Mercury’s FY2020 forecast hydro generation has been increased by 50GWh to 4070GWh.”

Mercury’s Q1 FY2020 hydro generation of 1214GWh decreased by 232GWh from the prior comparable period but remained 21GWh above average.

The company says it is proactively managing its electricity sales portfolio in response to wholesale market conditions, which are expected to persist with FY2021 and FY2022.

Mercury has reduced discounted mass market acquisition activity while maintaining its focus on rewarding existing customers.