Rain improves hydro: Mercury

The “wettest first half ever”, says Mercury in revealing its operational update for the three months ended December 31, 2022.

It says electricity spot prices collapsed during Q2, but forward electricity prices remain high for 2023-2026.

Extremely wet weather over key catchments boosted hydro generation – a “marked change” from the previous year, Mercury reports.

It says Waikato hydro generation was 1281GWh for the three months to December 31, 2022, up 352GWh (or 38%) on the prior comparable period. “Hydro spill was significant at 386GWh for the quarter and 675GWh over the half year to maintain lakes within operating levels.”

National inflows for the last quarter were also wet, around the upper tercile and very wet for the first half of the financial year, Mercury adds.

“This reflected in relatively low electricity spot prices over the quarter and half, averaging $47/MWh and $59/MWh in Auckland respectively. However, forward electricity prices remain high with calendar years 2023 to 2026 around or above $190/MWh in Auckland reflecting high thermal generation costs.”

Mercury says national demand growth remains modest, up 0.5% on the prior comparable period but 1.2% lower than the same period two years ago with lower industrial demand driven mainly by reduced electricity consumption by Channel Infrastructure at Marsden Point.

Geothermal generation for the quarter of 606GWh was 61GWh lower than the prior comparable period due to significant turnarounds (maintenance outages) at Nga Awa Pūrua and Kawerau.

Wind generation for the last quarter was 9% higher than the prior comparable period due mostly to commissioning of Turitea North wind farm in 2021.

”For the financial year, we are forecasting hydro generation of 4700GWh with much of this additional generation being sold at lower spot prices over the quarter.”

Mercury’s quarterly operational update now includes the impact of the Trustpower retail business resulting in higher mass market connections, volumes, and prices versus the prior comparable period.

In December 2022, Mercury acquired the outstanding interest of 52% in the NOW broadband business with 24,000 residential and commercial broadband connections.

Mercury saw connection growth across all product lines, lifting total connections by 11,000 over the quarter (excluding NOW acquisition). It had 35,000 new connections in Q2.

Commercial and industrial yields (physical and end user CfDs) rose by $13/MWh to almost $107/MWh versus the prior comparable period, reflecting the rising electricity forward curve repricing contract renewals.

Mercury confirms its FY2023 EBITDAF guidance of $620 million or normalised EBITDAF of $795m after adjusting for the non-cash unwind of acquired swaps relating to the Norske Skog, Tilt and Trustpower transactions.