Mercury says its first half result reflects a period of significant change for the company, including becoming New Zealand's largest wind generator.
Photo: Supplied / Mercury NZ Ltd
KEY NUMBERS
(for the six months ended 31 December 2021 vs year earlier)
- *Net profit: $427m vs $130m
- *Revenue: $873m vs $944m
- *Underlying profit: $242m vs $290m
- *Dividend: 8 cps vs 6.8 cents per share
- *Generation (GWh): 3,745 vs 3,320 gigawatt hours
The net profit reflected a $367m net gain on the sale of Mercury's 19.9 percent Tilt Renewables shareholding.
On the downside, the underlying profit was hit by the early exit of a foundation hedge with Norske Skog, costing it $50m.
In August, Mercury completed the acquisition of Tilt Renewables' New Zealand wind farms, generating 482 GWh over the period.
And within the remaining period, it progressively brought the Turitea North wind farm on stream, adding another 105 GWh over the period.
"Together these significantly diversify our revenue streams and position us well for an exciting period of growth as we head into an ever-accelerating pace of change with decarbonisation front and centre," Mercury chief executive Vince Hawksworth said.
The Turitea South wind farm was scheduled for completion in mid-2023, which would make Turitea New Zealand's largest wind farm.
He said the acquisition of Trustpower's retail business would be another significant milestone for Mercury.
The company's customer connections were holding steady at 327,000 ending a period of declining market share.
"This will accelerate Mercury's retail strategy, which is centred on delivering utility solutions and creating more value for our customers," Hawksworth said, adding the transaction was expected to be completed by the end of the financial year ending in June.
"This acquisition also significantly increases our scale, allowing us to make meaningful investment in our underlying IT systems and ways of working to drive greater innovation, new products and experiences."
Despite the changes, the company was expecting challenging operating conditions to continue, with sustained dry conditions across the Waikato catchment leading to reduced hydro generation.
"Careful lake management has been critical to manage electricity portfolio risks, and that prudence is reflected in our results," Hawksworth said.
Hydro generation was 91 GWh down on the prior comparable period (where conditions were also dry) as a result.
The 44-day unplanned outage at Kawerau geothermal power station also extended into the start of the financial year (ending on 20 July) and coincided with high spot prices.
"These challenging conditions reinforce the importance of building resilience in our business and our people."
Mercury chair Prue Flacks said regulatory uncertainty facing the sector was also a challenge.
"We agree with the government's position that climate change must be a priority but are increasingly concerned about the potential for policy or regulatory change that unintentionally undermines this position and jeopardises New Zealand's decarbonisation goals," she said.
"A good example of this is our resource management system, which needs to support renewable generation development if we are to decarbonise at a pace that becomes more urgent by the day."
Mercury's full year underlying profit guidance remained at $570m reflecting impacts of the Tilt Renewables and Trustpower retail acquisitions, but excluded likely interim insurance payment arising from Kawerau station unplanned outage.