Mercury rises to challenge with strong FY2019 result
20 August 2019 – Mercury produced a strong result under unusual weather and market conditions in its financial year to 30 June 2019, Chief Executive Fraser Whineray said today.
Announcing Mercury’s annual results, Mr Whineray said that the overall performance of the business was even more pleasing than last year’s record earnings, as Mercury executed a number of key strategic moves to position the company for long-term sustainable growth.
Financial year milestones included: the sale of Mercury’s Metrix smart metering business for $272 million; the announcement of a major refurbishment programme for its Karapiro hydro station; consolidation of three Auckland premises into one new Auckland office in Newmarket; the roll-out of a new customer IT platform (SAP Commerce Cloud); and the announcement of the construction of Mercury’s first wind farm, at Turitea near Palmerston North.
Operating earnings (EBITDAF) of $505 million were down 11% (FY2018 $566 million), impacted by early wet weather across the Waikato catchment giving way to an acutely dry period from September. Annual hydro generation of 4,006GWh was in line with the company’s long-term average but was 941GWh down on the record established last year.
Annual geothermal generation set a record, reaching 2,896GWh, coinciding with record high annual spot prices caused in part by gas supply and thermal generation constraints from October 2018.
“Making the most of the challenging hand dealt by Waikato catchment inflows and elevated spot pricing required a very strong performance from generation and wholesale markets teams in FY2019,” Mr Whineray said.
“Our assets were prudently managed through challenging weather and wholesale market conditions. High geothermal availability (97.7%), as the only renewable energy source that is not weather dependent, maximised the opportunity of historically high spot prices.”
Mercury reduced retail acquisition activity and focused on customer value and loyalty as retail margins contracted with elevated spot prices and ongoing high levels of retail competition.
Mercury’s record profit of $357 million was up $123 million on the prior year’s record, as the company benefited from lower interest costs as historic hedges matured, and from the gain on sale of its Metrix smart metering business. As with the prior year, there were no impairments recorded.
FY2019 FY2018 FY2017 FY2016 FY2015 EBITDAF
($M) 505 566 523 493 482 NET
PROFIT AFTER TAX
($M) 357 234 184 160 47 UNDERLYING
EARNINGS AFTER TAX
($M) 161 198 176 152 145 FULLY
IMPUTED ORDINARY DIVIDEND (CENTS PER
SHARE) 15.5 15.1 14.6 14.3 14.0 FULLY
IMPUTED SPECIAL DIVIDENDS (CENTS PER SHARE) 5.0 7.5 UNIMPUTED SPECIAL DIVIDEND
(CENTS PER SHARE) 4.0 SHARE BUYBACK
($M) 50 ELECTRICITY GENERATION
(GWh) 6,902 7,704 7,533 6,842 6,536
Mercury Chair Joan Withers announced a final ordinary dividend of 9.3 cents per share, fully imputed. This brings our total ordinary dividend to 15.5 cents per share, fully imputed, up 2.6% on FY2018. It is Mercury’s 11th consecutive year of ordinary dividend growth.
“Our underlying performance and the bold and carefully considered moves we have executed successfully are all indicators that Mercury is well positioned for growth in a dynamic market,” Mrs Withers said.
Total shareholder returns (TSR) of 42.5% included significant share price appreciation, which valued the company at $6.3 billion at financial year end, compared with $4.6 billion at the same time last year.
EBITDAF guidance is $485 million for FY2020, based on forecast mean hydro and geothermal generation (~ 6,620GWh). This guidance is subject to any material events, significant one-off expenses or other unforeseeable circumstances including hydrological conditions.
FY2020 ordinary dividend guidance has been issued at 15.8 cents per share, a 2% increase on FY2019.
Mercury will continue to provide updates of its mid-point estimate of full-year hydro generation with its quarterly operating statistics.
Mr Whineray said that Mercury anticipates solid long-term demand growth as renewable electricity’s advantages are increasingly unlocked through technology advances in applications such as transport and industrial heat, and as consumers demand cheaper, cleaner, locally generated and low-carbon sources of energy to power their lives.
“We will continue to explore inspiring ways to encourage the transition to electrified transport for the long-term benefit of the country as well as our owners.”
ABOUT MERCURY NZ LIMITED
Mercury’s mission is energy freedom. Our purpose is to inspire New Zealanders to enjoy energy in more wonderful ways and our goal is to be New Zealand’s leading energy brand. We focus on our customers, our people, our partners and our country; maintain a long-term view of sustainability; and promote wonderful choices. Mercury is energy made wonderful.