21 Aug 2018

Mercury's net profit rises 27 percent on record hydro generation

2:55 pm on 21 August 2018

Mercury Energy has made a strong full-year profit driven up by record hydro generation.

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Photo: RNZ / Russell Palmer

The power company's net profit rose 27 percent for the 12 months ended in June to $234 million, boosted by an increase in the value of movements in financial instruments, lower interest rate costs, but partly offset by increased depreciation and higher taxes.

Revenue rose 13 percent to $1.8 billion, while underlying earnings rose 7.3 percent to $561m.

Chief executive Fraser Whineray said the company also executed a number of key strategic projects over the past year, which put Mercury in a strong position for the year ahead.

It was forecasting underlying profit of $515m for the year ending in 2019, based on hydro generation of 4200 gigawatt hours, which compared with 4947 GWh in the year just ended.

He said the company's customer churn rate, which measured the number of customers switching to an alternative retailers was 6.4 percent, compared with an industry average of 8.1 percent.

"Retail market conditions remain very competitive, however, our brand and customer service activity, focused on inspiring, rewarding and making things easy for our customers, continues to show strong results," Mr Whineray said.

Mercury also executed a $50m share buyback through the year and completed the purchase of a 19.99 percent stake in Tilt Renewables, which was currently the subject of a takeover offer, in partnership with the larger shareholder, Infratil.

"Our shareholding in Tilt is an extension of our long-term growth strategy. It gives Mercury a meaningful interest in significant development opportunities related to Australia's accelerating transition to renewable energy sources and is part of Mercury's broader wind strategy which has been worked on for more than a decade," Mr Whineray said.

The company will pay a full year dividend of 15.1 cents per share, up 3.4 percent, with guidance of 15.5 cents per share for the current year.

Mr Whineray said the expected restart of New Zealand Aluminium Smelter's fourth potline at Tiwai Point was expected to contribute about 1 percent annually to demand growth.