18 Aug 2020

Mercury reports strong profit despite drought, Covid-19

2:11 pm on 18 August 2020

Despite dealing with drought and the Covid-19 lockdown, renewable energy firm Mercury has reported a strong full year profit.

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Photo: RNZ / Russell Palmer

It made $207 million compared with $357m last year, however last year's total included a one-off $177m boost from asset sales.

Removing the one-off cost, its profit was up $27m on 2019, largely due to lower interest and tax charges.

Chief executive Vince Hawksworth, who took over the role at the end of March just as the country went into level 4 lockdown, said the year was characterised by hydrology and the impacts of the pandemic.

Lake Taupō hydro storage ended the year at below average levels.

"The Waikato catchment has really been in drought for more than half the financial year so that reduced the amount of hydro-generation the company could achieve and as a result... lower revenue."

"That said, the earnings before interest tax depreciation and amortisation (EBITDA) were $494m which is only 2 percent less than last year, so all in all a pretty good year."

Hawksworth said the lockdown also threw up challenges but he was pleased with how the company had come through.

The company pushed ahead with advancement of it Turitea wind farm, despite the timing knocked back because of the lockdown.

"Completion of the 33 northern turbines is expected in the final quarter of 2021, and the 27 southern turbines in the second quarter of 2022," he said.

It also completed refurbishments at Whakamaru and Aratiatia hydro stations as well as a three-well geothermal drilling programme at Kawerau and Rotokawa steamfields.

Hawksworth said the company was in a good position once the Aluminium Smelter at Tiwai Point closed next year.

"We don't underestimate the impact of Tiwai and the other large industrials who are struggling at the moment.

"The positive thing for Mercury is all of our generation is on the North Island and that means we don't get as badly impacted from a wholesale perspective, however what we are conscious of is that competition for customers will only increase and we have to do a better job for our customers to ensure that they stay with us for a long time."

He said a more gradual exit of Tiwai would have been beneficial.

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