The March quarter was a topsy-turvy period for Mercury NZ Ltd (NZX: MCY; ASX: MEZ) with low hydro storage in January that led to high power prices and the impact of cyclonic conditions in part of February and March.
Average wholesale prices remained elevated for the quarter. With prices of $85/MWh at Otahuhu and $79/MWh at Benmore, this was up over $30/MWh on the prior comparable period.
However, prices varied significantly in the quarter with the January average hitting a record high due to national storage beginning the quarter at 82% of average and January national inflows being significantly below average.
This was contrasted with February and March as large inflows associated with cyclones Fehi and Gita suppressed wholesale prices and pushed national hydro storage to 114% of average by quarter end.
Mercury said the increased hydro contribution offset a reduction in geothermal output at Kawerau due to a planned two-yearly maintenance outage. Favourable hydrological conditions also lead to the company’s full year hydro generation forecast being lifted to 4,700GWh.
For the quarter there were high levels of retail competition and numbers decreased by 2,000 over the quarter to 391,000 due to intense retail competition with 48 retail brands now competing in the New Zealand market.
The decrease was spread across all Mercury group brands with the Mercury brand itself experiencing its first quarterly decline following six consecutive quarters of growth. Intense retail competition also impacted churn levels with Mercury's annualised churn for all brands being 19.2% for the year to February 28 compared to the same period the year prior.
Also yesterday, in a separate announcement, the company lifted its FY2018 EBITDAF guidance from $530 million to $540 M.
This was due to an expected 150 GWh increase in full year forecast hydro generation due to continued wet weather in the Taupo area.
Annual hydro generation is now forecast to be 4,700 GWh for the financial year, or 700 GWh above average. Guidance remains subject to material events.
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