17 April 2018
Mercury Q3 Operating Statistics & Guidance Update
FY2018 EBITDAF guidance lifted to $540 million (attached)
Mercury announced today that it has lifted its FY2018 EBITDAF guidance from $530 million to $540 million. This is 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 may change and remains subject to any material events, significant one-off expenses or other unforeseeable
circumstances including changes in hydrological conditions.
ENDS
Mercury Quarterly Operational Update (attached)
Three months ended 31 March 2018
• SECOND HIGHTEST Q3 GENERATION - 1,035GWh hydro generation; 114% of average
• 4,700GWh - Full year hydro generation forecast up 150GWh
• RETAIL COMPETITION INTENSE - Annual churn for all Mercury brands up 0.9% versus pcp; market churn up 1.2%
LOW STORAGE LEADS TO RECORD HIGH JANUARY PRICES; CYCLONES ARRIVE FEBRUARY-MARCH
Average wholesale prices remained elevated for the quarter ended 31 March 2018 being $85/MWh at Otahuhu and $79/MWh at
Benmore, up over $30/MWh on the prior comparable period. However prices varied significantly in the quarter with the
January average price 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 the end of the quarter.
ABOVE AVERAGE HYDRO GENERATION OFFSETS GEOTHERMAL OUTAGE
Mercury continued to benefit from high inflows into the Waikato catchment with hydro generation in the quarter reaching
114% of average[1]. The increased hydro contribution offset a reduction in geothermal output at Kawerau due to a planned two-yearly
maintenance outage. Favourable hydrological conditions have also lead to our full year hydro generation forecast being
lifted to 4,700GWh (up 150GWh on guidance provided with the Q2 FY2018 Operational Update).
Mercury's LWAP/GWAP ratio of 1.08, relative to 1.02 in the prior comparable period, was negatively affected by the
timing of inflows and by high prices coinciding with scheduled geothermal outages.
HIGH LEVELS OF RETAIL COMPETITION; INCREASED MARKET CHURN
Customer 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, up 12 from the previous year. 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 has also impacted churn levels with Mercury's annualised churn for all brands being 19.2% for
the year to 28 February 2018[2] and up 0.9% compared to the same period the year prior. This remains below market with market churn also increasing by
1.2% to 21.1%.
Mercury continues to 'Make It Easy' for our customers with 10,000 customers choosing to take up our offer to fix their
prices under our 'Beat The Price Rise' campaign. The total number of customers on fixed-term contracts was more than
127,000 at the end of the quarter, however down on the number at the start of the financial year as some customers chose
not to re-fix as their fixed terms expired.
The average energy VWAP was up 3% to $113.99/MWh as average prices for both residential and commercial customers rose
relative to the prior year.
URBAN DEMAND GROWTH NEGATED BY REDUCTION IN IRRIGATION AND DAIRY LOAD
National demand was down 0.8% versus the prior comparable period after normalising for temperature (down 1.5% on an
unadjusted basis). Lower irrigation demand (-1%) was the most negatively impacted sector with lower demand also seen in
the dairy (-0.2%), rural (-0.3%) and industrial (-0.2%) sectors. The contraction in these sectors was partially offset
by urban demand growth (up 1% after adjusting for temperature).
1 For quarters ended 31 March since 1999
2 March 2018 Electricity Authority switching data was not available at the time of release
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[1] For quarters ended 31 March since 1999
[2] March 2018 Electricity Authority switching data was not available at the time of release
ends