QUARTERLY HIGHLIGHTS
> RECORD - Q2 Generation of 1,848 GWh including 1,172 GWh from hydro
> WHOLESALE PRICES RISING - Highest Q2 wholesale price since FY2006
> 4,550 GWh - Full year hydro generation forecast up 150 GWh
ELEVATED WHOLESALE PRICES; RECORD GENERATION; HYDRO GENERATION FORECAST UP
Wholesale prices for the quarter ending 31 December 2017, of $93/MWh at
Otahuhu and $90/MWh at Benmore, almost reached the record highs set in
FY2006. These prices were up significantly on the prior comparable period by
$45/MWh and $50/MWh respectively.
South Island inflows were 68% of average (or almost 1,800 GWh below average)
contributing to wholesale prices increasing from $59/MWh at Otahuhu and
$53/MWh at Benmore in October to be $121/MWh and $122/MWh respectively in
December. Low inflows into the South Island hydro catchments resulted in
total South Island hydro storage falling from 120% of average at the start of
the quarter to end at 77% (average since 1999) (or almost 600 GWh below
average).
In contrast to the South Island, hydro inflows into the Waikato Hydro
Catchment were near normal contributing to the second consecutive quarter of
record output from our renewable generation fleet of 1,848 GWh. Mercury
utilised storage within Lake Taupo to generate 1,172 GWh from the Waikato
Hydro Scheme, optimising generation with rising wholesale prices. Lake Taupo
storage fell from 130% of average to 85% at the end of the quarter (average
since 1999) (or 70 GWh below average). Geothermal generation was down 39 GWh
to 676 GWh as scheduled maintenance outages were completed at the Nga Awa
Purua and Mokai power stations.
The quarter illustrated the value to Mercury of the low level of correlation
between wholesale prices and inflows into the Waikato Hydro Catchment.
Mercury was able to benefit from the coincidence of high hydro generation and
high wholesale prices (unlike what is typical for South Island hydro
operators).
With higher than average inflows into the Waikato Hydro Catchment since 31
December 2017, Mercury has updated its FY2018 mid-point hydro generation
forecast to 4,550 GWh (up 150 GWh on the forecast provided with the previous
Quarterly Operational Update).
CONTINUED BELOW MARKET CHURN; MODERATE END-USER PRICE GROWTH
Mercury''s rate of customer churn was again below market average as the
company continues to focus on rewarding, inspiring and making it easy for our
customers. For the quarter, Mercury''s annualised churn for all brands of
19.4% was 1.2% below the market average of 20.6%. Trader churn for all
Mercury brands for the quarter increased to market levels.
The company''s churn advantage over the twelve months to 31 December 2017
contributed in customer numbers increasing by 6,000 to 393,000 as fewer
customers switched from Mercury. The company experienced customer growth in
both the North (+4,000) and South Islands (+2,000) and for dual fuel
customers (+4,000).
The average energy price to customers was up (to $108.20/MWh) compared to the
same period last year ($106.11/MWh). This increase partially reflects loyalty
offerings redeemed in the prior period associated with the Mercury brand
launch.
UNDERLYING DEMAND GROWTH
After adjusting for temperature, national demand was up 3.7% compared to the
same quarter last year (or up 3.0% on an unadjusted basis). This increase in
demand was impacted by a normalisation of irrigation and dairy load due to
wet conditions in the prior period (1.8%). Positive signs of underlying
demand growth were again observed with continued growth in the urban (0.8%)
and rural (0.7%) sectors.
ENDS
For further information:
Media - Craig Dowling 0272 105 337
Investors - Tim Thompson 0275 173 470
End CA:00313368 For:MCY Type:MKTUPDTE Time:2018-01-24 08:51:36