Mercury NZ has posted a profit crash, reporting just $1 million in earnings for the year ended June.
Management said hydro inflows were weak, gas supplies were limited and poor weather weighed on renewable output. The company is 51% owned by the government and described the year as among its most difficult.
Key Drivers Behind Earnings Decline
“The fall was due to lower earnings before interest, tax, depreciation, amortisation and financial instruments (ebitdaf) and changes in unrealised gains or losses on unhedged electricity derivatives,” the company said.
Ebitdaf Performance and Market Response
Ebitdaf came in at $786m, $91m below last year but above Jarden’s forecast of $768m. The firm pointed to strong trading and tight cost management as drivers.
Generation was 7,906GWh, 10% lower than a year earlier. Hydro fell 17% to 3,410GWh, wind slipped 6%, and geothermal eased 2% on planned outages. St John said it was “a challenging year” with inflation and fuel constraints lifting spot prices during demand peaks.
Record Capital Investment Programme
Mercury is pressing ahead with record capital investment despite the profit crash. Chief executive Stew Hamilton confirmed the company was in the middle of a $1 billion build programme, covering three major projects: the Ngā Tamariki geothermal expansion, Kaiwera Downs 2, and the Kaiwaikawe wind farm.
“The ambition reflects significant reinvestment of capital with about $600m of growth capex expected to be deployed over the period on major infrastructure works for the benefit of New Zealand,” Hamilton said.
Refurbishment of the Karāpiro Hydro Station, due for completion in September, will deliver a 16.5MW capacity uplift. Mercury is also preparing a $550m reinvestment programme across the Maraetai, Ōhakuri, and Ātiamuri hydro stations — believed to be the country’s largest hydro reinvestment effort — which is expected to add 58MW of capacity and generate an extra 87GWh.
Wholesale Market Pressures
Mercury linked sector pressures to wholesale prices that topped $800 per megawatt hour in 2023, forcing shutdowns for some heavy users. St John said resilience would improve through the industry-backed plan for a reserve at Huntly Power Station.
“Improvements to market and policy settings are also required, including greater transparency of gas market information to support decision making,” he said. “Options such as capacity mechanisms or direct government investment should see careful cost-benefit evaluation.”
Impact on Customers and Pricing
Households have not been spared from the sector’s turbulence. Mercury lifted electricity prices by about 9.7% on April 1, largely due to regulated lines and transmission costs. Gas prices also rose amid continued supply tightness.
Hamilton said the company was “acutely aware” of the cost pressures facing households and businesses. He added that Mercury had hardship measures in place to support vulnerable customers. The company’s retail base grew 5% to 906,000 connections.
Dividends Increased Despite Profit Crash
Shareholders will receive a higher payout, with Mercury declaring a final dividend of 14.4c per share. The full-year dividend rose to 24.0c, 3% higher than in 2023. St John commented: “Despite this, we remain optimistic about the long-term outlook given the sheer volume of work currently under way.”