Mercury NZ Limited (NS) Analysis

Overview

Mercury (formerly Mighty River Power - NZX: MRP) is a company with a long heritage in renewable energy in New Zealand serving about 1-in-5 homes and businesses under the Mercury brand and other specialty brands, including the leading pre-pay product GLOBUG. Mercury also has proven capability and technical expertise in smart metering services and solar.

Mercury's electricity generation is 100% renewable, with the hydro and geothermal power stations operated by Mercury producing enough renewable electricity for about 1 million New Zealand homes. The nine hydro stations dating back to the 1920s make up the Waikato River Hydro System, accounting for about 10% of the country's total electricity supply that is predominantly hydro.

Mercury led a renaissance in geothermal energy over the past decade with an innovative investment programme in partnership with local Maori landowners, enabling the completion of three major geothermal projects in 2008 (Kawerau), 2010 (Nga Awa Purua) and 2013 (Ngatamariki). These sustainably harness natural heat deep underground, producing steady 'base-load'electricity - normally running 24/7 and are not dependent on the weather like other forms of renewable generation.

The company has established a leadership position in encouraging the electrification of transport, supporting the adoption of e-bikes and electric vehicles, partnering on charging infrastructure and moving 70% of the company's vehicle fleet to plug-in by 2018.

Mercury was publicly listed on the New Zealand and Australian stock exchanges in May 2013 with a large New Zealand ownership base, alongside the Government as majority owner. The company was renamed Mercury NZ Limited (NZX: MCY) on 29 July 2016.

Performance

The following information was extracted from Mercury NZ Limited's Full Year report, released on 20 August 2024:

FY24 financial overview

Mercury’s net profit after tax lifted to $290 million, largely due to changes in the fair value of unhedged financial instruments. Mercury reported $877 million EBITDAF, up 4% on the prior year, due to increased wind and geothermal generation and higher customer prices, offset by reduced hydro generation and higher operating costs.

Taupō storage was impacted by 30th percentile inflows during the financial year, and hydro generation was 4,096GWh, down 21% on the prior year’s record generation. Wind generation of 2,062GWh was up 40% on the prior year with the addition of new generation from Turitea South wind farm and stage 1 of the Kaiwera Downs wind farm. Geothermal generation was 2,622GWh, up 11% on the prior year due to improved resilience.

Operating costs were $385 million, up 11% on the prior year, primarily due to an increase in the number of full-time employees and new generation maintenance costs relating to the operation of Kaiwera Downs wind farm. Stay-in-business capital expenditure (CAPEX) was $142 million, up 19% on the prior year, with the geothermal drilling campaign ramped up during the year and continuing into FY25.

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