New Zealand renewable electricity company Mercury has recorded near-record low half-year profits due to a combination of below-average generation and divestment of smart metering business.
According to Mercury CEO Fraser Whineray, the company’s half-year earnings to December 2019 dropped from NZD302m ($190.4m) in 2019 half-year (HY) to NZD258m in HY 2020, while net profits dropped by NZD21m from NZD104m to NZD83m.
Mercury’s share prices hit their lowest point in 20 days at NZD5.12.
Whineray said: “While hydro generation was below the mid-point forecast we had at the start of the financial year, our portfolio strategy has captured opportunities in this dynamic environment.”
The company blames drier weather conditions that impacted the Waikato River, leading to below-average power generation. The river, which runs through New Zealand’s North Island for 425km, hosts nine of Mercury’s hydroelectric plants.
Mercury has also attributed the fall in revenue to maintenance works that affected its geothermal stations.
Hydroelectric generation was down by 306 gigawatt hours (GWh), from 2,448 GWh in 2019 to 2,142 GWh, while geothermal power fell by 71 GWh to 1,286 GWh.
The company said that the sale of its smart metering business Metrix to utilities Intellihub Group in December 2018 was also a factor in the fall. Whineray said: “When adjusted for lower generation and the sale of Metrix the result reflected strong execution across Mercury’s business.”
Despite losing 16,000 customers with a new approach that focuses on customer value rather than number, the company registered a 1.8% increase in its investments.
“We have been able to better apply insights to digital initiatives that reward loyalty and value. Mercury’s focus on customer value rather than growing customer numbers at all costs saw mass-market customer numbers down 16,000, however, we achieved a 1.8% uplift in yield across our mass-market segment through disciplined portfolio management,” added Whineray.
Whineray – expected to step down as CEO in March – has assured that the company’s portfolio is well positioned, despite future challenges due to national thermal fuel and competition in retail.
He said: “Intense competition in retail and strained retail margins will continue to be a feature. I also anticipate further competitor decisions on new generation development and retirement.
“Mercury is well-positioned for the full year as a result of our portfolio and channel management, reinvestment activities in generation, digital and our people, and new investment decisions.”