Mercury sees average 9.7% power price rise from April

Mercury says it has made good progress on renewables. Photo / Supplied

Mercury NZ said it expects power prices for its residential customers to rise on average by 9.7% from April.

The company said energy prices - gas and electricity - for consumers are expected to increase across the board.

The power price rise primarily reflected increases in lines and transmission charges due to rising costs and the level of investment in infrastructure required, in line with the Commerce Commission’s price path reset for the next five-year period, it said.

It also reflected the rise in the cost of wholesale electricity and other costs.

The company said last year’s dry winter had put a dent in its first-half operating result.

The company’s earnings before interest, tax, depreciation, amortisation and financial instruments (ebitdaf) came to $418 million in the six months, down $16m on the prior comparable period.

The fall in ebitdaf – the industry’s preferred measure – largely reflected lower generation and increased operating expenses, offset by increased sales yields.

Taking into account non-cash movements in its electricity derivatives, the company reported a $67m loss for the six months to December 31 – down $241m from the year-ago profit.

Mercury, slightly over half-owned by the Government, said low hydro inflows contributed to reduced generation and affected its earnings.

But it said it was a “robust” performance in challenging conditions.

The company said 46% of its half-year earnings had been reinvested into new and existing assets, with $1 billion committed to new renewables.

“Despite challenging operational conditions, we’ve continued to pursue growth in new renewables and, importantly, support security of supply,” Mercury chairman Scott St John said.

“We’ve seen good progress on our commitment to investing over $1 billion in new renewables, with three renewable projects under construction – enough to power up to 142,000 houses with renewable energy,” he said.

Lake Taupō was above normal levels by the end of the calendar year despite low hydro inflows, due to a focus on rebuilding storage before winter 2025.

Operational expenditure tracked up to $207m ($16m up on the prior comparable period) reflecting continued investment in generation maintenance.

The company’s ebitdaf guidance for the year remained at $820m.

Mercury declared a fully imputed interim dividend of 9.6¢ per share, up 3% on the first-half 2024 interim dividend.

Its full-year dividend guidance is unchanged at 24¢ per share, expected to be the 17th consecutive year of ordinary dividend growth.

Jamie Gray is an Auckland-based journalist covering the financial markets, the primary sector and energy. He joined the Herald in 2011.