The early exit of a long-term hedge with pulp and paper company Norske Skog in the first half of 2022, which reduced revenue by $65m in that period, also contributed to the lift in ebitdaf in 2023.
Operational expenditure was $54m higher than the prior comparable period while stay-in-business capital expenditure was up $11m, reflecting increased scale and activity across the business.
Hydro production was up 852 gigawatt hours to 2735 gigawatt hours after Lake Taupō experienced its highest ever inflows for the July to December period.
Wind production was also notably higher, reflecting a full six months of generation across Mercury’s wind farms including from the newly commissioned Turitea North wind farm.
“Wet weather has defined the period, in sharp contrast to a dry full year 2022. In addition to producing the highest hydro generation volume in our company’s history, another 675GWh was spilled to maintain lakes within resource consent operating limits,” chief executive Vince Hawksworth said.
The result also reflected a significantly larger retail business, primarily due to the completion of the Trustpower retail acquisition in May 2022 and a full six-month contribution at increased scale.
Mercury also acquired the outstanding shares in the broadband company NOW NZ in December 2022.
“Mercury is a much larger business than it was this time last year, and it shows strongly in our result,” he said.
Mercury added 440,000 more connections from the two big transactions alone.
The company declared an 8.7 cents per share dividend, up 9 per cent from the 8.0 cents paid in the previous comparative period.
Significant investment to increase scale and strong generation underpinned Mercury’s financial results.
While the country’s generating assets were largely undamaged by recent weather events, the scale of destruction for distribution and lines networks has been significant.
“Resilience of critical infrastructure needs to be one of New Zealand’s biggest priorities,” chair Prue Flacks said.
Both the retail and generation business encountered significant headwinds over the period including an inflationary environment, access to technology and a tight labour market.
“These challenges are not confined to Mercury alone, with businesses around New Zealand facing similar challenges. We expect these to continue into the future and have factored these into our business planning,” Flacks said.
Mercury’s full year ebitdaf guidance remains at $795m.
The company’s shares last traded at $6.15, down three cents.
