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Rain boosts Mercury's first-half profit

NZN 20/02/2017 Rebecca Howard

Mercury NZ has increased first-half profit 53 per cent, bolstered by favourable North Island hydro conditions and lifted its full year guidance.

The electricity generator and distributor, formerly known as MightyRiverPower, says net profit increased to $113 million in the six months ended December 31 from $74m in the prior period.

Its earnings before interest, tax, depreciation, amortisation and fair-value adjustments lifted to $270m from $257m.

The net profit growth was boosted by positive fair value movements and no impairment charges and "Mercury's financial results reflect a strong operating performance, together with above-average rainfall that enabled a 7 per cent increase in hydro generation," the company said.

Operating costs were down 6 per cent due to lower maintenance costs in the period. Mercury said it would pay a fully imputed dividend of 5.8 cents per share on April 3, up 1.8 per cent on the year.

It maintained its full-year dividend guidance of 14.6 cents per share.

Looking ahead, the generator lifted the full year ebitdaf guidance it gave in November to $500m versus prior guidance of $495m.

"The New Zealand electricity market remains healthy with strong underlying fundamentals and a good balance between supply and demand," it said.

The closure of several industrial facilities over the past 18 months has extended a decade-long trend of falling electricity demand and national consumption dipped in the first half due to wetter and warmer weather, however, GDP growth and record net migration were positives that would flow through to demand, it said.

Chief executive Fraser Whineray says the 2015 closure of the gas-fired Southdown station "substantially reduced" the company's future carbon obligations and it took the opportunity to sell some of its surplus carbon credits in the first half of the year.

Capital expenditure is expected to be $115m in the full year as a result of its focus on hydro reinvestment and geothermal drilling. The capex program is focused around Whakamaru and Aratiatia hydro stations.

Mercury shares were unchanged at $3.02 in early trading and have gained 19 per cent in the past 12 months.

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