Mercury Quarterly Operational Update

Mercury Quarterly Operational Update
Three months ended 30 September 2016

Quarterly Highlights

- Successful launch of the new Mercury brand in July

- Lowest customer switching rate of the major retailers

- Hydro generation forecast up 100GWh for FY2017 on higher inflows

Commentary

Customer Numbers Lift And Churn Reduces with Brand Launch

Following the well-received launch of the new Mercury brand in July, customer gains reached a four-year high in August with a net increase of more than 5,000 for the three months ended 30 September. Overall customer numbers at 30 September 2016 were flat compared to the same time last year.

While customer switching rates across the industry continued at near-record levels, Mercury’s focus on rewarding loyalty has resulted in high customer engagement around campaigns such as Free Power Days with almost 100,000 taken up during the period. Such loyalty initiatives contributed to the company’s switching rate (churn) for the quarter being 1.0% lower than the average of 5.4% for all other major retailers.

As guided with the release of Mercury’s FY2016 results, the average energy price to customers was down 1.5% to $117.46/MWh reflecting the continued roll-off of higher priced commercial contracts.

FAVOURABLE HYDRO CONDITIONS; LIFT IN EXPECTED ANNUAL HYDRO GENERATION

Similar to the same time last year, hydrological conditions have been favourable in the Waikato catchment with Taupo storage ending the quarter at 140%. Total hydro generation was above average for the quarter at 1,256GWh, though 52GWh lower than the prior year.

LWAP/GWAP was 1.04, slightly favourable to the prior comparable period of 1.05. This ratio continues to reflect above average hydro generation in the market and the consequential dampening of wholesale price volatility.

Due to the favourable hydrological conditions experienced throughout the quarter, Mercury has updated its mid-point FY2017 hydro generation forecast to 4,250GWh (up 100GWh on earlier guidance).

INDUSTRIAL DOWN, OTHER SEGMENT GROWTH CONTINUES

The closure of several industrial users of electricity within the last twelve months has extended a decade long trend of falling demand from this segment. However, growth continues across all other segments driven by strong underlying fundamentals, such as GDP growth and record net migration. After adjusting for temperature, national demand was down 0.2% but up 0.8% across all segments excluding industrial.

ENDS

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