Mercury's Q1 2024 Operational Performance

Mercury (ASX:MCY) has released its quarterly operational update for the three months ended 30 September 2024. The company experienced c&i electricity yield growth and repricing to a sustained higher forward curve despite low starting lake level and inflows in Q1. The market saw near record low national hydro storage and persistent gas supply constraints contributing to the tight electricity market in July and early August, resulting in record high spot electricity prices for the first half of the quarter. However, the situation eased from mid-August due to unseasonally wet conditions in the South Island, leading to major hydro lakes returning to normal levels.

Executive Commentary on Market Conditions

Market conditions in the electricity sector were challenging in Q1 2024. Near record low national hydro storage and persistent gas supply constraints led to tight electricity market conditions, resulting in record high spot electricity prices for the first half of the quarter. However, the situation improved from mid-August due to unseasonally wet conditions in the South Island, which normalized hydro lake levels. This, along with increased gas volume for generation and sector demand response, resulted in a significant reduction in wholesale spot prices in the second half of Q1 and into Q2. Despite national demand being 2.5% lower for the quarter relative to PCP, actual demand, normalized for the short-term industrial response, would have increased by 0.9%. Forward prices remained elevated, averaging $193/MWh in Auckland for financial years 2025 to 2027.

Quarterly Operational Summary and Outlook

Mercury's Q1 2024 operational update reflects the company's resilience in the face of challenging market conditions. The company experienced c&i electricity yield growth and repricing to a sustained higher forward curve, despite initial low lake levels and inflows. The improved performance in geothermal generation and higher wind generation partially offset the lower hydro generation. Mercury is forecasting hydro generation of 3,900GWh for the financial year, indicating an increase of 100GWh from the previous guidance in August. The spot gas prices shadowed electricity spot prices, with daily wholesale spot gas prices peaking at $54/GJ within the quarter. Looking ahead, Mercury remains focused on navigating the dynamic market conditions and maintaining its operational resilience.