Mercury NZ (ASX:MCY) outlined a stronger first-half performance for FY2026, pointing to higher renewable generation, tighter cost control, and continued investment in hydro, wind, geothermal and customer offerings. Chief Executive Stew Hamilton and CFO Richard Hopkins emphasized three recurring themes from the period: resilient earnings, disciplined growth, and balance sheet strength.
First-half earnings and cash flow driven by generation and lower costs
Hamilton said the company delivered first-half EBITDAF of NZD 337 million, up 28% from the prior comparable period, attributing the improvement primarily to higher renewable generation and “very good cost discipline.”
Hopkins said NPAT was NZD 20 million, which he attributed to negative non-cash fair value movements on electricity derivatives tied to existing long-dated contracts and three new contracts signed during the period, including the Huntly HFO.
On the EBITDA bridge from NZD 418 million to NZD 537 million, Hopkins said the key drivers were:
- Higher generation volume (+NZD 113 million), with hydro “doing the heavy lifting”
- Lower OpEx (+NZD 24 million)
Generation volume increased by 0.5 TWh. Hopkins said customer yields were “modestly positive,” citing mass market VWAP up NZD 11/MWh (7%) and C&I VWAP at NZD 1.2/MWh.
Guidance unchanged; management emphasizes conservatism and execution
Management reaffirmed full-year FY2026 guidance. Hamilton said the company remains on track to deliver:
- EBITDAF guidance of NZD 1 billion
- OpEx of NZD 370 million
- Sustained business CapEx of NZD 150 million
- Dividend guidance of NZD 0.25
Hopkins said the full-year EBITDA guidance assumes 4.4 TWh of hydro generation, subject to hydrology and wholesale conditions, and noted the second half began with a “strong storage position.” He said the company preferred to “stay conservative on guidance” and “let delivery do the talking.”
In Q&A, analysts asked whether the stronger first half and improved OpEx run rate could lead to lower full-year OpEx guidance. Hopkins responded that while the company could come in “a bit” lower if things go well, it would not be “material,” citing normal timing differences through the year and the risk of an unexpected maintenance event.
Hydro: major refurbishment program approved; stay-in-business CapEx guardrail maintained
A key focus of the call was Mercury’s hydro fleet on the Waikato River. Hamilton described it as the core of the company’s portfolio and “one of, if not the most flexible renewable asset in New Zealand.” The company completed a three-year upgrade at Karāpiro, which Hamilton said is now fully operational and uprated.
Mercury has now committed to a broader hydro upgrade program with final investment decision approved for NZD 590 million across Maraetai One, Ōhākurī, and Ātiamuri. Hamilton said the work would unfold over roughly a decade, with design and preparation across FY2026–FY2028 and replacement activity beginning in late FY2028 into FY2029, running through about FY2034. The upgrades are expected to add 76MW of capacity across the three stations.
Hopkins said hydro inflows were elevated at the 80th percentile, with record generation in July, and noted the company managed “a reasonable amount of spill,” citing over 400 GWh. He also said the program was intended to protect long-term earnings quality and reinforce hydro’s role as a flexibility engine.
In response to questions about whether the hydro program would lift ongoing maintenance capital, management said the spend sits within stay-in-business CapEx, and the company continues to expect to remain within the NZD 150 million annual guidance. Management also indicated the Arapuni left abutment strengthening spend would be concentrated in the next couple of years, while the three-station upgrade program would be spread over roughly seven to eight years.
Wind, geothermal and batteries: projects in execution and next decisions approaching
Hamilton said the company’s geothermal OEC5 unit at Ngātamariki was commissioned and began in January 2026, delivered on time and on budget. He also said Mercury completed an eight-well geothermal drilling program across Kawerau, Ngātamariki and Rotokawa, and is building capability spanning design, build and commissioning.
In Q&A, management said it expects to deliver a geothermal project before 2030, while additional geothermal opportunities—part of a broader 5 TWh potential identified by the company—would likely be delivered in the 2030s following further exploration and drilling. Hamilton said more detail would be provided at an investor event in May.
On wind, Hamilton said two projects are under construction and tracking to deliver:
- Corriedale Two in Southland
- Kaiwera Downs (with first generation expected in May and turbines coming on stream through year-end)
- Kaiwaikawe (first generation expected in August)
Hamilton said the two wind projects combined would supply power equivalent to about 140,000 homes. He also discussed the next wind consent and investment pathway for Mahinerangi Stage Two, renamed Puketoi, which is targeting a final investment decision in the first quarter of FY2027.
Management also discussed firming needs for a fully renewable portfolio. Hamilton said Mercury has a consented battery energy storage system (BESS) at Whakamaru and is targeting a final investment decision around “this time next year.” In Q&A, he said the site is consented up to 300MW, but deployment would likely be staged—potentially 100MW or 150MW initially—timed to match renewable generation additions.
Customers, balance sheet, and dividends
On the retail and customer side, management highlighted multi-product penetration and cost-to-serve improvements. Hamilton said 40% of customers now have multiple products. Hopkins said connections were up by 30,000 versus the prior comparable period, fiber had surpassed 150,000, and broadband represented over 94% of the broadband base. He also said OpEx per connection fell 4% year over year and was 16% below HY2024. The company said it remains on track to deliver Time of Use products by the end of FY2026.
On funding and leverage, Hopkins said Mercury targets an S&P-adjusted debt-to-EBITDA range of 2–3x consistent with a BBB+ rating, and reported the ratio at 2.2x at half year. Net debt rose NZD 60 million to NZD 2.243 billion. Hopkins also cited NZD 465 million of undrawn facilities and said the company was considering refinancing options for a NZD 200 million green bond maturing in September, with an intention to go to market during March.
Mercury declared an interim dividend of NZD 0.10, up 4%. Hopkins said the payout is toward the low end of the company’s range given a peak investment period, balancing progressive dividends with funding “value-accretive growth” and maintaining balance sheet resilience.
About Mercury NZ (ASX:MCY)
Mercury NZ Limited, together with its subsidiaries, engages in the production, trading, and sale of electricity and related activities in New Zealand. The company operates through Generation/Wholesale, Retail, and Other segments. It operates 9 hydro generation stations on the Waikato River; 6 wind plants; and 5 geothermal generation stations in the central North Island. The company sells electricity to residential, commercial, industrial, and spot market customers under the GLOBUG, Trustpower, and Mercury brands.
