Mercury NZ says high spot prices in the December quarter should enable it to meet its full-year earnings guidance despite lower hydro production and the loss of earnings from its soon-to be-sold meter business.

The firm today reiterated its September forecast for $515 million of operating earnings in the year through June. That was despite the company also lowering its full-year hydro generation assumption by 50 gigawatt-hours to 4,150 GWh due to low inflows into its Waikato catchment since October.

The sale of the Metrix business, announced last month and scheduled for March 1, would also reduce earnings before interest, tax, depreciation and changes in financial instruments by about $10 million, the company said.

Its shares fell 3 cents to $3.55, trimming its gains for the past 12 months to 7.9 percent.

Mercury, the country’s third-largest power retailer, makes most of its electricity at nine power stations on the Waikato River. It delivered record earnings last year after two years of unusually strong inflows.

But storage at Lake Taupo, at the head of the firm’s generation chain, dropped to its lowest since mid-2015 in November. It has since recovered but remains slightly below average.

Auckland-based Mercury said inflows in the December quarter were 16 percent below average for the period, reducing its hydro production by about 15 percent to 1,002 GWh.

Improved geothermal production left total generation in the quarter down 7 percent at 1,723 GWh.

But dry conditions on both islands, plant outages and reduced gas supplies from the Pohokura field resulted in record spot prices for the period.

Mercury received an average $204.21/MWh for its generation in the quarter, more than twice the $89.84 it received a year earlier.

For the six months, generation volume was down 5 percent at 3,901 GWh, but average prices were 53 percent higher at $138.15/MWh.

Mercury supplied about 381,000 customers at the end of December, down from 393,000 a year earlier.

It said it continues to focus on “value over volume” amid tough competition in the retail market. Its average mass-market sale price rose 5 percent to $126.54/MWh while volume was down 1.5 percent at 748 GWh for the quarter. The firm’s total purchases from the market were down almost 3 percent at 1,309 GWh, largely due to reduced spot customer sales.

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