Investors to cash in on Mercury buyback

Electricity generator and retailer Mercury NZ will spend up to $50 million buying back more of its shares, allowing it to return capital to shareholders and rebalance its capital structure.

Mercury will buy up to 20 million ordinary shares on the NZX main board between May 7 and June 30, which will be held as treasury stock, the company says. The buyback will bring its gearing levels close to two times for debt to earnings before interest, tax, depreciation, amortisation and any adjustments for fair value movements, consistent with Mercury's target range of two times to three times.

Mercury chair Joan Withers said purchasing the company’s shares at current market prices was an efficient use of excess balance sheet capacity and reflects Mercury’s desire to maintain capital flexibility for future value-enhancing initiatives for its shareholders. Its shares last traded at $3.185 and have dropped 1.4 percent over the past year.

“The board believes that the buyback is a prudent method of addressing the company’s low gearing relative to its target capital structure and is an efficient way of returning capital to shareholders," she said.

The newly purchased shares will add to the 1.6 percent of shares already held as treasury stock from Mercury’s buyback in the 2014 financial year.

Mercury said it will further consider appropriate capital management initiatives at the end of the financial year, given expected record financial results.

In April, Mercury raised its annual earnings guidance for a third time as persistent wet weather in the central North Island swelled the electricity generator-retailer's hydro scheme. It forecast ebitdaf of $540 million in the year ending June 30, up from a previous forecast of $530 million, which had already been upgraded on the favourable weather. Mercury reported ebitdaf of $523 million in 2017.

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