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Mercury NZ share price crashes 11.5% back to earth after yesterday’s surge

The Mercury NZ Limited (ASX: MCY) share price has come crashing back to earth with an 11% decline this morning after surging on yesterday’s wind farm construction announcement.

What did Mercury announce yesterday?

Mercury announced that it has committed to the construction of the first 33 of 60 consented wind turbines at Turitea, New Zealand in what is a big step forward for the renewables group.

Management said that current market conditions indicate that new renewable energy capacity is required for New Zealand, with the 119 megawatt (MW) Turitea wind farm to generate 470-gigawatt hours (GWh) per annum on average. That’s enough energy to power 210,000 cars.

When generation from the wind farm does connect to the national grid, anticipated to be late 2020, Turitea will be New Zealand’s largest wind farm and the first large-scale generation addition to New Zealand’s capacity since 2014.

What’s ahead for the Mercury share price?

The Mercury share price shot 15.3% higher to $4.23 per share after the announcement but has since retraced many of these gains as the stock fell 11.6% to $3.74 per share at the time of writing.

In contrast, the Tilt Renewables Ltd (ASX: TLT) has remained unchanged today at $2.25 per share, with the New Zealand renewables company’s share price pushing marginally higher in 2019.

Tilt is closely held with a minimal free float, as ~85% of the company’s shares are held by Infratil Ltd (ASX: IFT) with a ~65% stake and Mercury itself, which owns 20%.

As it continues to ramp up its electricity generation capacity, Mercury should see its share price continue to rise and I think there’s still a growth story there.

Amazingly, Mercury is still yielding an impressive unfranked 3.97%, which could be worth a look if franking credit changes do come into effect in the second half of this year.

While I’m quite bullish on Mercury, AGL Energy Ltd (ASX: AGL) or Infigen Energy Ltd (ASX: IFN) could offer renewables exposure a little closer to home and I think there’s room for at least one of these Utilities stocks in a well-rounded portfolio.

For those Fools who aren’t as bullish on the renewables sector in the short-term, this buy-rated stock could be set to soar in 2019 as it builds its share of a booming $22 billion industry.

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