MERCURY NZ LIMITED — Interim / Quarterly Report 2021

Jul 19, 2021

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QUARTERLY OPERATIONAL UPDATE

Three months ended 30 June 2021

>> QUARTERLY HIGHLIGHTS

GENERATION HEDGE SPOT PRICES VOLUMES PURCHASES ELEVATED FALL LIFT PHYSICAL GENERATION DOWN ELEVATED Q4 SPOT PRICES REFLECT CFD PURCHASES INCREASE BY 315GWh 85GWh IN THE QUARTER, SHORT-TERM FUEL CONSTRAINTS, VERSUS PCP AS MERCURY 126GWh ACROSS THE FULL-YEAR FUTURES PRICES EASING MITIGATES PRICE RISK

>> COMMENTARY

HYDRO GENERATION DOWN AS LOW INFLOWS PERSIST; GEOTHERMAL GENERATION IMPACTED BY KAWERAU OUTAGE

Mercury's hydro generation in FY2021-Q4 of 727GWh (193GWh below average[1] ) equalled the prior comparable period for the lowest level of hydro generation in company history. This was due to sustained dry hydrology that saw Waikato catchment inflows at the 13th percentile[2] for the quarter and at the 16[th] percentile[3] for FY2021. Consequently, hydro storage in Lake Taupo ended the year at 143GWh below average[2] .

Geothermal generation decreased from 675GWh in FY2020-Q4 to 590GWh in the most recent quarter due to an unplanned outage at the Kawerau power station that started on 7 June. The station is currently expected to return to service this week.

ELEVATED PRICES REFLECT CURRENT FUEL CONSTRAINTS WITH FUTURES EASING

Average spot prices in the quarter reflected low national hydro storage and continued gas deliverability issues, increasing to $277/MWh at Otahuhu and $261/MWh at Benmore from $115/MWh and $102/MWh respectively in FY2020-Q4. Elevated prices were also seen in Mercury's CFD purchases for FY2021-Q4 which increased by 315GWh, from 464GWh in FY2020-Q4 to 779GWh, to mitigate price risk from decreased physical generation.

Futures prices eased during the quarter due to a lift in national hydrology towards the end of June. FY2022 futures prices decreased from $193/MWh and $177/MWh at Otahuhu and Benmore at the start of the quarter to $170/MWh and $151/MWh respectively by the end of the quarter, with a subsequent further reduction to $144/MWh and $122/MWh as at 16 July 2021.

COMMERCIAL & INDUSTRIAL SALES LIFT AS MERCURY POSITIONS PORTFOLIO

Notwithstanding elevated spot prices, Mercury continued to engage with customers seeking to re-contract resulting in Commercial & Industrial segment sales (including both physical and financial) increasing by 227GWh, from 731GWh in FY2020-Q4 to 958GWh in FY2021Q4. The Commercial & Industrial sales yield increased by 9.1% from $93/MWh in FY2020-Q4 to $102/MWh in FY2021-Q4.

Customer numbers continued to decrease, dropping by 3,000 across the quarter to 328,000. This was reflected in Mass Market sales volumes which decreased by 63GWh to 672GWh versus 735GWh in the same quarter last year.

DEMAND IN Q4 LIFTS VERSUS COVID-19 LOCKDOWN AFFECTED PCP; DEMAND IN QUARTERS 1-3 DECREASES

Temperature-adjusted demand in FY2021-Q4 increased by 5.8% as the prior comparable period was affected by the COVID-19 Level 4 lockdown. Increases were seen across all sectors, with contributions from each sector being: urban (+2.5%), rural (+1.0), in dustrial (+1.2%), dairy (+0.8%) and irrigation (+0.3%).

The recovery in Q4 drove full-year temperature-adjusted demand up by 1.0%. Excluding this period, demand in the first three quarters in FY2021 decreased by -0.6% versus the same quarters in FY2020, largely driven by reduced industrial demand due to production cuts at the Tiwai Point aluminium smelter, Norske Skog's Kawerau mill and the Marsden Point refinery.

1 For quarters ended 30 June since 1999

2 For quarters ended 30 June since 1927

3 For 12-month periods ended 30 June since 1927

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE

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>> OPERATING STATISTICS

OPERATING INFORMATION		Three months ended 30 June 2021	Three months ended 30 June 2021	Three months ended 30 June 2020	Three months ended 30 June 2020	Twelve months ended 30 June 2021	Twelve months ended 30 June 2021	Twelve months ended 30 June 2020	Twelve months ended 30 June 2020
ELECTRICITY CUSTOMERS ('000s ICPs)			328		348
North Island Customers			291		307
South Island Customers			37		41
Dual Fuel Customers			45		47
		VWAP 1	Volume	VWAP 1	Volume	VWAP 1	Volume	VWAP 1	Volume
		($/MWh)	(GWh)	($/MWh)	(GWh)	($/MWh)	(GWh)	($/MWh)	(GWh)
ELECTRICITY SALES
Physical		129.27	1,205	124.20	1,108	123.77	4,522	118.45	4,361
Mass Market	2	142.10	672	136.45	735	139.70	2,654	130.84	2,892
Commercial & Industrial	3	113.09	533	100.05	373	101.15	1,868	94.05	1,469
Network Losses			56		54		213		213
Physical Purchases	4	287.92	1,262	128.97	1,163	193.56	4,735	115.14	4,573
Financial	5	98.15	846	86.00	807	91.75	3,432	83.63	3,377
End User CfDs		87.10	425	85.79	358	86.96	1,559	82.15	1,323
Other Sell CfDs	6	109.30	421	86.16	449	95.74	1,873	84.59	2,054
Spot Settlement of CfDs		269.63		109.24		175.21		101.15
Spot Customer Purchases		277.51	31	117.16	183	176.38	166	104.12	747
ELECTRICITY GENERATION
Physical		282.02	1,317	121.59	1,402	180.04	6,205	109.51	6,331
Hydro		295.88	727	134.90	727	186.94	3,611	117.03	3,712
Geothermal(consolidated)	7	264.93	590	107.42	675	170.44	2,594	98.91	2,619
Financial		210.08	779	84.28	464	139.05	1968	83.69	1,478
Buy CfDs	6	210.08	779	84.28	464	139.05	1968	83.69	1,478
Spot Settlement of CfDs		266.79		113.97		193.13		98.81
PORTFOLIO LWAP/GWAP	8		1.02		1.01		1.01		1.02

1 VWAP is volume weighted average energy-only price sold to customers after lines, metering and fees

2 Mass market includes residential segments and non time-of-use commercial customers

3 Fixed-price, variable-volume (FPVV) sales to time-of-use commercial customers

• 4 Excludes spot customer purchases

5 Excludes FTR and trading ASX positions (including positions held to maturity which were previously disclosed in CfD volumes)

• 6 Includes Virtual Asset Swap volumes of 149 GWh for the 3 months ended 30 June 2021 and 149 GWh for the 3 months ended 30 June 2020 and of 599 GWh for the 12 months ended 30 June 2021 and 601 GWh for the 12 months ended 30 June 2020

• 7 Includes Mercury's 65% share of Nga Awa Purua generation

• 8 Includes all physical and financial buys and sells except spot customer purchases

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE

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>> MARKET DATA

> ELECTRICITY GENERATION BY COMPANY FOR THE THREE MONTHS ENDED 30 JUNE

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MERCURY Financial Year Q4 2021 Financial Year Q4 2020
MERIDIAN ENERGY
CONTACT ENERGY
GENESIS ENERGY
TRUSTPOWER / TILT 8% 13% 7%
OTHER 15%
4% 4%
18%
23%
29%
35%
21%
23%
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Source: Electricity Authority

• SHARE OF ELECTRICITY SALES (GWh) FOR THE THREE MONTHS ENDED 30 JUNE (EXCLUDING CFDs)

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MERCURY
Financial Year Q4 2021
OTHER
13%
87%
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Financial Year Q4 2020
14%
86%
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Source: Mercury Purchases and Transpower SCADA

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE

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> OTAHUHU WHOLESALE PRICE AND NATIONAL HYDRO STORAGE LEVELS

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AVERAGE NATIONAL STORAGE FY2020 NATIONAL STORAGE
FY2021 NATIONAL STORAGE ROLLING 12 MONTH AVERAGE OTA PRICE
ROLLING 12 MONTH AVERAGE BEN PRICE
6,000 $200
$180
5,000
$160
4,000
$140
3,000 $120
$100
2,000
$80
1,000
$60
0 $40
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
GWh
$/MWh
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Source: NZX Hydro and NZEM Pricing Manager (NZX)

> TAUPO STORAGE

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AVERAGE SINCE 1999 FY2020 FY2021
600
500
400
300
200
100
0
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
GWh
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Source: NZX Hydro

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE

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> OTAHUHU ASX FUTURES SETTLEMENT PRICE

AS AT 30 JUNE 2020 AS AT 31 DECEMBER 2020 AS AT 31 MARCH 2021 AS AT 30 JUNE 2021

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$250
$200
$150
$100
$50
$0
FY21 FY22 FY23
Financial Year
Source: ASX
$193.18
$187.52 $184.24
$170.44
$143.18 $144.05
$135.59
$119.06
$114.01
$/MWh $103.11
$95.65 $92.56
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> BENMORE ASX FUTURES SETTLEMENT PRICE

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AS AT 30 JUNE 2020 AS AT 31 DECEMBER 2020 AS AT 31 MARCH 2021 AS AT 30 JUNE 2021
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
FY21 FY22 FY23
Financial Year
$174.84 $173.13 $177.01
$151.34
$120.57 $125.69 $124.13
$104.40
$100.69
$/MWh $79.83 $82.16
$75.74
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Source: ASX

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE

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> NATIONAL CONSUMPTION (NON-TEMPERATURE ADJUSTED)

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NATIONAL CONSUMPTION TIWAI POINT ALUMINIUM SMELTER CONSUMPTION
12,000
10,000
1,261 1,251 1,252 1,307 1,223 1,220
8,000
6,000
8,593 8,865 9,022 8,824 8,418 8,945
4,000
2,000
0
Q4 2016 Q4 2017 Q4 2018 Q4 2019 Q4 2020 Q4 2021
GWh
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Source: Transpower Information Exchange

> AUCKLAND CLIMATE SUMMARY ( ⁰ C)

FINANCIAL YEAR	Q1	Q2	Q3	Q4
2021	12.3	16.9	19.5	14.8
2020	12.3	16.7	19.5	14.4
2019	12.1	16.3	20.2	14.1
2018	12.3	17.2	20.7	14.3
2017	12.1	16.1	19.3	14.3
Historical Average(since 1999)	11.9	16.1	19.4	14.2

Source: Met Service

> MONTHLY TOTAL CONSUMER RETAIL SWITCHING (ICPs)

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NZ MARKET CHURN (LHS) ANNUAL NZ MARKET CHURN % (RHS)
50,000 25%
45,000
40,000 20%
35,000
30,000 15%
25,000
20,000 10%
15,000
10,000 5%
5,000
0 0%
% Churn
Monthly ICPs
Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21
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Source: Electricity Authority

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE

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