Mercury grows earnings and engagement with strong execution

NZX Appendix 1 – 30 June 2018 | Page 1 of 2





Mercury NZ Limited
Stock Exchange listings NZX (MCY) ASX (MCY)
Results for announcement to the market
1. Full year reporting periods
Reporting Period 12 months to 30 June 2018
Previous Reporting Period 12 months to 30 June 2017
NZD Amount ($M) Percentage change
Revenue from ordinary activities 1,803 +12.9%
Profit from ordinary activities after tax attributable to
security holders
234 +27.2%
Net profit attributable to security holders 234 +27.2%
Earnings before net interest expense, income tax,
depreciation, amortisation, change in fair value of
financial instruments, impairments and equity
accounted earnings (EBITDAF)
561 +7.3%
Underlying earnings after tax
1
198 +12.5%

NZD Amount Percentage change
Basic and diluted earnings per share (weighted
average number of shares)
$0.1702 +27.3%
Net tangible assets per share (excluding treasury
shares)
$2.34 +0.0%

Final Dividend Amount per security
Imputed amount per
security
Final Dividend $0.091 $0.035389
2

Appendix 1 – Full year results

NZX Appendix 1 – 30 June 2018 | Page 2 of 2
Record Date 13 September 2018
Dividend Payment Date 28 September 2018
Comments:
1. Underlying earnings after tax excludes one-off and/or
infrequently occurring events (exceeding $10 million of net
profit before tax). This is a non-GAAP measure.
2. A supplementary dividend of $0.016059 per share will be
payable on the final dividend to shareholders who are not
resident in New Zealand.
2. Control of entities gained or lost during the period
Name Date control lost
MRP NRI-Germany Holdings Limited Dissolved 5 October 2017.
MRP NRI-Peru Holdings Limited Dissolved 5 October 2017.
MRP NRI-Chile Holdings Limited Dissolved 5 October 2017.
MRP Geotermia Chile Limitada Sold 24 July 2017.
3. Dividends
See section 1 above and NZX Appendix 7 attached.
4. Dividend or distribution reinvestment plans
None.
5. Associates and joint venture entities
Refer to Annual Consolidated Financial Statements for year ended 30 June 2018.
6. Accounting Standards
Refer to Annual Consolidated Financial Statements for year ended 30 June 2018.
7. Audit
This report is derived from the audited Annual Consolidated Financial Statements. EY has provided an Audit Report on
the Financial Statements, copy attached.

Attachments:
➢ News release
➢ Results presentation
➢ Annual Report and Audited Financial Statements for the year ended 30 June 2018
➢ NZX Appendix 7 – ordinary dividend

---

Mercury grows earnings and engagement in year of strong execution

Summary
>> Operating earnings (EBITDAF) $561 million, up 7%
>> Net profit after tax $234 million, up 27%
>> Final ordinary dividend 9.1 cents per share fully imputed to be paid on 28 September 2018

21 August 2018 – Record hydro generation for a second consecutive year has driven another record financial
result for Mercury (NZX:MCY) in the 12-months to 30 June 2018. An emphasis on enabling people and their
performance saw further growth in employee engagement and the successful delivery of major reinvestment and
several key customer-focused innovations.
Mercury today reported a 7% lift in operating earnings (EBITDAF) to $561 million for the 2018 financial year ($523
million FY2017). The record result was significantly influenced by strong and timely hydro inflows across the
Waikato River catchment, and high geothermal availability was maintained. Total hydro generation of 4,947GWh
for the year was 947GWh (24%) ahead of average generation and up on FY2017’s record of 4,724 GWh. The lift in
Waikato hydro generation above average increased New Zealand’s proportion of renewable electricity by more
than 2%. Total generation including geothermal was 7,704 GWh (7,533 GWh FY2017).
Financial Results
FY2018 FY2017 FY2016 FY2015 FY2014
EBITDAF ($M) 561 523 493 482 504
NET PROFIT AFTER TAX ($M) 234 184 160 47 212
UNDERLYING EARNINGS AFTER
TAX ($M)
198 176 152 145 185
FULLY IMPUTED ORDINARY
DIVIDEND (CENTS PER SHARE)
15.1* 14.6 14.3 14.0 13.5
FULLY IMPUTED SPECIAL
DIVIDENDS
(CENTS PER SHARE)

5.0

7.5

UNIMPUTED SPECIAL DIVIDEND
(CENTS PER SHARE)

4.0

-
SHARE BUYBACK $50m

$50m
ELECTRICITY GENERATION (GWh) 7,704 7,533 6,842 6,536 6,295
* above guidance of 15.0 cps reflecting share buyback reducing the number of shares on issue.

Mercury’s chief executive, Fraser Whineray, said that sustaining high levels of operational performance while
executing a number of key strategic projects puts Mercury in a strong position for the year ahead.
Key projects during the year included a major ICT systems upgrade, completion of Metrix’s meter data project
upgrade expanding its ability to provide certified half-hourly meter reads; hydro refurbishments at Aratiatia and
Whakamaru stations (ongoing); and major maintenance outages at geothermal stations.
Employee engagement increased to 81.5% from 81% as measured by the 2018 IBM Employee Engagement
Survey Index. During the year Mercury received major honours at the IBM Best Workplace Awards and the New
Zealand HR Awards.
STOCK EXCHANGE LISTINGS: NZX (MCY) / ASX (MCY)

2

The Mercury brand maintained its trader churn (customer switching to an alternative retailer) advantage at 6.4%
compared to the rest of the market at 8.1%.
“Retail market conditions remain very competitive, however our brand and customer service activity, focused on
inspiring, rewarding and making things easy for our customers, continues to show strong results,” Mr Whineray
said.
Mercury brand activity from the prior year won the two top awards at New Zealand’s premier marketing events
during FY2018 year, claiming top spot against marketing heavyweights such as Air New Zealand and Z Energy.
“Mercury is benefitting from developing a distinctive brand. We advanced our e-bike campaign and launched a
high-profile integrated campaign utilising a converted classic ’57 Ford Fairlane to challenge misconceptions about
electric vehicles (EVs).”
Brand recognition has increased strongly to 63% from 43% since Mercury’s brand relaunch in 2016.
Mercury executed a $50m share buyback through the year. Mercury also completed the purchase of a 19.99%
stake in Tilt Renewables (NZX/ASX:TLT), a company with significant operational and consented wind generation
interests in Australasia, in May.
“Our shareholding in Tilt is an extension of our long-term growth strategy. It gives Mercury a meaningful interest in
significant development opportunities related to Australia’s accelerating transition to renewable energy sources and
is part of Mercury’s broader wind strategy which has been worked on for more than a decade,” Mr Whineray said.
Net profit after tax increased 27% to $234 million from (FY2017 $184 million), reflecting higher earnings partially
offset by higher tax expense. Underlying earnings after tax increased 13% to $198 million (FY2017 $176 million).
Operating costs were flat for the fifth consecutive year at $214 million and remain $45 million below their peak in
FY2012.
Stay-in-business capital expenditure remained elevated beyond normalised rates at $112 million (FY2017 $114
million) reflecting ongoing hydro refurbishment and ICT investment.
Dividend
Mercury Chair Joan Withers says Mercury’s nearly 85,000 owners, including the Crown, will receive a final ordinary
dividend of 9.1 cents per share, fully imputed. This brings full year final ordinary dividend payments to a total of
15.1 cents per share, fully imputed, up 3.4% on FY2017. This is above guidance and reflects the reduced number
of shares on issue following the completion of the $50 million share buyback. It is Mercury’s tenth consecutive year
of ordinary dividend growth.
“We are pleased to continue to deliver strong shareholder returns while executing on our strategy that includes
delivering sustainable growth.” Mrs Withers said.
“Execution of Mercury’s priorities this year has been impressive and I acknowledge the contribution to that of
people right through the business, along with the support of shareholders, partners and the loyalty of customers.”
FY2019 Guidance
EBITDAF guidance is $515m for FY2019, based on forecast hydro generation of 4,200 GWh. This guidance is
subject to any material events, significant one-off expenses or other unforeseeable circumstances including
hydrological conditions.
Operating expenditure is forecast to be flat versus FY2018; maintained at a similar level for the sixth year in a row.
Stay in business capital expenditure guidance is $95 million. This expenditure supports ongoing hydro and
geothermal investments that contribute to efficient generation, technology aligned to customer needs, and
investment in people and culture through Mercury’s Auckland office consolidation.
Ordinary fully imputed FY2019 dividend guidance has been issued at 15.5 cents per share, a 2.6% increase on
FY2018.

3

Mercury will continue to provide updates of its mid-point estimate of full-year hydro generation with its quarterly
operating statistics.
Outlook
Mr Whineray said that Mercury was well positioned to build momentum through developing its people, inspiring its
customers and executing on its growth strategy.
“Notwithstanding strong execution, weather can be fickle year on year, and our role is to maximise the outcomes
from the hand we are dealt,” Mr Whineray said.
“We expect continued electricity demand growth. While industrial demand decline remains a trend, we see this
being partially offset over the medium-term as industrials shift energy use away from fossil fuels.”
Mr Whineray said that the expected restarting of New Zealand Aluminium Smelter’s fourth potline at Tiwai Point,
Southland, is expected to contribute around 1% annually to demand growth.


For further information:
Media – Craig Dowling 0272 105 337
Investors – Tim Thompson 0275 173 470
ABOUT MERCURY NZ LIMITED
Mercury’s mission is energy freedom. Our purpose is to inspire New Zealanders to enjoy energy in more wonderful
ways and our goal is to be New Zealand’s leading energy brand. We focus on our customers, our people, our
partners and our country; maintain a long-term view of sustainability; and promote wonderful choices. Mercury is
energy made wonderful.
Visit us at: www.mercury.co.nz

---

Chief Financial Officer
Financial Results
for the year ended 30 June 2018
WILLIAM MEEK
FRASER WHINERAY
Chief Executive
21 August 2018

DISCLAIMER
The information in this presentation has been prepared by Mercury NZ Limited with due care and attention. However, neither the
company nor any of its directors, employees, shareholders nor any other person shall have any liability whatsoever to any personfor
any loss (including, without limitation, that arising from any fault or negligence) arising from this presentation or any information
supplied in connection with it.
This presentation may contain projections or forward-looking statements regarding a variety of items.Such projections or forward-
looking statements are based on current expectations, estimates and assumptions and are subject to a number of risks, uncertainties
and assumptions.There is no assurance that results contemplated in any projections and forward-looking statements in this
presentation will be realised.Actual results may differ materially from those projected in this presentation. No person is under any
obligation to update this presentation at any time after its release to you or to provide you with further information about Mercury NZ
Limited.
Forward-looking statements are subject to any material adverse events, significant one-off expenses or other unforeseeable
circumstances including hydrological conditions.
A number of non-GAAP financial measures are used in this presentation, which are outlined in the appendix of the presentation. You
should not consider any of these in isolation from, or as a substitute for, the information provided in the audited consolidatedfinancial
statements for the year ended 30 June 2018, which are available at www.mercury.co.nz.
The information in this presentation is of a general nature and does not constitute financial product advice, investment advice or any
recommendation. Nothing in this presentation constitutes legal, financial, tax or other advice.
DISCLAIMER
2

OUR MISSION
3

MERCURY
4
100% renewable generation
>Two low-cost complementary fuel sources
in base-load geothermal and peaking
hydro
Superior asset location
>North Island generation located near major
load centres; rain-fed hydro catchment
inflows aligned with winter peak demand
Substantial peaking capacity
>The Waikato hydro system is the largest
group of peaking stations in the
NorthIsland
High performance teams
>Dynamic company culture built on the
understanding that our people set
us apart
Track record of customer engagement
>Brand capital built through customer-led
innovation and rewarding loyalty
Long-term commercial partnerships
>With Maori landowners and other
key stakeholders
MERCURY’S COMPETITIVE ADVANTAGE

FY2018 HIGHLIGHTS
5

$561m
RECORDEARNINGS
Achieved as the value of favourable
hydrological conditions was realisedby
strong execution across the business
BRAND IDENTITY
Multi-award-winning campaigns
building brand capitalto differentiate
Mercury in intensely competitive retail
market
9.1cps
FINAL DIVIDEND
Fully-imputed total ordinary dividend of
15.1cps; an increase of 3.4% versus
FY2017
7,704GWh
RECORDGENERATION
As Mercury capitalisedon opportunities
provided by hydro inflows and maintained
high geothermal availability
Customer-ledtechnology
DEVELOPMENT
Throughcompletionof Metrix meter data
project, SAP upgrade and customer
technology platform upgrades
Stay-in-business capital expenditureof
$112m
Included delivery of ICT projects and
ongoing hydro refurbishment leading to
material efficiencyand capacitygains
COMPETITION
Retail market conditions highly
competitivewith market churn at
record levelsduring the year
GROWTH
Acquisition of 19.99% stake in Tilt
Renewablesachieving exposure to
Australian renewables transition; part of
decade-longwind strategy
$50m
SHARE BUYBACK
An efficient distribution of capital to
shareholders while retaining balance
sheet strength
FY2018 HIGHLIGHTS
6
FY2018 HIGHLIGHTS

698
214
523
184
176
258
2
114
201
69
734
214
561
234
198
259
150
112
207
50
0
100
200
300
400
500
600
700
800
Energy MarginOperating
Expenditure
EBITDAFNPATUnderlying
Earnings
Free Cash FlowNew InvestmentStay-In-Business
Capital
Expenditure
Declared
Ordinary
Dividend
Other
Distributions
$m
FY2017
FY2018
FINANCIAL PERFORMANCE
7
>EBITDAF, NPAT and Underlying Earnings up reflecting record total generation of 7,704GWh achieved as the value of
favourable hydro inflows was captured by continued strong execution across the business
>Free Cash Flow only up $1m due to timing of tax payments to impute prior year dividends (tax paid up $50m vs FY2017)
>Stay-in-business capex was elevated reflecting ongoing hydro refurbishment and technology investment
>$50m buyback of 15.6m shares as an efficient distribution of capital while retaining balance sheet strength
>Total ordinary dividend of 15.1cps, the 10
th
year of ordinary dividend growth; above guidance reflecting share buyback
FINANCIAL PERFORMANCE

DELIVERING CUSTOMER ADVOCACY
>Relative churn advantage
>Mercury brand trader churn
1
significantly lower than market at 6.4%
2
>Trader churn for all Mercury brands increased to be comparable to market at
8.0%
2
versus 8.1% reflecting heightened market competition
>Customer-led technology investment
>SAP technology platform upgrades enabling increased functionality and flexibility
to meet customer needs and also improved efficiency and processes
>Metrix data project delivering certified half-hourly meter reads to retailers
>Sustained brand momentum
>Award-winning campaigns building strong and distinctive brand assets with
associations with E-mobility and EVs in particular
>Brand recognition steadily increasing (from 43% to 63%)
4
since relaunch
>Fulfilment of our customer promises to Reward, Inspire and Make It Easy
>~90,000 customers redeemed a Free Power Day in FY2018
>Over 155,000 customers registered to receive Airpoints™
5
>Over 93,000 customers engaging with our Good Energy Monitor each week
6
STRATEGIC DRIVERS & FY2018 OUTCOMES
8
1
Switching where a customer changes retailer without moving house
2
From EA data; 12-monthly rolling trader churn / total churn as at 30 June 2018
3
Based on Mercury’s monthly survey of residential customers, 3-monthly rolling
average to 30 June 2018 / 2017 for Mercury brand only
4
Based on Mercury commissioned TRA brand survey
5
As at 30 June 2018
6
Weekly average over 12 months to 30 June 2018
19.8%
Total churn
2
FY2017: 17.7%
Market: 21.0%
6.4%
Mercury brand
trader churn
2
FY2017: 4.4%
Market: 8.1%
63%
Customer
satisfaction
3
FY2017: 64%
FY2018 OUTCOMES

94%
Geothermal
availability
3
FY2017: 96%
Market
4
: ~97%
1.06
LWAP/GWAP
2
FY2017: 1.05
0.87
FY2018 TRIFR
1
FY2017: 1.05
LEVERAGING CORE STRENGTHS
>Goal of zero-harm
>No high-severity incidents; TRIFR
1
at 0.87 (down from 1.05 in FY2017)
>High-levels of employee engagement maintained
>High levels of employee engagement in 2017 saw Mercury being recognised at
the IBM 2017 Best Workplaces Awards and the 2018 New Zealand HR Awards
>Employee engagement increased in 2018 to 81.5%
5
from 81.0%
5
>Enterprise-wide project execution
>Completed major maintenance outages at four geothermal stations
>Metrix half-hourly reconciled data re-platform brought online
>Ongoing hydro refurbishment with the rehabilitation of the 1
st
of three units at
Aratiatia Station and the 2
nd
of four units at Whakamaru Station leading to
material increases in hydro efficiency and capacity
>Southdown grid-scale battery storage being commissioned
>Competitive advantages deliver record earnings
>Favourable hydrological conditions and strong execution across the business
enabled record generation of 7,704GWh leading to FY2018 EBITDAF of $561m
STRATEGIC DRIVERS & FY2018 OUTCOMES
9
1
Total Recordable Injury Frequency Rate per 200,000 hours; includes onsite employees
and contractors
2
Average price of purchases (LWAP) over average price of generation (GWAP)
3
Percentage of time plant able to generate after accounting for outages
4
Derived from Planned Outage Co-ordination Process New Zealand geothermal outage
data (excluding Mercury operated plant)
5
As measured by the 2018 / 2017 IBM Employee Engagement Survey Engagement Index
FY2018 OUTCOMES

DELIVERING SUSTAINABLE GROWTH
>Managing cost
>Opex flat versus FY2017 at $214m for fifth year running
>Investing in growth
>Acquired a 19.99% stake in Tilt Renewables as a strong platform for gaining
exposure to Australia’s accelerating renewables transition
>Joint takeover offer with Infratilunderway to advance Mercury’s meaningful
interest in Tilt’s operational performance and growth opportunities
>Returns to shareholders
>Efficient distribution of capital to shareholders through share buyback of 15.6m
shares for $50m (circa 3.6cps) while retaining balance sheet strength
>FY2018 total ordinary dividend up 3.4% to 15.1cps, above original guidance
>FY2019 EBITDAF guidance is $515m
1
on 4,200GWh of hydro generation, subject
to any material events, significant one-off expenses or other unforeseeable
circumstances including hydrological conditions
>FY2019 ordinary dividend guidance up 2.6% to 15.5cps, which will be the 11
th
consecutive year of ordinary dividend growth
STRATEGIC DRIVERS & FY2018 OUTCOMES
10
FY2018 OUTCOMES
$50m
Share Buyback
of 15.6m shares
15.1cps
Total Ordinary
Dividend
FY2017: 14.6cps
19.99%
Tilt
acquisition
1
Includes impact of IFRS changes, see slide 32 in
Appendix for further details

11
MARKET DYNAMICS

12
FUTURES PRICES CURRENTLY UNRESPONSIVE TO PRICE VOLATILITY
ANTICIPATED MARKET OUTCOMES
>Demand growth
>Increased wholesale price volatility
>Futures price increase
>Commercial and Industrial (C&I) upwards price pressure
>Retail churn reduction
>Upward pressure on retail price
FUNDAMENTALS: SUPPLY AND DEMAND BETTER BALANCED
✓
✓
?
MARKET DYNAMICS
Pressure on retail margins
expected if wholesale price
and volatility remains elevated
}
?
?
?
C&I market demonstrating
higher tolerance for
wholesale price risk
}

UNDERLYING FACTORS DRIVE STEADY DEMAND GROWTH
MARKET DYNAMICS
13
>Demand higher, led by increases in the urban and dairy sectors
>Up 0.8% in FY2018 (1HY2018 1.4% & 2HY2018 0.1%), 1.3% after normalising for temperature (1HY2018 2.1% & 2HY2018 0.6%)
>Industrial demand decline remains a trend –reflecting ageing plant and relative global competitiveness
>Increased focus on renewable energy may partially offset this trend as the industrial and transport sectors’ green shoots shift energy use
away from fossil fuels
>Tiwai Point 4
th
potline restart expected to contribute ~0.5% demand growth in FY2019 (+1% annualised)
Source: TranspowerSCADA data, Mercury
1
Normalised for temperature
SectorGWhSector%Total %
Urban
1
+3552.2%0.9%
Rural
1
+480.7%0.1%
Dairy processing+871.4%0.2%
Irrigation+232.0%0.1%
Industrial-20(0.2%)(0.1%)
Other+365.1%0.1%
Total+5291.3%
FY2018 NORMALISED DEMAND GROWTH BY SECTOR
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Urban*Rural*DairyTiwaiIndustrial
(excluding
Tiwai)
Irrigation
GWh
DEMAND
FY2014FY2015FY2016
FY2017FY2018

$0
$50
$100
$150
$200
$250
$300
-1500-1000-500050010001500
OTA Wholesale Price ($/MWh)
Delta to SI Storage Average (GWh)
SI MONTHLY HYDRO STORAGE AND PRICE
Jan 1999 to Jun 2016
FY2017
FY2018
$0
$50
$100
$150
$200
$250
$300
-400-2000200400
OTA Wholesale Price ($/MWh)
Delta to NI Storage Average (GWh)
NI MONTHLY HYDRO STORAGE AND PRICE
Jan 1999 to Jun 2016
FY2017
FY2018
Graphs Source: NZX Hydro, Pricing Manager (NZX), Mercury
14
MARKET DYNAMICS
FY2018 WHOLESALE PRICES REFLECT VARIABLE NATIONAL HYDROLOGY
>Mercury benefitted from monthly price variation caused by swings in dry/wet conditions
>Above average North Island (NI) inflows coincided with periods of low South Island (SI) storage in FY2018
>Large SI hydro catchments and associated hydrology is a primary driver of wholesale prices
>Higher prices and increased volatility show effect of recent supply/demand rebalancing
~15% of annual national generation
17% of total hydro energy storage
28% of annual national inflows
~45% of annual national generation
83% of total hydro energy storage
72% of annual national inflows
Mercury benefits from high
prices and high volumes

0.7
0.8
0.9
1.0
1.1
1.2
1.3
2009201020112012201320142015201620172018
Financial Year
HYDRO GWAP / TWAP RATIO
MCY
MCY Long-Term Ratio
SI
SI Long-Term Ratio
0
10
20
30
40
50
60
70
80
90
2009201020112012201320142015201620172018
$ / MWh
Financial Year
EBITDAF
3
/ TOTAL GENERATION
MCYCEN
GNEMEL
>Value of low correlation of Mercury’s hydro catchment to SI hydrology shown by higher EBITDAF
3
/Generation ratio
>Also highlighted by Mercury’s consistently higher hydro generation GWAP/TWAP
1
ratio
>Long-term hydro generation GWAP/TWAP ratio is 1.10 versus 0.96 for major SI hydro generators
2
MERCURY’S HYDRO ADVANTAGE LIFTS GENERATION VALUE
15
MARKET DYNAMICS
1
Generation-Weighted Average Price / Time-Weighted
Average Price
2
Based on 10 years to 30 Jun 2018
3
Analyst consensus figures used for GNE and MEL
FY2018 EBITDAF, all other figures from company reports
Source: WITS, Pricing Manager (NZX), Mercury
Source: Company Reporting, WITS, Mercury

$0
$20
$40
$60
$80
$100
$120
$140
Apr-13Oct-13Apr-14Oct-14Apr-15Oct-15Apr-16Oct-16Apr-17Oct-17Apr-18Oct-18Apr-19
$/MWh
OTAHUHU FUTURES AND SPOT PRICES
(Monthly average 2 year price starting 3 quarters ahead)
ASX Futures
Spot (Monthly average)
$65
$70
$75
$80
$85
$90
$95
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
$/MWh
HISTORICAL ASX FUTURES PRICES
(Rolling 2 year average price starting 3 quarters ahead)
Otahuhu
Benmore
>Short-term futures prices sensitive to hydrological conditions
>Medium-term futures prices still range-bound (~$73-$83/MWh Otahuhu) despite increased wholesale price volatility
>Negative futures prices margin relative to wholesale prices in FY2018
16
FUTURES MARKET UNRESPONSIVE TO PRICE VOLATILITY
Futures pricing flat
Graphs Source: ASX, Pricing Manager (NZX)
MARKET DYNAMICS

0%
5%
10%
15%
20%
25%
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Annual Churn
NATIONAL CHURN RATE
(12mth rolling)
All Retailers
Mercury
Mercury Brand
}
>Intense retail competition in 2H FY2018 contributed to Mercury customer numbers decreasing by 4,000 in FY2018
>Customer satisfaction
1
based on Mercury’s survey remained stable going from 64% in FY2017 to 63%
-10,000
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
Switches
NATIONAL SWITCHING
Mercury Group
Mercury Brand
Prior 12mth Mercury Switches
Net Switches
0%
10%
20%
30%
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Switches
Withdrawn
2
RETAIL MARKET HIGHLY COMPETITIVE
17
All switches
Trader switches
3
Source: Electricity Authority, EMI –Market share trends and switching breakdown
1
Based on Mercury’s monthly survey of residential customers, 3-monthly rolling
average to 30 June for Mercury brand only
2
Switches which were initiated but not completed (inclusive of saves)
3
A trader switch is where a customer changes retailer without changing house
}
MARKET DYNAMICS

3%
6%
9%
12%
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Annual Churn
NATIONAL TRADER CHURN
(12mth rolling)
MarketCEN
GNEMEL
TPW Ex-TaurangaTPW
MCY GroupMCY Brand
Other
Graphs source: Electricity Authority, EMI –Switching breakdown
1
Tauranga (Powerco)
2
Auckland (Vector)
MERCURY BRAND MAINTAINS CHURN ADVANTAGE
18
>Mercury brand has kept a material churn advantage compared to the rest of the market
>Mercury group churn has increased to near-market levels as smaller brands have experienced elevated churn due to
the nature of their customer base
0%
3%
6%
9%
12%
15%
18%
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Annual Churn
AUCKLAND
2
TRADER CHURN
(12mth rolling)
MarketCEN
GNEMEL
TPWOther
MCY GroupMCY Brand
1
MARKET DYNAMICS

POLICY FOCUS OF NEW GOVERNMENT
MARKET DYNAMICS
19
Electricity Price Review
>Announced as part of coalition government agreement following September 2017 general election
>Focus on incremental changes designed to improve customer access, affordability and energy literacy
>Issues paper expected September 2018 followed by a submission process and workshops with stakeholders and consumers
Climate Change
>Legislation this year likely as some cross Party support exists for tightening NZ’s emissions reductions target, improving the
Emissions Trading Scheme and establishing an independent Climate Commission similar to the United Kingdom model
>Interim Climate Change Committee investigating options, costs and practicality of transitioning to a low emissions energy future
>Electrification across the economy key to a low carbon economy with scope to transform the transport and industrial heat sectors,
opportunity to establish economy-wide low emissions energy target and remove barriers to further investment in renewable
electricity generation
Thermal Fuel Discouraged
>New Zealand signatory to a November 2017 agreement to phase coal out of power generation by 2030
>Government announced that no new off-shore oil and gas drilling permits will be issued (April 2018)
Transmission Pricing Methodology
>Electricity Authority remains committed to a beneficiaries pay approach to transmission pricing; next update December 2018

MERCURY’S LONG-TERM WIND JOURNEY
MARKET DYNAMICS
20
Mercury must participate in wind to materially take part in renewable generation development in the medium-term
>More than decade long journey leads to optimal development options
>Large-scale development delayed by low demand growth environment over the past decade
>Acquisition of stake in Tilt Renewables is an extension of our long-term growth strategy
>Robust portfolio of operating wind farms in both Australia and New Zealand; best Australian pipeline
>Aligned with our signalled strategy for economic growth
>Allowing meaningful participation in Australia’s accelerating transition to renewable energy sources
200420052006200720082009201020112012
Projects
Consenting
processes
Milestones
0Up to 10-12 core prospects across NI & SI
Reduced to 2-3 by 2013
Puketoi
Turitea
2 (consented)
PNCC selects
MCY as developer
for Turitea
Turitea
consents
final
Puketoi
consents
final
201320142015201620172018
Tilt
Turitea landowner
agreements
signed
Puketoilandowner
agreements
signed
Investments

21
FINANCIAL SUMMARY

22
$561m
EBITDAF, up $38m, reflecting
favourable hydro inflows and continued
strong company-wide performance
$234m
NPAT, up $50m, reflecting higher
earnings, fair value gains and reduction in
impairments offset by higher tax expense
2.0x
Debt/EBITDAF, consistent with BBB+
credit rating and headroom for growth;
impacted by record earnings (2.3x after
normalising earnings for hydro variance)
$259m
Free Cash Flow, reflecting strong
cashflows from low cost 100%
renewable generation and tax
prepayments for dividend imputation
$50m
Share buyback as an efficient means of
returning capital while retaining balance
sheet strength
15.1cps
Fully-imputed full-year ordinary dividend
declared, above original guidance due
to share buyback
FINANCIAL SUMMARY
FY2018 FINANCIAL HIGHLIGHTS

CONTINUOUS FOCUS ON CAPITAL MANAGEMENT
23
FINANCIAL SUMMARY
Investment
in growth
Repayment of debt
Capital
returns to
shareholders
Operating Cash Flow
Free Cash Flow
Stay-in-business capital expenditure
Ordinary dividend

STABLE CAPITAL STRUCTURE
FINANCIAL SUMMARY
24
1
Adjusted for S&P treatment of Mercury’s Capital Bond
>BBB+ rating is key reference point for dividend policy and an efficient and sustainable capital structure
>S&P re-affirmed Mercury’s credit rating of BBB+/stable on 11 December 2017
>One-notch upgrade given majority Crown ownership
>Capital management continuously reviewed
>Targeting gearing at low end of Debt / EBITDAF between 2.2x and 3.0x (within key ratio for stand-alone S&P credit rating BBB)
to provide debt headroom due to Government minimum equity ownership requirement
>Gearing range reflects flexibility afforded by Treasury stock retained from share buyback
>Debt / EBITDAF 2.0xat 30 June 2018
1
(2.3x after EBITDAF normalisation for above-average hydro generation)
30 June 201830 June 201730 June 201630 June 201530 June 2014
Net debt ($m)
1,2491,0381,0681,0821,031
Gearing ratio (%)
27.523.924.424.524.3
Debt/EBITDAF(x)
2.0
1
1.8
1
2.0
1
2.0
1
2.1
Capital management
priority
Capital returns
Growth

FY2019 GUIDANCE SUMMARY
FINANCIAL SUMMARY
25
>FY2019 EBITDAF guidance is $515m on 4,200GWh of hydro generation, subject to hydrological volatility, wholesale
market conditions and any material adverse events, significant one-off expenses or other unforeseeable
circumstances
>FY2019 ordinary dividend guidance is up 2.6% to 15.5cps
>FY2019 operating expenditure is forecast to be flat versus FY2018
>FY2019 stay-in-business capital expenditure guidance is $95m
>FY2019 Free Cash Flow will be positively affected by the roll-off of historical interest rate hedges (circa $20m net
annual cash flow benefit); partially offset by increased debt

562
500
515
~15
~15
62
~15
400
430
460
490
520
550
580
FY2018 ActualHydro and Other
Adjustments
(4,150GWh)
FY2018 Original
Guidance
Hydro Normalisation
(4,000GWh)
Hydro Adjustment
(4,200GWh)
OtherFY2019 Guidance
$m
INDICATIVE GUIDANCE BRIDGE
IncreaseDecrease
FY2019 GUIDANCE –UNDERLYING EARNINGS GROWTH
FINANCIAL SUMMARY
26
>FY2019 EBITDAF guidance assumes:
>4,200GWh of hydro generation (747GWh less than FY2018, 200GWh above average)
>Operating expenditure flat relative to FY2018
>Growth from technology investment to improve customer profitability, cost transparency and trading performance
1
Includes impact of IFRS changes, see
slide 32 in Appendix for further details
1

A DECADE OF ORDINARY DIVIDEND GROWTH
27
>FY2018 fully imputed ordinary final dividend of 9.1cps which will be the 10
th
consecutive year of ordinary dividend
growth
>FY2019 ordinary dividend guidance is an increase of 2.6% to 15.5cps reflecting the reduced number of shares on
issue following the completion of the share buyback
0
5
10
15
20
25
200820092010201120122013201420152016201720182019F
Cents per share
Financial Year
DECLARED DISTRIBUTIONS
Interim dividendFinal dividendSpecial dividendShare buybackOrdinary dividend guidance
FINANCIAL SUMMARY

74
69
60
79
59
114
112
95
288
183
33
31
13
2
150
0
50
100
150
200
250
300
350
400
20122013201420152016201720182019F
$m
Financial Year
CAPITAL INVESTMENT
New investment
Stay-in-business
INVESTING IN LONG-TERM CAPABILITY
FINANCIAL SUMMARY
28
>Stay-in-business capital expenditure will be elevated in FY2019 primarily due to Auckland office consolidation for two
thirds of employees ($16m for office move)
>Consistent with medium-term guidance plus cost of new building development
>Planned stay-in-business capital expenditure in FY2019 also includes:
>Continued investment in long-lived asset capability as Waikato hydro system refurbishment continues at Aratiatia, Whakamaru
and Karapiro stations –resulting in material efficiency and capacity gains
>Continued technology investment to realise functionality of new systems
Stay-in-business capital expenditure for the period
FY2013 through FY2018 averages ~$80m

29
Q&A
Q&A

523
217
192
6
5
2
0
561
400
450
500
550
600
650
700
750
EBITDAF FY2017GenerationEnergy CostCFDsCustomer SalesOther RevenueOperating
Expenditure
EBITDAF FY2018
$m
Energy Margin up $36m
Improvement
Reduction
EBITDAF BRIDGE (FY2018 vs. FY2017)
APPENDIX
30
>Energy margin up $36m
>Record generation with 171GWh more generation from renewable sources
>Energy Cost increased with higher wholesale price
>Contribution from CFD sales was $40m, up $6m on FY2017
>Operating expenditure flat year-on-year
>Other revenue up $2m due to increases in revenue from metering and services provided to third parties
1
Energy cost excludes gas generation purchases and volume impacts of end user
sales, which are included within generation and customer sales respectively
2
Other revenue includes the direct costs related to metering services and the
purchase of solar equipment
12

-
50
100
150
200
250
300
350
400
2019202020212022202320242025202620272045
$m
Financial Year
DEBT MATURITIES AS AT 30 JUNE 2018
Domestic Wholesale BondsUS Private PlacementCapital BondDrawn Bank FacilitiesUndrawn Bank Facilities
DIVERSIFIED FUNDING PROFILE
31
>Committed bank loan facilities were $650m as at 30 June
>The average debt maturity profile for committed facilities was 7.2 years as at 30 June 2018
>Interest costs have been elevated due to interest rate hedges put in place in 2008 during the company’s domestic
geothermal investment programme. These hedges are rolling off with a circa $20m net annual cash flow benefit in
FY2019.
2
APPENDIX
1
Drawn bank facilities includes issued commercial paper
2
Assuming similar debt levels to FY2018
1

NEW IFRS STANDARDS
32
>Mercury will adopt IFRS 9 (Financial Instruments), IFRS 15 (Revenue From Contracts With Customers) and IFRS
16 (Leases) from FY2019
1
>Under IFRS 15
2
, credits awarded to customers in the form of upfront discounts will be recognised immediately
against revenue (previously recognised in expenses) and commissions directly attributable to obtaining new
customers will be capitalised to the balance sheet and amortisedback to expenses over a two year period
>IFRS 16 reclassification of operating lease payments will reduce expenses (increasing EBITDAF) but increase
depreciation and interest with no material impact on net profit
>IFRS 9 will have minimal impact on fair value movements through the income statement
APPENDIX
IMPACT ON GUIDANCE
IFRS 15IFRS 16Total
EBITDAF (Old standards)510
Revenue-4-4
Other expenses369
EBITDAF (New standards)-16515
1
Comparative financial statements for FY2018 will be restated
under new IFRS for the FY2019 Interim and Annual Reports
2
IFRS 15 will be reflected in Operating Statistics from Q1 FY2019;
Electricity Sales VWAP will be negatively impacted

FOR FURTHER INFORMATION >> TIM THOMPSON | HEAD OF TREASURY & INVESTOR RELATIONS T. 0275 173 470 E. INVESTOR@MERCURY.CO.NZ

---

OUR 2018
ANNUAL REPORT

02 OUR MISSION: ENERGY FREEDOM
04 AT A GLANCE
06 CHAIR & CHIEF EXECUTIVE UPDATES
18 OUR SUSTAINABILITY STATEMENT
22 24 HOURS OF WONDERFUL ENERGY
26 NEW THINKING AND HIGH PERFORMANCE TEAMS
30 KEEPING THE POWER COMING
34 CONNECTING WITH COMMUNITIES
38 GROWING SOLUTIONS TO CLIMATE CHANGE
42 FINANCIAL COMMENTARY
46 YOUR DIRECTORS
47 OUR EXECUTIVE TEAM

Energy Freedom is an outcome sought for all New Zealanders.
It is about New Zealand being less vulnerable economically and
better off environmentally through better use of homegrown
renewable energy.
OUR MISSION:
ENERGY FREEDOM.
REALISING
OUR PURPOSE
TO INSPIRE NEW ZEALANDERS

TO ENJOY ENERGY IN MORE
WONDERFUL WAYS
EXECUTING
OUR STRATEGY
DELIVERING CUSTOMER

ADVOCACY
LEVERAGING CORE STRENGTHS
DELIVERING SUSTAINABLE

GROWTH
BUILDING ON
OUR FOUNDATION >
WELLBEING
OF OUR PEOPLE AND

CUSTOMERS
02 // 03
FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
PILLARSCUSTOMER
PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS

LIVING
OUR ATTITUDE
ACHIEVING
OUR GOAL
TO BE NEW ZEALAND’S

LEADING ENERGY BRAND
COMMIT
& OWN IT
SHARE &
CONNECT
CURIOUS
& ORIGINAL
BUILDING ON
OUR FOUNDATION >
COMMERCIAL
COMMERCIALLY ASTUTE

DECISIONS
KAITIAKITANGA
THE CUSTODIANSHIP OF

NATURAL RESOURCES

FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
PILLARSCUSTOMER
PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS
91

EVs IN
OUR FLEET
Mercury is an electricity generator,
retailer and metering provider
whose purpose is to inspire
New Zealanders to enjoy energy
in more wonderful ways.
We have a long heritage in
renewable electricity generation.
Hydro and geothermal power
stations operated by Mercury
generate renewable energy
sufficient for 850,000 New Zealand
homes. This year we expanded our
renewable reach through the
acquisition of a 19.99% stake in Tilt
Renewables (Tilt) which has a
growing portfolio of wind and solar
projects in Australasia. We also
have our own consented windfarm
development options in the lower
North Island of New Zealand.
Mercury serves customers through
the Mercury brand and other
specialty brands, including the
leading prepay service GLOBUG.
Mercury’s smart metering
business, Metrix, enables better
energy choices through data.
We have a growing solar business,
Mercury Solar, with expertise in
battery and off-grid solutions.
Research and development is
also something we do: Mercury
is pioneering a scalable, national
grid-connected Tesla battery.
We support our people to be high
performers through a commitment
to wellbeing, inclusion and
development.
Our mission of Energy Freedom is
pursued in many ways, including
through the electrification of
transport. Four years ago, Mercury
identified the electrification of
transport as New Zealand’s
greatest opportunity for reducing
carbon emissions. We encourage
the adoption of electric vehicles
(EVs) and electric bikes (e.bikes)
and partnering on non-home
charging infrastructure and data.
Our goal is to be New Zealand’s
leading energy brand: inspiring,
rewarding and making things easy
for our customers.
388K
CUSTOMERS
2,181 solar customers
243 customers on
EV package
CUSTOMERS
341,286 residential
41,987 commercial
1,857 industrial
2,770 spot
2 geothermal joint ventures
4 formal iwi partnerships
10 community & commercial
partnerships
AT A GLANCE.
16

PARTNERSHIPS
04 // 05

> MERCURY
606 in Auckland
105 in Hamilton
18 in Taupo
57 in Rotorua
105 in rest of New Zealand
525

MALE
4,947 GWh of hydro
generation
2,757 GWh of
geothermal
generation
Services include:
> Providing electricity
consumption data
> Maintaining &
servicing assets
> Installing
infrastructure
891

EMPLOYEES
366

FEMALE
413K

SMART METERS
14

POWER
STATIONS*
19.99%

SHAREHOLDING
IN TILT
+
Not 100% owned by Mercury.
Geothermal stations
Hydro stations
R&D Centre
> INDUSTRY
FY2018 MARKET SHARE
GENERATIONSALES
14%19%
KARAPIRO
ARAPUNI
WAIPAPA
MARAETAI
I AND II
WHAKAMARU
MOKAI
+
OHAKURI
ATIAMURI
KAWERAU
ARATIATIA
NGATAMARIKI
NGA AWA
PURUA
+
LAKE TAUPO
ROTOKAWA
AUCKLAND
* Two are partnerships with Maori land trusts
FY2018FY2017
YOY
CHANGE
GENERATION VOLUME
(GWh)
770475332.3%
MARKET CAP
($bn as at 30 June)
4.594.57
NET DEBT
($bn as at 30 June)
1.251.04

HIGH QUALITY AND ALIGNED
EXECUTION ACROSS A BROAD
AND COMPLEX RANGE OF
ACTIVITIES HAS BEEN A
HALLMARK OF THIS YEAR.
JOAN WITHERS
CHAIR
06 // 07
FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
PILLARSCUSTOMER
PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS

ACROSS KEY FINANCIAL, BRAND
AND PEOPLE METRICS, WE HAVE
SET NEW RECORDS IN FY2018.
FRASER WHINERAY
CHIEF EXECUTIVE

Last year I highlighted the momentum
evident across the business under
Mercury’s new brand. That momentum
delivered record customer satisfaction
results, record employee engagement
and record financial results. This year
it is extremely heartening for me to see
a continuation of this performance, with
strong results set in these same areas.
Employee engagement was 81.5%
(FY2017 81%). Customer satisfaction
was 63% (FY2017 64%). And Mercury
has once again achieved record earnings
(EBITDAF) of $561 million, up 7% on
FY2017, following a second year of
record generation.
We made progress with our sustainable
growth strategy through the purchase
of a 19.99% stake in NZX and ASX-listed
Tilt (NZX:TLT) for nearly $144 million, or
$2.30 per share.
Mercury also completed an on-market
share buyback programme acquiring
nearly 15.6 million ordinary Mercury
shares (1.1%) for total consideration of
NZ$50 million, or NZ$3.21 per share.
Consistent with the 2014 buyback, the
shares are being held as treasury stock
to provide greater balance sheet
flexibility.
The buyback and Tilt investment have
lifted the company’s gearing. We target
a standalone rating of BBB (upgraded
to BBB+ because of the Crown’s 51%
shareholding) and at 2.0 we remain at
the conservative end of S&P’s indicative
range of 2.0x to 3.0x debt to EBITDAF
ratio. I make further comment on our
capital management initiatives later in
this report.
Concurrent with this extensive activity,
Mercury received significant external
recognition, with 22 awards won across
the organisation through the financial
year. These included awards for our
contact centre (teams and individuals);
for our marketing (two major awards for
our brand work); for our innovation (our
Auckland R&D Centre); for our legal
team; and two awards for our people:
Workplace Engagement Programme
of the Year and Best Workplace.
OUR RETURNS
Due to levels of rainfall higher than
average across almost the entire year,
Mercury’s hydro generation of 4,947GWh
was 223GWh up on FY2017, a new record.
Total Shareholder Return (TSR), or the
return from dividends paid and share
price changes, within FY2018 was 7.5%.
TSR was negatively impacted by our
removal from the MSCI global standard
index, as the significant share price
escalation of A2 Milk (NZX:ATM)
triggered its inclusion in our place. Given
the number of funds mandated to follow
the MSCI index, this event resulted in
record levels of shares transacting over a
very short period of time.
The Board is pleased to be returning
$207 million in total ordinary dividends
to our nearly 85,000 owners, including
the Crown, from cash flows generated
through the year. Details of our final
ordinary dividend are outlined later in
this update.
ALIGNED EXECUTION.
On behalf of your Board it is my pleasure to report to you,
our owners, on Mercury’s results for FY2018.
CHAIR’S UPDATE
While delivering strong financial results,
Mercury continues to play a broader role
in support of its customers, communities
and the country that distinguishes the
business in a highly competitive market.
During the year Mercury continued to
influence the national narrative on
energy and transport innovation,
promoting the electrification of transport
and initiating a scalable national grid
connected 1MW/2MWh battery trial to
be commissioned in August 2018.
As a board, we are delighted with the
role Chief Executive Fraser Whineray has
played in being a very early protagonist of
the benefits to be gained by the country
moving to a renewable energy target,
rather than just a renewable electricity
target, and the importance of the
electrification of vehicles as part of that
goal. We also influenced the regional
narrative on water, working collaboratively
with iwi and other stakeholders who desire
long-term sustainable outcomes across
the Waikato River catchment. Mercury
co-led a multi-stakeholder visit across
three Australian states to the complex
and diverse Murray Darling basin in
August 2017.
Mercury also influenced the sector’s
narrative on safety. This year the sector’s
StayLive workplace safety programme,
strongly supported by Mercury, won the
Electricity Engineers’ Association’s
workplace safety award, while Mercury
advanced its detailed process safety
programme across its Mokai, Ngatamariki
and Rotokawa geothermal sites in
collaboration with other geothermal
operators.
FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
PILLARSCUSTOMER
PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS
08 // 09

PEOPLE, LEADERSHIP
AND GOVERNANCE
High quality and aligned execution across
a broad and complex range of activity has
been a hallmark of this year, which Fraser
will outline in his update.
As a board, we are absolutely committed
to delivering the best possible governance
to the Company. Again, this year, we have
conducted an externally facilitated board
performance review. Our board has been
acknowledged in the highly regarded
Corporate Confidence Index which
measures institutional confidence in 50
major listed companies across Australia
and New Zealand as being in the top six
in critical areas such as effective board,
high standard of corporate governance
and appropriate board composition.
The composition of our board is always
under review and this year we were
delighted to have Scott St John join us.
Scott’s investment banking and wider
commercial background is a valued
addition to our mix of skills and
experience. You can see the graphical
description of those skills on page
34 of our 2018 Financial Report.
I announced at the 2016 Annual
Shareholders’ Meeting that I would not be
seeking re-election beyond my current
term which will end at the 2019 ASM.
Succession planning for my replacement
as Chair is underway and we are blessed
in that we have a number of high calibre
contenders currently sitting as directors.
Under our constitution the Minister of
Finance must approve the appointment
of the Chair and I have great confidence
your board will provide an excellent
successor for ratification.
Mercury has been and continues to be
a strong supporter of the Future
Directors programme which aims to
improve the pipeline of younger talent
coming into governance. We said
farewell to Nicky Ashton in December
and we have just appointed Anna
Lissaman, Director of People and Talent
at TVNZ, to the Future Director position
for an 18-month period from 1 July 2018.
Within the business, there has been
considerable focus on making human
capital a competitive advantage for
Mercury through the development and
implementation of a High Performance
Team framework. This has focused very
much on how formal and informal
teams interact, self-diagnose and
improve team performance.
Our commitment to the wellbeing of
people at Mercury is fundamental to the
sustainability of our business. Our goal
continues to be Zero Harm. We were
unsuccessful in that goal, though we are
very pleased to report that there were no
serious injuries this year.
$561M
RECORD EARNINGS
7.5%
TOTAL
SHAREHOLDER
RETURN
4,947GWh

A NEW RECORD
HYDRO GENERATION
MERCURY CONTINUES
TO PLAY A BROADER
ROLE IN SUPPORT OF
ITS CUSTOMERS,
COMMUNITIES AND
THE COUNTRY THAT
DISTINGUISHES THE
BUSINESS IN A HIGHLY
COMPETITIVE MARKET.

Our measure, Mercury’s total recordable
injury frequency rate (TRIFR), was 0.87
(down from 1.05 FY2017). Eighty-nine
percent of employees confirm that
Mercury cares about the wellbeing of its
people, compared with the 2017
benchmark across all New Zealand
organisations of 79%.
RETURNING VALUE
As noted earlier, your Board is pleased
to be returning a total of $207 million to
our owners, including the Crown, for the
full year.
The final ordinary dividend is 9.1 cents
per share, fully imputed. This brings
the full year fully imputed ordinary
dividend to 15.1 cents per share, up from
14.6 cents per share in FY2017.
This represents an increase of 0.1 cents
per share on guidance as a result of
fewer shares on issue following our
share buyback.
Mercury’s dividend is consistent with
our policy to make ordinary distributions
with a pay-out ratio of 70% to 85%
of free cash flow on average through
time. This return to shareholders
represents the tenth consecutive year
of ordinary dividend growth.
Mercury’s final dividend will be paid to
shareholders on 28 September 2018.
Our capital management initiatives
support Mercury’s investment-grade
credit rating (BBB+), which was
reaffirmed by S&P Global Ratings in
December 2017.
We have issued guidance for the FY2019
year based on forecast hydro generation
of 4,200GWh, 200GWh above average
based on catchment inflows and
generation year-to-date.
EBITDAF guidance for FY2019 is
$515 million, subject to any material
events, significant one-off expenses
or other unforeseeable circumstances
including hydrological conditions.
Ordinary dividend guidance has
been issued at 15.5 cents per share,
an increase of 2.6% on FY2018, again
reflecting fewer shares being on issue
following our share buyback.
Stay-in-business capital expenditure
guidance is $95 million due to planned
hydro, geothermal and technology
investments in FY2019, as well as
investment in people and culture
through Mercury’s Auckland office
consolidation to Newmarket.
CONNECTING
I look forward to providing an update
on Mercury’s business performance and
strategic priorities at our ASM in
Auckland. This year’s meeting will be held
earlier than in the past, on 28 September.
This has been arranged following
feedback, expressing a desire for us to
discuss our results with you, our owners,
in closer proximity to them having been
finalised. Owners not able to attend can
follow proceedings on a live webcast and
you can cast a proxy vote on any
resolutions by post or online.
We will also talk about our business
at a retail investor roadshow at a
number of locations around the country
late in the first half of the new financial
year.
CONCLUSION
What has heartened me most through
the year has been the strong alignment
evident across Mercury as we build on
our heritage through quality execution
of our strategic plan.
I extend my sincere thanks to my
colleagues on the board and I especially
want to pay tribute to our Chief
Executive Fraser Whineray, his executive
group and all our team members across
the country for their dedication,
commitment and contribution to
Mercury’s achievements. I gratefully
acknowledge our customers, partners,
other stakeholders and you, our owners,
for your continued trust and support.
JOAN WITHERS, CHAIR
ORDINARY DIVIDEND GUIDANCE HAS
BEEN ISSUED AT 15.5 CENTS PER SHARE,
AN INCREASE OF 2.6% ON FY2018.
10 // 1110 // 11
FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
PILLARSCUSTOMER
PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS

Across key financial, brand and people
metrics, we have set new records in
FY2018 above the previous records
achieved in FY2017. We are pleased to
have advanced these in strong
alignment with our mission of Energy
Freedom; for customers and the country.
A fundamental driver of performance
has been a clear customer-led
approach backed by a comprehensive
lift in leadership capability throughout
Mercury. The team is in very good shape,
has a clear direction and is showing
strong momentum early in FY2019. The
year ahead will see our growth strategy
take a stronger prominence, building on
our underlying core business execution.
FINANCIAL
PERFORMANCE
It rained. The resulting record Waikato
Hydro scheme generation was the
primary driver in lifting EBITDAF to
record levels. However, capturing value
from those inflows would not have been
possible without the expertise and efforts
of our people. In flood or drought, teams
throughout the company dynamically
manage planned and unplanned plant
maintenance, our portfolio and wholesale
markets positions and hundreds of
resource consent conditions as part of
environmental stewardship.
It continues to be clear that the value of
the Waikato Hydro scheme as a buffer to
nature’s volatility is as fundamental to
the Waikato community as it is for its
contribution to New Zealand’s renewable
electricity generation. Absent the
Waikato Hydro scheme, the rainfall over
the last few years, particularly with the
ex-cyclones of 2017, would have likely
resulted in extensive environmental and
public and private asset damage around
Taupo and throughout the lower Waikato.
We continue to enjoy a very strong
relationship with the Waikato Regional
Council who is the flood and drought
manager for the catchment and is the
critical co-ordinator in balancing matters
across the catchment in such events.
Stay-in-business capital expenditure
(SIB CAPEX) of $112 million reflected
high quality execution across hydro,
geothermal and technology platforms.
The reinvestment programme is critical
to our sustainability and delivery of
renewable energy over the long-term for
New Zealanders. The story of our Aratiatia
refurbishment is told later in this report.
We have continued a very strong run
on cost management with operational
expenditure (OPEX) remaining flat at
$214 million for five years. We are
forecasting to maintain the same levels
in FY2019.
TEAMWORK
We have invested in ourselves and our
teamwork this year, and the results are
strong. On the back of our FY2017
employee survey results we were assessed
as the best workplace in New Zealand
(IBM enterprise category, IBM Best
Workplace Awards). The internal aspects
of our rebranding to Mercury also resulted
in Mercury receiving recognition at the
New Zealand HR Awards 2018 for the
Workplace Engagement Programme of
the Year.
In FY2018 our people lifted their
engagement to even higher levels. Latterly,
this has been through the roll out of a High
Performance Team framework to support
inclusion, performance and alignment.
Our annual employee survey saw our
engagement index strengthen further
to 81.5% from last year’s 81%. The survey
also identified that 94% of our people
agree or strongly agree that Mercury is
committed to the health and safety of
our people. The highest employee survey
result was in response to the statement
that Mercury takes its environmental
responsibilities seriously (95.6%).
SAFETY, WELLBEING
AND INCLUSION
I am especially pleased that there were
no serious injuries for employees and
on-site contractors throughout the year,
particularly given the very high levels of
plant reinvestment activity. StayLive, a
large generator and transmission safety
information sharing group, received its
first external award. This co-operative
approach to safety, established by
Neal Barclay (now Chief Executive of
Meridian), Bob Weir (then Genesis
Energy) and myself eight years ago,
continues to provide real and growing
value to participants.
A very large safety investment was made
during the year resulting in the submission
of three geothermal safety cases to
WorkSafe for review, reflecting a process
safety approach at those sites. We are
also investing in process safety cases in
specific areas elsewhere in the business
for key customer and hydro risks.
Since rebranding two years ago, Mercury has continued to
accelerate the execution of its strategy to deliver customer
advocacy, leverage core strengths and achieve sustainable growth.
CUSTOMER,
COMMUNITY,
COUNTRY.
CHIEF EXECUTIVE’S UPDATE
FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
PILLARSCUSTOMER
PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS
12 // 13

Wellbeing and inclusion continue to
be focus areas that underpin effective
delivery of our strategy. They are reported
on further in the governance section of
this report.
On behalf of everyone at Mercury,
I acknowledge the passing during the
year of two employees who made a
wonderful contribution to Mercury,
Dave Keppel and Eucharist (Naisa)
Ng Shiu. Dave and Eucharist are
fondly remembered, and our thoughts
are with their families.
ENJOYING THE ENERGY
Our brand continues to strengthen, with
awareness and satisfaction measures
reaching record levels during FY2018.
This is in part driven by our campaign to
take the message about New Zealand’s
renewable energy advantage – and Energy
Freedom – from the head to the heart.
We have brought this to life through the
story of customers enjoying life through a
classic ’57 Ford Fairlane converted to the
wonderful energy of electricity thanks to:
a specialist Dunedin workshop, Control
Focus; a Hamilton power electronics
company, Scott Drive; a bus-strength
electric motor from Siemens, Germany;
and a lot of creativity from our marketing
team and our agency FCB.
More than 80% of New Zealanders
love our EV ad campaign which has
translated to record high positivity
toward Mercury.
There is a very important New Zealand
narrative behind Mercury’s extensive and
four-year strong campaign on electric
vehicles, namely the country’s Energy
Freedom. At our 2014 ASM we committed
to 70% of our vehicle fleet being electric in
2018. We achieved that one year early, with
one of New Zealand’s largest business
sector EV fleets of 91 vehicles. We also
predicted at the time that the number
of EV’s sold would exceed the number
of solar installations if the facts of the
environmental and economics benefits
became well known. This milestone was
reached for New Zealand in October 2017.
Mercury continues to focus on the things
our loyal customers tell us they want;
inspiring, rewarding and making things
easy for them.
WE HAVE CONTINUED A VERY
STRONG RUN ON COST MANAGEMENT
WITH OPERATIONAL EXPENDITURE
REMAINING FLAT AT $214M
FOR FIVE YEARS.
891
EMPLOYEES
94%
EMPLOYEES CONFIRM
MERCURY IS COMMITTED
TO HEALTH AND SAFETY,
COMPARED TO ALL
ORGANISATIONS
BENCHMARK OF 85%
91%
EMPLOYEES WHO CONFIRM
THAT MERCURY HAS A CLEAR
VISION OF WHERE IT IS
GOING, COMPARED TO 2017
ALL NZ ORGANISATIONS
BENCHMARK OF 76%
1
1 IBM Workplace Engagement Survey Benchmark

MORE THAN 93,000 CUSTOMERS ENJOY
DETAILED ENERGY USAGE DATA THROUGH
OUR GEM SYSTEM.
90K
CUSTOMERS ENJOYED A
JUNE FREE POWER DAY
Customers have continued to enjoy
wonderful experiences on e.bikes. More
than 1,200 people are estimated to have
ridden e.bikes at Mercury ride days, and
e.bike ownership continues to grow
strongly. A partnership with Big Street
Bikers in downtown Auckland introduced
a solar powered e.bike “rechargery”, a
bike-by-the-hour scheme, as well as
rent-to-buy options with discounts for
Mercury customers.
Mercury’s Free Power Day concept is
always well subscribed. Around 90,000
customers enjoyed a June Free Power
Day. One long-term customer and owner,
Mr Warren Johns, later in this report
wonderfully tells his story of how this day
inspired him to clean, bake and connect
with friends in his home of over 50 years.
INNOVATION
Our approach to innovation is to be
alongside our customers as
opportunities are tested and proven to
be viable, feasible and desirable – not
just one or other of these measures.
More than 93,000 customers enjoy
detailed energy usage data weekly
through our GEM system. Through GEM
our customers have, for more than five
years now, been able to understand their
energy consumption down to the
half-hour, receive estimates of their
consumption by usage in the home,
receive emails predicting their month
end bill and also weekly updates to help
them manage consumption in near real
time. We have launched a loyalty
focused customer app for smart devices,
the current release of which incorporates
access to these on-line GEM features.
Our digital experience (DX) team has
been working on smart device voice
activated services with Amazon’s Alexa,
the first energy company in New Zealand
to do so.
Many of our customers experienced
power outages during April’s storms.
Using our Incident Management Plan,
we implemented a widespread and
coordinated effort across our metering
and retail teams to minimise the
consequences to our customers. This
included placing a team from our
award-winning contact centre into a
network company to reduce its call
queues and creatively meshing smart
meter data to more accurately identify
affected homes to help network
companies with power restoration.
MEETING CUSTOMER
NEEDS
GLOBUG continues to be New Zealand’s
largest pre-pay electricity provider.
We work closely with various social
services around the provision of
this pre-pay product which, by
design, helps avoid the potential
for customers to build up
unmanageable debt.
GLOBUG gets considerable
media attention at times,
partly because of some of
the vulnerable customers
that it helps. We remain
committed to this product
for the role it plays in giving
consumers choice. GLOBUG
customer numbers, despite high
churn, are relatively flat year on year,
1,200
CUSTOMERS HAVE
ENJOYED RIDING
MERCURY E.BIKES
GLOBUG CONTINUES
TO BE NEW ZEALAND’S
LARGEST PRE-PAY
ELECTRICITY PROVIDER
FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
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PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS
14 // 15

showing that this is a very important
part of the market. The data clearly
shows that GLOBUG’s net impact is to
keep the lights on.
OUR VOICE
Consistent with my report last year, we
continue to work towards a reset of
distribution pricing settings and are
engaged in a number of trials with
network companies. We remain highly
focused on seeing New Zealand adopt
a low carbon energy target, and ideally
removing the renewable electricity target.
We will continue to promote the
electrification of transport, in its many
forms including heavy transport, as this
country’s greatest achievable opportunity
for reducing carbon emissions. We will
continue to engage with decision makers
to convey the importance of deep energy
storage for New Zealand’s security of
supply (and Energy Freedom).
We intend to ramp up our activity in
FY2019 to influence Government,
NGOs and the business sector to focus
on meaningful, scalable and connected
solutions to climate change which fit a
New Zealand context. I am concerned at
the tendency towards ‘window-dressing’
that masks big carbon emissions by
reporting small advances in reporting or
offsetting. “Every little bit” does not
always help when it results in countries
and their citizens misallocating their
time, effort and capital to tackle a global
issue which commands only our best
collective performance.
GUARDIANSHIP
Our ultra long-term approach has seen
us continue to focus on kaitiakitanga, or
guardianship, of the resources and
environment that support our
contribution to New Zealand.
During the year Mercury, working
alongside iwi partners and other
stakeholders, arranged a study tour of
Australia’s Murray/Darling catchment to
korero, grow relationships, and consider
how collaboratively we can support the
best long-term outcomes for the health
and wellbeing of New Zealand’s most
essential water catchment.
We also continue to invest in
maintaining our hydro and geothermal
assets. This important work builds on the
legacy of those who created them over
the course of nearly a century so that
they contribute the future of local
communities and to New Zealand for
many decades to come.
As but one example, at our Kawerau
geothermal station we replaced the
turbine after 10 years of service in the
largest planned shut undertaken at the
site. Ongoing curiosity, a common goal
and strong teamwork saw the plant
achieve daily records and make
sustainable production gains across the
year. On a recent visit I was delighted to
hear from Dean Cowell, who has been a
plant operator and technician of the
complex facility since opening in 2008,
express that the teamwork was the best
he had ever known it. There are many
similar stories of quality teamwork and
execution throughout Mercury.
GROWTH
In previous annual reports we have
outlined our strategy for growth. An
opportunity taken this year was the
purchase of a 19.99% stake in Tilt.
Tilt is well established in Australasia,
both in terms of its expertise and its
own growth through solar and wind
developments. This purchase allows
Mercury to benefit from Australia’s
necessary transition towards levels of
renewable electricity that New Zealand
has largely achieved. It fits within a
broader context of wind growth and
development, a journey we have been
on now for more than a decade.
Mercury also participated in AGL’s
divestment process to purchase their
smart metering business in Australia,
though we were unsuccessful.
19.99%
STAKE PURCHASED
IN TILT RENEWABLES

MARKET CONDITIONS
Wholesale market conditions have
become more volatile with the supply/
demand mix rebalancing in combination
with periods of average to below average
national hydrology. Such volatility plays
into the strengths of the Waikato Hydro
scheme, the North Island’s largest
peaking plant.
In FY2019 we look forward to New
Zealand's Aluminium Smelter (NZAS)
increasing national electricity demand
by more than 1% with the restart of its
fourth potline at Tiwai Point. This is a
positive development for New Zealand-
sourced aluminium relative to carbon
intensive Australian production.
CAPITAL STRUCTURE
We have strengthened our capital
structure by buying back $50 million
of Mercury shares for an average price
of $3.21 per share. In combination with
a buyback in 2014, we now have 2.7%
of Mercury’s shares as treasury stock,
meaning that existing shareholders
receive a larger proportion of the
company’s profits (reflected in a full
year dividend higher than guidance
for FY2018). It also enables Mercury
to re-issue those shares to more easily
raise equity capital to support both
opportunity and risk management.
Extensive hedging of interest rates
was taken out in 2008 prior to the
$1.4 billion domestic geothermal
development program. These are in
the process of rolling off, and we
expect a $20 million per annum benefit
to post-tax cashflow as interest costs
revert to current market levels.
Per our notification to all of our owners
in May, I apologise for the error which
saw owners’ email addresses and
Common Shareholder Numbers listed on
the Companies Office website for a time.
Once this error was identified we made
every effort to communicate this
transparently, quickly and clearly and
have changed the process for lodging
information to the Companies Office
to prevent a recurrence.
PARTNERSHIPS
Mercury’s partnership approach has
also created opportunities. This year we
announced a plan to trial New Zealand’s
first large scale, national grid connected,
battery electricity trading initiative.
Tesla successfully tendered for provision
of the battery, and our teams have been
working with the Electricity Authority,
Transpower and others to enable trading
back to the grid from the battery-stored
power. We look forward to sharing what
we learn over the next year following
commissioning in August 2018.
We have the largest partnerships with
commercial Maori entities of any NZX
company. The investment in geothermal
from those entities, ourselves and
Contact Energy of more than $3 billion
between 1996 and 2014 was responsible
for the displacement of large quantities
of base load thermal generation from
the New Zealand electricity system.
This drove the largest reduction in
New Zealand’s total greenhouse gas
emissions over that decade and made
geothermal, the only commercial
weather independent renewable fuel
system, the number two source of
electricity in New Zealand, behind hydro.
$112M
STAY-IN-BUSINESS CAPITAL
EXPENDITURE INCLUDED
DELIVERY OF KEY
TECHNOLOGY PROJECTS AND
PLANT REFURBISHMENT
WE HAVE THE LARGEST
PARTNERSHIPS WITH
COMMERCIAL MAORI
ENTITIES OF ANY NZX
COMPANY.
FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
PILLARSCUSTOMER
PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS
16 // 17

THIS YEAR WE ANNOUNCED A PLAN
TO TRIAL NEW ZEALAND’S FIRST
LARGE SCALE, NATIONAL GRID
CONNECTED, BATTERY ELECTRICITY
TRADING INITIATIVE.
In combination with New Zealand’s first
and largest carbon off-take tender in
2010 of circa $100 million over 15 years
covering some 10,000 hectares linked to
specific new growth forests, Mercury is
carbon positive (our carbon offsets
exceed our carbon creation). Our
approach is to address those things that
make a difference with substantive
action, and we will continue to challenge
“window dressing” by those who should
be doing more.
We acknowledge and recently celebrated
the recent 20-year anniversary of the
Rotokawa geothermal facility which was
opened on 27 June 1998 by the late
Kurupai Whata of Ngati Tahu, a mana
whenua of the area.
OUR PROGRAMME
OF WORK
Last year’s annual report (p18)
highlighted the key initiatives across our
brand, digital assets, generation assets
and people we expected to complete in
FY2018. All have been achieved.
For FY2019 we highlight the following
key activities:
• Continuing to promote New Zealand’s
competitive advantage in low-cost
renewable energy to key Government
and regulatory decision makers,
• Actively investing in material growth
strategies,
• Embedding our High Performance
Team framework,
• Ongoing development of our brand,
customer loyalty and digital offerings,
• Ongoing major hydro refurbishment
at Aratiatia, Whakamaru and Karapiro,
• Research and development
projects including the grid scale
battery, solar product development,
silica extraction from geothermal
fluids and e-mobility extensions,
• Further leverage of our metering
data services platforms,
• Resolving long-standing distribution
pricing signals for retailers that are
compatible with new technology,
• Enhancing the long-term water
quality of the Waikato Catchment.
OUTLOOK
We have started FY2019 strongly. With
quality execution against our clear
mission and strategy from an engaged
Mercury team we expect to grow value
for our consumers, communities, people,
country and owners this year.
Over the past four years we have taken
very deliberate steps to simplify and
reinvest in the business. The core
business is performing strongly, though
delivering only incremental growth in a
very challenging retail environment. We
expect to take more meaningful steps
towards growth in the next couple of
years. However, as we have demonstrated
in the last few years, a commercially
disciplined approach is essential.
We continue to listen carefully to all of
our stakeholders, in particular the new
Government, with its focus on value,
fairness and choice for customers;
renewable energy; and the regional
economy. We have been delivering in
these areas and will ensure that they
continue to be emphasised.
On behalf of everyone at Mercury I thank
you again for being part of our story.
There is much more to be done to
achieve our mission of Energy Freedom,
and progress is very encouraging.
Together we are Mercury.
Energy made wonderful.
Nga mihi nui ki a koutou katoa.
FRASER WHINERAY, CHIEF EXECUTIVE

During FY2018 Mercury reviewed its approach to integrating sustainability. The starting
point was a discussion around the need for a specific statement: something that
conveyed simply and concisely our view of sustainability as an essential element of the
way we operate, Our Direction.
The resulting statement (above) speaks of Energy Freedom, our mission, and also our
vision of sustainability, not just for Mercury, but for New Zealand. Internally it is
supported by five pillars: customer, people, commercial, partnerships and kaitiakitanga;
and associated focus areas. Our statement signals clearly that we fully intend to build
on our proud history for the next century and beyond.
SUSTAINABILITY AT MERCURY IS ABOUT
ENERGY FREEDOM, BUILT ON OUR
FIVE PILLARS OF CUSTOMER, PEOPLE,
COMMERCIAL, PARTNERSHIPS AND
KAITIAKITANGA. OUR HISTORY GOES
BACK ALMOST ONE HUNDRED YEARS
AND WE INTEND TO BE HERE FOR AT
LEAST A HUNDRED MORE.”
OUR
SUSTAINABILITY
STATEMENT.
18 // 19
FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
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UPDATES
OUR
SUSTAINABILITY
STATEMENT
PILLARSCUSTOMER
PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS

FOCUS AREAS:
Brand
Loyalty
Experience
FOCUS AREAS:

Operational
Excellence
Generation Development
Sustainable Growth
FOCUS AREAS:

Natural Resources
Climate Change
Assets
FOCUS AREAS:

High Performance
Teams
Safety and
Wellbeing
Capability and
Development
FOCUS AREAS:

Industry/Research
Iwi
Government
INTEGRATED THINKING
Mercury understands that integrating sustainability means
taking an ultra long-term view which guides our thinking, our
business planning and the way we operate on a day to day basis.
In FY2018 we took a step back, conducting a detailed review of
past disclosures, included revisiting our stakeholders, their
expectations of us and the things that they consider important.
The result is a simplification of the language used to describe
our five pillars and the refinement of associated focus areas.
The focus areas are a consolidation and rationalisation of the
twenty-two elements of a materiality matrix included in our
FY2017 annual report.
The executive then challenged themselves to consider the
future and created statements, for each of the focus areas to
succinctly describe what success will look like in 2028 if we
have met stakeholder expectations. Theses ten-year forward
statements continue to be worked on and through FY2019 will
be shared and discussed more widely with our people and our
stakeholders.
PILLAR:
COMMERCIAL
PILLAR:
CUSTOMER
Inspire, reward,
make it easy
PILLAR:
PEOPLE
PILLAR:
PARTNERSHIPS
PILLAR:
KAITIAKITANGA

FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
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COMMERCIAL
PARTNERSHIPS
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BUSINESS
FUNDAMENTALS
INTEGRATED
REPORTING <IR>
Mercury continues to integrate
sustainable business practice, refining
our approach and the language used, to
enable transparent and easily understood
disclosures. We think it important to
clearly convey our views and intentions.
To ensure our future disclosures meet
the expectations of shareholders and
investors we mapped our pillars and
focus areas against the International
Integrated Reporting Framework <IR>.
The <IR> requires organisations to reflect
on six capitals that are essential for value
creation. The capitals: natural, social and
relational, manufactured, intellectual,
human and financial, also need to be
considered from the perspective of
minimising future risks to the business
or “value destruction”.
The process resulted in Mercury being
able to map a close correlation between
our focus areas and the six capitals. It
also confirms we can continue to report
and communicate our performance in a
language that is already very familiar to
our internal and external stakeholders.
As a first step the scorecard is being
used to review all FY2019 to FY2023
business unit plans and create a
rolled-up group plan.
NEXT STEPS
The first step was to take our pillars and
focus areas and create a sustainability
scorecard. The scorecard: informs and
guides the internal business planning
process; provides a consistent approach
to shorter term, one and three-year
planning cycles and enables Mercury to
continue to embrace, and further
integrate, sustainability.
We have already started to engage our
people on integrating sustainability with
specific workshops and presentations to
enterprise and business leaders,
supported by internal communications.
They are therefore directly involved in
looking at existing and potentially new key
performance indicators (KPIs), measures
of success and targets that Mercury can
use to measure its performance.
This annual report is another example of
a channel to communicate our
intentions and inform and educate our
stakeholders, including our owners, and
we welcome any feedback you may have.
We have included the symbols that
represent our five pillars throughout this
report to reflect the integrated thinking
now underway.
We will continue to develop our use of
the integrated reporting framework and
other frameworks such as GRI and the
United Nations Sustainable Development
Goals (SDGs) to ensure our disclosures
reflect global standards.
Taking this comprehensive approach to
integrating sustainability reduces
business risks, identifies potential
opportunities and guides engagement
with all our stakeholders. We will
continue to review and report openly and
honestly on our performance on a
regular basis to ensure the utmost
transparency and we look forward to
sharing our progress with you.
<IR> capitals weighted to
Mercury’s Focus Areas
SOCIAL RELATIONAL 27%
INTELLECTUAL 4%
FINANCIAL 28%
HUMAN 11%
MANUFACTURED 15%
NATURAL 15%
20 // 21

24 HOURS OF
WONDERFUL
ENERGY.
Friday 6 June, 0005 hours. It might be the small hours of
the morning, but one home in Auckland is glowing with light.
A washing machine starts its first cycle of woolly jumpers,
bedding and tea towels.
Friday 6 June, 0010 hours. A stove switches on, and a pot
of pea and ham soup is underway.
Friday 6 June, 0025 hours. On goes a heater. It stays on
for another 19 hours. The oven starts, ready for three fruit cakes
and a loaf, all waiting to be baked.
And so begins Warren Johns’ day. He
had his Free Power Day booked for 6
June and was up at 12 o’clock that
morning to make the most of it.
Seven loads of washing completed.
Four cakes baked to share with friends.
Two hot baths while the rain pattered
outside. One batch of slow cooked
lamb shanks simmering in the oven.
All of this inside a warm toasty house
with National Radio playing in the
background.
Each of these activities by themselves
might not seem like much but together
they become something quite special
– showing how electricity really delivers
a whole host of wonderful options.
Mr Johns, who lives in his family home,
has continued the relationship his parents
had with us as the original owners of his
home. All up, they’ve been loyal Mercury
customers for nearly 20 years – right
back to day one of our company’s history.
He is also one of our investors.
Our relationship with him has grown over
time thanks to a series of inspiring,
customer-focused initiatives. Our newest
advocate for electric vehicles – a 1957
Ford Fairlane converted to plug-in electric
and christened Evie – is another great
example of “energy made wonderful”.
A self-confessed vintage and classic car
enthusiast, Mr Johns saw Evie at the
‘Galaxy of Cars’ show earlier this year. It
reminded him of his father’s 1937 Ford
V8 Coupe. So he talked to our
Mercury team, who were on site,
about Evie's vitals:
| 2.2 m wide | 5.5m long | 2.2 tonnes |
218 battery cells | 50 kWh capacity |
2 hour charging |
He has had a number of conversations
with us during his time with Mercury,
but never about a car.
It is a powerful illustration of how our
customer promise – to inspire, reward
and make things easy – has value across
the business. Through partnerships and
connecting it helps us learn about
what customers expect and value,
and that guides innovation. It also
allows us to show people the real value
of New Zealand’s renewable energy.
CUSTOMER
22 // 23
FINANCIAL
COMMENTARY
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STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
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PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS

VISIT OUR FACEBOOK PAGE FOR MORE
STORIES OF WHAT OUR CUSTOMERS
DID WITH THEIR FREE POWER DAYS.
Please visit facebook.com/mercurynz

90K
FREE POWER
DAYS ENJOYED
42K
FACEBOOK
ENGAGEMENTS
420K
CONVERSATIONS
WITH OUR
CUSTOMERS
24 // 25
FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
PILLARSCUSTOMER
PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS

EVIE’S STORY
Evie is our beautiful 1957 Ford Fairlane,
converted from a gas guzzler to plug-in
electric.
She is the poster-child for electric
vehicles, and really brings Mercury’s
mission, Energy Freedom, to life. We
think she is the perfect symbol of our
escape from the cost (environmental and
financial) and reliance on fossil fuels.
We have long promoted the rational
benefits of electric vehicles to New
Zealanders. At an equivalent of 30c per
litre compared with petrol and delivering
2,000kgs in annual reductions in carbon
emissions, they’ve always been an easy
decision for the head.
WARREN’S STORY
Mr Johns’ story came to our attention
after he wrote to Fraser, Mercury’s Chief
Executive, to outline how he used his
Free Power Day, his appreciation of Evie
and the wonderful ways he has
interacted with our people.
Upon receiving the letter, Fraser called
Mr Johns to thank him for sharing the
story of his wonderful day. As part of
Mr Johns’ letter he also told us how
much he would love to go for a drive in
Evie one day. It was an opportunity we
couldn’t resist, so on 7 August we took
him for a ride around his neighbourhood.
See what happened when we picked him
up at: http://bit.ly/evieandwarren
Converting this classic was a way for us
to start capturing people’s hearts as well.
Evie helps people see how wonderful
electric vehicles can be.
We plan to use Evie to continue to
showcase the outstanding opportunity
New Zealand has to achieve energy
freedom through renewable electricity
powering our transport. If we raise our
sights beyond renewable electricity
targets to our overall renewable energy
use, particularly across the transport and
industrial sectors, our country could take
major steps towards reducing our overall
greenhouse gas emissions and
dramatically reduce the cost that
imported fuel has on households and
the New Zealand economy.
FIND OUT MORE ABOUT
EVIE’S STORY.
Please visit mercury.co.nz/evie

NEW THINKING AND
HIGH PERFORMANCE
TEAMS.
Three graduates (from AUT and MIT) joined Mercury
during the year as part of a programme to attract new
skills and thinking to our business while introducing our
sector to potential future leaders. The graduates spent
their first few months engaging directly with customers
in Mercury’s award-winning Contact Centre.
The graduates brought up-to-the-minute IT skills, fresh
thinking and energy. They gained and then have been
able to share with Mercury a fresh perspective and their
valuable understanding of our customers.
Our Contact Centre teams also benefitted from having
the IT graduates onboard. They contributed to process
improvements and a new system for working with
customers.
The Digital Experience (DX) team are early adopters of
Mercury’s High Performance Team framework and have
utilised this in integrating the graduates into their team.
Siobhan Flynn, a Mercury Information Communication
and Technology (ICT) graduate, and Maurice van
Leeuwen, Senior Business Analyst, ICT - Digital Delivery,
tell their stories.
Mercury’s Attitude (our values):
COMMIT AND OWN IT
SHARE AND CONNECT
CURIOUS AND ORIGINAL
PEOPLE
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SIOBHAN FLYNN
ICT GRADUATE
I started as a graduate in the ICT team last August.
I’m definitely a ‘people person’. When I was at school and studying I worked for eight years
part time in retail. I loved the customers, and now I work for Mercury it’s still all about the
connections with the people I work with, as well as knowing that the work makes a positive
difference for our customers.
One of the things that attracted me to Mercury was our
commitment to renewable energy. It’s great that Mercury
cares about what’s happening in the world, and it’s
something that people of my generation particularly relate
to. It’s rewarding to see from the inside the different ways
that Mercury tries to connect with its customers and to
think about power in different ways such as through Evie,
the classic car converted to run on electricity.
Mercury seems ready to change as the world changes.
I started off with three months in Mercury’s customer
Contact Centre. This is the first time Mercury started ICT
graduates there, and it’s an amazing way of getting to
understand the business, and actually meeting (on the
phones) a lot of Mercury customers.
New Contact Centre team members have a full four-week
induction, with lots of support for learning and there’s a
really uplifting spirit evident. In all the teams I’ve been in
there’s a feeling of being able to express yourself and be
who you really are at work, and I really like the
encouragement of individuality.
Right from the beginning in the Contact Centre, we were
asked to keep a list of anything that raised a question for
us in terms of process, systems, or how they were working.
At the end of our time there we had a meeting with the
manager and the team leads and ran through the list. We
really felt that they listened.
Starting off in the Contact Centre now helps my ICT roles.
I’m able to connect what I learned about the business and
our customers with how our IT systems and processes
impact our customers. An example is knowing the
experience our customers have when they join us. It’s been
great to have that fresh knowledge that I can share with
the rest of the ICT team.
My managers also really encourage Mercury’s 'Curious and
Original' Attitude. If there’s something I don’t understand,
or something I think isn’t quite right, I ask. My managers
have told me: “you’re here to shake up the status quo and
challenge us”. I’ve felt very empowered that I can speak up.
79%
OF EMPLOYEES AGREE THAT THIS
ORGANISATION ENCOURAGES
IDEAS AND SUGGESTIONS ON HOW
TO IMPROVE THE WAY THINGS ARE
DONE, COMPARED TO 2017 NZ ALL
ORGS BENCHMARK 71%
84%
OF EMPLOYEES AGREE THAT
COOPERATION BETWEEN
TEAMS IS ENCOURAGED IN
THIS ORGANISATION,
COMPARED TO 2017 NZ ALL
ORGS BENCHMARK OF 71%
5,100
OUR ATTITUDE E-CARDS
SENT BY EMPLOYEES TO
THEIR PEERS

527
MERCURY PEOPLE
COMPLETED AT LEAST
ONE OF OUR 69
DEVELOPMENT TRAINING
EVENTS IN FY2018
87%
OF LEADERS COMPLETED
TRAINING ON BUILDING HIGH
PERFORMANCE TEAMS
A high performance
team is a diverse group
of individuals who all have
opinions and different
thinking styles, and who
are supported to give their
best to achieve great results.
We use the collective
brain power of the team
to make things easy for
our customers – faster.
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More and more of our customers are choosing to engage with Mercury through our digital
channels. I am a member of the Digital Experience (DX) team. We work mainly on the
Mercury website and the online customer portal My Account, to make these experiences easier
and more streamlined for our customers. That’s how we connect to Mercury’s mission of
Energy Freedom. This makes business sense too, as it differentiates us from our competitors.
79%
OF EMPLOYEES AGREE THAT
THE FEEDBACK AND
COACHING THEY GET HELPS
THEM TO IMPROVE THEIR
PERFORMANCE, COMPARED
TO 2017 NZ ALL ORGS
BENCHMARK OF 67%
89%
OF EMPLOYEES CONFIRM
THAT MERCURY CARES
ABOUT THE WELLBEING OF
ITS PEOPLE, COMPARED
WITH 2017 NZ ALL ORGS
BENCHMARK OF 79%
JOIN THE TEAM AT MERCURY.
SEE OUR CAREERS PAGES.
Please visit mercury.co.nz/careers
There are seven of us in the team, representing different areas
of ICT. But it’s actually much bigger than that. The work we do
is informed by our colleagues from Marketing, Customer
Insights and the Contact Centre. They get feedback and ideas
from our customers and that filters through to us, to make the
technical changes.
I really enjoy working with the different Mercury teams,
and that the work we do has a positive impact on our
customers. It makes it easier for them to engage with Mercury.
The other thing I enjoy is the different way of working in the
DX team. In the digital world we know we need to move very
fast. With advances in technology, a year-long project might not
end up being the best solution for our customers. Our new way
of working delivers small bites of new features and continually
assesses whether we’re doing the best thing for our customers.
Every two weeks we make a plan for what we’re going to do,
with the goal to build, test and roll out something useful.
For this approach to work, the DX team members have to
have both the ability and the willingness to communicate.
This means actively contributing to discussions and also
listening respectfully to other points of view.
We also need to be able to deal with uncertainty.
Sometimes you’ve got to give something a go without
being sure of success. The two week pace of what we
deliver forces us to do that because you haven’t always
got time to explore things into the real nitty gritty detail.
The other thing is resilience. Sometimes things don’t work out.
But you learn from that and then you go forward.
I enjoy working with graduates like Siobhan. They are smart and
enthusiastic and they pick things up quickly. They’re keen to give
things a go, and they own the job and carry it through to the end.
Sometimes they’ll see things from a different perspective.
Because they’ve had experience in a different part of the
business such as the Mercury Contact Centre, they bring direct
customer focus to our team through that experience and their
conversations with customers.
The graduates ask us questions that make us question
ourselves and the way we work. It’s a real opportunity for us as a
team to talk about what we do and to learn. Sometimes you get
into a routine and it’s only when someone new comes in that
you really look at how you’re doing something. You’re delivering
stuff together, and also learning as well.
MAURICE VAN LEEUWEN
SENIOR BUSINESS ANALYST
ICT – DIGITAL DELIVERY

COMMERCIAL
KEEPING THE
POWER COMING.
A lot happens between when a raindrop falls on New Zealand’s
Central Plateau and when, 425 kilometres later after flowing
down the Waikato River, it enters the Tasman Sea. Along that
journey the water contributes to diverse ecosystems, it is enjoyed
for recreation, and some is diverted for drinking water not only for
people in towns along the way, and the city of Hamilton that it
flows through, but for New Zealand’s largest city, Auckland.
From Lake Taupo the water also drops
just over 350m to sea level: slightly more
than the height of Auckland’s Sky Tower.
That’s where Mercury comes in:
harnessing the energy as gravity exerts
its force on that water.
Mercury’s hydro generation on the
Waikato River can be traced back to
the commissioning of the Arapuni Dam
(1929), with the ninth and final station
commissioned in 1970 (Maraetai II).
The Waikato Hydro system feeds
electricity to the national grid to meet
around 10% of the New Zealand’s
electricity needs. The hydro stations,
along with our geothermal stations, are
also the commercial backbone of our
business. Over the past five financial
years, hydro has contributed 58% of
our total generation. With a view to
our overall ultra-long term sustainability
we understand our duty of care to this
critical infrastructure.
This year our multi-year, multi-million
dollar reinvestment in the Waikato Hydro
scheme passed several milestones,
including completing the successful
upgrade of the first of three units at the
Aratiatia hydro power station.
The 78MW Aratiatia station,
13 kilometres downstream from Taupo
township, was commissioned in 1964.
The Aratiatia Rapids above the station,
which have functioned as the dam’s
spillway since commissioning, are rated
as one of Taupo's top tourist sights,
showcasing a fraction of the power
harnessed by the station's three
generating units. From the beginning,
extra work and innovation has been
needed to optimise the station’s output.
Paul Betschart, Lead Engineer to the
project, has been with Mercury for 10
years, and joined the Aratiatia upgrade
project in 2015.
“We’re at the point now where a lot of the
original equipment has given all that we
could have expected in terms of service
life,” says Paul. “Replacement of parts
was identified as the best way forward for
reliability, risk avoidance and efficiency.”
Improving the station’s long-term
performance and sustainability
motivated the way the project was
implemented. The overhaul focused on
the huge machinery that harnesses the
energy from the water, turning it into
I selected my degree at
university knowing that I
was interested in science
and engineering. I joined
Mercury as a graduate,
and now I’m a Senior
Engineer on our hydro
power stations. I’ve been
here 10 years and I can’t
think of anything else that
I’d rather be doing.
PAUL BETSCHART
LEAD ENGINEER
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G2 HAS 31.5MW
GENERATOR CAPABILITY
and discharges over
100 tonnes of water per
second at full load
150TONNES
OF ROTATING EQUIPMENT
IN EACH OF THE THREE
GENERATING UNITS
OVER
The Aratiatia upgrade project is supported
by Mercury teams from our Taupo,
Hamilton, Rotorua and Auckland offices.
An extra 40 engineers and other specialists
will call the Taupo District home while
they partner with us on this project, and
around 20 businesses in and around the
Taupo area supply painting, transport,
welding, engineering, machining
and catering services.
There have been no
notifiable injuries.
FULL PROJECT
COMPLETION:
2020
TOTAL EXPENDITURE:
$49M
1008
TECHNICAL DOCUMENTS
SUBMITTED BY ANDRITZ
Including 444 drawings, and
5243 email communications
between Andritz and the
Mercury team

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THE MERCURY PROJECT TEAM
OWN THE LONGER-TERM VIEW.
WE UNDERSTAND WHAT WE
WANT AS A WHOLE PLANT,
OVER A 50-YEAR LIFE.
members worked with Andritz in Austria
to discuss the preliminary design.
Manufacturing took place in foundries
and factories across the globe: Austria,
Germany, China, Czech Republic,
Hungary, Italy and India. And once
manufacture started the quality
assurance process started too.
“This is mechanically and electrically
stressed equipment. Safety and
performance depends on the design, the
materials and the execution. We had
reviewed the design, and then we
reviewed the materials and execution,”
says Paul.
Raw performance in terms of
megawatt (MW) output is guaranteed
in the contract. A lot of the work
throughout the design, manufacture
and installation of the machinery goes
beyond output, however, Paul says.
It’s about long-term performance,
making sure this plant will run as long
as possible, be easy to maintain, be safe
and be as reliable as possible.
Paul explains: “Our project partners
are on the same page and focused
on delivering a quality product. But we,
as the Mercury project team, own the
longer-term view. We understand what
we want as a whole plant, over a 50-year
life. Sometimes our experience and our
preferences lead to a different approach.
But it was all about teams working
together to get the best outcome.”
Installation of the first unit, G2, began
in October 2017, with return to service
completed in June 2018. Turning the
unit back on was itself a month-long
project. “Commissioning is pretty full on.
It’s both very well planned and managed,
and at the same time there’s quite a lot
of initiative required when you deal with
issues in real time.”
The three-year installation project means
there’s not a lot of time to pause and
contemplate the progress so far. Each of
the three units to be overhauled takes
around six months. Balancing complex
commercial, consumer and country
imperatives mean these stages are
timed to avoid having machines out of
action during New Zealand’s winter
energy demand peak, while working with
scheduled maintenance of other stations
on the river. Parts for Aratiatia’s next unit
to be overhauled arrived in July for
assembly. The G1 generator with its new
optimised low-flow turbine is scheduled
to return to service May 2019, and the
final unit, G3, will start its overhaul in
spring that year.
“Commissioning G2 was a huge
milestone,” says Paul. “Most of us were
looking forward to some downtime to
recharge. But everyone’s keen to take
what we learned and apply it to the
next two units.”
The outcome is a well-planned, safely
delivered project that returns the
generating units to operational service
with optimised capability incorporating
appropriate technology, resulting in long-
term reliability and sustainable operations
at Aratiatia for many years to come.
mechanical power and then electrical
power. After over 50 years of innovation,
tweaks and fixes, the project’s aim is to
safely restore and reconfigure the station
to deliver maximum value from current
and expected future operating
conditions. This has involved some very
creative approaches.
Paul explains: “The generators were
getting more prone to faults. That can
cost us generation time. The governors
that control the speed and output of the
turbine (like setting cruise control on a
modern car) could be updated with new
technology. And the turbines themselves,
the spinning water wheels and all the
equipment around them, were also in
need of attention.”
Long term, commercial thinking led to
the decision to replace one of the
station’s three turbines with a unit
specially configured to run at a lower
rate of water flow than that sustainable
with the old turbine design. This means
water use can be optimised when low
station flows are required, while still
retaining over 90% of the maximum
power capability of the old turbines and
also delivering a significant increase in
energy conversion efficiency. It was
decided to defer investment on replacing
the other two turbines until 2036, with
this long date giving Mercury additional
flexibility in its long-term planning.
Effective modernisation and
enhancement projects take time.
The contract was awarded to partner
Andritz in October 2015, two years of
assessment, planning, design, testing
and manufacture before the installation
of components. Paul and other team
GO SOLAR.
GET A QUOTE ONLINE OR
PHONE 0800 676 527.
Please visit mercury.co.nz/solar

For many of these individuals, our pre-pay brand GLOBUG is
sought as a tool to manage electricity – it breaks down
the barriers to reconnection, helps people avoid the spiral of
debt and can be paid for in small, manageable amounts.
While initially a sceptic of GLOBUG (and the sector in
general), continuous engagement with Brian has allowed our
relationship to evolve into one of collaboration. Together, we find
better solutions for our mutual customers, with dignity always
at the heart.
Brian is fundamental to our understanding of how we can best
support these individuals. In short, he is our eyes and ears, and
a voice for those who sometimes struggle to be heard.
Most recently Brian drew our attention to an increase in people
seeking support from the Fund, coinciding with the onslaught of
some bracingly cold winter weather. These insights allowed us to
work with the Mayor’s Welfare Fund on a solution for GLOBUG
customers. We ensured no disconnections occurred while working
with the Mayor’s fund at this critical time.
It is not the first time we’ve done this with Brian’s intel, and we do
not expect it to be the last.
Well-informed decisions like these enable us to maintain the
integrity of one of our core foundations – the wellbeing of our
customers. It is a value entirely aligned with Brian’s own
imperatives.
It is also a commercially astute decision, helping our customers
see the value of continuing to choose GLOBUG as their electricity
provider.
“I have worked with vulnerable people for years. Without GLOBUG
many of the at-risk households I support would be without
electricity and further disadvantaged. Electricity is a basic human
need – it is absolutely vital to our health, wellbeing and income.”
CONNECTING
WITH
COMMUNITIES.
Brian Pegler works for the Christchurch City Council’s Mayor’s Welfare Fund, which plays an integral
role in supporting vulnerable people in Christchurch.
PARTNERSHIPS
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ELECTRICITY IS A BASIC
HUMAN NEED – IT IS
ABSOLUTELY VITAL TO
OUR HEALTH, WELLBEING
AND INCOME.
DONATE TO STARSHIP
Please visit
starship.org.nz/mercury
BRIAN PEGLER
CHRISTCHURCH CITY COUNCIL
MAYOR’S WELFARE FUND

Helen joined Mercury twenty years ago as an analyst,
helping the business transition onto a new data
platform. However, the trajectory of her career changed
dramatically when she realised her passion was in
supporting individuals and families who needed help.
Now, Helen leads Mercury’s community relations team and is
tasked with helping improve the wellbeing of our most vulnerable
customers by partnering with other groups like Christchurch’s
Mayor’s Welfare Fund.
Her role is unique, in that it covers customer support at an
individual level, grassroots community involvement, and also
engagement with key government agencies and stakeholders.
Helen believes having flexibility to navigate these multiple
touchpoints with fluidity sets Mercury apart in its community
engagement practices.
With a nationwide focus, Helen sees first-hand how diverse
communities across the country are. Each has its own unique set
of challenges and opportunities. A common thread is the
unconditional love, care and support for the families in these
close-knit groups. These insights highlight that a one-size-fits-all
approach doesn’t serve these families and individuals as well as
targeted and focused support.
Essential to achieving better outcomes is a fulsome view of the
different pressure points a family may be facing, along with the
acceptance that electricity accessibility is often one of the many
balls these families are struggling to keep in the air.
“Partnerships are a path we follow. Along that path there are
gates we go through and each gate is another organisation with
information to help us get to our destination – helping a family
get back on track. These voices are important to us finding
collective solutions that ease pressure in a more holistic and
sustainable way.”
HELEN TUA
MERCURY
COMMUNITY RELATIONS MANAGER
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In a world where environmental, social and
economic systems are inextricably linked, no
organisation can operate successfully in isolation.
This interconnectivity means the actions we take
create far-reaching ripples, and seemingly small
decisions are easily magnified. That is why
‘partnerships’ is one of our five pillars.
Mercury’s approach to partnerships is extensively
applied across our business. Whether it is
operating our hydro and geothermal assets,
serving our customers or looking after our people,
working with others contributes to better, more
sustainable outcomes.
$100K
DONATED THROUGH
OUR EMPLOYEE
COMMUNITY FUND
$900K
DONATED TO STARSHIP
94%
OF OUR PEOPLE SAY
WE MAKE A POSITIVE
CONTRIBUTION TO
OUR COMMUNITIES
FIND OUT MORE ABOUT HOW
WE WORK IN PARTNERSHIP
WITH IWI, STARSHIP, WAIKATO RIVER
TRAILS AND MANY OTHERS.
Please visit mercury.co.nz/partnerships

Plump kererū (wood pigeon),
rare kārearea (New Zealand
falcon), kōtare (kingfisher),
ruru (morepork) and
pīwakawaka (fantail) call
through the thick regenerating
scrubby bush, secondary
beech and broadleaf forest,
manuka and remnant stands
of beech and northern rata
trees of Pigeon Bush Reserve.
Remote and isolated, the 1,157-hectare
reserve lies between the Remutaka and
Tararua Conservation Parks west of
Featherston in the South Wairarapa.
This steep, rugged land had been almost
completely cleared and intensively
farmed since the 1860s, but is returning
to dense forest after being bought,
protected and managed by the Native
Forest Restoration Trust since 1995.
The Trust is a leading organisation
in the protection and restoration of
New Zealand’s native forest. It is
committed to promoting the
regeneration of forests, protecting
native species and restoring their
habitats, and to improving the quality
of New Zealand’s waterways. Through a
ground-breaking commercial agreement
in 2012, Mercury has supported the
Trust’s work in this and some of the
other 7,000 hectares of native forests
and wetlands throughout New Zealand
it has purchased and protected.
The carbon credits that Mercury
purchases from the Trust come from the
regenerating native forest in Pigeon
Bush Reserve. The trees in the Reserve
are regularly measured and the extra
growth is calculated and converted into
carbon units, based on the age, size,
and type of tree.
Mercury has ten agreements that
support different New Zealand forestry
projects to offset carbon produced by
Mercury. The contract with the Native
Forest Restoration Trust was not only
commercially attractive, it stood out for its
strong alignment to Mercury’s ultra-long-
term view of kaitiakitanga (guardianship)
through the Trust’s objective of restoring
native forests so that New Zealanders
can enjoy them forever.
The Trust was born in 1980 out of direct
action taken by people protesting the
felling of giant totara in Pureora Forest.
Since that time, the Trust has continued
to protect New Zealand forests and has
rallied, purchased and protected well
over 7,000 hectares for the ongoing
benefit of all New Zealanders.
Sandy Crichton, Trust Manager, is clear
about the wider impact of the Trust.
“Protecting and restoring nature is an
important part of our climate change
response here in New Zealand.”
Through partnering with the Trust,
Mercury is supporting the Trust’s
stewardship of regenerating New
Zealand forest, and contributing to a
positive impact on climate change.
Sandy explains “From small beginnings,
founded on genuine passion to protect
and restore New Zealand’s native forest,
the Trust has gone on to become one of
the leading organisations involved in
native forest restoration. The Trust is still
relatively small, but we put the rallying
call out and huge numbers of passionate
people who really care a lot come
together. Our recent fundraising in
Northland and Taranaki is testament to
this, along with everyone who gives their
time on a volunteer basis.”
The Trust uses the extra income from
its contract with Mercury for reserve
management, including pest predator
control, weed control, track cutting,
signage and planting.
“Our relationship with Mercury is one of
our oldest and most important business
relationships,” says Sandy. “This was our
first contracted relationship around carbon
so it really paved the way in terms of other
relationships that we’ve since put in place.”
It was forward thinking at the time, it
is important now, and its value will be
experienced by all New Zealanders into
the future.
“The Trust recognises the efforts of
companies who have measured their
carbon footprint and then taken action
to try and reduce emissions, as well as
supporting native forest restoration to
reduce the impact of unavoidable
emissions,” says Sandy.
“The Trust’s work is only possible through
our incredible supporters and more
recently through ongoing carbon income
from organisations such as Mercury.”
GROWING SOLUTIONS
TO CLIMATE CHANGE
FIND OUT MORE ABOUT
THE NATIVE FOREST
RESTORATION TRUST
Please visit nfrt.org.nz
KAITIAKITANGA
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A GLOBAL ISSUE
The impacts of climate
change are a significant
global challenge that is
arguably starting to play
out locally in many parts
of New Zealand.
The Kyoto Protocol is an
international treaty aimed at
reducing greenhouse gas
emissions, whereby countries
can reduce emissions and/or
purchase carbon credits to cover
any excess emissions. In 2020
New Zealand’s obligations under
Kyoto are replaced for the
following decade by Paris
Accord targets.
The New Zealand Emissions
Trading Scheme (ETS)
was launched in 2008,
and Mercury and other
electricity generators were
entered into the Scheme in
2010. The ETS puts a price
on emissions to provide an
incentive to reduce
emissions.
Mercury has contracts
with foresters that
enable us to buy
carbon units at a given
price in order to offset
our carbon liability
under the ETS.
FIND OUT MORE ABOUT OUR COMMITMENT
TO RENEWABLE GENERATION.
Please visit mercury.co.nz/renewables
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BUSINESS
FUNDAMENTALS

MANAGING CLIMATE CHANGE RISKS
Mercury is aware climate change has the potential to create physical risks, as well as regulatory and financial,
for our operations well into the future. These could include more intense rainfall events in the Waikato catchment
and increasing average temperatures where we generate electricity.
We have undertaken preliminary modelling of various future climate change scenarios to 2050 and beyond.
Initial findings indicate increasing rainfall will provide the opportunity for increased generation. However, if the
intensity of rainfall events increases then more water may need to be spilled rather than used for generation.
Geothermal generation could also be reduced as increasing average temperatures will reduce the efficiency of
our cooling towers and the generation process. We will continue to monitor and manage climate change risks
and invest in a wide range of the most appropriate solutions.
CARBON IN OUR BUSINESS
Mercury carefully measures and manages its greenhouse gas emissions and has maintained a robust forestry
investment programme for the past eight years. An outcome of the programme is that Mercury has become
‘carbon positive’ in the past three years, where the forestry we invest in absorbs more carbon than Mercury
contributes to the environment.
Moving away from
thermal generation has
seen our total emissions
from generation
decrease by 47% over
the past three years.
The emissions intensity
of the electricity we put
into the NZ grid has
decreased by 55% over
the same period.
• While geothermal generation is a renewable energy
source, it is not emissions free. During the generation
process, greenhouse gas is released from the
geothermal fluid extracted from our geothermal
reservoirs. We closely monitor and report on the
amount of greenhouse gas released from our
geothermal power stations as required by the
Emissions Trading Scheme.
• Mercury takes responsibility for the carbon produced
by all the energy we provide, including the gas
consumed by our dual-fuel customers. We calculate
the carbon emissions associated with this fuel each
year and offset that along with what we directly emit.
• Mercury is actively reducing carbon emissions
from our business. We mothballed our thermal
(gas-fired) power station in 2015. This reduced our
carbon emissions, and associated financial liabilities,
by 47% over the past three years.
• We believe that electric transport offers the best
solution for cutting national greenhouse gas
emissions, as well as curbing transport related air
and noise pollution. We have already replaced every
possible vehicle in our fleet (91 out of 129) with
Electric Vehicles (EVs) and plug-in hybrid EVs (PHEVs).
Total reported carbon emissions include proportionate emissions
from our Tuaropaki Trust and Nga Awa Purua partnerships.
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
5,800
6,000
6,200
6,400
6,600
6,800
7,000
7, 200
7,400
7,600
7,800
GWhEmissions
CARBON EMISSIONS (TONNES C0
2
e)
FY15
FY16FY17FY18
GENERATION (GWh)

FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
PILLARSCUSTOMER
PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS
$734M
ENERGY MARGIN
(UP $36 MILLION
FROM FY2017)
Mercury’s financial performance for the
12 months to 30 June 2018 set another
record, with EBITDAF of $561 million,
an increase of $38 million on the
previous financial year. This record result
was underpinned by the highest North
Island hydro inflows and total generation
in the company’s history, the disciplined
management of costs and strong
execution of work programmes across
the business.
In May FY2018, Mercury completed a
$50 million share buyback (15.6 million
shares) at an average price of $3.21 per
share, bringing total shares held as
treasury stock to 39.1 million (2.7 %).
Mercury also completed the purchase
of a 19.99% stake in NZX and ASX listed
generator, Tilt Renewables Limited, for
$144 million or $2.30 per share. Post
year end, Mercury announced with
Infratil a joint takeover offer for all
the shares in Tilt. If the takeover is
successful, Mercury’s equity interest
in Tilt will remain at 19.99%.
Energy margin
Our energy margin of $734 million was
$36 million higher than the prior year.
Wet weather in the North Island, resulted
in record hydro generation of 4,947GWh
an increase of 223GWh, or 4.7%, on
FY2017. Record generation production
also coincided and benefited from
higher average wholesale prices (FY2018:
$82/MWh versus FY2017: $55/MWh at
Whakamaru) due to drier than normal
South Island hydrology and peakier
demand for electricity.
Despite increasing competition, the
Mercury brand continues to experience
below market average customer churn,
reflecting our focus on growing customer
promises. Growing our customer-led
digital offerings and capability and
upgrading key customer systems to a
fully-supported cloud-based
environment also contributed to this
year’s strong result.
Other income
Other income increased by $7 million to
$47 million, once the impacts of carbon
sales from the prior year are considered,.
This includes a $3 million increase in
revenue generated by our metering
business Metrix, land sales, proceeds
from insurance and dividends received
from our investment in Tilt.
Operating costs
Operating costs remained flat for the
fifth year in a row at $214 million due to
our ongoing focus on managing costs
and improved procurement practices.
This included major planned outages at
most of our geothermal sites, including a
22-day shut at our Kawerau station to
change out the steam turbine rotor and
refurbish the cooling towers (the biggest
shut in the plant’s history). Operating
costs represent the company’s indirect
costs of sales, including salaries and
wages, maintenance costs, and all other
corporate overheads.
FINANCIAL COMMENTARY.
$M
FINANCIAL YEAR
2014
2015201620172018
800
600
400
200
700
500
300
100
0
> FIGURE 1: ENERGY MARGIN
42 // 43

Operating earnings (EBITDAF)
As previously noted, EBITDAF for the year
was $561 million up $61 million on initial
guidance for the year and up $38 million
on FY2017, primarily due to the higher
hydro generation output and a focus on
capturing the value from higher and
more volatile wholesale electricity prices.
We have continued to execute well in our
core business by focusing on growing
customer loyalty, managing costs and
maintaining our strong regional
partnerships – all of which are reflected
in this record financial performance.
Profit for the year
Profit for the year was $234 million
up $50 million versus FY2017. Profit
increased due to higher operating
earnings, favourable fair value
movements in financial instruments
due largely to higher valuations of
non-hedge accounted electricity
derivative contracts, a roll down of the
group’s historic out of the money interest
rate swaps, and lower interest expense,
partially offset by higher depreciation
charges, mostly due to current year asset
additions and geothermal generation
asset revaluations in the prior year,
coupled with higher tax expense
because of higher operating earnings.
There were no impairments recognised
in FY2018.
2014
2015201620172018
FINANCIAL YEAR
$M
250
200
150
100
50
0
> FIGURE 2: OPERATING COSTS
2014
2015201620172018
FINANCIAL YEAR
$M
600
500
300
100
400
200
0
> FIGURE 3: OPERATING EARNINGS (EBITDAF)
$
561M
$
234M
PROFIT FOR
THE YEAR
(UP $50 MILLION)
RESULT
OPERATING EARNINGS
(EBITDAF)

Capital structure and dividends
As noted, Mercury completed an
on-market share buyback programme
acquiring nearly 15.6 million ordinary
Mercury shares (1.1%) for total
consideration of NZ$50 million.
Consistent with the 2014 buyback, the
shares are being held as treasury stock
providing future balance sheet flexibility.
The share buyback and Tilt investment
lifted the company’s gearing level to 2.0
at the top (good) end of Mercury’s target
range of 2.0x to 3.0x debt/EBITDAF ratio
for our S&P credit rating of BBB+, which
was reaffirmed in December 2017.
In line with Mercury’s dividend policy,
targeting a pay-out ratio of 70% to 85%
of Free Cash Flow on average over time,
a fully imputed 9.1 cents per share final
dividend has been declared. This brings
the full-year ordinary dividend to
15.1 cents per share, up from 14.6 cents
per share in FY2017, and marks our
10th consecutive year of ordinary
dividend growth. The final dividend will
be paid on the 28th September 2018.
Underlying earnings after tax
Underlying earnings is presented to enable
stakeholders to make an assessment
and comparison of earnings after
removing one-off and/or infrequently
occurring events (exceeding $10 million
of profit before tax), impairments and
any changes in the fair value of derivative
financial instruments. Underlying Earnings
after tax increased by $22 million to
$198 million reflecting the company’s
stronger EBITDAF performance partially
offset by higher depreciation costs on
the previous year.
Net cash flows from operating
activities
Net cash provided by operating
activities represents the cash flows from
the sale of electricity and metering
services, along with the costs associated
with their sale and the cash costs of
interest and taxes. This decreased by
$1 million in FY2018 to $371 million.
Significantly higher cash taxes in FY2018
of $102 million versus $52 million in
FY2017 were due to tax prepayments
made in FY2016 and FY2018 for
dividend imputation reasons.
15.1 CENTS
FULL YEAR ORDINARY DIVIDEND
9.1 CENTS
FINAL DIVIDEND
BBB+
OUR S&P CREDIT
RATING
$198M
UNDERLYING EARNINGS AFTER TAX
> FIGURE 4: CAPITAL EXPENDITURE
NEW INVESTMENT
STAY-IN-BUSINESS
$M
FINANCIAL YEAR
2014
2015201620172018
120
80
40
100
60
20
0
> FIGURE 5: DIVIDENDS
SPECIAL
FINAL
INTERIM
CENTS/SHARE
FINANCIAL YEAR
2014
2015201620172018
25
15
5
20
10
0
44 // 45
FINANCIAL
COMMENTARY
OUR TEAM AND
STAKEHOLDERS
CHAIR AND
CHIEF EXECUTIVE
UPDATES
OUR
SUSTAINABILITY
STATEMENT
PILLARSCUSTOMER
PEOPLE
COMMERCIAL
PARTNERSHIPS
KAITIAKITANGA
BUSINESS
FUNDAMENTALS