Governance Roadshow Presentation – December 2018

Mercury
Governance Roadshow
JAMES MILLER
Director
JOAN WITHERS
Chair
3 December 2018

DISCLAIMER
This presentation has been prepared by Mercury NZ Limited and its group of companies (“Company”) for informational purposes. This disclaimer
applies to this document and the verbal or written comments of any person presenting it.
Information in this presentation has been prepared by the Company with due care and attention.However, neither the Company norany of its
directors, employees, shareholders nor any other person gives any warranties or representations (express or implied) as to the accuracy or
completeness of this information. To the maximum extent permitted by law, none of the Company, its directors, employees, shareholders or any
other person shall have any liability whatsoever to any person for any loss (including, without limitation, 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, and uncertainties,including
material adverse events, significant one-off expenses and other unforeseeable circumstances, such as, without limitation, hydrological conditions.
There is no assurance that results contemplated in any of these projections and forward-looking statements will be realised, noris there any
assurance that the expectations, estimates and assumptions underpinning those projections or forward-looking statements are reasonable.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 or to provide you with further information about the Company.
A number of non-GAAP financial measures are used in this presentation.You should not consider any of these in isolation from, or as a substitute
for, the information provided in the audited consolidated financial statements, 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. The presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any security andmay not be relied upon in
connection with the purchase or sale of any security. Nothing in this presentation constitutes legal, financial, tax or other advice.
DISCLAIMER
2

3
MERCURY AT A GLANCE
Market Capitalisation of
$4.6b
1
2
nd
largest NZ gentailer
10
th
largest NZX50 company by market
capitalisation
100% RENEWABLE GENERATOR,
RETAILER AND METERING PROVIDER
~6,800GWh generation per annum from
flexible hydro and baseload geothermal
~390,000 customers
2nd largest NZ meter data and services
provider
85,000
OWNERS WITH CROWN AS
MAJORITY OWNER
Minimum 51% legislated government
ownership
Corporate credit rating from S&P of
BBB+/Stable
Debt of $1.2b
2
FY2019 EBITDAF guidance of
$515m
Based on above-average hydrology and
flat operating expenditure
FY2019 ordinary dividend guidance of
15.5c
Ordinary net dividend yield of 4.4%
3
(6.1% gross
4
)
OVERVIEW
1
As at 31 October 2018
2
As at 30 June 2018
3
12 months to 31 October 2018
4
Including full imputation

MERCURY
MERCURY AT A GLANCE
4

OUR MISSION
5

>Our priorities are aligned to our five pillars of sustainable business performance:
OUR STRATEGY
EXECUTING OUR STRATEGY
6

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
7
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
8
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
9
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

0
100
200
300
400
500
20092010201120122013201420152016201720182019
$m
Financial Year
CAPEX
Stay-In-BusinessGrowth
0
200
400
600
20092010201120122013201420152016201720182019
$m
Financial Year
EBITDAF
0
200
400
600
20092010201120122013201420152016201720182019
$m
Financial Year
OPEX
Operating expenditureOne-off costs
1x
2x
3x
4x
20092010201120122013201420152016201720182019
Financial Year
DEBT/EBITDAF
DEBT/EBITDAF
0
200
400
600
20092010201120122013201420152016201720182019
$m
Financial Year
DISTRIBUTIONS
Interim dividendFinal dividend
Special dividendShare buyback
10
MERCURY’S FINANCIAL TRACK RECORD
Flat from FY2014
Generation development
-10,000
-5,000
0
5,000
10,000
20092010201120122013201420152016201720182019
GWh
Financial Year
GENERATION VS SALES
Geo
Hydro
Thermal
MERCURY
CAGR: ~3%
10 years of ordinary dividend growth
Capacity for growth

CONTINUOUS FOCUS ON PRUDENT CAPITAL MANAGEMENT
11
MERCURY

STABLE CAPITAL STRUCTURE
MERCURY
12
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 structure prudently managed
>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

BOARD OF DIRECTORS

BOARD STRUCTURE AND FUNCTION
BOARD OF DIRECTORS
>Committed to maintaining the highest standards of business
behaviour and accountability
>Board recognised in Corporate Confidence Index (CCI) in critical
areas such as effective board, high standard of corporate governance
and appropriate board composition
>Key governance focus for 2018 included:
>Board skills and experience
>Succession planning
>Appointment of Scott St John made to complement skills of
existing directors after a comprehensive evaluation of company
requirements
>Developing the pipeline –on-going support for the Institute of
Directors Future Directors Programme
14

BOARD STRUCTURE AND FUNCTION
BOARD OF DIRECTORS
15
>Detailed skills requirements developed against
business strategies and future direction
>Balancing industry knowledge with that of
management
>Ensuring diversity of skills/approach
>Assessed to hold highly relevant capability
>External reviews (last completed June 2018)
combined with internal reviews
>Focus on developing optimal dynamic
>Managing workload and independence
>Keeping up to date on core skills and emerging
trends through ongoing training, e.g.
Cambridge Institute for Sustainability Leadership;
continuous disclosure
>Continuing and extending learning agenda
>Tailored to address gaps identified in skills matrix
>Consider appropriate tenure and orderly transition
>Clear pathway being laid for cohesive Chair and
Committee chair transitions
Skills matrix / gaps and strengths
1
Ongoing professional development
Comprehensive review process
Succession planning
1
Refer Corporate Governance Statement 2018, pg3

LEADERSHIP TEAM

>Composition of Leadership Team aligned with strategic
priorities
>Range of tenures across Leadership Team balances
retention of institutional knowledge with diverse
perspectives and capabilities
>HRC provides thought partnership on Leadership Team
appointments and performance measurement
LEADERSHIP TEAM
17
LEADERSHIP TEAM
56%
11%
33%
8+ years
4 - 8 years
0 - 4 years
LEADERSHIP TEAM TENURE IN COMPANY

>Executive short-term incentive KPIs are aligned with our strategy
>Long-term incentives are aligned with the enhancement of shareholder value over a multi-year period
>New Zealand REM incorporates balanced incentives at an order of magnitude different to international markets
KEY GOVERNANCE MATTERS
REMUNERATION
18
SHORT TERM INCENTIVE COMPOSITION
CHIEF EXECUTIVE REMUNERATION
PERFORMANCE PAY FOR FY2019

KEY GOVERNANCE MATTERS
RISK MANAGEMENT
>Comprehensive approach encompassing financial, strategic, environmental, operational, regulatory, reputational,
social and governance risks from internal and external sources
19

52%
26%
13%
9%
Crown
New Zealand Retail
International Institutions
New Zealand Institutions
51%
24%
14%
8%
3%
Crown
New Zealand Retail
International Institutions
New Zealand Institutions
Treasury Stock
OWNERSHIP
20
>Listed on NZX and ASX in May 2013
>Approximately 85,000 shareholders with Crown as majority owner
>Public Finance Act and Company’s constitution require at least 51% Crown ownership
>No other person may hold more than 10% of shares
>Eight independent Directors -no direct Crown Board representation
MERCURY SHARE REGISTER
May 2013
MERCURY SHARE REGISTER
October 2018
KEY GOVERNANCE MATTERS

FOR FURTHER INFORMATION >> TIM THOMPSON | HEAD OF TREASURY & INVESTOR RELATIONS T. +64 275 173 470 E. INVESTOR@MERCURY.CO.NZ