Chair and CEO – Annual Meeting speeches and presentation

creating a new energy future


VECTOR LTD ANNUAL MEETING OF SHAREHOLDERS

SPEAKING NOTES

Chair, Dame Alison Paterson:
Good afternoon ladies and gentlemen.
My name is Dame Alison Paterson and I am Chair of Vector.
The video you just saw was just a small showcase of what Vector has been up to this year,
including the installation of a renewable energy system in Niue, a spectacular Vector Lights
show for World Energy Day - and the launch of a new-look corporate brand.
As we have a quorum and it’s 2:00pm, I will now declare open the 2019 Annual Meeting of
Vector Limited shareholders.
On behalf of my fellow Directors, a warm welcome to you all, and a special welcome to those
shareholders who are following this meeting from our webcast.
In addition to those attending in person today, 1,049 shareholders, holding a total of more
than 807,489,252 shares, have appointed proxies.
In my capacity as Chair of the meeting and in my own name I hold proxies for 677
shareholders, representing 53,072,506 shares. Also included in the proxies are 751,000,000
shares held by Entrust, our majority shareholder. Entrust is represented in the audience
today by Mr William Cairns and Dr Paul Hutchison.
We welcome any members of the media to our meeting today also. As this is a meeting for
shareholders, Vector’s Group Chief Executive Simon Mackenzie and I will be happy to talk to
media after the meeting.
Before we move on to the agenda, I will cover a couple of housekeeping matters. If you have
a cell phone, please turn it to silent. If we need to evacuate this room for any reason, there
are [point out exits] and there is also the entrance you came through.
It's now my pleasure to introduce my fellow directors: Karen Sherry, Jonathan Mason, Bruce
Turner, Dame Paula Rebstock, and Michael Buczkowski. Unfortunately, Director Tony
Carter had a prior commitment before this meeting was scheduled and so has not been able
to join us in person today. Bob Thompson is also unable to be here.
Bob Thomson and Karen Sherry retire from the Vector board at the end of the meeting. On
behalf of my fellow directors and our shareholders, I would like to formally thank both Karen
and Bob. You have made significant contributions to Vector and to Auckland over a number
of years on the Board.
As noted in the notice for today’s meeting, Entrust has nominated Entrust Trustee Alastair
Bell to be a director in place of Karen Sherry.
Also joining us on stage today are our Group Chief Executive Simon Mackenzie and John
Rodger our General Counsel and Company Secretary. We have members of our executive
team in the audience today, as well as representatives from our external auditors KPMG and
legal advisers Chapman Tripp.
market release
23/09/2019

creating a new energy future


So, to the structure for the day. We released our financial results on 23 August and all the
details on this are extensively covered in our annual report, which I encourage you to read.
Rather than repeat that detail, I will instead provide a strategic overview of Vector’s future as
we see it before handing over to Simon to review some of the highlights for the year and the
progress we are making against our strategy.
After that we will open the meeting for specific discussion on the annual report, including the
financial statements and audit report, as well as matters raised in our respective addresses.
We will then move to the formal business of the meeting.

Dame Alison Paterson’s Address:
I think we can all agree it has been a year of tremendous change. And like the world around
us, the pace of change at Vector is accelerating.
As a company, our work is at the heart of two key challenges facing us: investing to support
Auckland’s relentless growth, and providing energy solutions which can move us all towards
an affordable low-carbon world.
Meanwhile, our customers continue to adopt new technologies in their homes, businesses
and leisure activities - and increasingly - with the new electric vehicles that they drive.
Vector’s customers continue to tell us that they value energy services that are safe and
reliable. They also tell us they want greater choice and control of how, where and when they
use energy.
Vector’s focus is to continue leading the way in meeting these challenges for all our
customers, and for New Zealand as a whole.
As we have signalled for many years, significant investment is required to ensure Vector is
ready for the future. This readiness is not limited to our traditional energy networks - it
includes advancing our digital capability and new energy solutions as well.
Many of you will be aware that April 2020 marks the start of the next five-year regulatory
period - in which the Commerce Commission will reset limits for our electricity network
revenues and network quality standards.
It is our primary responsibility to keep the lights on for Auckland and therefore it should go
without saying that we remain committed to meeting our quality compliance targets.
But in addition to that, a key focus of our ongoing engagement with the Commerce
Commission concerns today’s record-low interest and inflation rates, and how these are on
track to crystallise the economic challenges present in the existing regulatory model.
Here at Vector, we strongly believe that regulatory settings should not restrict our ability to
deliver Auckland growth or invest in technology to future-proof our network for the people of
Auckland.
Within the broader regulatory regime, we see avenues for Vector and the Commerce
Commission to continue to work together to correct these anomalies, and better align
cashflows with investment needs.
The Commission’s final reset decision is due on 28 November 2019. As has been signalled
previously, we will be revisiting our dividend policy and electricity business investment

creating a new energy future


strategy, and providing guidance on FY20 earnings, once we have the Commission’s
decision.
For the past decade, our strategy has been to build a strategic asset portfolio to provide
more options for sustainable returns. Alongside our regulated electricity and gas businesses,
we have continued to grow our wider businesses, particularly Vector Advanced Metering
Services (AMS) and Vector Communications, which, along with our Gas Trading business
and Vector PowerSmart, define our company as an energy group with a growing domestic
and international footprint.
Among the many highlights this year, we were pleased with the continued growth of our
metering business, both here and in Australia. We also celebrated the successful installation
of a renewable energy system for the people of Niue. This system was delivered in
partnership with the New Zealand and Niuean governments, and is dramatically reducing
Niue’s dependence on imported diesel.

Our network of EV charging stations across Auckland remains very popular with EV owners.
In the past year these chargers provided more than 96,000 free charging sessions, saving
well over one thousand tonnes of CO2emissions from entering the environment. As EV’s
become more prevalent, these charging stations are providing us with valuable insights for
efficient network planning in future. So too, are the EECA-backed research trials we have
underway with customers in Piha, and EV owners in other parts of Auckland.

In keeping with our commitment to sustainability, this year we were pleased to report a 17%
reduction in our corporate carbon intensity.

Moving to our people highlights, towards the end of last year, Vector became the first New
Zealand corporate to receive the Accessibility Tick - making our workplace more welcoming
to people with disabilities and continuing our leadership on diversity and inclusion initiatives.
In another example of this, just last month Vector was presented with the Supreme Award at
the Diversity Works Awards for our commitment to building an inclusive and supportive
workplace culture.
These accolades reinforce that Vector is a top performer. They show the high standards we
aspire to, because we know that success in the energy sector is not an accident. It comes
from being very clear about what we want and going all-out, with the best people, to get
there.
We take our responsibilities seriously. Our responsibility to rise to challenges present in our
environment. Our responsibility to our people and our customers; to Auckland and its
continued growth. We take seriously our responsibilities to you, our investors, and to the
environment and the country as a whole.
By investing in our people, the advancement of our networks and new energy solutions, and
by providing greater choice and control to our customers - we are enabling the accelerating
change around us.
Thank you. I shall now hand over to our Group Chief Executive, Simon Mackenzie.

creating a new energy future


Group Chief Executive’s Address:
Thank you, Alison,
At Vector, our ambition is to create a new energy future - not just for Auckland, but for all
New Zealand and beyond.
As Alison has explained, meeting the changing needs of tomorrow takes foresight, capability
and an environment that enables innovation, investment and momentum.
Vector is leading the way in creating intelligent and affordable energy systems that have the
structural integrity to empower our customers now, and well into the future.
We are working alongside customers, industry, global technology companies and our
regulators to ensure we can tackle the challenges and opportunities of our rapidly changing
world - and create a new energy future together.
I would like to take a few moments to walk you through Vector’s financial performance in FY
2019.
Our earnings were steady, with adjusted EBITDA of $485.8 million, which was ahead of
FY18 and in the mid-point of our guidance range.
Revenues continued to benefit from strong electricity and gas connection growth, and the
further expansion of Vector AMS in New Zealand and Australia.
These gains were partially offset by increased expenditure to improve electricity network
reliability, as well as the underperformance of E-Co Products Group - which trades as the
household brand, HRV.
Group net profit after tax was $84.0 million, and included a non-cash impairment of $46.6
million in respect of E-Co Products Group.
The prior year’s net profit of $149.8 million included a one-off tax gain of $16.7 million. If we
exclude the non-cash impairment and one-off tax gain, Group net profit after tax was $130.6
million, which was down only slightly on the prior year.
As a result of E-Co Products Group’s performance, in September last year we made the
decision to bring in a new management team and CEO to lead the business forward. We
have also integrated E-Co into Vector, as opposed to running it as a standalone, separate
business.
The new management team has since undertaken a strategic review, and is now focused on
a new energy solutions approach as part of the Vector PowerSmart brand.
With these changes in place, we are expecting a return to profitability in FY20.

Shifting our focus to Vector’s operational performance, Auckland’s growing population has
once again contributed to strong electricity and gas connection growth. We had 14,322 new
electricity and gas connections over the past year, up slightly on the prior year and around
40% higher than five years ago.
A reasonably mild start to winter contributed to slightly lower electricity volumes, down 0.4%
on last year to 8,410 GWh.

creating a new energy future



To keep pace with Auckland’s growth and enhance network integrity, this past year Vector
invested $260.9 million in our networks, which is an average of $5 million every week.

As I have already mentioned, metering growth continued in both New Zealand and Australia
this past year. We deployed 57,000 additional meters in New Zealand and 96,000 in
Australia, bringing our total smart meter fleet to 1.56 million. The acquisition of Vircom in
September last year complements our New Zealand metering business - augmenting our
nationwide service capability.

Natural Gas faced a challenging year with multiple planned and unplanned outages of major
gas fields. These outages led to significant supply disruption for some customers as well as
considerable market volatility. On the supply side, South Auckland Bottle Swap plant
continued to drive efficiencies and production at our Kapuni gas field was up 8.5%. In 2018
our Bottle Swap plant won the Deloittes Energy Excellence Health & Safety award – and
we’re very proud of that achievement.

In terms of the rest of our Technology business segment, our commercial energy solutions
business, PowerSmart, completed a substantial renewable energy project Niue this year, as
we saw in the video that played at the start of the meeting.

You may have seen in the news that, just last month, Vector Powersmart announced a major
renewable energy project with Watercare to build New Zealand’s largest solar array in the
heart of Auckland’s North Shore. On the screen, you will see an artist’s impression of what
this will look like once complete.

Our continued investment in large-scale commercial solar and battery systems is proving
well-timed, given the economic trends we are observing internationally. For example, some
solar farms in Australia are currently producing energy at half the cost of wind-powered
generation.

Such trends tell us that decarbonising the environment is no longer the only compelling
reason to embrace solar and other renewable energy solutions. It’s becoming a matter of
pure economics. In fact, some analysts can now estimate that, for two-thirds of the world,
renewables like solar cost less than a large proportion of carbon-intensive energy sources.
Our Vector Fibre business has also delivered a steady performance over the year, and we
see opportunities to grow as customer dependency on high-speed telecommunications
services continues to increase across the board.

Many of you may be aware that telecommunications wholesale provider, Chorus, is also
having its new regulatory settings determined over the next year or so. As part of this new
regulation, the Commerce Commission will set wholesale access terms for Chorus’s
nationwide fibre network.

Vector Fibre is focused on ensuring these terms of access are fair to encourage competition
and innovation at the wholesale level - and so there are opportunities for Vector Fibre to
extend its services to a broader section of the market.

creating a new energy future


Shifting our focus to our electricity business, in recent years, Vector has been open about the
various challenges that are driving more disruptive power outages.
We remain committed to meeting our regulatory compliance requirements - and this past
year we have further strengthened our focus on improving electricity network reliability.
Our challenge is primarily the time it takes to restore power following an outage. This is
challenging on many fronts given growing environmental changes and the challenges
associated with Auckland’s traffic congestion.
You may have seen the report from the AA that estimates the average motorway commuter
now loses 85 hours every year to traffic congestion. Our crews increasingly find themselves
sitting in heavy traffic – which prevents them from arriving at fault sites in a timely matter. So,
to reduce the travel time required to assess and repair faults, Vector has significantly
strengthened both the number of fault crews and the amount of network equipment stored at
strategic locations around the city.
Another example of our strengthened focus is the increased investment in standby mobile
generation, which has already improved our ability to restore power quickly to customers
while our crews work to repair the root cause of the fault.
For many years Vector has been growing its data and analytics capability - which is a core
component of our new energy future strategy. By having the right information, at the right
time and understanding it - we are turning data into powerful insights that let us make better
decisions on behalf of our customers, and our shareholders.
A recent example of this is our recently adopted technology to help predict where power
outages will likely occur during severe weather events. We will soon have the insights we
need to proactively place crews in the right place ahead of time, reducing the outage impact
for customers.
The technology is also helping us proactively identify vegetation trouble spots that might
interfere with powerlines so we can better target cut and trim activity. These applications are
the tip of the iceberg is terms of what’s possible with data-driven insights and decision
making.
Another example of Vector’s commitment to improving reliability of the electricity network
relates to the rapid convergence of energy and transport. In the past year, we’ve seen
increasing Government policy focus on the accelerated electrification of the transport sector,
to help New Zealand achieve its zero carbon goals.

Vector has embraced digital technology to help prepare Auckland for the impact that the rise
of electric vehicles (EVs) will have on our energy systems. This is critical because some
residential EV chargers can add the equivalent of 8.8 new houses to the electricity grid.

Over the past year Vector’s 29 EV charging stations installed around the city provided more
than 96,000 free charging sessions, giving us more valuable insights about customer
charging behaviour for future network planning.

Earlier Alison mentioned the EECA-backed vehicle-to-home trial we have underway with
customers in Piha. More recently we commenced a trail to understand specific drivers of EV
charging behaviour - engaging more than 100 EV owners across Auckland’s community to

creating a new energy future


help us deepen these insights.

Equally important in the context of these examples, is that we have invested in digital
platforms to connect, manage and optimise the integration of new energy solutions into our
network environment. Ultimately this combination serves to enable better solutions for
customers, as well as efficient investment.
As we continue to expand our digital capability, it becomes increasingly critical that we
expand our cybersecurity expertise along with it. Vector is primarily focused on the protection
of critical network assets, and to safeguard any customer data that is used for network
management purposes.
Our Unified Security Operations Centre (SOC) - which has been developed over a number of
years in response to the global increase in cybersecurity risk – continues to form the
backbone of our risk management approach.
We also see considerable untapped value in taking a shared approach to strengthening the
security of New Zealand’s entire electricity infrastructure.
Over the coming year we will continue to engage proactively with the wider industry to
promote this holistic approach to managing cyber security risks.
Many of you will be aware that the government will soon release its long-anticipated
electricity price review report.
The EPR process has highlighted the critical role that continued investment in technology
and innovation will play in delivering better outcomes for energy consumers. This is
especially important for ensuring energy affordability and facilitating the electrification of the
transport sector.
Throughout the EPR process we have argued that consumers must always sit at the centre
of decision making - and that this decision-making must be backed by data. We are among a
chorus of voices calling for greater access to customers’ smart meter data, while ensuring -
of course - that appropriate safeguards are met.

Vector also supports the phasing out of low fixed charge tariff regulations and removal of
prompt-payment discounts, as these are widely-acknowledged as not being of benefit to
those most in need of affordability interventions.

I think it is important to point out that even while the panel was working through the review
process, the wholesale price of electricity went up by 25% - a rise which will eventually find
its way through to consumers. From our point of view, this demonstrates that fundamental
problems within the wholesale electricity market remain, and that they ought to be
addressed.

Given the criticality of energy affordability, the need to decarbonise our economy and other
challenges involving the transport and heat processing sectors, Vector has been calling for a
Ministry for Energy to be established.

A dedicated ministry could provide the coordination needed to solve complex issues such as
these, and provide the certainty the industry needs to continue to make smart investment
decisions.

creating a new energy future



Moving to the topic of regulation. As Alison outlined in her address, the electricity regulatory
reset on 1 April 2020 is a crucial event for Vector because it sets our electricity network
revenues for the five years to 31 March 2025. We call this period DPP3.

Right now we are awaiting the Commerce Commission’s final decision on our network
expenditure allowance and quality targets for DPP3. This is expected in November this year.

Equally important in this process is the regulated WACC that will apply for the next five-year
regulatory period. This is set based off the five-year government bond rate, between 1 June
and 31 August this year. A key focus of Vector’s engagement with the Commission
throughout this reset process is how forecasting inaccuracies, low interest rates and asset
indexation are crystallising challenges within the existing regulatory model.

To put these challenges into perspective, since 2013, significant regulatory forecasting
inaccuracies alone have resulted in around $270 million of lost revenue, which has a direct
impact on profit.

We think the case to align regulatory settings with the investment needs of today has never
been stronger. We continue to engage with the Commission on this issue, specifically, we
are asking for two changes to the current regime that will allow for greater cashflow.

The first is a switch to non-indexing of assets, which has the positive impact of delivering
cashflow to support investment for growth. Furthermore, non-indexing is NPV neutral,
meaning customers would pay the same amount over the life of the assets, and is both a
choice and option for other regulated entities.

The second change relates to today’s current ultra-low interest rate environment, and the
urgent need for the Commerce Commission to amend the way it derives the cost of debt in
its Weighted Average Cost of Capital (WACC) calculations.

International regulatory practice typically calculates debt costs based on a 10-year (Australia)
or 20-year (UK) trailing average, to better reflect efficient debt book management. Vector is
advocating for New Zealand regulation to align with international practice.

Within the broader regulatory regime, there are avenues for Vector and the Commerce
Commission to work together to correct these anomalies, and better align cashflows with
investment needs.

We remain committed to working openly and collaboratively with the Commerce Commission
– both within the reset process and beyond – to explore all options to address these two
challenges.

Looking ahead, while acknowledging the key challenges ahead of us, we remain committed
to Vector’s vision to create a new energy future for New Zealanders. We remain confident in
our plan to rise to the challenges of Auckland’s growth and increasing electrification of
transport. We will continue to target investment as efficiently as we can by supporting

creating a new energy future


traditional network assets with digital and new energy solutions for the benefit of energy
consumers.

However, as we have said already, changes to regulatory settings which enable this
investment will be critical.

We are pleased by our ongoing success in the Australian metering market and look forward
to continued growth in the coming year. Our revised approach for Vector Communications
and the newly consolidated Vector PowerSmart business are already gaining traction, and
we look forward to reporting on progress and improved profitability.

Our Gas Trading business will continue to adapt and seek new opportunities in the
challenging market conditions.

Following the final Default Price Path 3 (DDP3) decision later this year, Vector will be
revisiting our dividend policy and electricity business investment strategy, which may be
affected by the reset of our future electricity revenues.
Looking even further ahead, to the next decade and beyond, Vector will need to continue its
transformation and continue to show leadership on technology, sustainability and the
provision of customer choice. It is certain that the industry will continue to be disrupted and
the impacts of climate change will continue to be felt. Vector will need to not only stay ahead
of the curve, but to continue to balance the needs of customers today with those of the next
generation.

ENDS

Media contact
Elissa Downey, Acting Senior Manager Corporate Communications, Vector
Elissa.downey@vector.co.nz, 021 866 146


About Vector
Vector is New Zealand’s leading network infrastructure company which runs a portfolio of businesses
delivering energy and communication services to more than one million homes and commercial
customers across the country. Vector is leading the country in creating a new energy future for
customers and continues to grow and invest in the growth of Auckland, and in a wide range of
activities and locations. Vector is listed on the New Zealand Stock Exchange with ticker symbol VCT.
Our majority shareholder, with voting rights of 75.1%, is Entrust. For further information, visit
www.vector.co.nz

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Eden Park
23 September 2019
Annual Shareholder Meeting

This presentation contains forward-looking statements.
Forward-looking statements often include words such as "anticipates", "estimates", "expects",
"intends", "plans", "believes“and similar words in connection with discussions of future
operating or financial performance.
The forward-looking statements are based on management's and directors’ current
expectations and assumptions regarding Vector’s businesses and performance, the economy
and other future conditions, circumstances and results.
As with any projection or forecast, forward-looking statements are inherently susceptible to
uncertainty and changes in circumstances. Vector’s actual results may vary materially from
those expressed or implied in its forward-looking statements.
Disclaimer

Dame Alison
Paterson
Chair

Agenda
•Ordinary business
•Chair’s Address
•Group Chief Executive’s Address
•Resolutions and Voting
•General Business
•Meeting Close

Dame Alison
Paterson
Chair

Simon Mackenzie
Group Chief Executive

Creating a new energy future

Overview of financial performance
9
1328.4
470.1
381.2
149.8
389.9
162.5
1318.6
485.8
425.1
84.0
348.1
165.0
RevenueAdjusted EBITDACapital ExpenditureNet ProfitOperating Cash FlowFull Year Dividend
FY19 FINANCIAL PERFORMANCE ($M)
FY18
FY19
From 1 July 2018 we adopted IFRS 15/16
and changed the accounting treatment
of gains/losses on disposal of fixed assets.
Excluding these accounting changes,
comparable adjusted EBITDA would be
$475m (up 1%). Comparatives not
adjusted. See Appendix for more detail.
NPAT impacted by
$46.6m impairment
of E-Co and one-off
tax gain in prior
year of $16.7m
Adjusted EBITDA is not a GAAP measure of profit. For a reconciliation of adjusted EBITDA to EBITDA and net profit refer to page31 of this presentation.

•HRV combining with
PowerSmart to form ‘Vector
PowerSmart
•600kW renewable energy
system installed in Niue
•More than 96,000 rapid EV
charging sessions on Vector
owned charging stations
FY19 Business insights
•14,322 new electricity and gas
connections, c50% higher than 5
years ago
•Electricity volumes down 0.4%
to 8,410 GWh with C&I volumes
lower but residential volumes
higher
•Invested a further $261m of
capital expenditure in our
networks –or $5m every week
•Deployed 57k advanced
meters in NZ
•Deployed 96k advanced
meters in Australia
•Smart meter fleet totals 1.6m
across NZ and Australia
•Acquisition of Vircom
augments nationwide service
capability in NZ
•Continued natural gas supply
constraints due to field
outages
•Kapunifield production up
8.5%
•New LPG 9kg Bottle Swap
plant generating cost
efficiencies
•Bottle Swap plant won
‘Health and Safety Initiative of
the year’ at Deloitte Energy
Excellence Awards
New energy solutions
Challenging environment
for Gas Trading
Metering growth
Network growth
10

Simon Mackenzie
Group Chief Executive

Creating a new energy future

Dame Alison
Paterson
Chair

Ordinary business

Election of
Tony Carter

[Tony Carter video]

Election of
Tony Carter
Proxy votingVotes
For 803,658,434
Against 254,281
Discretionary3,576,537
Abstain15,762

Election of
Dame Paula
Rebstock

Election of
Dame Paula Rebstock
Proxy votingVotes
For 803,671,556
Against 169,259
Discretionary3,645,630
Abstain18,569

Election of
Bruce Turner

Election of
Bruce Turner
Proxy votingVotes
For 803,315,279
Against 392,219
Discretionary3,723,409
Abstain74,107

Re-election of
Jonathan
Mason

Re-election of
Jonathan Mason
Proxy votingVotes
For 803,077,904
Against 564,679
Discretionary3,791,400
Abstain71,031

Election of
Alastair Bell

Election of
Alastair Bell
Proxy votingVotes
For 803,427,795
Against 241,228
Discretionary3,770,692
Abstain65,299

Appointment and remuneration of auditor

Appointment and remuneration of auditor
Proxy votingVotes
For 803,577,488
Against 178,633
Discretionary3,707,258
Abstain41,635

Amendment of constitution

Amendment of constitution
Proxy votingVotes
For 798,238,730
Against 5,241,726
Discretionary3,938,742
Abstain85,816

Voting

General business

Q&A

Thank you