Quarterly Operational Update

QUARTERLY OPERATIONAL UPDATE
Three months ended 30 September 2019
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE01
HYDRO GENERATION FORECAST
UP 50GWh DUE TO
ABOVE-AVERAGE INFLOWS
INCREASED EXPOSURE TO SPOT
AND COMMERCIAL & INDUSTRIAL
SALES CHANNELS
ELEVATED PRICES SUSTAINED
AS HYDRO STORAGE DECLINES WITH
THERMAL OUTAGES PENDING
>> QUARTERLY HIGHLIGHTS
SPOT PRICES
>$100/MWh
PROACTIVE
PORTFOLIO
MANAGEMENT
4,070GWh
>> COMMENTARY
OTAHUHUSPOT PRICEAT RECORD AS HYDRO STORAGE DECLINES WITH THERMAL OUTAGES ON THE HORIZON
Spot prices were elevated during the quarter, increasing post-winter as the market responded to below-average inflows and major thermal
fuel and generation outages scheduled in Q2-FY2020. This resulted in average spot prices for the quarter reaching a record $125/MWh at
Otahuhu and $112/MWh at Benmore.
National hydro storage fell from 106% to 83% of average over the quarter driven by South Island inflows being 102GWh below average
1
. The
uncorrelated nature of North Island inflows was demonstrated as Waikato catchment inflows were 72GWh above average
1
in the 3 months to
30 September 2019. Consequently, Mercury's FY2020 forecast hydro generation has been increased by 50GWh to 4,070GWh.
HYDRO GENERATION DECLINES VERSUS PCP BUT REMAINS ABOVE-AVERAGE
Mercury's Q1-FY2020 hydro generation of 1,214GWh decreased by 232GWh from the prior comparable period but remained 21GWh above
average
2
. Reduced hydro generation volumes enabled increased utilisation of Waikato Hydro Scheme flexibility. Mercury's LWAP/GWAP
ratio decreased favourably from 1.07 in Q1-FY2019 to 1.04 in the most recent quarter.
VALUE FOCUS ENCOMPASSES RISK MANAGEMENT, REWARDING LOYALTY AND BIAS TOWARDS C&I SALES
Mercury is proactively managing its electricity sales portfolio in response to wholesale market conditions, which are expected to persist with
FY2021 and FY2022 Otahuhu futures prices increasing to $112/MWh and $103/MWh respectively as at 30 September 2019. This has seen
the company bias sales towards higher-yielding spot and Commercial & Industrial channels.
Consistent with this strategy, Mercury has reduced discounted mass market acquisition activity while maintaining its focus onrewarding
existing customers. The proportion of customers acquired on discounted rates decreased to 28% in Q1-FY2020 compared to 57% during
the same period in FY2019. Additionally, the company did not renew an arrangement it had with Farm Source. The exit of thisarrangement
resulted in 3,000 customers (representing 8,000 connections) switching to other retailers in the 3 months to 30 September 2019. This
predominantly dairy load imposed additional cost to Mercury as peak consumption coincides with seasonally low summer inflows into
Mercury's Taupo catchment. Mercury's group churn increased from 19.9%
3
in Q1-FY2019 to 22.0%
3
in the current period in large part due to
the exit of this Farm Source arrangement (underlying Mercury group churn was 19.8%
3
after normalising for Farm Source).
Consequently, Mass Market sales volumes decreased by 63GWh and average yield for Mass Market sales increased by 1.4% to $129/MWh
versus $127/MWh in the same quarter last year. Also, Commercial & Industrial sales increased by 83GWh from 588GWh to 671GWh with
yield increasing by 6.7% from $83/MWh in Q1-FY2019 to $88/MWh in Q1-FY2020.
URBAN SECTOR LEADS DEMAND HIGHER; INDUSTRIAL DEMAND FLAT DESPITE MODERATE TIWAI INCREASE
Demandincreased by 0.2% on a temperature-adjusted basis (+0.5% on an unadjusted basis) in Q1-FY2020 primarily due to increased
(+0.3%) urban sector demand. Industrial sector demand (+0.1%) was flat as increased Tiwai demand (up 4%) was offset by decreases from
other industrial users.Rural sector demand (-0.1%) decreased while dairy (+0.0%), irrigation (-0.0%) and other (-0.1%) sector demand was
stable.
1
For quarters ended 30 Septembersince 1927
2
For quarters ended 30 September since 1999
3
12-month rolling average

VWAP
1
VolumeVWAP
1
Volume
(GWh)(GWh)
2
892955
3
348297
323291
1,3011,316
198225
1,4991,541
361386
319343
4243
4748
Volume
(GWh)
Volume
(GWh)
4
570664
Volume
(GWh)
Volume
(GWh)
1,2141,446
5
690678
6
4655
1,9502,179
1.041.07
7
8993
1
VWAP is volume weighted average energy-only price sold to customers after lines, metering and fees
2
Mass market includes residential segments and non time-of-use commercial customers
3
Fixed-price, variable-volume (FPVV) sales to time-of-use commercial customers
4
5
Includes Mercury's 65% share of Nga Awa Purua generation
6
Tuaropaki Power Company (Mokai) equity share
7
Includes carbon emissions from Mercury gas sales, wholly owned geothermals and proportionate emissions from the Mokai and Nga Awa Purua stations
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE02
OPERATING INFORMATION
Three months ended
30 September 2019
Three months ended
30 September 2018
End User CfD
FPVV
($/MWh)($/MWh)
ELECTRICITY SALES
Mass Market127.04128.80
Commercial & Industrial88.3282.76
Total NZEM Purchases91.53128.09
FPVV purchases from market
Spot customer purchases
ELECTRICITY CUSTOMERS
('000)
127.0089.07
CONTRACTS FOR DIFFERENCE
ELECTRICITY GENERATION
VWAP
($/MWh)
VWAP
($/MWh)
118.4280.51
79.59116.35
Geothermal (equity accounted)
Total
Hydro
Geothermal (consolidated)
CARBON EMISSIONS
('000 TONNES CO2)
North Island Customers
South Island Customers
Net Sell CfD
Dual Fuel Customers
Includes End User CfD volumes. Includes Virtual Asset Swap volumes in both Buy and Sell CfD volumes of 151 GWh for the 3 months ended
30 September 2019 and 151 GWh for the 3 months ended 30 September 2018
123.0385.90
LWAP/GWAP
>> OPERATING STATISTICS

> ELECTRICITY GENERATION BY COMPANY FOR THE THREE MONTHS ENDED 30 SEPTEMBER
Source: Electricity Authority
> SHARE OF ELECTRICITY SALES (GWh) FOR THE THREE MONTHS ENDED 30 SEPTEMBER (EXCLUDING CFDs)
Source: Mercury Purchases and Transpower SCADA
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE03
18%
32%
21%
17%
5%
7%
Financial Year Q1 2020
MERCURY
MERIDIAN ENERGY
CONTACT ENERGY
GENESIS ENERGY
TRUSTPOWER / TILT
OTHER
>> MARKET DATA
20%
31%
22%
16%
5%
6%
Financial Year Q1 2019
14%
86%
Financial Year Q1 2020
MERCURY
OTHER
14%
86%
Financial Year Q1 2019

> OTAHUHU WHOLESALE PRICE AND NATIONAL HYDRO STORAGE LEVELS
Source: NZX Hydro and NZEM Pricing Manager (NZX)
> TAUPO STORAGE
Source: NZX Hydro
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE04
$40
$60
$80
$100
$120
$140
$160
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
JulAugSepOctNovDecJanFebMarAprMayJun
$/MWh
GWh
AVERAGE NATIONAL STORAGEFY2019 NATIONAL STORAGE
FY2020 NATIONAL STORAGEROLLING 12 MONTH AVERAGE OTA PRICE
ROLLING 12 MONTH AVERAGE BEN PRICE
0
50
100
150
200
250
300
350
400
450
500
JulAugSepOctNovDecJanFebMarAprMayJun
GWh
AVERAGE SINCE 1999FY2019FY2020

> OTAHUHU ASX FUTURES SETTLEMENT PRICE
Source: ASX
> BENMORE ASX FUTURES SETTLEMENT PRICE
Source: ASX
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE05
$79.89
$77.26
$72.50
$111.81
$92.54
$89.54
$113.71
$98.54
$94.79
$139.10
$111.93
$102.79
$0
$20
$40
$60
$80
$100
$120
$140
$160
FY20FY21FY22
$/MWh
Financial Year
AS AT 30 SEPTEMBER 2018AS AT 31 MARCH 2019AS AT 30 JUNE 2019AS AT 30 SEPTEMBER 2019
$73.90
$73.33
$69.55
$98.30
$83.13
$80.86
$91.00
$86.19
$85.16
$121.22
$98.96
$91.80
$0
$20
$40
$60
$80
$100
$120
$140
FY20FY21FY22
$/MWh
Financial Year
AS AT 30 SEPTEMBER 2018AS AT 31 MARCH 2019AS AT 30 JUNE 2019AS AT 30 SEPTEMBER 2019

> NATIONAL CONSUMPTION (NON-TEMPERATURE ADJUSTED)
Source: Transpower Information Exchange
> AUCKLAND CLIMATE SUMMARY ( ⁰C)
FINANCIAL YEAR
Q1Q2Q3Q4
202012.3---
201912.116.320.214.1
201812.317.220.714.3
201712.116.119.314.3
201611.416.020.615.3
Historical Average (since 1999)11.916.119.414.2
Source: Met Service
> MONTHLY TOTAL CONSUMER RETAIL SWITCHING (ICPs)
Source: Electricity Authority
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE06
9,386
9,573
9,430
9,451
9,554
9,553
1,250
1,268
1,267
1,251
1,263
1,316
0
2,000
4,000
6,000
8,000
10,000
12,000
Q1 2015Q1 2016Q1 2017Q1 2018Q1 2019Q1 2020
GWh
NATIONAL CONSUMPTIONTIWAI POINT ALUMINIUM SMELTER CONSUMPTION
0%
5%
10%
15%
20%
25%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
Jul-10Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
% Churn
Monthly ICPs
NZ MARKET CHURN (LHS)ANNUAL NZ MARKET CHURN % (RHS)