Mercury agrees to acquire Trustpower’s retail business

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The Mercury Building, 33 Broadway, Newmarket 1023

PHONE:
+ 64 9 308 8200
mercury.co.nz
PO Box 90399, Auckland 1142
New Zealand

FAX:
+ 64 9 308 8209



Mercury enters into binding agreements to acquire
Trustpower’s retail business
21 June 2021 – Mercury NZ Limited (Mercury) has announced that it has entered into binding agreements with
Trustpower Limited (Trustpower, NZX:TPW) to acquire Trustpower’s retail business for NZ$441 million, payable in
cash. The transaction is conditional on several matters, including Commerce Commission clearance, completion of
the proposed restructure of Tauranga Energy Consumer Trust (TECT) and Trustpower shareholder approval.
Trustpower’s retail business is a leading multi-product utilities retailer selling electricity, gas, fixed and wireless
broadband and mobile phone services to approximately 231,000 customers nationwide.
The combined business will have approximately 780,000 connections across both energy and telco services.
Mercury Chief Executive Vince Hawksworth said the acquisition would accelerate Mercury’s retail strategy, which is
centred on delivering the right product mix and value for customers.
“Mercury and Trustpower are two highly complementary organisations, and this agreement would see the best of
both being brought together for our customers,” said Mr Hawksworth.
“We know customers value the convenience and ease of bundled services in their home and Trustpower has deep
expertise in bundling products in a way that people clearly appreciate. We see this adding material value to our
customers and Mercury.”
“Bringing together the retail businesses of Mercury and Trustpower will also give us the scale to make meaningful
investment in the underlying IT systems, driving greater innovation for our customers.”
Mr Hawksworth said the strength of Trustpower’s retail offering was underpinned by a highly skilled and motivated
team, with approximately 500 staff focused on retail, based in Tauranga and Oamaru.
“We see a huge amount of talent and capability across both organisations, each with a strong focus on delivering
the best possible outcomes for customers. We’re excited for how we can continue to build on this together,” said Mr
Hawksworth.
“Customers will continue to enjoy all the great services and support they have today with Trustpower and with
Mercury. And we’re looking forward to unlocking even more benefits and products for them over time.”
STOCK EXCHANGE LISTINGS: NZX (MCY) / ASX (MCY)

NEWS RELEASE

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Mr Hawksworth noted that deeper integration of the two businesses is not planned until the underlying IT systems
will enable improved customer experience.
Mercury has secured a commitment for a new bank facility sufficient to finance the acquisition.
Mercury notes:
The transaction is conditional on Mercury obtaining Commerce Commission clearance for the purchase of
Trustpower’s retail business. Mercury will be working with the Commerce Commission to progress the application
as efficiently as possible once filed.
In addition to requiring Trustpower shareholder approval, the transaction is also conditional on the proposed TECT
restructure being completed. Independent of this transaction, the TECT trustees already have this restructure
process underway, as they wish to ensure that all Trustpower’s local retail customers (as at 28 January 2021) will
remain beneficiaries of the Trust following any sale of Trustpower’s retail business. Mercury’s offer is conditional
on the restructure occurring to ensure that those Trustpower retail customers could continue as beneficiaries of the
Trust. Further details of the TECT restructure can be found on TECT’s website.
The timing for regulatory approvals depends on several factors, including the current workload of the regulator.
Mercury anticipates that these conditions will be fulfilled and completion of the transaction will occur within CY2021.
Further detail is provided in the accompanying presentation.

ENDS
Howard Thomas
General Counsel and Company Secretary
Mercury NZ Limited


For investor relations queries, please contact:
Tim Thompson
Head of Treasury and Investor Relations
0275 173 470
For media queries, please contact:
Shannon Goldstone
Communication Manager
Media phone: 027 210 5337


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

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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 thispresentation 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. There is no assurance that results contemplated in any of these projections and forward-
looking statements will be realised, nor is there any assurance that the expectations, estimates and assumptions underpinningthose 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.
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 and may not be relied uponin connection with the purchase or
sale of any security. Nothing in this presentation constitutes legal, financial, tax or other advice.
1

TRANSACTION OVERVIEW
2
Mercury has agreed to acquire Trustpowerretail for $441m
1
>The transaction price reflects:
>Trustpower’sretail business –see slide 3
>10-year electricity supply hedge agreement (CFD) with declining
volume over time
>ISP network
>Restructured Tauranga Energy Consumer Trust (TECT) rebate
arrangements
>Settlement following Commerce Commission approval, implementation
of the TECT Deed restructure and Trustpowershareholder approval
>Represents stand-alone acquisition multiple of ~8.0x EBITDAF; ~5.2x
EBITDAF including forecast future cost synergies
2
>Forecast cost synergies of ~$35m
3
per annum after transition
>Expected transition costs of ~$50m
3
over 3 years
>Mercury has secured a commitment for a new bank facility sufficient to
finance the acquisition
1
Including normalised working capital
2
Forecast synergies fully realised after ~3 year transition –see slide 6 for further details
3
Split between opexand capex –see slide 6 for further details

TRUSTPOWER RETAIL AT A GLANCE
3
>Tauranga-based retailer operating in the electricity, gas and
telecommunications markets:
~112,000 telco connections
~252,000 electricity connections
~44,000 gas connections
~8,000 mobile connections
52% of customers with two or more
products
>Nation-wide carrier-grade ISP network and capability
>~550 employees in Tauranga and Oamaru
Source: Trustpower
Electricity
TelcoGas
INDEPENDENT
RETAILERS
INDEPENDENT
RETAILERS
INDEPENDENT
RETAILERS

NEW ZEALAND’S UTILITY MARKETS ARE CONVERGING
4
Other Telco
Electricity
GasBroadband
Coverage and Retail Market Share (% Revenue) by Product (FY20)
Not reported
12%5%
5%
(since 2007)
21%12%
1%
(since 2017)
1%
2%
(Entered NZ energy market Dec 2016)
9%
46%
Planning to enter Aus
energy market
46%
19%13%
Trustpower
Contact
Vocus
Telstra
Optus (incl.
Amaysim)
AGL
Sold to AGL in 2020
7%11%
Not reported
(acquired Southern
Phone in 2020)
Not reported
(launched MVNO via
Optus in Feb 2021)
New Zealand
Australia
Energy
w/ Telco
Bundle
Energy
w/ Telco
Bundle
Telco w/
Energy
Bundle
Telco
Entering
Energy
Native
Telco
Energy
w/ Telco
Bundle
Origin7%8%
Not reported
(since 2018)
Energy
w/ Telco
Bundle
Ways
to Play
Company
Source: Investor presentations, Company announcements, News articles, Industry research reports (e.g. MarketLine, IBISWorld)
>Consumers have responded positively in the New
Zealand market to bundled utility product offerings,
with perceived value of convenience, connectedness
and control over household utilities
>Utility providers have also seen value in delivering
these offerings through:
>Increased share of wallet
>Increased customer tenure
>Ability to cross or up-sell through customer bases
>Increased scale, allowing lower costs per
connection and improved economics for
systems/capability investment

BRINGING TOGETHER TWO COMPLEMENTARY BUSINESSES
5
The merger willaccelerate our retail strategy centred on delivering the right product mix and value
propositions for our customers
> Brings together New Zealand’s largest multi-utility business
>Accelerates our capability to deliver multiple products and services
>Provides scale efficiency to allow us to leverage further investment in technology
>Develops our focuson building high value propositions for customers
PROPORTION OF CUSTOMERS ON MULTIPLE PRODUCTS
48%
52%
Single Product
Multi Product
86%
14%
MERCURY
(Electricity & gas only)
TRUSTPOWER
(Electricity, gas, telco & mobile)
Source: TrustpowerFY2021 Results Presentation

FINANCIAL METRICS AND CAPITAL STRUCTURE
6
Full realisation of integration of businesses will take time
>Forecast cost synergies of $35m per annum
3
(~85% opex,
~15% capex) achieved over 3 year transition period
>Expect transition costs of $50m
4
(~60% opex, ~40% capex)
Purchase price corresponds to $1,060 per connection
>~$640 per connection using purchase price excluding value
of the ISP network, CFD and TECT construct
Increased FY22 gearing expected to decline with full
contribution of recent investments
5
>Mercury has secured a commitment for a new bank facility
sufficient to finance the acquisition
>Mercury is committed to maintaining a BBB+ credit rating
and has flexibility in our capital structure settings
KEY FINANCIAL INFORMATION
Purchase price / Enterprise Value (EV)$441m
1
EBITDAF –Stand-alone (year 1)~$55m
2
EBITDAF –Year 1 + forecast synergies (run-rate)~$85m
2
EV / EBITDAF –Stand-alone~8.0x
EV / EBITDAF –Including forecast synergies~5.2x
1
Including normalised working capital
2
On an accounting basis including IFRS15/16 adjustments of ~$15m
3
Year 1 approximately $5m
4
Year 1 approximately $30m
5
Including Trustpowerretail, Tilt and Turiteawind farm

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