Chorus submits 2022 fibre regulatory report

Chorus Limited
Level 10, 1 Willis Street
P O Box 632
Wellington
New Zealand

Email: company.secretary@chorus.co.nz

STOCK EXCHANGE ANNOUNCEMENT

31 May 2023

Chorus submits 2022 fibre regulatory report
Chorus has today published its Information Disclosure for fibre fixed lines access services
(FFLAS) for the 2022 disclosure year. This disclosure will also be submitted to the
Commerce Commission.
As part of this process Chorus has calculated that the regulated asset base (RAB)
increased from $5,448 million to $5,710 million during 2022.
While annual RAB movements do not affect the maximum allowable revenue (MAR) in the
current regulatory period, the RAB closing value will be the basis of the opening RAB for
the next regulatory period from January 2025.

As expected, Chorus has calculated that it under-earnt its MAR for 2022. Revenues were
$23 million lower than allowed in 2022 and, together with various other adjustments, this
results in a wash-up balance of $47 million that will be carried forward to 2025.
Details of these calculations and other summary financial information are provided in the
attached presentation summary.
All calculations are subject to Commerce Commission review and approval.
The full Information Disclosure reporting schedules are available at
https://company.chorus.co.nz/disclosures

Authorised by:


Mark Aue
Chief Financial Officer

ENDS

For further information:

Brett Jackson
Investor Relations Manager
Phone: +64 4 896 4039
Mobile: +64 (27) 488 7808
Email: brett.jackson@chorus.co.nz

Steve Pettigrew
Head of External Communications
Mobile: +64 (27) 258 6257
Email: steve.pettigrew@chorus.co.nz

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Information Disclosure update
31 May 2023

31 May 2023
Disclaimer
This presentation:
• Is provided for general information purposes and does not constitute investment advice or an offer of or invitation to purchase Chorus
securities.
• Includes forward-looking statements. These statements are not guarantees or predictions of future performance. They involve known
and unknown risks, uncertainties and other factors, many of which are beyond Chorus’ control, and which may cause actual resultsto
differ materially from those contained in this presentation.
• Includes statements relating to past performance which should not be regarded as reliable indicators of future performance.
• Is current at the date of this presentation, unless otherwise stated. Except as required by law or the NZX Main Board and ASX listing
rules, Chorus is not under any obligation to update this presentation, whether as a result of new information, future events or otherwise.
• Should be read in conjunction with Chorus’ audited consolidated financial statements for the year to 30 June 2022and NZX and ASX
market releases.
• Includes non-GAAP financial measures such as "EBITDA”. These measures do not have a standardised meaning prescribed by GAAP and
therefore may not be comparable to similar financial information presented by other entities. They should not be used in substitution for,
or isolation of, Chorus' audited consolidated financial statements. We monitor EBITDA as a key performance indicator and we believe it
assists investors in assessing the performance of the core operations of our business.
• Has been prepared with due care and attention. However, Chorus and its directors and employees accept no liability for any errors or
omissions.
• Contains information from third parties Chorus believes reliable. However, no representations or warranties (express or implied) are
made as to the accuracy or completeness of such information.
INFORMATION DISCLOSURE UPDATE
2

31 May 2023
INFORMATION DISCLOSURE UPDATE
Information Disclosure overview
Chorus has published a range of schedules required under the Commerce Commission’s Information Disclosure (ID) Determination –
these detailed schedules are available at https://company.chorus.co.nz/disclosures
The schedules include data applicable to assets across various regulatory frameworks and geographic locations:
▪PQ FFLAS: Chorus fibre fixed line access services/assets subject to the Part 6 Maximum Allowable Revenue (MAR) and
Regulated Asset Base (RAB) price-quality (PQ) regime
▪ID-only FFLAS: Chorus fibre access services/assets not subject to Part 6 regulation but requiring information disclosure (e.g.
fibre network in other Local Fibre Company areas)
▪ID FFLAS: combined PQ FFLAS and ID-only FFLAS services/assets
The following slides summarise some key aspects of today’s Information Disclosure submission. In reviewing these slides and the ID
schedules it should be noted that:
▪ID reporting is on the basis of disclosure (calendar) year and cost categories are different from Chorus’ financial reporting
categories (see Appendix for summary). Chorus has provided regulatory information in the presentation on a six-monthly basis
to assist investors with financial year comparisons.
▪While ID reporting references a 2022 vanilla WACC of 5.86%, this is for reporting purposes only and does not reflect the vanilla
WACC of 4.72% that Chorus must apply for the 2022-2024 regulatory period (RP1).
▪Consistent with the regulatory input methodologies, Chorus has updated allocators and attribution for three operating
expenditure categories to better reflect cost drivers. These updates are excluded from RP1 wash-ups.
▪ID reporting requires forecasts for connections, operating and capital expenditure. These forecasts were prepared in early 2022.
Since then, market conditions (e.g. COVID impacts, labour constraints and economic outlook) and business priorities and
strategy have continued to evolve. Potential future projects are also contingent on a range of factors, such as stakeholder
preferences, deliverability and regulatory approvals.Therefore, future connections and expenditure amounts on these schedules
should not be considered to reflect Chorus’ current business plan or the likely content of our PQP2 expenditure proposal due in
late 2023.
▪All historical financial numbers are nominal. Forecast numbers in the schedules are nominal and constant.
3

31 May 2023
INFORMATION DISCLOSURE UPDATE
RAB movements for 2022 ID year
Table that shows starting RAB (split Core vs FLA?) and a waterfall for movements in period (e.g.
final RAB, depreciation, new assets (net of contrib?), CPI = end of 2022 RAB
ComponentCore RAB
$m (nominal)
Financial Loss
Asset (FLA)
$m (nominal)
Notes
Opening RAB (1 January 2022)4,0321,416
October 2022 final RAB decision total of $5,413m (core $3,997m and FLA
$1,416m) updated for 2022 allocation factors.
lessDepreciation(277)(234)
FLA depreciation is diminishing value and the core RAB is straight-line.
Assets start depreciating the regulatory year after commissioning.
plusRevaluations287102
7.22% actual inflation in the December quarter versus forecast 1.8% used in
the initial 2022 MAR. The ID RAB rolls forward into RP2 and will be reflected
in the RP2 MAR.
plusAssets commissioned356
Amount is net of $52m capital contributions
plusAdjustment resulting from
asset allocation
28
An upwards adjustment reflects a greater proportion of shared assets being
attributable to fibre (due to differences in allocations drivers such as
revenues and connections) than was forecast for the opening RAB in 2023.
Total closing RAB value
(31 Dec 2022)
4,4261,284
NOTE:
1. RAB movements do not affect the RP1 MAR. The ID RAB closing value will be the basis of the opening RAB for RP2.
2. RAB movement calculations are subject to Commerce Commission review and approval.
4
Closing RAB of $5,710m

31 May 2023
INFORMATION DISCLOSURE UPDATE
2022 MAR wash-up balance of $46.8m
5
DescriptionRevenue
$m (nominal)
Wash-up
$m (nominal)
Notes
Building blocks revenue
Pass-through costs
Forecast total allowable revenue 2022
676.1
14.2
690.2
2022 MAR was set on the basis of 2021 forecasts.
Less 2022 FFLAS revenue received(667.2)23.0
Chorus under-earnt initial MAR allowance by $23m.
PlusInitial RAB true-up8.5
MAR adjustment to reflect increased allocation of shared
assets in the final RAB decision: expect ~$30m smoothed
across RP1.
PlusPass-through costs 1.5
Actual pass-through cost of $15.7m versus forecast $14.2m.
PlusCrown financing benefit 0.1
Reflects lower Crown financing balance than forecast.
PlusCost allocators13.7
Previously forecast cost inputs (e.g. totex, connections and
data traffic) have been updated for actuals in the period.
Total wash-up balance for 202246.8
The wash-up balance is rolled forward each year using the
post-tax WACC as the time-value of money to preserve NPV
neutrality. The RP1 balance will be added to the RP2 MAR.
Updated total allowable revenue 2022714
NOTE:
1.The regulations omitted a 2022 wash-up for actual CPI. The 2023 and 2024 MAR will be updated for forecast CPI changes as part ofin-period smoothing.
The 2023 MAR used 2.17% forecast CPI and will be updated for 3.37% (June 2022 forecast) with actual CPI applied via the wash-up process for RP2.
2.There was no wash-up required for individual capex proposals in 2022.
3.A wash-up for connection capex differences vs forecast will occur at the end of 2024.
4.All wash-up estimates are subject to Commerce Commission review and approval.

31 May 2023
INFORMATION DISCLOSURE UPDATE
Operating & Capital Expenditure for 2021-2022
Opex
categoriesSub-categories
H2
2021
H1
2022
H2
2022
Customer ▪Customer operations
(4)(3)(4)
▪Product, Sales &
Marketing
111113
Network▪Maintenance
121414
▪Network operations
889
▪Operating costs
444
Support▪Asset management
71111
▪Corporate
122021
▪Technology
101310
TOTAL ($m)
607878
Pass through
costs ($m)
888
6
Note:
1. 2021 amounts are unaudited and represent Chorus’ estimates of opexand capex attributable to PQ-FFLAS.
2. The RP1 opexallowance for 2022 is $160m (excluding pass through costs). Previously forecast cost inputs (e.g. totex, connections and data
traffic) are updated for actual percentages through the annual wash-up process. Chorus has also updated three opexallocator types in 2022 that are
not part of the MAR wash-up process.
>Regulatory/calendar year
>The credit for Customer-Customer
operations reflectscapitalised labour
costs that are offset in other opexlines.
>Support-Corporateopexfor H2 2021
was lower due to the release of a one-
off provision for holiday pay.

>Strongergreenfieldsgrowth than forecast,
with contributions netted from total
31 May 2023
INFORMATION DISCLOSURE UPDATE
7
Capex
CategoriesSub-categories
H2
2021
H1
2022
H2
2022
Extending the
network
▪Augmentation
3
32
▪New property developments
8
814
▪UFB communal
47
295
Installations▪Complex
1
11
▪Standard
100
7983
IT and support▪Business IT
9
57
▪Corporate
-
3-
▪Network & Customer
9
1014
Network
capacity
▪Access
5
99
▪Aggregation
7
712
▪Transport
3
47
Network sustain
& enhance
▪Field sustain
5
74
▪Relocations
1
12
▪Resilience
2
12
▪Site sustain
7
77
TOTAL ($m)
207
174169
Note: total capex was $34m below 2022 allowance of $377m (net of
$52m contributions).
>Regulatory/calendar year
>UFB spend reducing with rollout end
>Despite technician shortages installation
volumes were higher than forecast for RP1,
but offset by lower per unit cost and
incentive spend

31 May 2023
INFORMATION DISCLOSURE UPDATE
Indicative EBITDA & capex: PQ-FFLAS vs Other
PQ FFLASH2
2021
H1
2022
H2
2022
Revenue 309323344
Opex(60)(78)(78)
Pass through
costs
(8)(8)(8)
EBITDA241237258
Capex (net of
capital
contributions)
207174169
Capital
contributions
192527
OtherH2
2021
H1
2022
H2
2022
Revenue 174159143
Opex(68)(68)(59)
EBITDA1069184
Total capex373026
8
>the tables below provide an indicative split of EBITDA and capital expenditure between regulated Price-Quality FFLAS
(PQ FFLAS) and Other (i.e. non PQ FFLAS) activity over the 2021 and 2022 calendar years
>capital contributions are deducted from asset values for PQ-FFLAS and are included as Other revenue

31 May 2023
INFORMATION DISCLOSURE UPDATE
Appendix: ID vs financial reporting categories
9

31 May 2023
INFORMATION DISCLOSURE UPDATE
10