Record generation and significant business growth
Results announcement
Results for announcement to the market
Name of issuer Mercury NZ Limited (MCY)
Reporting Period 12 months to 30 June 2023
Previous Reporting Period 12 months to 30 June 2022
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$2,730,000 +24.8%
Total Revenue $2,730,000 +24.8%
Net profit/(loss) from
continuing operations
$103,000 -78.0%
Total net profit/(loss) $103,000 -78.0%
Final Dividend
Amount per Quoted Equity
Security
$0.13100000
Imputed amount per Quoted
Equity Security
$0.05094444
Record Date 14 September 2023
Dividend Payment Date 29 September 2023
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$3.40 $3.35
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Refer to accompanying audited financial statements.
Authority for this announcement
Name of person
authorised
to make this announcement
Howard Thomas, Company Secretary
Contact person for this
announcement
Howard Thomas, Company Secretary
Contact phone number +64 9 308 8200
Contact email address Howard.Thomas@Mercury.co.nz
Date of release through MAP
21/08/221/08/2023
Audited financial statements accompany this announcement.
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STOCK EXCHANGE LISTINGS: NZX (MCY) / ASX (MCY)
NEWS RELEASE
Results reflect record generation and significant business growth
FY23 Financial Results Summary
FY2023 FY2022 Change %
NET PROFIT AFTER TAX ($M) 103 469 -78%
EBITDAF ($M) 841 581 45%
STAY-IN-BUSINESS CAPITAL EXPENDITURE ($M) 119 68 75%
ELECTRICITY GENERATION (GWh)
9,038
7,499 21%
FINAL FULLY IMPUTED ORDINARY DIVIDEND (CENTS PER SHARE)
13.1 12.0 9%
TOTAL ORDINARY DIVIDEND (CENTS PER SHARE), FULLY IMPUTED
21.8 20.0 9%
21 August 2023 – Significant investments to increase the scale of our business and record generation has
delivered results for Mercury in 2023.
“This year we realise the full benefits of large-scale investments made over the past two years to grow our renewable
generation and customer business,” said Mercury Chief Executive, Vince Hawksworth.
Annual generation exceeded 9 TWh up 21% from 2022 levels. Record inflows into the hydro catchment underpinned strong
hydro generation at 5,209 GWh, 28% higher than average. More than 1,000 GWh was spilled during the year to maintain lakes
within consented operating limits. Wind generation increased 16% to 1,471 GWh following the Turitea South wind farm
becoming fully operational.
Mercury’s scaled retail business also contributed to this result. Mercury is New Zealand’s largest electricity retailer by customer
market share, with 860,000 customer connections following the Trustpower retail and NOW NZ acquisitions in 2022.
Mercury’s net profit after tax was $103 million, down $366 million on the previous year, with the previous year’s results including
the gain made on the sale of our Tilt Renewables shareholding. Mercury reported $841 million operating earnings (EBITDAF),
up $260 million on the prior year’s $581 million EBITDAF. Operational expenditure was $346 million, up $116 million on the prior
year, while total stay-in-business capital expenditure was $119 million (up $51 million on the prior year).
During the year there was record-breaking rainfall in many parts of New Zealand, including the Waikato catchment. This is
reflected in today’s result, as signalled in previous updates to the market.
“We know that for some the rainfall events had devastating impacts, and we provided financial assistance and on-the-ground
help for our most severely impacted customers during the year in recognition of this. We also elected to delay the
implementation of customer price changes to these affected areas,” said Mr Hawksworth.
Results have been partially offset by lower annual geothermal generation due to outages and lower electricity spot prices,
however the turnaround at Kawerau geothermal station to install a new turbine and generator was completed successfully.
Supporting customers in need
Mercury Chair, Prue Flacks, said the company remained highly attuned to its role supporting New Zealanders through the
transition to a low-carbon economy and more immediate economic challenges.
“We acknowledge this is a challenging time for many, with the rising cost of living impacting many households. As a major
electricity retailer, we have a role to play in supporting customers and we take that responsibility seriously,” said Ms Flacks.
Actions to strengthen customer care this year included collaborating on joint research into hidden hardship with Genesis Energy
and working on potential solutions with community groups. A two-year Winter Energy Study in partnership with Kāinga Ora -
Homes and Communities to trial how capped bills benefit customers over winter was also launched.
Significant progress ‘InterGREATing’ the retail business
Significant progress was made to bring together Trustpower and Mercury employees, customers, brands, processes and
systems during the year. All Trustpower customers were welcomed onto the Mercury brand in June, which included a refreshed
technology platform, bill, website and app.
“We are firmly focussed on the successful migration of all our customers to a single technology stack. This is a major
programme of work, and managing customer experience through this process is front of mind,” said Mr Hawksworth.
“Completion of integration is key to unlocking benefits of the acquisition and we’re on track to deliver the cost synergies forecast
when we announced the Trustpower retail acquisition.”
Delivering on quality renewables pipeline
Mr Hawksworth said the company celebrated several key milestones during the year as the business continued to grow its wind
generation portfolio.
Full operation of Turitea South wind farm commenced in July 2023 with total project cost confirmed at $450 million (excluding
capitalised interest). The $115 million, 43 MW Kaiwera Downs 1 wind farm is also nearing completion and remains on track to
be operational by October 2023, with first power targeted for early September.
“We are actively considering our next projects as we continue to move at pace to bring more renewables online for the country,”
said Mr Hawksworth.
Consent has been granted for the expansion of an additional generating unit at the Ngā Tamariki geothermal station, and design
and procurement is now underway prior to Final Investment Decision. Kaiwera Downs 2 and Kaiwaikawe wind farms are also
both nearing Final Investment Decision development stages.
“Simultaneously, we continued our 20-plus year, half billion-dollar hydro refurbishment programme, to ensure the vital hydro
assets in the Waikato are able to operate for another century,” said Mr Hawksworth.
Other operational highlights
• Developed Mercury’s first Climate Transition Action Plan including emissions reduction targets, using tools provided by the
Science-Based Targets Initiative.
• Cross-sector collaboration including commissioning an independent report by the Boston Consulting Group to provide a
system-wide perspective on New Zealand’s low-carbon transition.
• Sales to commercial and industrial customers (physical and financial) lifting to 3,592 GWh, including a significant long-term
agreement with Amazon to purchase approximately half the real-time output from the southern section of the Turitea wind
farm.
• Progress on Diversity, Equity and Inclusion initiatives including the launch of more inclusive leave policies and the extension
of the Diverse Emerging Leaders programme.
• Launch of a comprehensive health, safety and wellbeing policy towards a more holistic approach to safety and wellbeing.
Total Recordable Injury Frequency Rate (TRIFR) was 0.49 for FY23 (down from 0.60 in 2022).
Dividend
Ms Flacks announced the Board had declared a final dividend of 13.1 cents per share (cps) to be paid on 29 September 2023.
This brings the full-year ordinary dividend to 21.8 cps, up 9% (20.0 cps FY22). This is the 15th consecutive year of ordinary
dividend growth.
Shareholders can further support growth by participating in Mercury’s Dividend Reinvestment Plan, which has been extended.
Shares for the FY2023 final dividend will be offered at a discount of 2.0% to the market price, calculated in accordance with the
Dividend Reinvestment Plan Offer dated 22 February 2022.
Guidance
Mercury is largely on track to meet or in some cases exceed its three-year objectives, two years in.
Mercury’s FY24 EBITDAF guidance has been set at $835 million.
Guidance may change and remains subject to any material events, significant one-off expenses or other unforeseen
circumstances including changes to hydrological conditions.
FY24 stay-in-business capex guidance is $160 million, and FY24 ordinary dividend guidance is 23.3 cps representing a 6.9%
increase on FY23 and the 16th consecutive year of ordinary dividend increases.
ENDS
Howard Thomas
General Counsel and Company Secretary
Mercury NZ Limited
For investor relations queries, please contact:
Paul Ruediger
Head of Business Performance & Investor Relations
027 517 3470
investor@mercury.co.nz
For media queries, please contact:
Shannon Goldstone
Head of Communications
027 210 5337
mercurycommunications@mercury.co.nz
ABOUT MERCURY NZ LIMITED
Mercury generates electricity from 100% renewable sources: hydro, geothermal and wind.
We are also a retailer of electricity, gas, broadband and mobile services.
We’re listed on the New Zealand Stock Exchange and the Australian Stock Exchange with the ticker symbol ‘MCY’, with foreign
exempt listed status. The New Zealand Government holds a legislated minimum 51% shareholding in the Company.
Visit us at: www.mercury.co.nz
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21 August 2023
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TOGETHER ON THE JOURNEY.
2023 INTEGRATED REPORT.
MERCURY NZ LIMITED
MERCURY INTEGRATED REPORT 2023
MENU
2
Mercury is committed to providing the full picture: transparent
disclosures in easily understood, comparable and engaging ways
so that we meet the expectations of our many stakeholders.
This is an Integrated Report which follows the Integrated
Reporting <IR> framework.
We describe Our Business Model, including inputs, outputs, and
the outcomes of our strategic approach across our five long-term
aspirations that determine how we generate long-term value.
We include a specific Global Reporting Initiative (GRI) Index and
comprehensive climate disclosures, which align with the recently
published Aotearoa New Zealand Climate Standards.
We have grouped our reporting into six sections to help you
find areas of particular interest, but they are all part of who we
are, what we do and why. Across all this, our aim is to report
openly and honestly on our performance in a way that shows
the integrated approach we take.
If you have any comments about this report, including things
we could do better, please email investor@mercury.co.nz
STATEMENT FROM THE DIRECTORS
The directors are pleased to present Mercury NZ Limited’s
Integrated Report and Financial Statements for the year ended
30 June 2023. The Auditor-General is required to be Mercury’s
auditor, and has appointed Lloyd Bunyan of Ernst & Young to
undertake the audit on his behalf.
This Integrated Report is dated 21 August 2023 and is signed
on behalf of the Board by:
PRUE FLACKS // CHAIRJAMES MILLER // DIRECTOR
ABOUT THIS REPORT.
TOGETHER ON THE JOURNEY.
Kia ora and welcome to Mercury’s 2023 Integrated Report. Our theme this year –
Together on the Journey – is a celebration of the power of collaboration, cohesion
and unity.
This reflects the many times we’ve come together with a shared destination in mind
this year. Whether this be bringing together our people and customers under
a single brand, collaborating with community to strengthen our support of customers
or working with the sector to help shape Aotearoa’s future energy landscape.
Beyond the bounds of our organisation, we also recognise our role as part of
a community navigating the challenges of a rapidly changing, complex world:
the ever-pressing issues of climate change, dramatic technological advancement
and demand for a more inclusive and equitable society.
ABOUT THIS REPORT
MERCURY INTEGRATED REPORT 2023
wHO wE
ARE
3
MENU
We generate electricity from 100% renewable sources: hydro,
geothermal and wind. We are also a retailer of electricity, gas,
broadband and mobile services.
Our electricity generation sites are located along the
Waikato River (hydro), the nearby steamfields of the
northern part of the Central Plateau (geothermal)
and in the Manawatū, South Taranaki, Otago and
Southland regions (wind).
This year, we completed construction of New Zealand's
largest wind farm, Turitea, on the Tararua Ranges
in the Manawatū. We have a pipeline of future wind
development sites across the country, and are on track
to complete construction of Stage 1 of a new wind
farm at Kaiwera Downs near Gore in October 2023.
We are committed to building and maintaining,
authentic relationships with iwi/Māori, particularly in the
lands around our generating assets. This will be achieved
through ongoing conversations, and careful listening to
understand where our values and aspirations align.
We sell electricity, gas, broadband and mobile
services through our retail operations to residential
and small to medium-sized business customers.
Our sub-brand GLOBUG is our pre-pay electricity
product. Our Commercial sales team service industrial
and wholesale market customers offering electricity.
04 HOw wE CREATE VALUE.
TE PĒwHEA O TĀ MĀTOU
wHAKAMANA.
05 OUR BUSINESS MODEL
06 PROGRESS TOWARDS OUR OBJECTIVES
07 OUR FY22-24 STRATEGIC FRAMEWORK
08 CHAIR & CHIEF EXECUTIVE UPDATE
11 wHAT MATTERS MOST.
TE MEA NUI.
12 ENGAGING WITH IWI AND STAKEHOLDERS
13 THE RISKS WE FACE
14 PULLING IT ALL TOGETHER
15 HOw wE DELIVER VALUE.
TE PĒwHEA O TĀ MĀTOU TUKU HIRA.
16 DELIVERING VALUE AT A GLANCE
17 KIRITAKI / CUSTOMER
19 KŌTUITANGA / PARTNERSHIPS
21 KAITIAKITANGA / STEWARDSHIP
23 NGĀ TĀNGAGA / PEOPLE
25 ARUMNI / COMMERCIAL
27 LOOKING AT THE NUMBERS.
TE TITIRO KI NGĀ TATAU.
28 FINANCIAL COMMENTARY
29 FINANCIAL TRACK RECORD
30 INDEPENDENT AUDITOR’S REPORT
33 GROUP FINANCIAL STATEMENTS
36 NOTES TO FINANCIAL STATEMENTS
58 CLIMATE STATEMENT.
TE TAUĀKI ĀHUARANGI.
60 INTRODUCTION
61 GOVERNANCE
64 STRATEGY
70 RISK MANAGEMENT
72 METRICS & TARGETS
74 LEADERSHIP & GOVERNANCE.
E TĀTAKI ME TE wHAKAHAERE.
75 YOUR BOARD OF DIRECTORS
78 YOUR EXECUTIVE TEAM
79 GOVERNANCE AT MERCURY
95 REMUNERATION REPORT
104 DIRECTORS’ DISCLOSURES
106 SECURITY HOLDER INFORMATION
112 COMPANY DISCLOSURES
113 OTHER DISCLOSURES
115 GLOBAL REPORTING INITIATVE (GRI) INDEX
118 INFORMATION FOR SHAREHOLDERS
119 DIRECTORY
120 GLOSSARY
121 RĀRANGI INGOA LIST OF NAMES
wHO wE ARE.MENU.
KARĀPIRO
ARAPUNI
wAIPĀPA
MARAETAI I
AND II
wHAKAMARU
ŌHAKURI
ĀTIAMURI
ARATIATIA
NGĀ TAMARIKI
NGĀ AwA
PŪRUA
+
LAKE TAUPŌ
ROTOKAwA
+
MŌKAI
+
KAwERAU
MAHINERANGI
KAIwERA
DOwNS++
TURITEA
TARARUA
wAIPIPI
+ not 100% owned by Mercury
++ under construction
HYDRO STATIONS
GEOTHERMAL STATIONS
wIND FARMS
Turitea wind farm.4
HO
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wE CREATE VALUE
MENU
MERCURY INTEGRATED REPORT 2023
HOw wE CREATE VALUE.
TE PĒwHEA O TĀ MĀTOU wHAKAMANA.
In this section we highlight factors that affect our ability
to create value over time (Our Business Model), including
outlining our past and current performance and outcomes,
and present our strategic framework. Our Chair, Prue Flacks,
and Chief Executive, Vince Hawksworth, then jointly
summarise our 2023 financial year.
MERCURY INTEGRATED REPORT 2023
HO
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MENU
5
OUR BUSINESS MODEL.
5,209
2,3581,471
6,749
Gwh HYDRO
GENERATION
Gwh GEO
GENERATION
Gwh wIND
GENERATION
Gwh PHYSICAL
SALES
590k electricity
102k gas
151k telecommunications
17k mobile
2 geothermal joint ventures
8 formal iwi relationships
20 community and
commercial partnerships
72
K
SHAREHOLDERS
860
K
CUSTOMER
CONNECTIONS
9 hydro
5 geothermal
6 wind
20
POwER
S TATIONS
763 women
747 men
2 non-binary
518 in Auckland
520 in Tauranga
124 in Hamilton
134 Rest of NZ
74 in Rotorua
42 in Taupō
100 Oamaru
1,512
PERMANENT
EMPLOYEES
3
K
BONDHOLDERS
10
20
FORMAL IwI
RELATIONSHIPS
PARTNERSHIPS
OUR BUSINESS
MODEL EXPLAINED.
Our Business Model shows our key inputs
interacting with our business activities to
create outputs of sustainable, commercial
value. The outcomes of our activity are
measured and take us towards achieving
our long-term aspirations and realising
our purpose.
INPUTSOUR BUSINESS ACTIVITIESOUTPUTS
17
%
CONSUMPTION
MARKET SHARE
22
%
GENERATION
MARKET SHARE
C
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KIRITAKI
/
CUSTOMER
Inspiring, rewarding and making
it easier for our customers.
KAITIAKITANGA
/ STEwARDSHIP
Long-term sustainability of natural
resources and assets.
NGĀ TĀNGATA
/
OUR PEOPLE
Enabling our people to perform
together in a changing environment
and keep each other safe.
KŌTUITANGA
/
PARTNERSHIPS
Providing greater opportunities for New Zealand,
our industry, our partners and our business
through long-term collaboration.
ARUMONI
/
COMMERCIAL
Achieving our commercial goals
through sustainable growth.
MERCURY INTEGRATED REPORT 2023
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THREE-YEAR
OBJECTIVES
PROGRESS AGAINST OUR MEASURESFY23 OUTCOMES
LONG-TERM
ASPIRATIONS
Enhance our licence
to operate through
collaborative work with
our stakeholders
•
Zero Harm organisation
Refreshed Health, Safety & Wellbeing policy launched. Building culture to grow capability of people and systems enabling safe and healthy outcomes.
•
No serious injury at Mercury sites or of customers
through our service
No serious injuries in FY23. Total Recordable Injury Frequency Rate 0.49 (down from 0.60 in FY22).
•
Enhanced engagement with iwi, partners
& stakeholders
Ongoing partnership meetings held with all river iwi. Leadership Tira Hoe with Waikato Tainui, senior engagement with other key iwi leaders. Relationships
progressed with iwi at wind sites. Initiatives to upskill staff in place. Increased use of te reo Māori in company communications.
•
Collaboration with stakeholders in the Waikato
to improve the catchment
Continued investment in environmental restoration projects within the Waikato catchment via Waikato Catchment Ecological Enhancement Trust annual contestable
fund. Installed real-time water quality monitoring sites in partnership with river iwi. Participating in the BiosecurityNZ golden clam governance group along with river
iwi partners.
•
Good practice approach to climate risk
Continued to mature our approach to identifying, managing and disclosing our climate risks. Provided a climate statement in accordance with the Aotearoa
New Zealand Climate Standard, adopting this one year earlier than required.
•
Delivering our customer care plan
Vulnerable customer initiatives refined and delivered with several more in development. Commenced two-year trial with Kāinga Ora on capped electricity options
to understand impact on wellbeing and test new vulnerable consumer solutions.
Increase the value of
our business to $800m
EBITDAF
•
EBITDAF growth
Turitea South wind farm fully operational. EBITDAF target in FY23 exceeded due to record generation (hydro and wind) and electricity yield growth. FY24 guidance
set at $835m including new generation from Kaiwera Downs Stage 1.
•
Retail value growth
Consolidation of the Trustpower retail business and Mercury brand completed in June; on track to deliver forecast synergies. Exceeded customer connection
targets, growth across all products (electricity, gas & telco).
•
Portfolio management
Entered longer term contracts with large commercial and industrial users in elevated electricity spot and futures market. Negotiated long term agreement
with Amazon to purchase 50% of the real time output from Turitea South wind farm.
•
Generation asset performance
Operational performance for hydro and wind assets on-track based on availability measures. Geothermal impacted by unplanned outages.
Unleash the full potential
of our people through
transforming culture
•
Improvement in Culture Index
Culture index steady for majority of FY23, then significant lift near year end (73% in FY22 to 78%).
•
Increase in diverse representation
Diversity increased across a range of measures. Diverse Emerging Leaders programme resulted in large number of secondments and promotions.
•
Learning opportunities taken up that lift capability
Adopted principles of a learning organisation focusing on learning everyday, everywhere, providing wide range of opportunities for formal and informal learning.
Be an adaptive & resilient
organisation, responsive
to future needs
•
Our people taking up opportunities through
internal movement
Approx. 46% of roles appointed internally. Adaptive ways of working embedded, resulting in significant learning opportunities and secondments for people.
•
Our systems are fit for purpose
Significant work underway to review, update or renew fit-for-purpose systems leading to a single technology stack. Artificial Intelligence and Machine Learning
use cases deployed to optimise operations, productivity, and improve customer experiences across the business.
Play a leading role in
New Zealand's successful
transition to a low-carbon
economy
•
Electricity is viewed as an enabler of the transition
to a low carbon economy
Continued working with others across the sector to develop mechanisms to support collective action (across the sector and between public/private sector participants).
•
Progress on engagement with new technology
Engaged with industry via the Flex Forum, actively trialling peak demand mechanisms. Also engaged with suppliers on turbine technology developments.
•
Support for transport decarbonisation
Hikotron and Big Street Bikers partnerships in place. Support in place for two-year transport-on-demand trial with Bay of Plenty Regional Council and Waka Kotahi
NZTA utilising electric transport.
•
Progress on reducing our own emissions
Committed to set emissions reduction target in line with the Science Based Targets initiative Net Zero guidance and have developed our Climate Transition Action Plan.
Create executable options
for new growth
•
New opportunities for growth
Significant focus on creating and developing new options, including capacity/flexibility opportunities and exploring solar.
•
Executable development options
Construction commenced on Kaiwera Downs 1 wind farm, on track to be fully operational by October 2023. Consent gained for additional generating unit (OEC5)
at Ngā Tamariki geothermal station, now nearing Final Investment Decision. Kaiwera Downs 2 and Kaiwaikawe wind farms also in final stages of planning before
moving to Final Investment Decision.
This shows how we are progressing towards our three-year objectives. This helps to identify, based
on how we are tracking, where we will be focusing to achieve these objectives by end of FY24.
See ‘Our Strategic Framework’ on Page 7 to see how our objectives link to each of the categories for our long-term aspirations.
PROGRESS TOwARDS OUR FY22-24 OBJECTIVES.
KE Y:
•
On track / likely to meet expectation
•
Minor delay / uncertain will meet expectation
•
Significant delay / unlikely to meet expectation
THRIVING TODAY
SHAPING TOMORROw
MERCURY INTEGRATED REPORT 2023
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OUR FY22–24 STRATEGIC FRAMEwORK.
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KIRITAKI
/
CUSTOMER
We put customers at the heart of our
business, they trust us to deliver
innovative services that provide
value and convenience.
KAITIAKITANGA
/ STEwARDSHIP
We leave our physical assets and
the natural environment thriving
for future generations.
ARUMONI
/
COMMERCIAL
We are leading in sustainable
commercial growth and renewable
generation development
in Aotearoa.
NGĀ TĀNGATA
/
OUR PEOPLE
We learn and adapt
so we all realise our full potential,
driving success and growth.
KŌTUITANGA
/
PARTNERSHIPS
We are the partner of choice;
trusted by communities,
iwi and industry to create
shared value.
TIAKINA TE ANAMATA, MĀ TE
TŪHONO I NGĀ TĀNGATA ME NGĀ
wĀHI O TE INAMATA
TAKING CARE OF TOMORROW:
CONNECTING PEOPLE AND
PLACE TODAY
OUR
PURPOSE
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A
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B
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Be an adaptive and
resilient organisation,
responsive to
future needs.
Play a
leading role
in New Zealand’s
successful transition to
a low-carbon economy.
Enhance our
licence to operate
through collaborative
work with our
stakeholders.
Create executable
options for new
growth.
Unleash the
full potential of our
people through
transforming
culture.
Increase the value
of our business
to $800M
EBITDAF.
T
H
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2035
Our strategic framework maps why we exist, and what we will need to
focus on over the near and longer term, to continue to grow and create
value over time.
This year we have introduced our new purpose and long-term aspirations.
These are foundational aspects of our strategic framework, providing the
longer-term direction for our organisation. With the change and growth
that our organisation has embarked on over the past few years, we
have updated these to better reflect the business that we are.
Our purpose 'Taking care of tomorrow: Connecting people and
place today' captures our why. It recognises the role we play in using
our unique assets and capabilities to enable everyday living and
connectivity in our communities, and to bring together the people
we work with to care for the natural environment and resources that
we use. Our interconnected long-term aspirations expand on our
purpose and capture what we aspire to achieve.
We are now two years into our three-year objectives and are making
good progress towards achieving these. Next financial year we will
reset our objectives for FY25-27.
MERCURY INTEGRATED REPORT 2023
HO
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MENU
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CHAIR
& CHIEF
EXECUTIVE
U P DAT E .
KUPU A TE HEAMANA ME TE POU
wHAKAHAERE.
SNAPSHOT.
Kia tiakina te anamata e tātou, mā te tūhono i te
tāngata me te wāhi o te inamata. Together we
are taking care of tomorrow: Connecting people
and place today.
We believe Mercury can help Aotearoa
New Zealand transition to a low carbon future
through our renewable generation assets and
quality renewable generation pipeline, our scale
retail business, our partners and our people.
RESULTS REFLECT SIGNIFICANT
INVESTMENT, STRONG GENERATION
Performance over the period was secured by
significant investment to increase scale and
record generation.
Record inflows in our hydro catchment resulted
in a boost to hydro generation, at 5,209 GWh
compared with an average of 4,056 GWh.
More than 1,000 GWh was spilled over the
period to maintain lakes within consented
operating limits. We acknowledge the
devastating impact rainfall events over the period
have had on our communities, and we have
provided financial assistance and on-the-ground
help for customers most severely impacted.
This financial year we realised the benefits of
a materially larger business. Wind generation
was 1,471 GWh for the year, up from 1,269
GWh in the prior comparable period, including
a significant contribution from our Turitea wind
farm. Our scaled retail business contributed a
full year with 860k customer connections at
the end of the year, reflecting the acquisition of
the Trustpower retail business and broadband
company NOW NZ in 2022.
Results were partially offset by slightly lower
geothermal generation due to outages and
lower wholesale electricity prices. Futures
prices for CY24-26 have moderated from
PRUE FLACKS // CHAIR
VINCE HAwKSwORTH // CHIEF EXECUTIVE
earlier highs, but industry issues such as
high thermal costs and regulatory reform
still pose challenges.
Mercury’s net profit after tax was $103 million,
down $366 million on the previous year, with
FY22's results capturing the one-off net gain
made on the sale of our Tilt Renewables
shareholding. Mercury reported $841 million
EBITDAF
1
, up $260 million on the prior year’s
$581 million. Operating expenditure was $346m,
up $116m on prior year, while stay-in-business
capital expenditure was $119 million (up $51
million on the prior year). Mercury’s FY24
EBITDAF guidance has been set at $835 million.
We acknowledge it is a challenging time for
many New Zealanders, with the rising cost
of living impacting many households.
We recognise we have a role to play in
supporting customers and outline the
actions we are taking further in this report.
1
EBITDAF: Earnings before net interest expense, tax expense, depreciation and amortisation, change in the fair value of financial instruments, gain on sale and impairments.
Vince Hawksworth, Chief Executive and Prue Flacks, Chair.
SIGNIFICANT INVESTMENT
Our performance reflects major investment to
grow our renewable generation portfolio and
retail business.
STRONG GENERATION
The financial year was also characterised
by strong hydro and new wind generation.
QUALITY RENEwABLES PIPELINE
We continue to grow our renewable generation
portfolio and enhance our existing assets.
SCALE RETAIL BUSINESS
We focussed on successfully integrating
our retail business.
PARTNERING FOR CHANGE
We collaborated with others to help
shape meaningful change and support
decarbonisation in New Zealand.
BUILDING RESILIENCE
We are becoming a more adaptive organisation
as we look to thrive in a changeable world.
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HIGH-QUALITY GENERATION
PIPELINE BUILDS ON OUR
STRENGTHS
This year saw several key milestones reached
as we continued to grow our wind generation
portfolio. Full operation of our Turitea South wind
farm commenced in July with total project costs
confirmed at $450 million (excluding capitalised
interest). We are also nearing completion of our
$115 million, 43MW Kaiwera Downs 1 wind farm,
and it remains on track to be operational by
October 2023.
Simultaneously, we are enhancing the
resilience and performance of our generation
fleet through our 20-plus year, half-billion
dollar hydro refurbishment programme.
In particular the Karāpiro hydro upgrade project,
currently valued at ~$90m, saw the first of three
units replaced with new and uprated turbines
and generators. When finished this will add
additional capacity of 17MW, additional energy
generation of 32GWh per annum and extend
the 76-year-old station’s life by another 50
years. New turbine and generator rotors were
also installed at our Kawerau geothermal station.
Looking forward, we have a quality renewable
generation pipeline in varying stages of
readiness and continue to focus on identifying
new renewable prospects. We are in the
pre-Final Investment Decision development
stages of Kaiwera Downs 2 and Kaiwaikawe
wind farms and are pleased to have gained
consent for the expansion of an additional
generating unit (OEC5) at our Ngā Tamariki
geothermal station.
We are also working on projects that meet the
capacity needs of an increasingly renewable
future - increasing the resilience of supply to
benefit New Zealand electricity users, as well
as Mercury.
We note that policy changes including
Resource Management Act reform and
the risk of regulatory intervention such as
Lake Onslow continue to create uncertainty.
This, together with global and domestic
inflationary impacts (compounded by
post-COVID supply constraints), are being
factored into future business cases.
VALUE FOR CUSTOMERS ENABLED
BY A SCALE RETAIL BUSINESS
Mercury is New Zealand’s largest electricity
retailer by customer market share following
the acquisition of the Trustpower retail
business more than a year ago. This year,
as part of our focus on successfully
‘interGREATing’, we transitioned our people
and customers to one brand (Mercury) in
June. We are now migrating customers to
a single technology stack, which is key
to unlocking benefits of the acquisition.
We remain on track to deliver the cost
synergies forecast when we announced
the Trustpower retail acquisition.
In parallel we maintained momentum within our
core retail business. We saw connection growth
across all products – electricity, gas and telco
– with a net increase of 61,000 connections.
We capped our average annual price change
to between 3% and 5% in recognition of cost
pressures many households are facing, however
we expect prices will continue to increase over
the medium term.
Turning to support of customers in need,
our joint research into hidden hardship with
Genesis is nearing completion and as part of
this we have co-designed several solutions
with community providers to collaboratively
progress. We also launched a two-year Winter
Energy Study in partnership with Kāinga Ora -
Homes and Communities to offer customers
a capped electricity bill in the winter, to
encourage whānau to use as much electricity
as they need to heat their homes.
Sales to commercial and industrial customers,
both physical and financial, lifted over the period
to 3,592 GWh. This included a significant
long-term agreement with Amazon to purchase
half the real-time output from the southern
section of our Turitea wind farm. Commercial and
industrial (physical and financial) yields increased
by $14/MWh, reflecting the strongly rising
forward curve repricing contract renewals. Longer
dated supply arrangements are becoming more
commonplace as large users look to mitigate
the impact of rising wholesale prices.
PARTNERING wITH OTHERS TO
ACHIEVE MEANINGFUL CHANGE
During the year we actively engaged in the
commissioning of an independent report by
the Boston Consulting Group (BCG) alongside
our sector peers to provide a system-wide
perspective on what might be required for a
successful and stable transition of the energy
sector. We support the report's recommendations
and would like to see this work inputting into key
workstreams like the National Energy Strategy
to help New Zealand move faster on supportive
climate and energy policy.
Building on this report, we are working with
others in the sector to establish mechanisms
that enable collective action and help set
New Zealand up for success.
$841M
o
EBITDAF
NET PROFIT
$103M
p
13.1CPS
o
FINAL DIVIDEND
DECLARED
OPERATING
EXPENDITURE
$346M
o
Blades for the turbines at Kaiwera Downs 1 wind farm unloading at Bluff - credit South Port, Chris Howell.
PERFORMANCE OVER THE PERIOD wAS
SECURED BY SIGNIFICANT INVESTMENT TO
INCREASE SCALE AND RECORD GENERATION.
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BUILDING RESILIENCE IN A
CHANGEABLE wORLD
In an increasingly fast-paced, complex and
uncertain world, we are working to become a
more adaptive organisation, placing continuous
learning at our core. This approach enables
our people to effectively navigate the challenges
and opportunities that may arise.
Our focus on building a diverse, equitable and
inclusive workforce resulted in changes to our
leave policies to better support the needs of
our employees. We have made progress on
achieving our gender diversity targets and
have increased leadership representation of
Māori, Pacific Island, and Asian employees
during the year. However, we still have more
to do in this space, as outlined in more detail
further in this report.
Turning to safety, we are pleased to report that our
Total Recordable Injury Frequency Rate (TRIFR)
was 0.49 for FY23 (down from 0.60 the previous
year). We have launched a comprehensive health,
safety and wellbeing policy which moves us away
from a singular focus on "zero harm" towards a
more holistic understanding of the benefits that
an improved safety and wellbeing culture has
on our performance.
FULL-YEAR DIVIDEND
The Board has declared a final dividend
of 13.1 cents per share (cps). This brings the
full-year ordinary dividend to 21.8 cps, up
9% (20.0 cps FY22). We are pleased to be
able to increase the ordinary dividend for the
15th year in a row. We have further extended
our Dividend Reinvestment Plan to allow our
shareholders to support Mercury’s growth.
Our FY24 ordinary dividend guidance is
23.3 cps, representing a 7% increase on FY23
and the 16th consecutive year of ordinary
dividend increases.
CLOSING REMARKS
As we reflect on our progress two years into
our three-year objectives, we are pleased
to be largely on track to meet or in some
cases exceed these targets. We are grateful
for the commitment and dedication of
our people – they are instrumental to our
continued success.
In addition to the achievements outlined
in this update, this report marks another
significant moment for us as we reach
more than a decade since listing.
Both the world and our company have
undergone transformative change over this
period. We have adapted to new challenges,
embraced innovation, and positioned ourselves
for a future that holds immense potential.
The future will likely test us in many ways.
However, we are confident in our ability to
overcome these obstacles and deliver on our
commitments. With a clear vision, a resilient
business, and a talented team, we are well-
equipped to navigate the evolving landscape
and seize the opportunities that lie before us.
Whāia te mātauranga, hei oranga mō koutou,
hei oranga mō tātou katoa. (Seek knowledge
for the sake of your well-being, for the well-
being of all.)
VINCE HAwKSwORTH // CHIEF EXECUTIVE
PRUE FLACKS // CHAIR
Gordon Lindsay at Ōhakuri Dam.
11
wHAT MATTERS MOST
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MERCURY INTEGRATED REPORT 2023
wHAT MATTERS MOST.
TE MEA NUI.
In this section we look at how we have engaged with iwi and stakeholders and
then responded to what we have learned, as well as the trends we have seen
in our key risk areas in FY23. We then cover how these risks and insights, as well
as key opportunities and other external environment insights, combine to form
a view of what's material to our business.
Leah Wyatt (right) and Austrian Federal Minister of Labour and Economy, Martin Kocher. The Minister
was welcomed to Karāpiro station by mana whenua Ngāti Koroki Kahukura, when he came to see the
installation of a new turbine by Austrian contractor Andritz Hydro.
MERCURY INTEGRATED REPORT 2023
wHAT MATTERS MOST
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Building and maintaining relationships
with iwi and stakeholders across our
business is fundamental to our ability
to create value and contributes to the
long-term success of our business.
We need to understand what's important to
the people and groups we work with and rely
on for our business. That way we can commit
the right resource to the most relevant business
activities. Our strategy and business plans are
developed with consideration given to the
relevant priorities identified by stakeholders
and iwi/Māori (who we consider partners)
as most important to them. We also
recognise we need to maintain, and potentially
build, stakeholder relationships over time.
During the year we completed a number of
formal and informal engagements with key
groups we work with. For example, we gathered
a wealth of customer feedback through our
ongoing Voice of Customer programme and
strategic pieces of research to understand
what matters most to customers. Further, we
conducted quarterly Employee Voice surveys
as well as extensive employee engagement
to gather input for the creation of our new
purpose. We were also actively involved in
Government initiatives and programmes and
hosted an Investor Day in Palmerston North.
RESPONDING TO wHAT wE HAVE LEARNED
The feedback we have received through these
engagements has helped inform our business
activities. For example, customer research
findings helped us determine which offers
we would provide as we transitioned to a single
brand, while employee feedback helped to
shape our new leave policies.
We also continue to evolve our approach to
iwi engagement following a review of our
relationships with iwi in FY22. Some of the
actions we have taken off the back of this are
outlined in the Ngā Tāngata/People section.
We are eager to gather additional insights
from our partners and stakeholders and will
continue to define the most appropriate and
productive ways to shape our engagement
processes in FY24.
wORKING TOwARDS A SUSTAINABLE
FUTURE
We are focussed on contributing to a
collaborative and thriving cross-sector
ecosystem to help move New Zealand
towards a more sustainable future. In FY23
that has seen us engage on a range of
regulatory processes and support multiple
sector initiatives, which are outlined in the
Kōtuitanga/Partnerships section. This will
be a continued focus for us in FY24 as we
input into the National Energy Strategy and
other key activity.
OPENING OUR DOORS TO
COMMUNITY.
This year we hosted a hui at our
Auckland office for community,
industry, government, and research
representatives as part of our joint
research into hidden hardship.
This was the third and final hui as part
of this research, which sought to include
community perspectives on hidden
hardship challenges and work together
with industry to co-design solutions.
At this hui, attendees ranked potential
solutions earlier identified by the group.
These ranged from ‘easy wins’ to
longer-term, more complex ideas
to implement. We are now working
collaboratively to progress solutions.
ENGAGING wITH IwI AND STAKEHOLDERS.
TE TORO KI NGĀ IwI ME TE HUNGA wHAI PĀNGA.
Participants at the hidden hardship hui
at our Auckland office.
KEY GROUPS wE wORK wITH:
EMPLOYEES
COMMUNITY
IwI
INDUSTRY
PARTICIPANTS
SUPPLIERS
INVESTORS
PARTNERS
GOVERNMENT
& REGULATORS
CUSTOMERS
MERCURY INTEGRATED REPORT 2023
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13
KEY RISK
AREA
SAFETYCOMPLIANCE
AND REGULATORY
R EPU TAT IO NOPERATIONALFINANCIALPEOPLE
FACTORS
IMPACTING
CURRENT
TRENDS
Safety continues to be
one of the major risks that
could affect the wellbeing
of employees, contractors,
customers, and the public.
Our focus on process safety
continues as a priority at
our generating assets.
The resources in our
Process Safety team have
been increased to grow our
maturity and effectiveness.
We continue a programme
of work in FY23 to improve
our safety critical elements
at our three major hazard
facilities. We also continue
to monitor and meet the
requirements of our safety
cases, collaborating regularly
with WorkSafe.
Managing safety risk is of
primary importance to us,
particularly with large projects,
including our Turitea and
Kaiwera Downs wind farms,
hydro and geothermal
refurbishments, and
maintenance turnarounds.
Compliance with resource
consents and the Electricity
Industry Participation Code
is important for our ability
to operate.
Compliance with internal
policies is an important
tool to assess risks and
deter fraud.
We continue to consider
possible regulatory change,
which can present
significant ongoing risks
to us. During FY23, several
regulatory processes with
the potential for significant
impact to us were progressed
(e.g. Resource Management
Act reform, Aotearoa New
Zealand Climate Standards
(NZ CS), Emissions
Reduction Plan, National
Energy Strategy, NZ Battery
Project, Price discovery
under 100% renewable
electricity supply, wholesale
market review, Transmission
Pricing Methodology
implementation).
Our reputation with
investors, stakeholders and
the broader community is
one of our most significant
assets. Ensuring that our
fuel resources, plants and
systems don’t have negative
impacts on others is critical.
The importance of
stakeholder relationships
and input has continued to
grow across each of our key
stakeholder groups – our
customers, communities,
partners and owners.
The level and sophistication
of cyber-attacks continue to
increase within New Zealand
and globally. We continue to
implement a comprehensive
and multi-faceted security
uplift programme that seeks
to improve the organisation’s
security maturity across our
IT, Operational Technology
and Internet Service
Provider environments.
Operational risks have
a potentially significant
impact on our ability to
generate electricity, provide
telco and ISP services and
create revenue. The key
operational risks include:
asset management and
availability; fuel availability;
market exposure; and
business interruption events
(such as natural disasters or
global pandemics).
In managing these risks in
FY23, we focussed on
our programme of hydro
refurbishments and
geothermal turnarounds;
adding Turitea South into
our generation fleet;
integrating our retail
businesses and actively
balancing the challenges
faced by highly variable
fuel supplies (water, wind
and gas).
Key financial risks include:
climate change impacts,
appropriate insurance
cover and our ability to
execute on projects and
new growth initiatives.
Finance and related
activities have key process
controls that are subject
to regular review and
continuous improvement.
A core element of financial
sustainability is the
opportunity cost related to
our ability to identify and
execute growth options.
In FY23, this risk was
mitigated through the
completion of the southern
section of the Turitea
wind farm, along with the
successful integration of
our retail businesses.
We continue to deal with
the shifting landscape of
today’s work environment
and markets. Attracting,
developing and retaining
capable people who can
contribute to our strategic
priorities and grow with the
business remains our focus.
We also continue to focus
on the physical and mental
wellbeing of our people.
In FY23 we established a
new “One Mercury” team
culture bringing together
all our people.
Alongside this we are
implementing an Adaptive
Leadership programme,
with the aim of ensuring
our people and business
are dynamic, adaptive and
future ready.
Together these initiatives seek
to create a culture and
way-of-working that embraces
learning, challenges
mindsets, lifts capability
and celebrates curiosity.
OUR
LONG-TERM
ASPIRATIONS
A comprehensive summary of our
key risks and how we manage them
is included in the Governance at
Mercury section of the report.
This page provides a summary of
the trends we have seen this year in
our key risk areas. We take these into
account in our view of what matters
most and to shape our focus for how
we create value over time.
THE RISKS wE FACE.
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wHAT MATTERS MOST
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Our five long-term aspiration categories,
established in 2016, represent the key drivers
of material value creation for our business.
They enable us to integrate what matters
most to Mercury and our stakeholders.
They form the framework for our long-term
strategy and near-term business planning
and reflect the six capitals of the Integrated
Reporting <IR> framework.
Each year our view of what is material for us
is informed by reviewing our strategy against
a broad context including:
• the external environment
• feedback from iwi and stakeholders on
what is important to them about Mercury
• insights from our risk assessment, as well
as opportunities to explore
• other items covered in the preceding pages
We keep up to date with changes in these
areas to consider how our approach needs
to evolve to ensure we continue to create value.
These insights are combined to form a view
of what’s material to our business.
In FY23, we reviewed our long-term aspirations,
taking into account the broad context noted
earlier, and the significant changes to our
business from the recent acquisitions of Tilt
Renewables’ New Zealand operations and
the Trustpower retail business.
As part of this process, we reviewed what
is material to our business which has been
grouped under our five long-term aspiration
areas below:
MATERIALITY ASSESSMENT
<IR> CapitalsOur long-term aspiration areaswhat’s important to us and our stakeholders
Social & Relationship Kiritaki / Customer • Building trust
• Customer experience
• Customer loyalty
• Innovative services
Kōtuitanga / Partnerships• Building trust
• Creating shared value
• Forming strong, long-term relationships
with iwi, industry and our communities
Natural
Manufactured
Kaitiakitanga / Stewardship• Optimising our physical assets
• Improving the natural environment
• Resilience to climate change
Human
Intellectual
Ngā Tāngata / People• Being a learning and adaptive organisation
• People and capability development
• Health, safety and wellbeing
Financial
Arumoni / Commercial • Sustainable commercial growth
• Renewable generation development
Reporting on what’s important to us and our stakeholders forms the basis of this Integrated Report. We will continue to engage with iwi and stakeholders to understand what
matters most to them, as well as to us, to inform our views on materiality.
Ngā Tamariki geothermal station.
PULLING IT ALL TOGETHER.
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HOw wE DELIVER VALUE.
TE PĒwHEA O TĀ MĀTOU TUKU HIRA.
In this section, we report on material activity which has
happened over the past year to build towards reaching our
long-term aspirations. We reflect on our progress, share
successes and how we have responded to challenges
we have encountered.
Aratiatia rapids.
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• Integrating Mercury and Trustpower retail
businesses
• Enabling our business to be Future Ready
• Taking a programme approach to
customer care
• Safety
• Reputation
CONNECTIONS
wITH:
KIRITAKI / CUSTOMER
+ KEY TOPICS– KEY RISK AREAS
• Shaping a collective view on decarbonisation
• Supporting customers’ decarbonisation goals
• Playing an active role in sector evolution
• Compliance & regulatory
• Reputation • Operational
CONNECTIONS
wITH:
KŌTUITANGA / PARTNERSHIPS
+ KEY TOPICS– KEY RISK AREAS
• Commitment to Net-Zero
• Enhancing our existing generation assets
• Collaborating to deliver upgrades after the
Kawerau outage
• Reputation
• Operational
CONNECTIONS
wITH:
KAITIAKITANGA / STEWARDSHIP
+ KEY TOPICS– KEY RISK AREAS
• Building an adaptive and resilient Mercury
• Fostering diversity, equity and inclusion
• Lifting health, safety and wellbeing
• Safety
• People
CONNECTIONS
wITH:
N GĀ TĀN GATA / PEOPLE
+ KEY TOPICS– KEY RISK AREAS
• Responding to the high rainfall
• Executing on new generation at pace
• Focus on maximising value of geothermal
operations
• Operational
• Financial
CONNECTIONS
wITH:
ARUMONI / COMMERCIAL
+ KEY TOPICS– KEY RISK AREAS
A
S
P
I
R
A
T
I
O
N
S
O
U
R
L
O
N
G
T
E
R
M
DELIVERING VALUE AT A GLANCE.
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INTEGRATING MERCURY AND
TRUSTPOWER RETAIL BUSINESSES
Following our acquisition of the Trustpower retail
business in May 2022, we have been working at
pace to integrate our two retail businesses and
position Mercury as ‘Future Ready’. Having a
scaled retail offering enables us to add value
for our customers in terms of convenience, cost
efficiencies and delivery of innovative solutions.
We have called the first stop on our journey
to having a Future Ready retail business ‘Fit
For Now’, denoting a focus on moving quickly
and pragmatically onto a common operating
model (people, process and systems), which
is key to unlocking benefits of the acquisition.
We made significant progress over the period,
including transitioning customers, sites and
people to a single brand (Mercury). As part
of the transition to a single brand, we created
a set of customer offers combining the best
of Mercury and Trustpower’s previous offers.
We also enhanced the digital experience for
customers providing insights, flexibility and more
through a new Mercury app, website, chatbot,
customer bill and MyAccount platform. We are
in the process of ensuring all Mercury customers
have access to these benefits, which will be
achieved when we migrate customers onto our
single technology stack in the coming months.
We are now seeing the benefits from the use of
shared services, decommissioning of several
duplicate enterprise technologies and core retail
business activity. We remain on track to deliver
further signalled benefits over the next two years.
Meanwhile in December we completed
our acquisition of NOW NZ, a small
telecommunications provider based in
Hawke’s Bay, which we originally partnered with
to pilot Mercury Broadband. We see an exciting
opportunity to grow our presence in the small
to medium business telecommunications
market with the help of NOW, which continues
to operate as a standalone business.
1. KIRITAKI
/
CUSTOMER.
Fiona Smith, Gina Mackie and Davey Van Gooswilligen in Tauranga.
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ENABLING OUR BUSINESS TO BE
FUTURE READY
Our vision for growth in our retail business
is centred on meeting our customers changing
needs with a range of bundled services.
'Fit For Now' is the springboard for the next
stage of our journey in which we will realise
remaining synergies and use our scale and
evolved operating model to better capitalise
on future opportunities.
TAKING A PROGRAMME APPROACH
TO CUSTOMER CARE
As one of the largest participants in New
Zealand’s electricity sector, we are mindful
of the material role we can play ensuring the
shift to a low-carbon economy is equitable
for all consumers.
We are taking action to help maintain
accessibility and affordability of electricity
supply for our customers. We take a
programme approach to customer care which
at this stage covers areas such as increasing
our knowledge and understanding, directly
supporting individuals and delivering through
partnerships. Central to our approach is a focus
on holistic solutions for those most in need of
extra support.
Our joint research into hidden hardship with
Genesis is nearing completion and as part
of this we have co-designed several solutions
with community providers to collaboratively
progress. Meanwhile, we have launched a
two-year Winter Energy Study in partnership
with Kāinga Ora, which we see as an exciting
opportunity to test and learn whether a
capped proposition might be a sustainable
future product for customers in hardship.
As part of our direct support this year we
provided financial assistance to alleviate
pressure for households affected by
Cyclones Hale and Gabrielle and the
Auckland Anniversary weekend floods.
This included crediting accounts, waiving
bills and field service fees and providing
one-off payments.
We have meanwhile expanded our support
of social electricity provider Nau Mai Rā, helping
to ensure the continuity of their product for
whānau in need. We continue to support several
ERANZ-managed programmes including a
credit scheme for those affected by the low fixed
user charge tariff phase out and a pilot with the
Ministry of Social Development to fast-track
redirections of WINZ payments towards
customers’ electricity bills, broadening
access to post-pay power. We also continue
to evolve our approach to digital inclusion, taking
learnings from programmes previously
delivered by Trustpower.
We recognise maintaining our licence to
operate is critical and so are extremely
disappointed by an incident which occurred
between 2016 and 2020 that saw us incorrectly
apply early termination fees for about 2,000
customers. In May we were fined $279,500
for breaching the Fair Trading Act in respect
of this matter. We focussed on making
things right with affected customers as
quickly as possible, including completing
remediation almost two years ago.
Malakai Fukofuka and Shazreena Shaheem.
wE ARE MINDFUL OF THE MATERIAL ROLE
wE CAN PLAY ENSURING THE SHIFT TO
A LOw CARBON ECONOMY IS EQUITABLE.
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2. KŌTUITANGA
/
PARTNERSHIPS.
SHAPING A COLLECTIVE VIEW ON
DECARBONISATION
The challenge of decarbonising New Zealand's
energy system is complex and requires
widespread collaboration. It is essential we
work together to achieve the best outcomes
for the country in transitioning to a low-carbon
energy system.
During the year we worked with several of our
electricity sector peers to commission Boston
Consulting Group (BCG) to undertake an
independent study on how best to decarbonise
New Zealand’s economy.
The resulting report, 'The Future is Electric', fills
an important gap, providing a whole-of-
sector view on the best route for the electricity
sector to support Aotearoa’s transition to a
low-carbon energy system.
The report identifies there is more than enough
new renewable generation in the project pipeline
across the sector to meet the projected changes,
amplifying the importance of taking a long-
term view of policy, regulatory and market
settings that enable action.
Alongside this, we made a joint commitment
with a diverse group of energy sector
participants to help reduce emissions and build
a more sustainable future for all New Zealanders.
The ‘Powering Change’ initiative kicked off with
the launch of a new website. This initiative sets
out progress by the sector towards New Zealand’s
climate change goals and details the collective
action of members. It aims to help provide
transparency and give the public confidence
that change is occurring.
Moving forward, the sector is working on
further detailing collective action, including
developing targets to evaluate progress.
We see an opportunity for this progress
to be tracked through the Powering Change
platform, maximising our accountability.
We are currently working with the private
and public sector to understand how this
could look.
70% of our fleet is electric or plug-in hybrid.
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SUPPORTING CUSTOMERS’
DECARBONISATION GOALS
During the year we continued to work with
some of our larger customers to support their
decarbonisation goals including developing
significant Power Purchase Agreements (PPA).
A PPA is an electricity supply agreement,
where a price is agreed for a period of supply.
This included agreeing a long-term PPA
with Amazon for renewable energy for their
Auckland data centres, planned for launch in
2024. Amazon will purchase half the real time
output of Turitea South (the southern section
of Mercury’s Turitea wind farm). Mercury has a
strong pipeline of renewable development
opportunities and having a customer who
is able to buy a significant amount of Turitea
South’s generation means that we remain
well positioned to continue developing
renewable projects at pace.
We also arranged to ‘sleeve’ a PPA between our
customer, Ryman Healthcare (New Zealand’s
largest retirement village operator) and
independent generator Solar Bay.
This contractual ‘sleeving’ structure means
that Mercury supplies electricity when solar
output is low and buys solar output above what
the customer needs if output is high. Mercury
manages the difference between what Ryman
needs and Solar Bay can supply. Through this
arrangement Ryman gets a reliable supply of
power to some of its villages and long-term
price certainty through agreements with both
Solar Bay and Mercury. We acknowledge that
smaller, independent generators have a role
to play in New Zealand’s renewable energy
supply and see potential to support this
through collaborative arrangements like this.
In this case, Ryman will be the new solar
farm’s only customer and having a guaranteed
single buyer means Solar Bay can proceed
with development.
Looking forward, we see agreements like these
become more common as large commercial
customers look to directly support renewable
generation development while maintaining
certainty of cost and certainty of supply.
THE CHALLENGE OF DECARBONISING NEw
ZEALAND'S ENERGY SYSTEM IS COMPLEX AND
REQUIRES wIDESPREAD COLLABORATION.
PLAYING AN ACTIVE ROLE IN
SECTOR EVOLUTION
Market and policy frameworks must evolve to
support the low-carbon transition and keep pace
with rapidly changing technology. During the year
we engaged on key regulatory and policy topics
to seek views from stakeholders and share our
own perspectives.
New Zealand’s first three emissions budgets
provide a clear pathway for reducing emissions.
While cost of living concerns have influenced
the first emissions budget (2022 – 2025),
we advocate for balancing these immediate
pressures with the need to uphold a strong
climate change response framework longer
term. This certainty enables investment and
innovation in renewable electricity generation,
which is vital considering the role of electrification
in New Zealand’s second and third emissions
budgets. New Zealand’s renewable electricity
development pipeline must proceed at pace to
meet anticipated growth in demand.
For this reason, Resource Management
reforms have been a significant area of focus
for Mercury, with Bills for the Natural and
Built Environment Act (NBEA) and Spatial
Planning Act (SPA) published over the year.
In addition to individually submitting our views
to government, we worked with peers to provide
a cohesive industry perspective. Mercury believes
the proposed system needs to go further to
enable vital infrastructure development whilst
still protecting the environment.
Maintaining a secure supply of electricity
is a key challenge as we progress towards a
more renewable future. During the year we
engaged constructively with our peers, the
system operator and regulatory bodies on
this shared challenge. This included putting
forward options for a winter peak product and
engaging on key topics that are likely to form
part of New Zealand’s gas transition plan,
reflecting our view that thermal generation
has a critical role to play in managing security
of supply over the medium term. The Ministry
for Business, Innovation and Employment's
work on electricity market measures will be a
key process in confirming the role of thermal
through the transition, and we continue to
watch this closely.
We also engaged on the Commerce
Commission’s retail service quality work
programme aimed at improving information
retailers provide about mobile and broadband
services. Mercury supports proposals that
provide pricing and service quality information
in a transparent and understandable form.
Helping to make customers’ decisions easier and
promoting service innovation and competition is
becoming increasingly important as a result of
rapid and complex technological change. This
will continue to be a focus going forward as the
Commission looks to build on this programme.
Looking forward, we believe it is crucial that
bipartisan support for the climate change
response architecture continues and we will
advocate strongly for this continuity as a key
signal for our trajectory toward 2050.
Vince Hawksworth, Mercury (centre) with Amazon leaders at Turitea.
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COMMITMENT TO NET ZERO
To play a leading role in Aotearoa New Zealand’s
successful transition to a low-carbon economy,
we must demonstrate how our own actions
are consistent with this objective. This year,
we have set an emissions reduction target
in accordance with the Science Based Targets
initiative (SBTi) framework.
This globally recognised framework provides
a comprehensive and science-based approach
to guide companies in setting emission
reduction targets in line with a 1.5º maximum
global temperature increase and with the
goals of the Paris Agreement. The SBTi
recognises the energy sector will be a critical
enabler for others to achieve their emissions
reduction goals so has shortened the target
date for companies operating in this sector to
2040, 10 years earlier than most other sectors.
Our Climate Transition Action Plan outlines our
targets in more detail together with the actions
we can take as a business. Every individual,
organisation and country have a role to play
in collectively addressing climate change, and
we are confident these targets set Mercury
on the path to actively participate in climate
change mitigation.
Mercury’s targets include:
• Reducing scope 1 emissions (emissions
associated with generating electricity) by
70% per MWh* and maintained at 70%
per MWh* by 2030 and 2040 respectively.
• Reduce scope 3 emissions (emissions from
the sale of natural gas) by 42%* and 90%*
by 2030 and 2040 respectively.
Waikato river.
3. KAITIAKITANGA
/
S T E WA R D S H I P.
* from a 2022 base year.
BY 2030
p
70%
*
BY 2030
p
42%
*
BY 2040
p
70%
*
BY 2040
p
90%
*
SCOPE 1
SCOPE 3
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Agreeing a target and actions sends a clear
message to our people, customers, suppliers,
investors, and other stakeholders on our future
trajectory to mitigate impact. It supports us
to explore innovative technologies and practices,
such as carbon reinjection, that can also lead
to operational efficiencies and enhanced
competitiveness. It helps us deepen relationships
with stakeholders, as we seek to collaborate in
a meaningful way on this shared challenge.
Details of the material risks we will likely navigate
are captured in the Climate Transition Action Plan.
ENHANCING OUR EXISTING
GENERATION ASSETS
During the year we continued to execute on our
scheduled hydro refurbishment programme to
maintain and enhance the generation capacity
and resilience of our hydro stations. This builds
on nearly a decade of ongoing significant
investment and will likely continue over the
next 15 years.
Our investment programme at Karāpiro,
currently valued at ~$90m, continues to
progress with significant planning and enabling
works. This year we achieved the successful
replacement of the first of three generating
units (generators, turbines, and governors).
Works were delivered by our contractor partner
Andritz Hydro, a global Austrian company.
The project will enable the Karāpiro station
to generate renewable power for the next 50
years and enhances value by providing an
additional 5MW per unit, increasing capacity
from 96MW to 112.5MW (32GWh/year).
On-site works for the second unit to be
replaced are now underway, with the full
project scheduled for completion April 2025.
Lead-in work has started for the next two
stations to be rehabilitated. An eight-year
project starting in 2027 at Maraetai I will
see all turbines, generators and governors
replaced at a cost of around $140 million.
The upgrades will add around 32 GWh
annual output to the station (an additional
5-8MW per generating unit).
In addition, planning is underway for Ātiamuri,
with works scheduled for FY2028 to upgrade
all turbines, generators, and governors at a
cost of around $90million. These upgrades
will add 1-4MW per unit.
Like our new generation builds, this very
large and complex programme of work is
further challenged by constraints globally
in manufacture of equipment, supplier
availability and inflation and this is being
factored into our planning.
OUR HYDRO REFURBISHMENT
PROGRAMME BUILDS ON NEARLY A
DECADE OF ONGOING SIGNIFICANT
INVESTMENT.
COLLABORATING TO DELIVER
UPGRADES AFTER THE KAWERAU
OUTAGE
Our asset management team is committed
to ongoing comprehensive analysis to build
our understanding of risks and increase the
resilience of our assets.
Following major damage to the 106MW
Kawerau geothermal power station turbine
in 2021, a $36m project has been carried out
to replace the generator and turbine steam
path. We also took the opportunity to replace
the main control system, major pumping
systems, large diameter steam piping and a
range of ancillary equipment. This large piece
of work involved collaboration across many
teams from geothermal and hydro operations
to accommodate the resource required. This
programme of work will ensure that the station
is ready to run efficiently and safely for the next
decade and beyond.
Karāpiro dam: 39-tonne head gate lift as part of refurbishment project.
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BUILDING AN ADAPTIVE AND
RESILIENT MERCURY
The world is increasingly complex and the
challenges materially different. Climate change,
digital transformation and artificial intelligence,
cybersecurity threats, attracting and retaining
the best people cannot be sufficiently
addressed with simple solutions.
Our business must evolve to enable us to
thrive in these less predictable environments,
so we are moving to more adaptive ways of
thinking and working. We have identified six
key dimensions to help us focus our efforts,
outlined in the infographic on this page.
During the year we focussed on lifting our
people’s capability and experience in adaptive
practice. We established a leadership programme
aimed at developing those in formal and informal
leadership roles to grow their leadership skills
and we built out our coaching capabilities.
Both initiatives equip our people to play an
active role shifting Mercury towards a more
adaptive business.
While we lift people's capabilities in adaptive
practices, we are also introducing these ways
of working into some of the complex problems
we are working on.
The integration of Mercury and Trustpower
retail businesses is an example of where this
has worked well. We have established an adaptive
delivery model, with the project primarily building
on the skills and capability of our own people
rather than external providers.
Another example is in evolving our retail
business planning approach, bringing
multiple teams together to collaborate
towards a shared understanding of business
goals through ‘big room planning’ sessions.
Through this, we better understand
dependencies on other teams, identify
risks and uncover impediments early.
Transitioning to an adaptive organisation
requires a thoughtful and deliberate approach
to people as well as the processes and
structures that hinder or help us deliver.
At times it has been challenging shifting
deeply held beliefs, and we recognise this
will be a continuous journey. In the future
we will be better placed to achieve our
ambitions and leverage the opportunities
that come with inevitable disruption.
Participants of our adaptive leadership programme - Dean Han,
together with Kelly Melia and Angela Kennerley.
4. NGĀ TĀNGATA
/
PEOPLE.
ALIGNED TO
A SHARED PURPOSE
& JOINT OUTCOMES
PEOPLE &
CUSTOMER FOCUSSED
SET UP TO COLLABORATE
& DELIVER THE HIGHEST VALUE
EMBRACES
TRANSPARENCY
AUTONOMY
& EMPOWERMENT
GROWTH MINDSET
& LEARNING CULTURE
ADAPTIVE
ORGANISATION
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FOSTERING DIVERSITY, EQUITY,
AND INCLUSION
Having a team of individuals with different
backgrounds, views, experience, and capability
working together makes us stronger and better
as an organisation. During this financial year
we undertook several initiatives to continue
our journey towards fostering greater diversity,
equity and inclusion. You can read our Diversity,
Equity & Inclusion Policy on our website.
Our Diverse Emerging Leaders programme
helps emerging leaders grow their leadership
capability and sense of belonging by
embracing their cultural identity and the
uniqueness they bring. We built on the
success of last year's pilot and doubled the
number of participants in this year’s cohort who
over seven months completed the programme
where they developed and built capabilities.
They explored topics such as resilience,
authenticity, conflict management, courageous
conversations, career development strategies,
and managing the imposter phenomenon.
We are starting to see the impact of this
programme now. The second cohort’s
programme came to an end in May 2023
and 32% of that group have moved into
more senior roles at Mercury since they
started the programme in November
2022. 86% of the pilot cohort have also
experienced internal movement since
their programme started in August 2021.
Given the impact and success of the
programme, a third cohort will start towards
the end of this calendar year. The impacts of
this programme not only directly contribute
to our Diversity, Equity and Inclusion targets
but more broadly we are beginning to see an
increase in our cultural maturity, competence
and confidence - leading to inclusivity and
greater sense of belonging for all our people.
To increase Mercury’s cultural capability, our
understanding of Te Tiriti o Waitangi (Treaty
of Waitangi) and enable our staff to feel more
confident in their knowledge to participate in
te ao Māori, we launched an online self-driven
e-learning programme. This is focussed on
te ao Māori, Aotearoa New Zealand history and
te reo Māori me ōna tikanga. It includes learning
modules covering pronunciation, greetings
and introductions, general etiquette, history of
Aotearoa and more. About 150 Mercury people
including Board, management and operational
levels are enrolled on the programme which will
span approximately 12 months. At completion,
we are hoping our kaimahi will have more
knowledge, feel empowered to grow their use
of te reo Māori and become more confident
to engage with te ao Māori.
During the year we also boosted the
inclusiveness of our leave policies to better
reflect and allow for the various needs and
circumstances of our people. This includes
a significant update to our Parental Leave
offering, the introduction of Gender Affirmation
Leave and an update to our Bereavement
Leave policy to remove any prescriptive
reference to relationships.
LIFTING HEALTH, SAFETY
AND WELLBEING
This year we have lifted the maturity of our
approach to safety, shifting towards a more
holistic and comprehensive view.
Our new Health, Safety & Wellbeing Policy
was launched in April 2023 to reflect this
way of thinking.
While preventing harm still underpins our
culture, in order to continue to improve in
all areas of health, safety and wellbeing it is
important we do not create too narrow a focus
on zero-harm. Our new policy aims to shift
our culture to one where we can learn from
the things that haven’t gone right and are
encouraged to share those learnings widely.
Our refreshed policy reinforces the Mercury
Attitude of "Care” for safety and seeks to go
beyond being a compliance document – by the
nature of its design and language, it is intended
to be a living document which is accessible
and relevant to all our people regardless of role
or physical location. This policy is bought to
life for our employees through safety material
toolkits to support safety conversations, utilising
'Learning Teams' as an inclusive method to
understand events and developing robust
safety leadership routines.
Longer term we anticipate that in addition to
driving better safety outcomes this enhanced
approach will help lift productivity, improve
employee engagement and contribute to a
more sustainable way of supporting our people.
" The Diverse Emerging Leaders
programme allowed me to realise that
I do have a voice, I do deserve more
and most importantly that I was already
doing that, I just needed to give myself
permission to embrace it."
Shaun A Wilson
Team Leader, Sales Success
OUR PROGRAMME HELPS
EMERGING LEADERS GROw
THEIR LEADERSHIP CAPABILITY
BY EMBRACING THEIR
CULTURAL IDENTITY AND THE
UNIQUENESS THEY BRING.
OUR SKILLS PLEDGE
While we remain supportive of the intent behind the Aotearoa Skills Pledge
Mercury has elected to stop disclosing training data as we have broadened our
approach to learning beyond formal training hours to include learning such as
on-the-job and peer-to-peer learning, secondments, communities of practice,
adaptive learning and coaching or mentoring.
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A third consecutive La Ninā weather system
(wetter North Island, drier South Island) drove
persistent North Island rainfall this year, and
Lake Taupō and the catchment had the highest
ever in-flows on record. Full year generation
from the Waikato Hydro System was above
5,200 GWh (compared with about 4,000 GWh
in an average year). The high inflows required
us to spill more than 1,000 GWh (divert water
past the power stations) to help manage lake
levels and protect our assets.
The Taupō Gates and the eight dams that
make up the Waikato Hydro System are a
critical tool to help manage the impact of
floods and droughts in the Waikato catchment
from Taupō to Port Waikato. During the
extreme rainfall in January-February 2023 the
lake level went above our Maximum Control
Level by 2.8cm for eight days. The effects of
extreme weather events are anticipated by
our resource consents, with the probability
of exceeding Maximum Control Level at 1
in 5 years. Prior to the exceedance this year,
the last time the lake level exceeded the
Maximum Control Level was in 2011.
EXECUTING ON NEW GENERATION
AT PACE
Developing more renewable generation remains
a key growth area for Mercury and is one of
the most meaningful ways in which we can
contribute to New Zealand’s decarbonisation
goals. We are well positioned to develop new
generation at the pace required and have
flexibility to respond to changing market
conditions thanks to our diverse suite of options
including onshore wind, geothermal, capacity
and flexibility projects.
wAIKATO HYDRO
GENERATION
5,209Gwh
5. ARUMONI
/
COMMERCIAL.
RESPONDING TO THE
HIGH RAINFALL
Taupō Gates looking south.
wE HAVE A PREMIUM DEVELOPMENT
PIPELINE AT VARYING STAGES
OF READINESS.
We have a premium development pipeline at
varying stages of readiness, and at over 9,000
GWh this is equal in size to our existing fleet
of hydro, geothermal and wind generation.
We remain confident we have the resource
and capability to develop this considerable
pipeline ourselves but also continue to look
for opportunities to accelerate development,
including through partnerships.
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We celebrated the final construction stage of
the $450m Turitea wind farm at a ceremony
attended by the Minister of Energy Dr Megan
Woods, mana whenua Rangitāne o Manawatū,
local government, delivery partners and
community. This considerable project adds
2% additional renewable energy to the national
grid, and over 2,500 people worked to bring
this new electricity to New Zealand over the
course of the project.
We also started construction at our $115m
Kaiwera Downs 1 wind farm which is proceeding
to plan. Once complete in October 2023, this
wind farm will have annualised generation of
147 GWh. We have staged the construction
of this wind farm so that the initial 10 turbines
are constructed now, with the ability to develop
the larger second phase when market
conditions allow.
We continue to develop other projects in our
pipeline. Kaiwera Downs 2 and Kaiwaikawe
wind farms are now at the final stages of
planning, including monitoring post-COVID
market and supply chain pressures as we
move towards final investment decisions.
Looking forward, we are actively developing
further sites, including monitoring wind
at sites where we have options, and actively
engaging with landowners. We are also
working towards consenting further projects,
providing further flexibility to adapt to changing
market conditions.
We are developing a project to add a
fifth generating unit to the Ngā Tamariki
geothermal station, adding ~47MW capacity
to the station. With resource consent now
approved for this additional unit, we are currently
progressing the design and procurement prior
to Final Investment Decision. The project to
add this fifth unit comes after nearly ten
years of operating the current four units,
developing a deep understanding of overall
sustainable development capacity to be
certain that adding the fifth unit will not be
detrimental to the geothermal reservoir’s
ongoing health. The project design will also
consider the re-injection of non-condensable
gases into the reservoir.
FOCUS ON MAXIMISING VALUE OF
GEOTHERMAL OPERATIONS
Geothermal generation is a key supplier of
baseload to the national energy mix. Our
geothermal operations faced a challenging year
with several unplanned outages across the fleet.
A dedicated Optimisation Team is working
to maximise the value of our geothermal
stations, with initiatives underway to improve
performance of the plant machinery and
processes and improve output. This includes
control system optimisation at the Ngā
Tamariki geothermal station, improving
management of non-condensable gas
accumulation in OEC generating units,
reducing inlet pressure on one of the units
at Mōkai, and removal of a restriction in the
reinjection system at Ngā Awa Pūrua.
We have begun our most ambitious drilling
campaign in over a decade, with eight “make
up” wells (to maintain generating capacity) and
one well repair in a campaign that is scheduled
for completion late 2024. The campaign
consists of three wells at Kawerau, two at Ngā
Tamariki, and a further three at Rotokawa
geothermal power stations, with a total
investment of $135m.
Rotokawa geothermal field.
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This section explains how our integrated thinking, our decisions and our
actions play out in financial results. We provide commentary on our financial
performance for the year to the end of June 2023 compared with prior years,
as well as our auditor’s report and our financial statements. Segment reporting
has been set out so that you can clearly see the financial dynamics of our
generation operations as distinct from our retail operations.
Whirinaki River.
LOOKING AT THE NUMBERS.
TE TITIRO KI NGĀ TATAU.
28 FINANCIAL COMMENTARY
29 FINANCIAL TRACK RECORD
30 INDEPENDENT AUDITOR'S REPORT
GROUP FINANCIAL STATEMENTS
33 CONSOLIDATED INCOME STATEMENT
33 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
34 CONSOLIDATED BALANCE SHEET
35 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
35 CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
36 GENERAL INFORMATION & SIGNIFICANT MATTERS
A. FINANCIAL PERFORMANCE
38 A1. REVENUE
38 A2. SEGMENT REPORTING
41 A3. TAXATION
B. OPERATING ASSETS
42 B1. PROPERTY, PLANT & EQUIPMENT
44 B2. INTANGIBLE ASSETS
C. WORKING CAPITAL AND PROVISIONS
45 C1. RECEIVABLES
46 C2. INVENTORIES
46 C3. PROVISIONS
D. FUNDING
47 D1. SHARE CAPITAL & DISTRIBUTIONS
47 D2. BORROWINGS
49 D3. COMMITMENTS & CONTINGENCIES
50 D4. CASH & CASH EQUIVALENTS
E. GROUP STRUCTURE
50 E1. ASSOCIATES & JOINT ARRANGEMENTS
51 E2. RELATED PARTY TRANSACTIONS
F. RISK
51 F1. DERIVATIVE FINANCIAL INSTRUMENTS
55 F2. FINANCIAL RISK MANAGEMENT
G. OTHER
57 G1. SHARE BASED PAYMENTS
57 G2. SUBSEQUENT EVENTS & OTHER MATTERS
CONTENTS.
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28
MENU
FINANCIAL COMMENTARY.
Mercury’s FY2023 EBITDAF is $841 million, up more than 40%
on the prior year $581 million. This record high result reflects
the ongoing benefits from the Tilt and Trustpower acquisitions
made during FY2022, a full year of operations for the north
section of Turitea windfarm and commissioning of the south
section, as well as above average hydro generation in a year
of extremely high inflows.
RETAIL INTEGRATION
One team, one brand, one purpose. Significant progress was
made during FY23 “interGREATing” our Trustpower and Mercury
staff, customers, brands, processes, and systems. All Trustpower
customers rebranded to Mercury in mid-June, with a refreshed
Gentrack stack, loyalty programme, new bill, website, and app.
The successful transition was reflected in the strong uptake of the
new Mercury customer app by over 60k customers and continued
connection growth, which lifted to 860k by the end of the year.
OPERATIONAL ACTIVITY
At 5,209GWh, Mercury’s hydro generation was up by almost
1100GWh compared to the group’s long-term average, and
up over 1500GWh compared to the dry prior year. Lake Taupō
started the financial year at 70% storage, ~120GWh above
average, and storage remained above average across the entire
year as extremely wet conditions persisted with 100th percentile
inflows to the Taupō/Waikato catchment. Management of the
lake level also resulted in ~1100GWh of spill during the year, and
the lake ended the year with storage above average by ~80GWh.
Geothermal generation was down 210GWh on the prior year due
to the planned outage at the Kawerau geothermal station to
replace the steam path and generator damaged in the June
2021 outage, as well as various planned and unplanned outages
at other stations.
Wind generation increased 202GWh despite below average
wind conditions with the addition of new generation from the
south section of the Turitea windfarm following completion of
construction in early 2023.
The above average hydro generation meant that net position
increased from neutral last year to 560GWh long for FY2023.
Average spot prices were $60/MWh lower although the impact
on the portfolio was mitigated by hedging through short-dated
sales which achieved prices well above spot outcomes.
In our customer business, we again saw lifts in customer yields
across all customer segments. Yields in the commercial and
industrial segment (physical and financial) increased by $14/
MWh over the period. Average mass market yields increased
$7/MWh. Mass market customer numbers increased across all
products (electricity, gas, telco and mobile) with customers with
2 or more products up 14,000 to 190,000 continuing Mercury’s
transition to a truly multi-product utility provider.
OPERATING EARNINGS (EBITDAF)
Mercury’s EBITDAF of $841 million rose $260 million from the
previous year, as explained below.
Mercury’s trading margin of $1,163 million was up $418 million
from the previous year’s trading margin, driven by above average
hydro generation, new wind generation from Turitea and increased
scale of the retail business following the Trustpower acquisition in
the prior year.
Operating costs increased by $116 million on the prior year,
primarily due to an increase in operational activity resulting
from the Trustpower retail acquisition, including spend on
the Retail Integration as noted above.
PROFIT FOR THE YEAR
Mercury’s net profit after tax of $103 million was down
significantly from the prior year, primarily due to the $367 million
non-taxable gain on disposal of shares in Tilt recognised in
FY2022. In addition to the $260 million increase in EBITDAF
described above, reductions to profit of note were fair
value movements ($126 million), impairments ($12 million),
revaluation loss on generation assets ($41 million),
depreciation ($51 million), and interest costs ($39 million).
CAPITAL STRUCTURE AND DIVIDENDS
Net debt was $1,907 million as at 30 June 2023, a decrease
of $54 million from the prior year. Mercury’s USD 30m tranche
of USPP Notes was repaid in December 2022 and a $25m
wholesale bond was repaid in March 2023. $150m of senior
retail green bonds was issued in June 2023 and tracked
in accordance with Mercury’s Green Financing Framework.
Treasury stock of $28 million was re-issued through FY2023
in relation to Mercury’s dividend reinvestment plan (DRP).
The company’s gearing level is calculated at 2.0 times debt/
EBITDAF after adjusting for Mercury’s subordinated debt.
Gearing is down on the previous year due to the increase in
EBITDFAF and slight decrease in debt. The gearing ratio remains
within Mercury’s target range of 2.0x to 3.0x debt/EBITDAF
supporting our S&P credit rating of BBB+. At year end, Mercury
held 13 million shares as treasury stock, has available debt
headroom of $595 million and held cash and cash equivalents
of $75 million. This continues to provide balance sheet flexibility
for growth over and above current commitments.
A fully imputed final ordinary dividend of 13.1 cents per share
(cps) has been declared. This brings the full-year ordinary dividend
to 21.8 cps, up 9% on prior year (from 20.0 cents per share),
marking our fifteenth consecutive year of ordinary dividend
growth. Under the terms of Mercury’s DRP, dated 22 February
2022, shareholders may elect to receive the dividend either wholly
or partially by receiving Mercury ordinary shares in lieu of cash.
The Board has determined that shares issued under the DRP in
respect of the 2023 final ordinary dividend will be issued at a
discount of 2.0% to the daily volume weighted average share
price calculated in accordance with the DRP terms and conditions.
CASH FLOwS FROM OPERATING ACTIVITIES
Net cash provided by operating activities represents
cashflows from the sale of electricity, gas, broadband, and
telecommunication services, along with the costs associated
with their sale and the cash costs of interest and taxes. Cash
flows from operating activities were up $226 million this year,
largely due to increased EBITDAF.
BALANCE SHEET
Total assets of the company reduced by $212 million, due mainly
to changes in the fair value of financial instruments assets.
Stay in business capital expenditure (CAPEX) increased by $51
million on the prior year at $119 million, with major work including
Retail Integration, the Kawerau turbine and steam path
replacement, the first unit of the Karāpiro rehabilitation, and
preparation for the drilling campaign. Leaving aside the Tilt and
Trustpower retail acquisitions made in FY2022, growth CAPEX was
up $92 million on the prior year to $177 million with completion
of the Turitea windfarm and beginning of the construction of the
first stage of Kaiwera Downs windfarm which is expected to be
operational in the first half of FY2024.
MERCURY INTEGRATED REPORT 2023
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FINANCIAL PERFORMANCE TRENDS
For the year ended 30 June ($ million)
2023202220212020
1
2019
2
Income statement
Trading margin
1,163745616652667
EBITDAF
841581463490506
Net profit for the year
103469141209357
Balance sheet
Total shareholders’ equity
4,8494,7524,1863,7333,537
Total assets
9,4199,6317,9786,8776,484
Total liabilities
4,5704,8793,7923,1442,947
Cash flow
Operating cash flow
578352338352361
Investing cash flow
(271)(534)(296)(194)63
Financing cash flow
(297)8442(173)(335)
Capital expenditure
Total capital expenditure
2961,420250275115
Growth capital expenditure
1771,35219416526
Stay-in-business capital expenditure
119685611089
Other financial measures
Free cash flow
459284282242272
Ordinary and special declared dividends
302275231215211
Ordinary dividends per share (cents)
21.820.017.015.815.5
Earnings per share
7.4 434.3210.3615.3626.23
Net debt
1,9071,9611,3291,1491,096
Gearing (net debt/net debt + equity, %)
28.229.224.123.523.7
Debt/EBITDAF (x)
3
2.02.92.52.21.9
FINANCIAL TRACK RECORD.
For the year ended 30 June ($ million)
2023202220212020
1
2019
2
Operational measures
Total recordable injury frequency rate (TRIFR)
4
0.490.600.641.260.72
Sales to customers (FPVV, GWh)
6,7495,1054,5224,3614,500
Electricity customers (‘000)
590 574328348373
Electricity generation (GWh)
9,038 7,4996,2056,3316,703
1
Restated for change in accounting policy in relation to configuration and customisation costs incurred in implementing SaaS arrangements.
2
Financial results for the period 30 June 2019 include Metrix which the Group sold on 1 March 2019.
3
Restated and adjusted for S&P treatment.
4
Per 200,000 hours; includes on-site employees and contractors.
MERCURY INTEGRATED REPORT 2023
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OPINION
We have audited the consolidated financial statements of the
Group on pages 33 to 57, that comprise the consolidated balance
sheet as at 30 June 2023, the consolidated income statement,
consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated cash flow
statement for the year then ended on that date, and notes to the
consolidated financial statements that include accounting policies
and other explanatory information.
In our opinion, the consolidated financial statements of the Group
present fairly, in all material respects, the consolidated financial
position of the Group as at 30 June 2023, and its consolidated
financial performance and cash flows for the year then ended
in accordance with New Zealand Equivalents to International
Financial Reporting Standards and International Financial
Reporting Standards.
BASIS FOR OPINION
We conducted our audit in accordance with the Auditor-General’s
Auditing Standards, which incorporate the Professional and
Ethical Standards and the International Standards on Auditing
(New Zealand) issued by the New Zealand Auditing and
Assurance Standards Board. Our responsibilities under those
standards are further described in the
Auditor’s responsibilities
for the audit of the consolidated financial statements
section of
our report. We are independent of the Group in accordance with
the Auditor-General’s Auditing Standards, which incorporate
Professional and Ethical Standard 1:
International Code of Ethics
for Assurance Practitioners
issued by the New Zealand Auditing
and Assurance Standards Board, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
In addition to the audit, we have carried out engagements in the
areas of a review of the Group’s consolidated financial statements
for the six months ended 31 December 2022, agreed upon
procedures, pre-assurance reviews and other limited assurance
engagements, which are compatible with independence
requirements. Partners and employees of our firm may deal with
the Group on normal terms within the ordinary course of trading
activities of the business of the Group. Other than the audit and
the engagements described, we have no relationship with or
interests in the Group or any of its subsidiaries.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
consolidated financial statements of the current period.
These matters were addressed in the context of our audit
TO THE SHAREHOLDERS OF MERCURY NZ LIMITED
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2023
The Auditor-General is the auditor of Mercury NZ Limited (‘the Company’). The Auditor-General has appointed me, Lloyd Bunyan,
using the staff and resources of Ernst & Young, to carry out the audit of the consolidated financial statements of the Group
(comprising the Company, its subsidiaries, and other controlled entities) on his behalf.
of the consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate
opinion on these matters.
We have fulfilled the responsibilities described in the
Auditor’s
responsibilities for the audit of the consolidated financial
statements
section of the audit report, including in relation to
these matters. Accordingly, our audit included the performance
of procedures designed to respond to our assessment of the
risks of material misstatement of the consolidated financial
statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the
basis for our audit opinion on the accompanying consolidated
financial statements.
INDEPENDENT AUDITOR’S REPORT.
MERCURY INTEGRATED REPORT 2023
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why significantHow our audit addressed the key audit matter
Generation assets were revalued to $7,773 million at 30 June
2023 as set out in note B1 of the consolidated financial
statements. The generation assets represent approximately
83% of the Group’s total assets.
The Group engages an external valuation specialist to estimate
the fair value of generation assets using a discounted cash
flow model. The most significant inputs used to estimate
the fair value of the generation assets include the forecast
wholesale electricity price path, generation volumes and the
discount rate as described in note B1 of the consolidated
financial statements.
The forecast wholesale electricity price path and discount rate
assumptions are estimated by the Group’s external valuation
specialist (“valuer”). Forecast generation volumes are based
on the Group’s own forecast average generation volumes and
are assessed by the valuer.
We consider the valuation of generation assets to be a key
audit matter given the significance of the assets to the
Group and because the inputs to the valuation models
are inherently subjective.
In obtaining sufficient appropriate audit evidence we:
• met with the valuer to understand the valuation methods
adopted and the significant inputs used by the valuer to
estimate the fair value of the generation assets as at
30 June 2023.
• compared forecast generation volumes to historical
generation volumes.
• involved our own valuation specialists to:
- consider the process used to determine the forecast
wholesale electricity price path estimated by the valuer;
and
- assess the appropriateness of the discount rate.
• assessed the competence, capabilities and objectivity of the
valuer;
• assessed whether the valuation adjustments made to the
recorded asset values were in accordance with the Group’s
accounting policy; and
• assessed the adequacy of the related financial statement
disclosures in note B1.
As a result of the above procedures, we considered the
valuation techniques and key assumptions reasonable in
forming our opinion on the financial statements as a whole.
why significantHow our audit addressed the key audit matter
The Group’s activities expose it to certain risks which
are managed using derivative financial instruments.
At 30 June 2023, the fair value of derivative assets total
$444 million and derivative liabilities total $449 million as
set out in note F1 of the consolidated financial statements.
These balances include certain electricity price derivatives
for which the valuation inputs are not readily observable
in active primary or secondary markets and require
the use of more complex valuation assumptions including
the Group’s internal forecast wholesale electricity price
path. Derivatives for which the valuation inputs are not
readily observable are referred to as ‘level 3’ derivatives
as disclosed in note F1 of the consolidated financial statements.
We consider the valuation of level 3 derivatives to be a key
audit matter as the inputs to the valuation models are
inherently subjective.
In obtaining sufficient appropriate audit evidence we:
• involved our valuation specialists to assess the models used
to estimate the fair value of the level 3 derivatives as at
30 June 2023 on a sample basis. Our valuation specialists:
- evaluated the appropriateness of the valuation
methodologies; and
- assessed the Group’s internal forecast wholesale electricity
price path by comparing it to other price path estimates
obtained in performing the generation asset valuation
procedures detailed above.
• together with our internal valuation specialists, challenged
key assumptions and inputs.
• agreed key contract terms, including contract start and
maturity dates and electricity strike prices, to the relevant
contract on a sample basis.
• assessed the adequacy of the related financial statement
disclosures as described in notes F1 and F2.
As a result of the above procedures, we considered the
valuation techniques and key assumptions reasonable in
forming our opinion on the financial statements as a whole.
VALUATION OF GENERATION ASSETSVALUATION OF LEVEL 3 DERIVATIVE FINANCIAL INSTRUMENTS
MERCURY INTEGRATED REPORT 2023
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32
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OTHER INFORMATION
The Directors are responsible on behalf of the Group for
the other information. The other information comprises the
information included on pages 1 to 29 and 58 to 121 but does
not include the consolidated financial statements and our
auditor’s report thereon.
Our opinion on the consolidated financial statements does
not cover the other information and we do not express any
form of audit opinion or assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements, or our
knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed,
we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
DIRECTORS’ RESPONSIBILITY FOR THE
CONSOLIDATED FINANCIAL STATEMENTS
The Directors are responsible on behalf of the Group for the
preparation and fair presentation of the consolidated financial
statements in accordance with New Zealand Equivalents to
International Financial Reporting Standards and International
Financial Reporting Standards, and for such internal control as
the Directors determine is necessary to enable the preparation
of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors
are responsible on behalf of the Group for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative
but to do so.
The Directors’ responsibilities arise from the Financial Markets
Conduct Act 2013.
AUDITOR’S RESPONSIBILITY FOR THE AUDIT OF THE
CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with the
Auditor-General’s Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of shareholders taken on the basis of
these consolidated financial statements.
As part of an audit in accordance with the Auditor-General’s
Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
• Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related
disclosures made by management.
LLOYD BUNYAN // ERNST & YOUNG
ON BEHALF OF THE AUDITOR-GENERAL
AUCKLAND, NEW ZEALAND
21 AUGUST 2023
• Conclude on the appropriateness of the use of the going
concern basis of accounting by the directors and, based on the
audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures
in the consolidated financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure, and content
of the consolidated financial statements, including the
disclosures, and whether the consolidated financial
statements represent the underlying transactions
and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities
within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction,
supervision, and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with the Directors regarding, among other
matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide the Directors with a statement that we have
complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we
determine those matters that were of most significance in the
audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Our responsibilities arise from the Public Audit Act 2001.
MERCURY INTEGRATED REPORT 2023
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33
CONSOLIDATED INCOME STATEMENT.
For the year ended 30 June 2023
Note
2023
$M
202 2
$M
RevenueA1, A22,7302,188
ExpensesA2(1,900)(1,602)
Depreciation and amortisationB1, B2(344)(293)
ImpairmentA2, B2(12)–
Revaluation loss of generation assetsA2, B1(41)–
Change in the fair value of financial instrumentsF1, F2(172)(85)
Change in the fair value of carbon units held for tradingC2(36)3
Share of profit/(loss) from associates and joint venturesE15 (5)
Gain/(loss) on acquisitions and disposals12 366
Interest incomeA23 2
Interest expenseA2(103)(64)
Profit before tax142 510
Tax exp e nseA3(39)(41)
Profit for the year attributable to owners of the parent103 469
Basic and diluted earnings per share (cents)7.4 434.32
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME.
For the year ended 30 June 2023
Note
2023
$M
202 2
$M
Profit for the year attributable to owners of the parent103 469
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Change in asset revaluation reserve 113 298
Change in cash flow hedge reserve transferred to balance sheetF1 2 (1)
Share of movements in associates' and joint ventures' reservesE1 11 1
Tax ef fe c t (31)(83)
Items that may be reclassified subsequently to profit or loss
Change in cash flow hedge reserveF121259
Transfer of share of associate's reserves to profit or loss upon disposal of investment in associateF1 – (21)
Tax ef fe c t(60)(16)
Other comprehensive income for the year, net of taxation247237
Total comprehensive income for the year attributable to owners of the parent350706
The accompanying notes form an integral part of these financial statements.
GROUP FINANCIAL STATEMENTS.
MERCURY INTEGRATED REPORT 2023
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34
PRUE FLACKS // CHAIR OF
THE BOARD OF DIRECTORS
21 August 2023
JAMES MILLER // CHAIR OF THE RISK
ASSURANCE AND AUDIT COMMITTEE
21 August 2023
CONSOLIDATED BALANCE SHEET.
As at 30 June 2023
Note
2023
$M
Restated 202 2
$M
SHAREHOLDERS’ EQUITY
Issued capital 378 378
Treasury sharesD1 (34) (50)
Reserves 4,505 4,424
Total shareholders’ equity 4,849 4,752
ASSETS
Current assets
Cash and cash equivalentsD4 75 65
Trade and other receivablesC1 440 489
Contract assets and costs 32 20
InventoriesC2 91 94
Derivative financial instrumentsF1 201 311
Total current assets 839 979
Non-current assets
Property, plant and equipmentB1 8,099 8,080
Intangible assetsB2 138 123
Investment in and advances to associates and joint venturesE180 73
Advances to joint operationsE1 4 4
Trade and other receivablesC1 1 3
Contract assets and costs 15 10
Derivative financial instrumentsF1 243 359
Total non-current assets 8,580 8,652
Total assets9,4199,631
Note
2023
$M
Restated 202 2
$M
LIABILITIES
Current liabilities
Payables and accruals 344 383
ProvisionsC33-
BorrowingsD2 375 561
Derivative financial instrumentsF1 186 292
Taxation payableA3 44 14
Total current liabilities 9521,250
Non-current liabilities
ProvisionsC3 81 81
Derivative financial instrumentsF1 263400
BorrowingsD2 1,523 1,395
Deferred taxA3 1,751 1,753
Total non-current liabilities 3,6183,629
Total liabilities 4,570 4,879
Net assets 4,849 4,752
For and on behalf of the Board of Directors who authorised the issue of the Financial Statements on 21 August 2023.
The accompanying notes form an integral part of these financial statements.
MERCURY INTEGRATED REPORT 2023
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35
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY.
For the year ended 30 June 2023
Note
Issued
capital
$M
Retained
earnings
$M
Asset
revaluation
reserve
$M
Cash flow
hedge
reserve
$M
Other
reserves
$M
Total
equity
$M
BALANCE AS AT 1 JULY 2021 378 2143,959(268)(97)4,186
Recycling of share of associates' reserves to
retained earnings upon disposal–23(21)–(2)–
Transfer of share of associates' reserves to
profit or loss upon disposal –––(20)(1)(21)
Movement in asset revaluation reserve,
net of taxation––215––215
Movement in cash flow hedge reserve,
net of taxation–––22–22
Share of movements in associates’ and joint
ventures’ reserves–––21–21
Other comprehensive income–2319423(3)237
Net profit for the year–469–––469
Total comprehensive income for the year–49219423(3)706
Dividend–(248)–––(248)
Issue of treasury shares–58––50108
Balance as at 30 June 20223785164,153(245)(50)4,752
BALANCE AS AT 1 JULY 2022 378 516 4,153 (245) (50) 4,752
Movement in asset revaluation reserve,
net of taxation––82–– 82
Movement in cash flow hedge reserve,
net of taxation––– 154 – 154
Share of movements in associates’ and joint
ventures’ reserves–––11–11
Other comprehensive income–– 82 165 – 247
Net profit for the year– 103 –––103
Total comprehensive income for the year–10382 165 –350
Dividend– (286)––– (286)
Issue of treasury shares for dividend
reinvestment programmeD1– 15 ––1328
Sale of treasury sharesD1–2––35
Balance as at 30 June 2023378 350 4,235 (80) (34) 4,849
CONSOLIDATED CASH FLOw STATEMENT.
For the year ended 30 June 2023
Note
202 3
$M
202 2
$M
CASH FLOwS FROM OPERATING ACTIVITIES
Receipts from customers 2,620 2,011
Payments to suppliers and related parties (1,687) (1,433)
Payments to employees (147) (93)
Interest received 3 2
Interest paid (104) (61)
Taxes paid (107) ( 74)
Net cash provided by operating activitiesD4 578 352
CASH FLOwS FROM INVESTING ACTIVITIES
Payments for acquisition of property, plant and equipment (250)(114)
Payments for acquisition of intangibles (47)(25)
Proceeds from the disposal of investment in Tilt Renewables Limited–603
Proceeds from receivables recognised from acquisitions –124
Payments for acquisition of NOW New Zealand (17)–
Payments associated with business combinations, net of cash acquired – (1,099)
Distributions received from/(Advances paid to) associates and joint ventures 6 10
(Lodgements)/return of prudential deposits 37 (33)
Net cash (used)/received in investing activities (271)(534)
CASH FLOwS FROM FINANCING ACTIVITIES
Proceeds from borrowings 509 777
Repayment of borrowings (544)(548)
Principal repayment of lease liabilities (9)(6)
Proceeds from the sale of treasury shares 5 93
Dividends paid (258)(232)
Net cash (used)/received in financing activities (297)84
Net increase/(decrease) in cash and cash equivalents held 10 (98)
Cash and cash equivalents at the beginning of the period 65 163
Cash and cash equivalents at the end of the period 75 65
Cash balance comprises:
Cash held at bank at the end of the period7565
The accompanying notes form an integral part of these financial statements.
The 'Other reserves' category includes treasury shares, the foreign currency translation reserve
and the share based payment reserve.
MERCURY INTEGRATED REPORT 2023
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36
GENERAL INFORMATION AND SIGNIFICANT
MAT T ER S
GENERAL INFORMATION
These consolidated financial statements (“Group financial
statements”) are for Mercury NZ Limited Group (“the Group”).
The Group financial statements comprise Mercury NZ Limited
("the Company") as the parent, and its subsidiaries, including its
investments in associates and interests in joint arrangements.
The Company is incorporated in New Zealand and registered under
the Companies Act 1993. It is listed on the NZX Main Board and on
the ASX, with foreign exempt listed status. It also has bonds quoted
on the NZX Debt Market. The Company is an FMC reporting entity
under the Financial Markets Conduct Act 2013.
The Company is a mixed ownership model company, majority
owned by the Government, bound by the requirements of the Public
Finance Act 1989. The liabilities of the Group are not guaranteed in
any way by the Government or by any other shareholder.
BASIS OF PREPARATION
The Group financial statements have been prepared:
• in accordance with the Financial Markets Conduct Act 2013
and Generally Accepted Accounting Practice in New Zealand
(“GAAP”). They comply with New Zealand equivalents to
International Financial Reporting Standards (“NZ IFRS”)
and International Financial Reporting Standards ("IFRS")
as appropriate for profit-oriented entities
• on a historical cost basis, with the exception of certain fair
value measurements
• using the same accounting policies for all reporting periods
presented, with the exception of a change in the accounting
treatment of unhedged electricity derivatives
(see Significant Matters)
• in millions of New Zealand dollars, unless otherwise stated
• exclusive of GST, with the exception of payables and
receivables that include GST invoiced.
ESTIMATES & JUDGEMENTS
The preparation of financial statements requires judgements
and estimates that impact the application of policies and the
reported amounts of assets and liabilities, income and expenses.
Actual results may differ from these estimates.
The areas of significant estimates and judgements are as follows:
• Purchase price allocation as a result of the acquisition of
Trustpower's retail business and NOW New Zealand Ltd
(refer to Acquisition Accounting and Significant Matters)
• Fair value of generation plant and equipment (refer note B1)
• Valuation of financial instruments (refer notes F1 and F2).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
ACQUISITION ACCOUNTING AND SIGNIFICANT
MAT T ERS
Acquisition of Trustpower Limited's Retail Business
("Trustpower transaction")
In the previous reporting period the Group completed its acquisition
of Trustpower Limited's retail business and disclosed a provisional
purchase price allocation. The Group has now completed its
purchase price allocation in accordance with NZ IFRS 3
Business
Combinations.
The fair values allocated to the assets and liabilities,
and the linked derivative are disclosed below. The final allocation
differs from the provisional purchase price allocation by
$1 million as a result of a reduction in the contract assets
balance acquired and a corresponding reduction in the acquisition
consideration amount.
Acquisition consideration -
by way of cash ($M)470
Fair value allocated
on 1 May 2022 ($M)
Derivative financial instruments 488
Intangible assets 32
Property, plant and equipment 19
Right-of-use assets 22
Lease liabilities (22)
Contract assets 28
Inventories 3
Receivables 49
Payables and accruals (3)
Deferred tax liabilities (146)
Net assets 470
The Group previously recognised a bargain purchase gain of
$1m from the transaction.
Acquisition of remaining shares in NOw New Zealand Ltd
In the 2021 financial year Mercury acquired a 48% interest in
NOW New Zealand ("NOW"). On 15 December 2022, the Group
paid $16.7m in cash to acquire the remaining 52% of shares in
NOW. After considering the acquisition date fair value of the
existing 48% interest, this resulted in the entire investment being
valued at $32.4m and a gain of $12m being recognised in the
income statement. The Group has prepared a purchase price
allocation in accordance with NZ IFRS 3
Business Combinations.
The fair value allocated to the asset and liability classes upon
acquisition are disclosed below.
Fair value allocated on
15 December 2022 ($M)
Customer assets 30
Property, plant and equipment 4
Receivables 3
Payables and accruals (6)
Borrowings (3)
Deferred tax liabilities (6)
Goodwill 10
Net assets acquired 32
In the December 2022 interim report, the Group recognised $9m
goodwill from the transaction based on the preliminary acquisition
accounting. The valuation of the assets and liabilities acquired has
now been completed as above and total goodwill of $10m has
been recognised.
Since acquisition, revenue and net loss after tax attributable to
NOW within the consolidated statement of profit and loss totalled
$20m and $(1)m respectively. If the acquisition had occurred as
of the beginning of the reporting period, the total revenue and net
loss after tax attributable to NOW would have been $45m and
$(6)m respectively.
MERCURY INTEGRATED REPORT 2023
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37 Kawerau geothermal station.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
Change in accounting treatment of unhedged
electricity derivatives
Following the IFRS Interpretations Committee (IFRIC) Agenda
Decision on Physical Settlement of Contracts to Buy or Sell a
Non-Financial Item (IFRS 9
Financial Instruments), the Group has
reassessed the accounting treatment of realised gains and losses on
unhedged electricity derivatives. In 2023, realised gains and losses
on unhedged derivative contracts will not be reclassified to revenue
or expenses and will continue to be recognised within the change in
fair value of financial instruments in the statement of profit and loss.
Settlements of unhedged derivatives that occurred in 2022 have not
been reclassified or restated in the financial statements as the overall
impact is not considered material.
Management reporting continues to reclassify realised gains
or losses on unhedged derivatives to revenue or expenses which
means the gains and losses are included within the non-GAAP
measure of EBITDAF (Earnings before net interest expense, tax
expense, depreciation, amortistion, change in the fair value of
financial instruments, gain/(loss) on disposal and impairments).
This measure is reported in Note A2 and includes a reconciliation
of realised and unrealised changes in fair value between the
statement of profit and loss and EBITDAF.
Restatement on presentation of Financial Transmission
Rights (FTRs):
An error has been identified in the presentation of Financial
Transmission Rights (FTRs). FTRs are Level 1 electricity derivatives
used to manage locational price risk. The Group previously disclosed
FTRs gross with acquisition cost as a liability in Payables and accruals
and its hedge value separately as an asset in Derivative financial
instruments. As these are net settled, the Group has changed
presentation on the consolidated balance sheet in 2023 and
restated the prior year. The effects of this change in presentation
on the consolidated balance sheet are shown in the following table:
Audited year
ended 30 June
2022
$M
Adjustments
$M
Restated audited
year ended 30
June 2022
$M
CONSOLIDATED BALANCE SHEET
Current Assets
Derivative financial instruments328(17)311
Non-Current Assets
Derivative financial instruments371(12)359
Current Liabilities
Payables and accruals(400)17(383)
Non-Current Liabilities
Payables and accruals(12)12–
Accounting standards, interpretations and amendments
not yet effective
In December 2022, the External Reporting Board ("XRB") of
New Zealand released the Aotearoa New Zealand Climate Standards
("NZ CS") setting the requirements for the reporting of climate risks.
The NZ CS are mandatory for periods beginning on and from
1 January 2023, so Mercury will apply the standards for the period
ending 30 June 2024.
As with previous years, the Group has prepared separate voluntary
Climate-related disclosures which can be found in the Climate
Statement section of the Integrated Report. These disclosures do not
form part of the consolidated financial statements.
The potential impacts of climate change and the environmental
policies of the New Zealand Government have been considered
by the Group when determining its strategy. This has potential
impacts on the financial statements in the following areas:
• Generation assets and energy derivatives are revalued to fair value
at the end of each reporting period. A key input for the valuations
is the wholesale electricity price path. This price path reflects the
impact of environmental policies on the supply and demand
of power which could affect future prices. Refer to note B1.
• The Group is an active participant in New Zealand's Emissions
Trading Scheme (ETS) and began trading in surplus carbon units
in 2022. The market value of carbon units impacts the fair value
of units held for trading and the cost of meeting the Group's ETS
compliance obligations.
There are no other accounting standards that are not yet effective
that will have a material impact on the Group's financial statements.
RESTATEMENT ON PRESENTATION OF FTRS
MERCURY INTEGRATED REPORT 2023
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38
NOTE A1. REVENUE
Mercury earns revenue from the following sources:
Revenue streamDescription & Revenue Recognition
Electricity generation,
net of hedging
Revenue is received from:
- Electricity generated and sold through the wholesale markets, and power purchase agreements
(PPAs). Revenue is recognised at the time of generation.
- net settlement of hedged energy contracts sold or bought on the futures market, and to generators,
retailers and commercial & industrial customers and recognised at the time of hedge settlement.
Electricity and gas
sales to customers
- Electricity and gas sales to customers are recognised when the energy is supplied for customer consumption.
- Acquisition incentives such as credits and appliances are offered to new customers and treated as
individual performance obligations and a portion of the expected revenue over the life of the total
contract is allocated to the performance obligation based on their standalone selling price and
recognised immediately. Corresponding contract assets are recognised on the balance sheet and
amortised to the income statement over the contract period as the future consideration is billed.
Incremental costs to obtain and retain customers are recognised on the balance sheet as contract
costs and amortised to the income statement on a straight-line basis over the expected average
mass market customer tenure.
Telco revenueCustomers consume mobile and broadband services which are measured and billed according to
monthly billing cycles and are recognised when the service has been provided. Acquisition incentives
are treated the same as above.
Other revenueRevenue is received from:
- Insurance proceeds and external management management fees. Revenue is recognised at the time
the insurance proceeds are received and the services have been delivered.
- Sale of emission units sold to third parties. The net gain on sale is recognised at the point in time that
the emission unit is confirmed as being transferred into the acquirer's emission unit account.
NOTE A2. SEGMENT REPORTING
IDENTIFICATION OF REPORTABLE SEGMENTS
The operating segments are identified by management based
on the nature of the products and services provided. Discrete
financial information about each of these operating segments is
reported to the Chief Executive, being the chief operating decision-
maker, on a monthly basis, who assesses the performance of
the operating segments on a measure of EBITDAF. EBITDAF is a
non-GAAP measure that is used internally to assess the operating
performance of the Group without the impact of non-cash and
one-off or infrequent transactions. Segment EBITDAF represents
earnings before net interest expense, tax expense, depreciation,
amortisation, change in the fair value of financial instruments,
gain/(loss) on disposal and impairments by each segment inclusive
of an allocation of central operating revenue and costs. Operating
segments are aggregated into reportable segments only if they
share similar economic characteristics. Realised gains or losses on
unhedged electricity swaps are reported within Electricity margin
for the purposes of EBITDAF, but are reported within the change
in fair value of financial instruments in the income statement.
Realised gains or losses (settlements) on hedged electricity
swaps are reported within Electricity margin for the purposes
of EBITDAF, and within revenue or expenses as appropriate
in the income statement. Unrealised gains or losses, recognised
in profit and loss, on both hedged and unhedged electricity swaps
are not included in EBITDAF and are reported in the change in
fair value of financial instruments in the income statement.
A reconciliation of EBITDAF to profit before tax can be found
in the summary table of the note.
The presentation of segment EBITDAF has been split out in more
detail than previous disclosures to provide more transparency on
the revenue of products and services provided by the Group.
IDENTIFIED SEGMENTS
Generation/wholesale
The generation/wholesale market segment encompasses activity
associated with the electricity production, electricity trading,
generation development activities and the company's share of
associates earnings in TPC Holdings Limited (see Note E1). It also
includes revenue from the sale of electricity, to both commercial
& industrial customers and the retail segment, net settlement of
energy hedges and sale of trading emissions units to third parties.
Retail
The retail market segment encompasses activity associated with
sale of electricity, gas, telecommunication products/services and
other related products and services to mass market customers in
New Zealand.
Other Segments
Represents corporate support services which are not directly
attributable to the generation/wholesale or retail segments and the
company's share of associates earnings in EnergySource LLC and
EnergySource Minerals LLC.
Inter-segment
Transactions between segments represent transfer charges by
generation/wholesale to retail for the purchase of electricity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
MERCURY INTEGRATED REPORT 2023
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39
NOTE A2. SEGMENT REPORTING (CONTINUED)
SEGMENT RESULTS
YEAR ENDED 30 JUNE 202 3
Generation/
wholesale
$M
Retail
$M
Other
Segments
$M
Inter–
segment
$M
Total
$M
Generation, net of economic hedging825 - –– 825
Sales to customers442 1,206 –– 1,648
Inter-segment sales529 - – (529) –
Electricity Revenue 1,796 1,206 – (529) 2,473
Purchases, net of economic hedging (656) (529) –529 (656)
Transmission & distribution (115) (468) –– (583)
Metering (4) (63) –– (67)
ELECTRICITY MARGIN 1,021 146 –– 1,167
Gas Revenue–89 –– 89
Purchases– (29) –– (29)
Transmission & distribution– (33) –– (33)
Metering– (8) –– (8)
GAS MARGIN– 19 –– 19
Telco Revenue– 155 –– 155
Cost of sales– (105) –– (105)
TELCO MARGIN– 50 –– 50
Other direct cost of sales (35) (38) –– (73)
TRADING MARGIN 986 177 –– 1,163
OTHER INCOME2112–24
Employee compensation and benefits (46) (84) (18) – (148)
Maintenance expenses (54) (16) – – (70)
Other expenses (54) (62) (12) – (128)
Allocation of corporate overheads (9) (21) 30 ––
Total operating expenses (163) (183)–– (346)
Segment EBITDAF844(5)2–841
Summary and reconciliation
to net profit before tax
Generation/
wholesale
$M
Retail
$M
Other
Segments
$M
Inter–
segment
$M
Total
$M
Revenue1,809 1,450 – (529) 2,730
Expenses (973) (1,456) –529 (1,900)
Realised gain/(loss) on unhedged
electricity swaps
6 –––6
Share of profit/(loss) from associates
and joint ventures
2 1 2–5
Segment EBITDAF844(5)2–841
Gain / (loss) on acquisition and disposal–12–– 12
Impairment–(12)–– (12)
Revaluation loss of generation assets(41)––– (41)
Change in fair value of carbon
units held for trading(36)––– (36)
Unrealised change in the fair
value of financial instruments (178)
Interest income3
Interest expense (103)
Depreciation and amortisation (344)
Profit before tax 142
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
MERCURY INTEGRATED REPORT 2023
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40
NOTE A2. SEGMENT REPORTING (CONTINUED)
YEAR ENDED 30 JUNE 2022
Generation/
wholesale
$M
Retail
$M
Other
Segments
$M
Inter–
segment
$M
Total
$M
Generation, net of economic hedging929 ––– 929
Sales to customers377 748 –– 1,125
Inter-segment sales300 –– (300) –
Electricity Revenue 1,606 748 – (300) 2,054
Purchases (851) (300) –300 (851)
Transmission & distribution (101) (288) –– (389)
Metering (4) (39) –– (43)
ELECTRICITY MARGIN 650 121––771
Gas Revenue–46 –– 46
Purchases– (13) –– (13)
Transmission & distribution– (19) –– (19)
Metering– (5) –– (5)
GAS MARGIN– 9 –– 9
Telco Revenue–21––21
Cost of sales– (17) –– (17)
TELCO MARGIN–4––4
Other direct cost of sales (30) (10) –– (40)
TRADING MARGIN 620 124 ––74 4
OTHER INCOME645(2)–67
Employee compensation and benefits (41) (37) (16) – (94)
Maintenance expenses (41) (10) –– (51)
Other expenses (43) (30) (12) – (85)
Allocation of corporate overheads (14) (14) 28 ––
Total operating expenses (139) (91)–– (230)
Segment EBITDAF54538(2)–581
Generation/
wholesale
$M
Retail
$M
Other
Segments
$M
Inter–
segment
$M
Total
$M
Summary and reconciliation to net profit
before tax
Revenue1,670 820 (2) (300) 2,188
Expenses(1,120)(782)–300(1,602)
Share of profit/(loss) from associates
and joint ventures
(5) ––– (5)
Segment EBITDAF54538(2)–581
Gain / (loss) on disposal366–––366
Revaluation of carbon trading units3–––3
Change in the fair value of financial
instruments (85)
Interest income2
Interest expense (64)
Depreciation and amortisation (293)
Profit before tax510
Audit Fees
Mercury NZ Limited (the Company) is a public entity as defined in the Public Audit Act 2001 and the Auditor-General is the auditor
of every public entity. The Auditor-General has appointed Lloyd Bunyan of EY to carry out the audit on his behalf. NZX listing rules
and Mercury's Audit Independence Policy requires that the signing partner performing the audit to rotate every five years.
2023
$000
2022
$000
Audit of the financial statements668742
Review of interim financial statements7575
Other assurance related services1873
Non-audit services26
Foreign tax services–28
Total fees paid to auditors932854
Other assurance-related services include a pre-issuance review of climate-related disclosures, and limited assurance engagements
relating to Mercury's greenhouse gas emissions inventory ($184k) and Mercury's Master Trust Deed ($3k).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
MERCURY INTEGRATED REPORT 2023
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41
N OT E A 3. TA X AT IO N
2023
$M
202 2
$M
Income Tax
(i) Tax expense
Profit before tax142510
Prima facie tax expense at 28% on the profit before tax(40)(143)
Adjusted for the tax effect of the following items:
• share of associates’ and joint ventures’ tax paid earnings 11
• capital gain3106
• impairment of NOW goodwill(3)–
• other differences–(5)
Tax expense attributable to profit from ordinary activities(39)(41)
Represented by:
Current tax expense(140)(91)
Deferred tax recognised in the income statement10150
The effective tax rate for the financial year is 28% (30 June 2022: 8% due to the non-taxable gain on disposal of shares in Tilt
Renewables Limited, 29% after adjustment for the gain).
The income tax expense charged to the income statement includes both the current year’s provision and the income tax effect of:
• taxable temporary differences, except those arising from initial recognition of goodwill; and
• deductible temporary differences to the extent that it is probable that they will be utilised.
Deferred Tax
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax and accounting bases
of the assets and liabilities. A deferred tax asset is only recognised to the extent that there will be future taxable profit to utilise the
temporary difference.
Property, plant and equipment is held on capital account for income tax purposes. Where assets are revalued, with no similar
adjustment to the tax base, a taxable temporary difference is created that is recognised in deferred tax.
Property,
plant and
equipment
$M
Financial
instruments
$M
Employee
entitlements
$M
Other
$M
Total
$M
(ii) Movement in deferred tax
Asset/(Liability) Balance as at 1 July 2021 (1,498) 97 3 35 (1,363)
Charged/(credited) to the income statement 25 28 – (3) 50
Charged/(credited) to other
comprehensive income (80) (16)– (3) (99)
Deferred tax associated with the acquisition
of Tilt and Trustpower retail businesses (206) (125)– (7) (338)
Other movements––– (3) (3)
Asset/(Liability) Balance as at 30 June 2022 (1,759)(16)319 (1,753)
Asset/(Liability) Balance as at 1 July 2022 (1,759) (16)3 19 (1,753)
Charged/(credited) to the income statement 34 53 113101
Charged/(credited) to other
comprehensive income (31) (60)–– (91)
Deferred tax associated with
the acquisition of NOW––– (8) (8)
Asset/(Liability) Balance as at 30 June 2023 (1,756) (23)424 (1,751)
'Other' deferred tax balances comprises temporary differences relating to the acquisition of NOW and the use of carried forward
losses from Waverley Wind Farm Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
MERCURY INTEGRATED REPORT 2023
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42
NOTE B1. PROPERTY, PLANT AND EQUIPMENT
Generation
assets at
fair value
$M
Other assets
at cost
$M
Right-of-use
assets
$M
Capital work in
progress at cost
$M
Total
$M
YEAR ENDED 30 JUNE 2022
Opening net book value 6,362 39 40 387 6,828
Additions–– 26 128 154
Additions in relation to the acquisition
of Tilt New Zealand assets 1,026 – 16 – 1,042
Additions in relation to the acquisition
of Trustpower retail business– 18 22 1 41
Transfers 302 5 – (307)–
Disposals (5) (2)–– (7)
Net revaluation movement 293 ––– 293
Depreciation charge for the year (255) (9) (7)– (271)
Closing net book value 7,723 51 97 209 8,080
Balance at 30 June 2022
Cost or valuation 7,723 137 120 209 8,189
Accumulated depreciation– (86) (23)– (109)
Net book value 7,723 51 97 209 8,080
Generation
assets at fair
value
$M
Other assets
at cost
$M
Right-of-use
assets
$M
Capital work in
progress at cost
$M
Total
$M
YEAR ENDED 30 JUNE 2023
Opening net book value 7,723 51 97 209 8,080
Additions 1 1 – 244 246
Additions in relation to the acquisition
of Now New Zealand– 4 –– 4
Transfers 257 4 – (261)–
Disposals (7)––– (7)
Gain on revaluation 110 ––– 110
Loss on revaluation (41)––– (41)
Depreciation charge for the year (270) (13) (10)– (293)
Closing net book value 7,7 73 47 87 192 8,099
Balance at 30 June 2023
Cost or valuation 7,7 73 146 120 192 8,231
Accumulated depreciation– (99) (33) – (132)
Net book value 7,7 73 47 87 192 8,099
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
MERCURY INTEGRATED REPORT 2023
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43
NOTE B1. PROPERTY, PLANT AND
EQUIPMENT (CONTINUED)
ASSETS CARRYING VALUES
All assets, except Generation plant and equipment, are recognised at
cost less accumulated depreciation. Fixed assets, excluding land, are
depreciated on a straight line basis over their expected useful lives.
Generation plant and equipment is originally recognised at cost and
subsequently measured at fair value less accumulated depreciation.
An independent valuation is completed annually to determine the
fair value of these assets. Any surplus on revaluation is recognised
in the asset revaluation reserve, except where it offsets a previous
decrease in value that was recognised in the income statement.
Any accumulated depreciation or impairment recognised between
revaluations is eliminated against the gross carrying amount of the
asset at the date of the revaluation and the net amount is restated to
the revaluated amount of the asset.
The Group's leases relate to properties, geothermal steam royalties,
office equipment, and transmission equipment. These leases are
recognised as a right-of-use asset and a corresponding liability.
The initial value of the asset and liability represent the present value
of all reasonably expected future lease payments. Lease payments
are recorded as a repayment of the lease obligation and interest
expense. Lease assets are depreciated on a straight-line basis
over the term of the lease. The most significant leases relate to
office buildings in Auckland and Tauranga. The weighted average
incremental borrowing rate applied to lease liabilities in 2023 was
5.36% (2022: 5.27%). The Group's lease interest was $6m (2022:
$5m) and lease liability is disclosed in note D2.
As at 30 June 2023, the capital work in progress balance is
largely made up of the following:
- Karāpiro hydro station rehabilitation project
- Geothermal drilling with expected completion in 2026
- Kaiwera Downs windfarm with stage one of the windfarm project
expected to be operational in the first quarter of financial year
2024, and its second stage will remain under development.
Depreciation
Depreciation is calculated on a straight-line basis on all property,
plant and equipment other than freehold land, capital work in
progress and exploration, so as to write down the assets to their
estimated residual value over their expected useful lives.
The annual depreciation rates are as follows:
202 32022
Office fixture and fittings,
including fit-out2-33%2-33%
Generation assets1-20%1-20%
Computer hardware and
tangible software5-33%5-33%
Other plant and equipment2-33%2-33%
Vehicles5-33%5-33%
Right of use assets2-50%2-50%
ASSETS CARRIED AT FAIR VALUE
All generation assets shown at valuation were revalued using
a net present value methodology by PricewaterhouseCoopers,
an independent valuer, as at 30 June 2023. This resulted in an
increase of $110.3 million to the carrying value of the Turitea wind
farm, a decrease to the carrying value of Tararua and Waipipi
wind farms of $4.5 million and $36.8 million respectively and
no change in the carrying values of hydro and geothermal assets
in the current year.
The revaluation decreases of Tararua and Waipipi result in
a revaluation loss of carrying value, which is recognised in the
statement of profit and loss, as the assets have no existing
revaluation reserve. As a consequence of the revaluation,
accumulated depreciation on these generation assets has
been reset to nil.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
SensitivityValuation impact
202 3
$M
2022
$M
Future wholesale electricity price path+/- 10%$1,091 / ($1,087)$1,201 / ($1,201)
Discount rate+/- 0.5%($489) / $573($733) / $894
Operational expenditure+/- 10%($336) / $336($341) / $341
The carrying amount of revalued generation assets, had they been recognised at cost, would have been $2,654 million
(2022: $2,514 million).
AREA OF KEY JUDGEMENT
GENERATION ASSET VALUATION
The key assumptions used in the valuation include the forecast of the future wholesale electricity price path, generation volumes, projected
operational and capital expenditure and asset life assumptions and discount rates. In all cases there is an element of judgement required
as valuations make use of unobservable inputs including wholesale electricity prices over time of between $99/MWh and $179/MWh (2022:
$74/MWh and $145/MWh), average operational expenditure of $224 million p.a. (2022: $204 million p.a.), net average production volumes
of 8,771 GWh p.a. (2022: 8,362 GWh p.a.), a post-tax discount rate of between 6.6% and 7.0% for wind assets backed by long-term Power
Purchase Agreements (2022: 5.6% to 6.0%) and between 7.5% and 7.9% for other assets (2022: 6.5% to 6.9%). The valuation also assumes
the on-going operation of New Zealand Aluminium Smelter Limited at Tiwai Point, no material changes to the wholesale market regulatory
regime, hydro and geothermal fuel supply being sustained over the modelled horizon and no material changes to generation consent
conditions. The discounted cash flow valuation approach assumes 100% control and consequently a control premium should be applied
if using an equity valuation technique to derive comparative asset values.
Generation assets are classified as level three in the fair value hierarchy due to the use of non-market observable inputs in the valuation.
Changes in the level three category during the period relates to transfers from cost measurement (capital work in progress), depreciation
and impairment (recognised in profit and loss) and revaluation movements (recognised in other comprehensive income). The following table
outlines the valuation impact of changes to assumptions, keeping all other valuation inputs constant, that the valuation is most sensitive to.
MERCURY INTEGRATED REPORT 2023
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44
NOTE B2. INTANGIBLE ASSETS
Intangible
software
$M
Acquired
brand
$M
Rights
$M
Emissions
units
$M
work in
progress
$M
Total
$M
YEAR ENDED 30 JUNE 2022
Opening net book value24–16607107
Additions–––92635
Additions in relation to the Trustpower
retail acquisition1118––231
Transfers17––(27)(17)(27)
Disposals––––––
Surrendered Units–––(1)–(1)
Amortisation for the year(20)(1)(1)––(22)
Closing net book amount3217154118123
BALANCE AT 30 JUNE 2022
Cost16318344118274
Accumulated amortisation(131)(1)(19) – – (151)
Net book value3217154118123
YEAR ENDED 30 JUNE 2023
Opening net book value 32 17 15 41 18 123
Additions––– 10 37 47
Additions in relation to the
Now New Zealand acquisition– 41 ––– 41
Transfers45––– (45)–
Impairment– (13)––– (13)
Disposals––––––
Surrendered Units––– (9)– (9)
Amortisation for the year (27) (23) (1)–– (51)
Closing net book amount 50 22 14 42 10 138
BALANCE AT 30 JUNE 2023
Cost 208 46 34 4210340
Accumulated amortisation (158) (24) (20)–– (202)
Net book value 50 22 14 4210138
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
Software
Acquired computer software licenses are recognised at cost
and amortised over their estimated useful lives of 1 - 15 years
(2022: 1 - 15 years). As these assets are deemed to have a finite
life, impairment testing will only be performed when there is an
indication that the intangible asset may be impaired.
Acquired Intangible Assets
As part of the acquisition of the Trustpower retail business in
2022, the Group allocated part of the purchase price to the
Trustpower brand acquired ($19m). At the time of acquisition,
the brand acquired was assessed to have a useful life of 2 years.
With the retirement of the Trustpower brand in June 2023,
amortisation of the brand asset has been accelerated to reflect
the reduced useful life of the brand.
As part of the acquisition of NOW (refer Significant Matters) the
Group allocated part of the purchase price to the customer list
acquired ($30m, assessed useful life of 2.5 years) and goodwill
($10m). The goodwill was allocated to the NOW cash generating
unit (CGU) within the Retail segment and the unit was tested
for impairment at year end. The recoverable amount of the CGU
has been determined from an estimate of fair value less costs
of disposal. The customer list was tested for impairment before
the goodwill. The customer list had a carrying amount of $24m
and a recoverable amount of $22m. The CGU had a carrying
amount of $29m and a recoverable amount of $16m. The result
of the tests is an impairment loss of $2m on the customer list
and $10m on the goodwill. The CGU is currently loss making
due to customer acquisition combined with manual processes.
It is management’s expectation that that CGU can be integrated
within the wider Retail business to achieve scale and synergies
that are not reflected in the current value.
The impairment losses have been recognised in the statement of
profit and loss in the current period. The customer list asset fair
value was estimated using measurements in Level 3 of the fair
value hierarchy. The valuation is an estimate of average margin per
customer over the expected 2.5 year useful life. The key assumption
is the expected useful life which has been assigned based on past
experience. For the recoverable amount of the CGU to equal the
carrying amount the useful life would need to increase to 4.5 years.
The remaining assets in the CGU are not considered material
and include fixed assets, receivables, payables and borrowings.
For these assets their fair value was estimated to be the same
as their carrying value.
Rights
Rights, of which land access rights are the most significant,
acquired to further the Group's generation development
programme are stated at cost less accumulated amortisation
and any accumulated impairment losses. Rights, which have
a finite life, are amortised over the life of the rights, which range
from 5 to 60 years (2022: 5 to 60 years). Testing for impairment
will only arise when there is an indication that the asset may
be impaired.
Carbon Units & Emissions Obligations
Purchased carbon units are recorded at cost (purchase price).
At 30 June 2023, the Group held a total of 1,568,674 units
within intangible assets (2022: 1,676,497 units). Carbon units,
when allocated or purchased for purposes other than trading
units, are recorded as intangible assets and are not revalued
subsequent to initial recognition.
Carbon units that are surrendered to the government in
compensation for the Group's emissions obligations are
recognised as an expense in the income statement and a
reduction to intangible assets in the balance sheet, based
on the weighted average cost of the units surrendered.
Emissions obligations are recognised as a current liability as the
obligation is incurred. Up to the level of units held, the liability is
recorded at the carrying value of those units intended to settle
the liability. Contracts for the purchase of carbon units are
recognised when they are settled.
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NOTE C1. RECEIVABLES
202 3
$M
202 2
$M
RECEIVABLES
Trade receivables and accruals360379
Allowance for credit loss (7)(5)
Net trade receivables and accruals353374
ASX prudential deposits6097
Prepayments2821
441 492
Trade receivables are measured at amortised cost using the effective
interest method. Customers are typically invoiced on a monthly
basis. Large commercial and industrial customers are billed on a
calendar month basis, while for most mass market customers billing
occurs on a rolling cycle each month and over the year. Revenue
accruals for unbilled telecommunication services and unread gas
and electricity meters at balance date involves an estimate of
consumption for each unread meter based on past consumption
history. Generation revenue accruals are derived mostly from
generation sales to the New Zealand wholesale market at the
prevailing spot price at the grid injection point. Revenue is invoiced
by the Wholesale Market Clearing Manager on a calendar month
basis reflecting actual metered generation at the stations.
Trade receivables are non-interest bearing and are generally on 30
day terms for large commercial and industrial customers and mass
market customers are on 18 day terms. For terms and conditions of
related party receivables refer to note E1.
The Group recognises an allowance for impairment loss when
there is an indication that the Group will not be able to collect
amounts due according to the original terms of the receivable.
An additional allowance for credit loss of $8 million (2022: $1
million) was recognised during the year. Receivables of $6 million
(2022: $1 million) which were deemed uncollectable were written
off. The increase from 2022 is due to the Trustpower acquisition
resulting in a larger retail business with higher trade receivables,
as well as adjustments for tighter economic conditions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
The Company applies the simplified approach to measuring
expected credit losses, which uses a lifetime expected loss
allowance for all trade receivables, with impairment being
recognised in the income statement and a corresponding
provision on the balance sheet at the time of billing.
To measure the expected credit losses, trade receivables have
been grouped based on days past due. The expected loss rates
are based on the historical credit losses in prior periods, adjusted
for any significant known amounts that are not receivable.
Separate loss rate models are maintained for Mercury and
Trustpower customer bases and the table below is consolidated
to show combined losses.
The following table details the loss allowance at 30 June 2023:
1-30 days
past due
31-60 days
past due
>60 days
past dueTotal
Expected loss
rate%4%24%84%
Gross carrying
amount
– trade
receivables$M242632
Expected
credit loss$M1157
2023
$M
2022
$M
Movements in the allowance for
impairment loss were as follows:
Balance at the beginning of the year 5 1
Allowance recognised on acquisition of
Trustpower retail business–4
Charge for the year 8 1
Amounts written off (6)(1)
Balance at the end of the year 7 5
Prudential deposits act as security to cover mark-to-market
movement in the ASX futures position.
Turitea wind farm.
MERCURY INTEGRATED REPORT 2023
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46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
NOTE C2. INVENTORIES
Cost of consumable stores are determined on a weighted average basis and includes expenditure incurred in acquiring consumable
stores and bringing them to their final condition and location. Consumable stores include consumables held to service and repair
operating plants and finished goods relating to the retail business.
Inventories also include carbon units (NZUs) which management has identified as held for trading. These are measured at fair value
less cost to sell. A change in fair value is recognised in the income statement. Fair value is calculated based on the CommTrade spot
price at the valuation date. As a result, the units are classified as level one in the fair value hierarchy. The change in fair value in carbon
units held for trading in 2023 is a result of uncertainty in the carbon market driving the spot price of carbon down.
2023
$M
2022
$M
Consumable Stores 51 29
Carbon Units - at fair value less cost to sell 40 65
Inventories 91 94
CARBON UNITS - AT FAIR VALUE LESS COST TO SELL
2023
Units
000
2023
Value
$M
2022
Units
000
2022
Value
$M
Opening Balance 854 65 ––
Transferred from Intangibles Assets–– 685 26
Purchases 321 27 1,284 88
Amounts recognised in profit or loss (221) (16) (1,115) (52)
Change in fair value– (36)–3
Closing Balance954 40 85465
NOTE C3. PROVISIONS
2023
$M
2022
$M
Balance at the beginning of the year8186
Provisions made/(used) during the year––
Provisions reversed during the year–(8)
Discounting movement33
Balance at the end of the year8481
Current3 –
Non-current8181
8481
Provisions have been recognised for the abandonment and subsequent restoration of areas from which geothermal resources have
been utilised. The provision is calculated based on the present value of management's best estimate of the expenditure required,
and the likely timing of settlement. Changes in these estimates made during the year are reported as an increase in provisions and a
reduction in revaluation reserves. The increase in provision resulting from the passage of time (the discount effect) is recognised as
an interest expense. The provision will be utilised when the individual wells are abandoned. The wells are estimated to have an average
useful life of 19 years.
MERCURY INTEGRATED REPORT 2023
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47
NOTE D1. SHARE CAPITAL AND DISTRIBUTION
The share capital of the Company is represented by 1,400,012,517 ordinary shares (2022: 1,400,012,517) issued and fully paid. The weighted
average number of shares on issue during the year, on both a basic and diluted basis, was 1,385,131,962 (2022: 1,366,520,442). These
shares do not have a par value, have equal voting rights and share equally in dividends and any surplus on winding up.
2023
Number
of shares
(M)
2023
$M
2022
Number
of shares
(M)
2022
$M
Treasury shares
Balance at the beginning of the year1950 39 100
Issue of treasury shares for dividend
reinvestment programme(5)(13) (20) (50)
Sale of treasury shares(1)(3)––
Balance at the end of the year1334 19 50
Treasury shares were issued during 2023 for the following purposes:
• The dividend reinvestment programme (DRP) continued in 2023 with the transfer of 4,734,460 shares to shareholders that
elected to reinvest the net proceeds of cash dividends payable; and
• A trust holding treasury shares for executive long term incentive (LTI) payments was wound up during the year and 860,139
shares were sold in November 2022 for $4.7m.
Cents per share
2023
$M
2022
$M
Dividends declared and paid
Final dividend for 2021 10.2 – 139
Interim dividend for 2022 8.0 – 109
Final dividend for 2022 12.0 166–
Interim dividend for 2023 8.7 120 –
286 248
The imputation credit account was in a surplus balance at 31 March 2023, as legally required. At 30 June 2023, no imputation credits
were available (2022: $nil) as the imputation credit account had a deficit of $39 million (2022: deficit of $39 million) due to the
timing of the interim dividend payment.
20232022
Earnings per share
Profit for the year attributable to owners of the parent ($m)103469
Weighted average ordinary shares 1,400 1,400
less weighted average treasury shares (15) (33)
Weighted average ordinary shares for earnings per share (millions) 1,385 1,367
Basic and diluted earnings per share (cents)7.4 434.32
NOTE D2. BORROwINGS
Borrowing currency
denominationMaturity Coupon
2023
$M
2022
$M
Debt measured at amortised cost
Bank facilitiesNZDVariousFloating57 226
Commercial paper programmeNZD< 3 monthsFloating300 255
Capital bonds - MCY020NZDJul-20493.60%302302
Debt in fair value hedge relationships
USPP – US$30mUSDDec-20224.35%–48
Wholesale bondsNZDMar-20235.79%– 25
USPP – US$45mUSDDec-20254.60%70 71
Green retail bonds - MCY040NZDSep-20262.16%179 180
Green retail bonds - MCY030NZDSep-20271.56%172 172
Green retail bonds - MCY060NZDJun-20285.64%156 –
Green wholesale bondsAUDNov-20282.92%193 195
Green wholesale bondsNZDOct-20301.92%119 119
Capital bonds - MCY050NZDMay-20525.73%245 252
Lease liabilities113 120
Deferred financing costs(8)(9)
Total carrying value of loans1,898 1,956
Current375561
Non-current1,5231,395
1,8981,956
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
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NOTE D2. BORROwINGS (CONTINUED)
Current borrowings include all drawn bank facilities, borrowings with a contractual maturity of less than one year, accrued interest and
current lease liabilities. Undrawn borrowing facilities at 30 June 2023 totalled $295m, net of Commercial Paper on issue.
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost, with the exception of the USPP, capital bond (MC050) and Green bonds. When the group applies fair value hedges to borrowings,
the carrying value of the borrowings are adjusted for fair value changes attributable to the risk being hedged. Fair value is calculated
using the discounted cashflow method, with applicable market yield curves adjusted for the Group's credit rating.
CHANGES IN BORROwINGS FROM FINANCING ACTIVITIES
2023
$M
2022
$M
Borrowings at the start of the year1,956 1,491
Net cash borrowed/(repaid)(35) 229
Cash paid on principal of lease liability(9)(6)
Debt acquired from Tilt–251
Non-cash change in lease obligations263
Non-cash change in fair value adjustment(17) (69)
Non-cash change in deferred financing costs1 (3)
Borrowings at the end of the year1,898 1,956
BANK FACILITIES
The Group has $650 million of committed and unsecured bank
loan facilities as at 30 June 2023 (30 June 2022: $750 million).
COMMERCIAL PAPER PROGRAMME
The Group has a $400 million Commercial Paper programme
which is fully backed by committed and undrawn bank facilities.
Notes issued under the programme are short-term money
market instruments, unsecured and unsubordinated and
targeted at professional investors. The programme is rated
A2 by S&P Global.
GREEN BONDS
The Group has $908 million of green bonds as at 30 June 2023
(30 June 2022: $757 million). The green bond proceeds have been
tracked in accordance with the Green Financing Framework. On 19
June 2023 Mercury issued $150 million of new 5-year unsecured,
unsubordinated, fixed rate green bonds (MCY060). The MCY060
bonds are due to expire on 19 June 2028 and have fixed interest
rate of 5.64% per annum.
USPP
The group has $59 million of United States Private Placement
(USPP). The group uses a cross currency interest rate swaps
(CCIRS) to manage foreign exchange and interest rate risks on
the notes. While the NZ dollar amount required to repay the
USPP is fixed as a result of the CCIRS, the USPP is required to
be translated to NZD at the spot rate at the reporting date.
Any revaluation of the USPP as a result of this translation is
offset by the change in the value of the CCIRS.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
DEEDS
The Group has entered into a Master Trust Deed and Supplementary
Trust Deeds for all its NZD denominated Senior Fixed and Floating
Rate Bonds with the New Zealand Guardian Trust Company Limited,
acting as trustee for the holders. The Group has agreed, subject to
certain exceptions, not to create or permit to exist a security interest
over or affecting its assets to secure indebtedness, and to maintain
certain financial covenants. There has been no breach of the terms
of these deeds.
The Group has entered into a negative pledge deed in favour of its
bank financiers in which the Group has agreed, subject to certain
exceptions, not to create or permit to exist a security interest over
or affecting its assets to secure its indebtedness, and to maintain
certain financial ratios in relation to the Group. These undertakings
and covenants also apply to the US Private Placement terms and
conditions. There was no breach of the terms of this deed or the
terms and conditions of the US Private Placement.
LEASE LIABILITIES
The Group has entered into various lease contracts for the
right to use land & buildings and office equipment and is
also deemed to be a lessee of transmission equipment. The
most significant leases relate to office buildings in Auckland
and Tauranga. Lease payments of $15m were made in 2023,
including lease interest expense of $6m (2022: payments of
$11m, lease interest expense of $5m).
MERCURY INTEGRATED REPORT 2023
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49
NOTE D3. COMMITMENTS AND
CONTINGENCIES
Capital
Commitments
2023
$M
2022
$M
Within one year 134 157
One to five years 67 85
Later than five years –3
201 245
Capital commitments include purchases of both property, plant
and equipment (PP&E) and intangibles. PP&E commitments
include contracts for construction of wind generation assets
at Kaiwera Downs, refurbishment of hydro generation assets
at Karāpiro and well drilling campaigns in 2024 and 2025.
Intangible commitments are contracts to purchase New Zealand
emissions trading scheme (NZ ETS) units. In the event the NZ
ETS is terminated the existing forward purchase agreements,
which cover the five year period from the end of the reporting
period, will also terminate.
Contingencies
On 7 June 2021, the Kawerau geothermal power station experienced
an unplanned outage as a result of a mechanical failure. An outage
was completed in June 2023 to install replacement equipment.
The Group received an initial payment of $26m recorded as income
in 2022, and expects to receive additional insurance proceeds in
the 2024 financial year once the total loss to the Group as a result
of the incident has been confirmed. It is not currently practical
to estimate the value of additional insurance receipts, therefore
no additional revenue is recognised.
The Group holds land and has interests in fresh water and
geothermal resources that are subject to claims that have
been brought against the Group and the Crown.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
The Pouakani Claims Trust No 2 and a group of kaumatua have
filed a claim in the Māori Land Court seeking a declaration that
certain parts of the Waikato riverbed on which Mercury operates
hydro assets are Māori customary land, including the riverbed
beneath the Whakamaru, Maraetai I and II and Waipapa dams
and certain related powerstations. The claim has been amended
to include interests in the water flowing over the riverbed. Mercury
holds the fee simple or beneficial title to those parts of Waikato
riverbed beneath the Whakamaru, Maraetai I and II and Waipapa
dams and has received advice that if the outcome of the claim
adversely affects the Group’s title to, or ability to access or operate
its hydro assets, Mercury may bring a claim seeking compensation
against the Crown. The claim is currently subject to a judicial review
challenge to the Māori Land Court’s decision to decline Mercury’s
application to strike out parts of the claim. Mercury’s judicial
review was partially successful in the High Court. The High Court
decision is now subject to appeals by the applicants, the Crown
and Mercury. The applicants have also filed a related claim in the
Waitangi Tribunal pursuant to the Treaty of Waitangi Acy 1975, but
have not yet taken any further steps in relation to that claim.
The Group holds land at Maraetai, Waikato that was subject
to a remedies hearing brought against the Government in the
Waitangi Tribunal. The remedies hearing related to an application
seeking binding recommendations for the resumption of land at
Pouakani, including the Group’s land at Maraetai. The Crown and
Ngāti Kahungunu ki Wairarapa Tāmaki nui-ā-Rua Settlement
Trust signed a settlement deed addressing the resumption claim,
and settlement legislation has now been enacted to bring this
claim to an end. Wairarapa Moana Incorporation has issued a
further claim against the Crown claiming the Ngāti Kahungunu
ki Wairarapa Tāmaki nui-ā-Rua settlement breaches the New
Zealand Bill of Rights Act 1990. Mercury is not a party to this
claim. Mercury has received advice that if a resumption claim
succeeded, Mercury would have rights of recourse against the
Crown for compensation as if the property had been taken under
the Public Works Act 1981.
A separate claim by the New Zealand Māori Council relating to
fresh water and geothermal resources was lodged in 2012 with
the Waitangi Tribunal. The Tribunal concluded that Māori have
residual (but as yet undefined) proprietary rights in fresh water
and geothermal resources and it will be for the Government
to determine how any such rights and interests may best be
addressed. The Tribunal has recently indicated its intention to
progress to stage three of that inquiry, and the inquiry is currently
at the interlocutory (pre-hearing) phase. The impact of this claim
on the Group’s operations, and consequently the amount of any
claim or recourse the Group may have should that impact be
adverse to the Group’s interests, are unknown at this time.
From time to time the Group will issue letters of credit and
guarantees to various suppliers in the normal course of business.
However, there is no expectation that any outflow of resource
relating to these letters of credit or guarantees will be required
as a consequence.
The Group has no other material contingent assets or liabilities.
MERCURY INTEGRATED REPORT 2023
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50
NOTE D4. CASH & CASH EQUIVALENTS
2023
$M
2022
$M
Profit for the year103469
Items classified as investing or financing activities:
• Dividend income from Tilt Renewables Limited–(5)
Adjustments for non-cash movements:
• Change in interest accrual (6) 1
• Gain on revaluation of NOW New Zealand shares (12)–
• Gain on disposal of shares in Tilt Renewables Limited– (367)
• Depreciation and amortisation 344 293
• Impairment 12 –
• Loss on revaluation of generation assets41–
• Amortisation of contract assets and costs to profit or loss 41 8
• Net gain/(loss) on sale of property, plant and equipment– 2
• Change in the fair value of unrealised financial instruments 178 85
• Change in the fair value of carbon units held for trading36(3)
• Movement in effect of discounting on long-term provisions 3 5
• Share of earnings of associate and joint venture companies (5) 5
• Close-out of electricity swap and non-cash amortisation of acquired swap value– 43
• Increase in deferred tax (61) (50)
Net cash provided by operating activities before change in assets and liabilities 674 486
Change in assets and liabilities during the year:
• Increase in trade receivables and prepayments (48)(141)
• (Decrease)/increase in inventories 3 (67)
• Increase in contract assets and costs, net of amortisation (58)–
• (Decrease)/increase in trade payables and accruals (23)61
• Increase/(decrease) in provision for tax 30 13
Net cash inflow from operating activities 578 352
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
NOTE E1. INVESTMENT IN AND ADVANCES TO ASSOCIATES AND JOINT ARRANGEMENTS
(JOINT VENTURES AND JOINT OPERATIONS)
The Group financial statements include the following:
Interest held
Name of entityPrincipal activityType
Accounting
Method20232022Country
TPC Holdings LimitedInvestment holdingAssociateEquity25.00%25.00%New Zealand
NOW New Zealand LimitedBroadband ISPAssociateEquityN/A48.46%New Zealand
RotokawaSteamfield operationJoint operationFair value64.80%64.80%New Zealand
Ngā Awa PūruaElectricity generationJoint operationFair value65.00%65.00%New Zealand
EnergySource LLCInvestment holdingJoint ventureEquity20.86%20.86%United States
EnergySource Minerals LLCMineral extractionJoint ventureEquity18.41%18.99%United States
In December 2022 the Group acquired the remaining 51.54% shareholding in NOW New Zealand Limited. In accordance with NZ
IFRS 3
Business Combinations, the Group's existing stake was remeasured to fair value (from $4m to $16m) resulting in a gain of
$12m reported in the income statement with the entire investment subsequently being reclassified as a wholly owned subsidiary.
Further detail on the acquisition can be found in the General Information and Significant Matters note.
AssociatesJoint ventures
2023
$M
2022
$M
2023
$M
2022
$M
Balance at the beginning of the year 67 77 6 9
Additional investment during the year–– 3 –
Share of earnings 4 (2) 2 (3)
Share of movement in other comprehensive income and reserves 11 (2)––
Distributions received during the year (6) (6) (3)–
Reclassification of NOW to subsidiary (16)–––
Fair value revaluation of NOW during the year 12 –––
Balance at the end of the year 72 67 8 6
At the end of the year the Group had outstanding advances to its Rotokawa joint venture partner in the amount of $4 million
(2022: $4 million) and its associate TPC Holdings Limited of $4 million (2022: $4 million).
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The long-term advance to our Rotokawa Joint Venture partner
of $3 million (2022: $4 million) carries a floating interest rate.
Repayments under the advance are linked to the level of receipts
under the geothermal energy supply agreement. There is no fixed
repayment date; the agreement will terminate on receipt of any
outstanding balances.
No related party debts have been written off, forgiven, or any
impairment charge booked.
Transaction value
2023
$000
2022
$000
Key management personnel
compensation (paid and payable)
comprised:
• Directors’ fees1,1011,030
• Benefits for the Chief Executive
and Senior Management:
Salary and other short-term
benefits 7,04 46,564
Termination benefits––
Share-based payments680561
8,8258,155
The increase in Director’s fees is due to the addition of two new
directors in the current financial year. The total shareholder approved
director fee pool has been increased pro-rata to accommodate
the new directors in accordance with the NZX Listing Rules.
Other transactions with key management personnel
Key management personnel are those people with responsibility
and authority for planning, directing and controlling the activities
of the Group. Key management personnel for the Group are
considered to be the Directors and Senior Management.
A number of Directors also provide directorship services to other
third party entities.
A number of key management personnel provide directorship
services to subsidiaries and other third party entities as part of
their employment without receiving any additional remuneration.
A number of these entities transacted with the Group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
NOTE E2. RELATED PARTY TRANSACTIONS
MAJORITY SHAREHOLDER
The majority shareholder of Mercury NZ Limited is the Government.
Transactions cover a variety of services including energy, postal,
travel and tax.
TRANSACTIONS wITH RELATED PARTIES
The Group entered into a number of contracts with other Crown-
controlled entities to hedge against wholesale electricity price
risk, the most significant being a virtual asset swap with Meridian
Energy Limited which has a remaining life of 2.5 years and a
contract for difference with Genesis Energy Limited for generation
produced at the Waipipi wind farm.
Mercury NZ Limited also has investments in subsidiaries, associates
and joint arrangements, all of which are considered related parties.
As these are consolidated financial statements, transactions
between related parties within the Group have been eliminated.
Consequently, only those transactions between entities which have
some owners external to the Group have been reported below:
Transaction value
2023
$M
2022
$M
Associates
• Management fees and service
fees received 18 13
• Energy contract settlements
received 2 21
• Service fees paid 7 4
Joint operations
• Management fees and service
agreements received and paid 21 18
• Energy contract settlements
received–10
• Interest Income 1 –
An advance to TPC Holdings Limited of $4 million (2022: $4 million)
is interest free and is repayable on demand subject to certain
conditions being met.
The Group purchases directors and officers insurance for the
benefit of key management personnel in relation to the services
they provide to the Group.
NOTE F1. DERIVATIVE FINANCIAL
INSTRUMENTS
The Group uses a range of derivative contracts in order to manage
risk and hedge against cash flow and fair value volatility. It is the
Group's policy to apply hedge accounting to reduce volatility in
profit or loss, and where possible, derivatives are hedge accounted
under NZ IFRS 9 as either cash flow or fair value hedges.
Interest rate and cross currency interest rate derivatives
Interest rate swaps and cross currency derivatives are used
to managed interest rate risks. Interest rate swaps where we
pay-fixed, and receive-floating interest rates are designated
as cash flow hedges in a relationship with a portion of floating
rate debt exposure. Interest rate swaps where we receive-fixed,
pay-floating interest rate are designated as fair value hedges in
a relationship with the swap rate on fixed rate bonds. Cross-
currency swaps are designated as both fair value and cash flow
hedge relationships with the USPP and Australian denominated
Green wholesale bond (refer note D2), depending on the
component of the debt being hedged: the risk free (swap) rate
as a fair value hedge; and the credit margin as cash flow hedge.
Foreign exchange derivatives
Foreign exchange forward contracts are designated as cash flow
hedges in a relationship with forecast purchases of inventory and
capital equipment, mainly for maintenance and construction of
generation assets.
Electricity contracts
Where possible, electricity price derivatives are designated as cash
flow hedges in a relationship with forecast electricity sales and
purchases. Exceptions are swaps and options used for trading
(electricity futures, options and financial transmission rights)
as well as other contracts that have been deemed not eligible for
hedge accounting due to price reset mechanisms (e.g. Manawa
contract) or contracts with variable volume structures (e.g. wind
and solar power purchase agreements).
The fair values of derivative financial instruments are
summarised below:
2023
$M
Restated
2022
$M
CURRENT ASSETS
Electricity price derivative 190276
Interest rate derivative 11 23
Cross currency interest rate
derivative –9
Foreign exchange derivative–3
201 311
CURRENT LIABILITIES
Electricity price derivative 133 259
Interest rate derivative 44 28
Cross currency interest rate
derivative 9 4
Foreign exchange derivative–1
186 292
NON-CURRENT ASSETS
Electricity price derivative 224 335
Interest rate derivative 6 11
Cross currency interest rate
derivative 13 13
243 359
NON-CURRENT
LIABILITIES
Electricity price derivative 180 285
Interest rate derivative 73 104
Cross currency interest rate
derivative 10 10
263 400
MERCURY INTEGRATED REPORT 2023
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NOTE F1. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Change in fair value of financial instruments2023
$M
2022
$M
Realised gain/(loss) on unhedged electricity swaps 6–
Unrealised change in the fair value of financial instruments through income statements (178) (85)
Change in fair value of derivative financial instruments per income statement (172)(85)
The unrealised changes in fair values of financial instruments recognised in the income statement and other comprehensive income
are summarised below:
Income statement
Other comprehensive
income
2023
$M
2022
$M
2023
$M
2022
$M
Cross currency interest rate derivatives (14) (8) – –
USPP bond & AUD Green Bond in fair value hedge relationship 13 8 – –
Movement in fair value of borrowing derivatives (1)– – –
Electricity price derivatives (188)(68) 211 (8)
Interest rate derivatives (including Green bond fair value change) (6)(15) 2 66
Foreign exchange rate derivatives–1 (1)1
Ineffectiveness of cash flow hedges recognised in the income statement 17 (3)––
Total change in fair value of derivative financial instruments (178)(85) 212 59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
MOVEMENT IN CASH FLOw HEDGE RESERVE ON HEDGED UNREALISED GAINS/LOSSES
2023
$M
2022
$M
Opening balance (245)(268)
Effective portion of cash flow hedges recognised in the reserve 212 59
Amount transferred to balance sheet 2 (1)
Equity accounted share of associates’ movement in other comprehensive income 11 1
Transfer of share of associates' reserves to profit or loss upon disposal–(20)
Tax effect of movements (60)(16)
Closing balance (80)(245)
Unrealised gains and losses on hedged derivatives are recognised in the cash flow hedge reserve and other comprehensive income.
When the gains or losses are realised, they are released from the cash flow hedge reserve to the balance sheet or profit and loss
in line with the underlying hedged item.
MERCURY INTEGRATED REPORT 2023
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53
NOTE F1. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Restated 30 June 2022
Quoted
market price
Market
observable
inputs
Non-market
observable
inputsTotal
Valuation technique
Level 1
$M
Level 2
$M
Level 3
$M$M
Financial assets
Derivative instruments
• Electricity price derivatives19– 592611
• Interest rate derivatives–34–34
• Cross currency interest rate derivatives–22–22
• Foreign exchange rate derivatives–3–3
1959 592 670
Financial liabilities
Derivative instruments
• Electricity price derivatives46–498544
• Interest rate derivatives–133–133
• Cross currency interest rate derivatives–14–14
• Foreign exchange rate derivatives–1–1
46 148 498 692
Net financial asset/(liability)(27)(89)94(22)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
AREA OF KEY JUDGEMENT
FAIR VALUE ESTIMATION
Valuation Techniques
All fair value balances are assigned to a fair value hierarchy levels as defined by NZ IFRS 13 Fair Value Measurement.
No transfers occurred between hierarchy levels in 2023.
The following table provides a breakdown of the fair value of derivatives by the source of key valuation inputs:
30 June 2023
Quoted
market price
Market
observable
inputs
Non-market
observable
inputsTotal
Valuation technique
Level 1
$M
Level 2
$M
Level 3
$M$M
Financial assets
Derivative instruments
• Electricity price derivatives33–381414
• Interest rate derivatives–17–17
• Cross currency interest rate derivatives–13–13
33 30 381 444
Financial liabilities
Derivative instruments
• Electricity price derivatives45–268313
• Interest rate derivatives–117– 117
• Cross currency interest rate derivatives–19–19
45 136 268 449
Net financial asset/(liability)(12)(106)113(6)
MERCURY INTEGRATED REPORT 2023
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NOTE F1. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Valuation of Level 1 Financial Instruments
Level 1 financial derivatives includes ASX futures and financial transmission rights with fair values
determined using quoted prices. These prices represent regularly occurring market transactions on an
orderly basis.
Valuation of Level 2 Financial Instruments
The fair values of level two derivatives are determined using discounted cash flow models. Listed below
are the Level 2 derivatives and the key inputs to the valuation model.
DerivativeValuation Input
Cross Currency Interest Rate Swaps (CCIRS)Forward interest rate price curve and foreign
exchange rate curve
Interest Rate SwapsForward interest rate curve
Foreign Exchange ContractForward foreign exchange rate curves
VALUATION PROCESS OF LEVEL 3 FINANCIAL INSTRUMENTS
The Group uses various methods in estimating the fair value of a financial instrument. Where the fair
value of a derivative is calculated as the present value of the estimated future cash flows of the instrument
there are two key inputs being used:
20232022
Price path $73/MWh to $153/MWh$76/MWh to $194/MWh
Discount factor0.31 to 0.930.21 to 0.97
The wide range in discount factors are driven by entering into longer term derivative contracts.
The selection of valuation inputs requires significant judgement, and therefore there is a range of
reasonably possible assumptions in respect of these inputs that could be used in estimating the fair
values of these derivatives. Maximum use is made of observable market data when selecting inputs and
developing assumptions for the valuation technique.
Reconciliation of level 3 unrealised fair value movements
The unrealised Level 3 fair value movements in the Group's income statement are recognised within 'change
in the fair value of financial instruments', along with realised gains/losses on financial instruments not in a
hedging relationship.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
Fair value through other
comprehensive income
Fair value through
profit or lossTotal
2023
$M
2022
$M
2023
$M
2022
$M
2023
$M
2022
$M
Opening balance (257)(284) 351 2594(259)
Acquired contracts–––345–345
New contracts 23 (76)10(12)32(88)
Matured contracts 66 30 17 68336
Gains and losses
• Through the income statement–– (188)(13)(188)(13)
• Through other comprehensive income 91 73––9173
Closing balance (78)(257) 191 35111394
Level 3 Sensitivity Analysis
The following summarises the potential impact of increases or decreases in
price risk exposures of the Group on post tax profit. Sensitivity analysis is based
on an assessment of the reasonably possible movements in forward price.
The electricity sensitivities disclosed below do not include level 1 electricity
derivatives. Refer to note F2 for sensitivity analysis on all electricity derivatives.
Impact on post tax profit
2023
$M
2022
$M
Group
Electricity forward price increased by 10%4850
Electricity forward price decreased by 10%(36)(45)
Deferred ‘inception’ gains/(losses)
There is a presumption that when derivative contracts are entered into at an
arm's length basis that the fair value at inception is zero. The contract price of
non exchange traded electricity derivative contracts are agreed on a bilateral
basis, the pricing for which may differ from the prevailing derived market price
curve for a variety of reasons. In these circumstances an inception adjustment
is made to bring the initial fair value of the contract to zero at inception. This
inception adjustment is amortised over the life of the contract by adjusting
the future price path used to determine the fair value of the derivatives by a
constant amount to return the initial fair value to zero.
The table below details the movements in inception value gains/(losses)
included in the fair value of derivative financial assets and liabilities as at
30 June.
2023
$M
2022
$M
Electricity price derivatives
Opening deferred inception gains / (losses)2627
Deferred inception gains on new hedges1710
Deferred inception (losses)/gains realised
during the year(4)(11)
Closing inception gains3926
MERCURY INTEGRATED REPORT 2023
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NOTE F2. FINANCIAL RISK MANAGEMENT
The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to proactively manage
these risks with the aim of protecting shareholder wealth. Exposure to price, credit, foreign exchange, liquidity and interest rate risks
arise in the normal course of the Group's business. The Group's principal financial instruments comprise cash and cash equivalents,
trade receivables and accruals (not prepayments), advances, payables and accruals, borrowings and derivative financial instruments.
(A) MARKET RISK
Nature of risk exposureRisk Management Policy
Electricity price
The Group is exposed to movements in the spot price of electricity
arising from the sale and purchase of electricity in the market.
The Group enters into electricity derivative contracts, including
swaps, futures, options and PPAs that establish a fixed price
at which future quantities of electricity are purchased and
sold. The electricity contracts are periodically settled with any
difference between the contract price and the electricity spot
price settled between the parties. Cash flow hedge accounting
is applied.
Foreign exchange
The Group is exposed to foreign exchange risk as a result of
transactions denominated in a currency other than the Group's
functional currency. The currencies giving rise to this risk are
primarily US Dollar, Japanese Yen, Euro, Yuan and AU Dollar.
The Group's policy is to enter into forward exchange
contracts to hedge its committed foreign denominated
expenditure programme.
Interest rate
The Group has exposure to interest rate risk to the extent that
it borrows for fixed terms at floating interest rates.
The Group uses mostly interest rate swaps and rarely interest
rate options to manage this exposure.
Derivatives in designated
hedging relationships
ElectricityForeign ExchangeInterest Rate
2023
$M
2022
$M
2023
$M
2022
$M
2023
$M
2022
$M
Notional amount3,613 3,367 31 49 2,061 2,067
Maturity1- 16 years1- 31 years1 year1 year0- 10 years0- 10 years
Carrying amount - asset414 611 – 3 17 166
Carrying amount - liability (313) (544)– (1) (117) (133)
Recognised in OCI (188) (68)– 1 (7) (15)
Ineffectiveness 9 (6)–– 7 3
Hedge Ratio*1:11:11:11:11:11:1
At inception, each hedge relationship is formalised in hedge documentation. Hedge accounting is discontinued when the hedge instrument
expires or is terminated, exercised or no longer qualifies for hedge accounting. The Group determines the existence of an economic
relationship between the hedging instrument and the hedged item based on the amount and timing of respective cashflows, reference
interest rates, currency, maturities and notional amounts. The Group assesses whether the derivative designated in each hedging relationship
is expected to be, and has been, effective in offsetting the changes in cash flows of the hedged item using the hypothetical derivative method.
The Group’s policy is to designate derivatives in hedge relationships on inception when their fair value is zero, applying a hedge ratio of
1:1. The main source of ineffectiveness for electricity contracts relates to the difference between the market price and the strike price at
inception of the contracts.
For interest rate derivatives, the weighted average hedge rate for cashflow hedges (receive floating, pay fixed rate) is 3.6% (2022:
3.6%) and for fair value hedges (pay fixed, receive floating) is 2.5% (2022: 1.8%)
Market risk sensitivity analysis
The following summarises the potential impact of increases or decreases in the relevant market risk exposures of the Group on post
tax profit (unhedged derivatives) and on other components of equity (hedged derivatives) from the change in the derivative valuation.
The analysis does not take into account dynamic market response over time, which could be material. The electricity sensitivities
disclosed below include level 1 derivatives.
Impact on post tax profitImpact on equity
2023
$M
2022
$M
2023
$M
2022
$M
Group
Electricity forward price increased by 10%5045(62)(69)
Electricity forward price decreased by 10%(34)(40)6270
Forward foreign exchange rates increased by 10%––(2)(3)
Forward foreign exchange rates decreased by 10%––24
Interest rates higher by 100 bps (28)(31)614
Interest rates lower by 100 bps2933(6)(15)
(B) CREDIT RISK
Nature of risk exposureRisk Management Policy
The carrying amounts of financial assets
recognised in the balance sheet best represent
the Group's maximum exposure to credit risk
at the reporting date without taking account
of any collateral held by way of customer bonds.
The Group manages its exposure to credit risk under policies approved by the Board of
Directors. The Group performs credit assessments on all electricity customers and normally
requires a bond from commercial customers who have yet to establish a suitable credit
history. In the event of a failure by a retailer to settle its obligations to the Energy Clearing
House, following the exhaustion of its prudential security, a proportionate share of the
shortfall will be assumed by all generator class market participants. The Group would be
impacted in the event that this occurs. It is the Group's policy to only enter into derivative
transactions with banks that it has signed an ISDA master agreement with, and which have
a minimum long-term Moody's (or equivalent) credit rating of A- or higher.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
MERCURY INTEGRATED REPORT 2023
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56
NOTE F2. FINANCIAL RISK MANAGEMENT (CONTINUED)
(C) LIQUIDITY RISK
Nature of risk exposureRisk Management Policy
Liquidity risk is the risk
that the Group will not be
able to meet its financial
obligations as they fall
due.
The Group manages its exposure to liquidity risk
under policies approved by the Board of Directors.
Policies require that prescribed headroom is
available in undrawn and committed facilities
to cover unplanned needs and that a limited
amount of facilities mature over the immediate
12 month forward-looking period. The Group's
objective is to maintain a balance between
continuity of funding and flexibility through the
use of various funding sources.
The following liquidity risk disclosures reflect all contractually fixed payoffs,
repayments and interest from recognised non-derivative financial liabilities.
The timing of cash flows for non-derivative financial liabilities is based
on the contractual terms of the underlying contract.
The information on contractual cashflows are presented on an undiscounted
basis, consequently the totals will not reconcile with the amounts recognised
in the balance sheet.
• Net settled derivatives include interest rate derivatives and electricity
price derivatives.
• Gross settled derivatives relate to foreign exchange derivatives
that are used to hedge future purchase commitments.
• Foreign exchange derivatives may be rolled on an instalment basis until the
underlying transaction occurs. While the maturity of these derivatives are short-
term the underlying expenditure is forecast to occur over different time periods.
The Group also expects to receive funds relating to derivative asset settlements.
While the following table gives the impression of a liquidity shortfall, the
analysis does not take into account expected future operating cash flows
or committed and undrawn debt facilities that will provide additional liquidity
support. The expectation of cash receipts in relation to derivative assets
should also be considered when assessing the ability of the Group to
meet its obligations.
Less than 6 months
$M
6 to 12 months
$M
1 to 5 years
$M
Later than 5 years
$M
Total
$M
30 JUNE 2023
Liquid financial assets
Cash and cash equivalents 75 – – – 75
Receivables 440 – 1 – 441
Non derivative financial liabilities
Payables and accruals (344) – – – (344)
Borrowings (383) (28) (840)(1,793) (3,044)
Lease liabilities (7) (7) (55)(88) (157)
Derivative financial liabilities
Derivative liabilities - net settled
Electricity price derivatives(30)(48)(163)4(238)
Interest rate derivatives(23)(23)(69)(12)(128)
Cross currency interest rate derivative(5)(5)(7)8(9)
Derivative liabilities - gross settled
Foreign exchange derivatives inflows 31 – – – 31
Foreign exchange derivatives outflows (31) – – – (31)
Net outflows(276)(112) (1,134)(1,881)(3,403)
Less than 6 months
$M
6 to 12 months
$M
1 to 5 years
$M
Later than 5 years
$M
Total
$M
RESTATED 30 JUNE 2022
Liquid financial assets
Cash and cash equivalents 65 – – – 65
Receivables 489 – 3 – 492
Non derivative financial liabilities
Payables and accruals (383) – – – (383)
Borrowings (545)(49)(454)(1,918)(2,966)
Lease liabilities (7)(7)(58)(99)(171)
Derivative financial liabilities
Derivative liabilities - net settled
Electricity price derivatives(121)(120)(281)5(516)
Interest rate derivatives(12)(16)(88)(18)(135)
Cross currency interest rate derivative(1)(3)(19)7(16)
Derivative liabilities - gross settled
Foreign exchange derivatives inflows 51 – – – 51
Foreign exchange derivatives outflows (49) – – – (49)
Net outflows(514)(195)(897)(2,023)(3,629)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
MERCURY INTEGRATED REPORT 2023
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57
NOTE F2. FINANCIAL RISK MANAGEMENT
(CONTINUED)
(D) CAPITAL RISK MANAGEMENT
Management seeks to maintain a sustainable financial structure
for the Group having regard to the risks from predicted short and
medium-term economic, market and hydrological conditions
along with estimated financial performance. Capital is managed
to provide sufficient funds to undertake required asset reinvestment
as well as to finance new generation development projects and
other growth opportunities to increase shareholder value at a rate
similar to comparable private sector companies.
In order to maintain or adjust the capital structure, changes can be
made to the amount paid as dividends to shareholders, capital can
be returned or injected or assets sold to reduce borrowings.
Consistent with other companies in the industry, the Group
monitors capital on the basis of its gearing ratio. This ratio
is calculated as net debt divided by total capital. Net debt is
calculated as total borrowings (both current and non-current)
less cash and cash equivalents. Total capital is calculated
as shareholders' equity plus net debt. The gearing ratio is
calculated below:
2023
$M
2022
$M
Borrowings at carrying value1,8981,956
Fair value adjustments8470
Less cash and cash equivalents(75)(65)
Net debt1,9071,961
Total equity4,8494,752
Total capital6,756 6,713
Gearing ratio28.2%29.2%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
For the year ended 30 June 2023
Under the negative pledge deed in favour of its bank financiers
the Group must, in addition to not exceeding its maximum gearing
ratio, exceed minimum interest cover ratios and a minimum
shareholder equity threshold.
The Group seeks to maintain a debt to EBITDAF ratio of less
than 3.0 times, on average through time, to maintain credit
metrics sufficient to support its credit rating on an on-going
basis. For the purpose of calculating this ratio and consistent
with the rating agency treatment, adjustments are made to net
debt and EBITDAF based on the definitions provided by the
rating agency. For the year ended 30 June 2023, the Group
had a debt to EBITDAF ratio of 2.0 times (2022: 2.9 times).
NOTE G1. SHARE-BASED PAYMENTS
Long-term Incentive Plan
The Group operates an equity-settled share based long-term
incentive (LTI) plan for senior executives. The plan is designed
to enhance the alignment between shareholders and those
executives most able to influence the performance of the Group.
Under the plan executives are granted the shares at nil cost if certain
total shareholder return targets are met. Performance is measured
against a combination of: i) other electricity generators who are listed
on the NZX; and (ii) out performance against the Group's internal
return on capital hurdles. The plan is due to vest in July 2024 and
July 2025.
Each LTI plan provides the board with a level of discretion and
represents the grant of in-substance nil-price options to executives.
During the year the Group expensed $680,022 in relation to equity-
settled share based payment transactions (2022: $561,274).
The cost of the share-based payment is recognised over the
period in which the performance or service conditions are
fulfilled. The total amount expensed is based on the Group’s
best estimate of the number of equity instruments that will
ultimately vest, taking into consideration the likelihood that
service conditions will be met, multiplied by the initial fair value
of each share.
Movements in the number of share options are as follows:
20232022
Balance at the beginning of the year 863,879 709,603
Options granted 348,101 256,152
Options expired (57,009)–
Options exercised (224,730) (101,876)
Balance at the end of the year930,241 863,879
358,528 options were exercisable at the end of the year (2022:
224,730) with the remaining options under the plan having a
weighted average life of 1 year (2022: 1.0 year).
NOTE G2. SUBSEQUENT EVENTS & OTHER
MAT T ER S
The Board of Directors has approved a fully imputed final dividend
of 13.1 cents per share to be paid on 29 September 2023.
The Company plans to continue with the DRP announced in the
last financial year, with a DRP strike price to be determined by the
average of daily volume weighted average sale price for a share,
calculated on all price setting trades of shares that took place
through the NZX Main Board over a period of five trading days
starting on 18 September 2023, less a 2% discount.
There are no other material events subsequent to balance date that
would affect the fair presentation of these financial statements.
58
CLIMATE STATEMENT
MENU
MERCURY INTEGRATED REPORT 2023
CLIMATE STATEMENT.
TE TAUĀKI ĀHUARANGI.
In this section we cover how we consider and respond to climate-related risks
and opportunities as we pursue our long-term objective of playing a leading
role in New Zealand's successful transition to a low-carbon future.
Ōhakuri substation, downstream of the hydro station.
MERCURY INTEGRATED REPORT 2023
CLIMATE STATEMENT
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59
CONTENTS.
60 INTRODUCTION
61 GOVERNANCE
64 STRATEGY
70 RISK MANAGEMENT
72 METRICS & TARGETS
MERCURY AND
CLIMATE CHANGE.
Impacts from climate change, actions to reduce
emissions and the transition to a low carbon
economy are shaping the world around us.
Our strategy anticipates that our business will
encounter both climate-related opportunities
and risks as we pursue our objective of playing
a leading role in New Zealand's successful
transition to a low-carbon future.
This climate statement has been prepared
in alignment with the incoming Aotearoa
New Zealand Climate Standards
1
(NZ CS).
These standards were published in December
1
www.xrb.govt.nz/standards/climate-related-disclosures/aotearoa-new-zealand-
climate-standards/aotearoa-new-zealand-climate-standard-1/
Turitea wind farm.
2022 by the External Reporting Board, a NZ
Government agency, and are aligned with the
internationally recognised TCFD framework.
These standards provide a consistent framework
for entities to consider and disclose information
on their climate-related risks and opportunities
with the objective of enabling the users of this
statement to assess and make decisions on
how Mercury is responding to the risks and
opportunities of climate change.
MERCURY INTEGRATED REPORT 2023
CLIMATE S
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Over the past six years we have improved
our capability to identify, assess and manage
climate-related risks and opportunities.
Our governance approach and disclosure of
these risks and opportunities has evolved over
this period. Our integrated strategy considers
climate-related risks and opportunities, and
we have made changes to our governance
frameworks and remuneration models to ensure
that Mercury's Executive Management Team
(EMT) have appropriate oversight of, and are
actively assessing and managing, these climate-
related risks and opportunities. A summary of
key points in this climate statement are:
• Material climate-related risks and
opportunities are regularly discussed by
our Board and EMT
• Scenario analysis was completed in FY23,
with three scenarios created based on:
– (1) a 1.5-degree future
– (2) a 1.5-2 degree future and
– (3) a greater than 4-degree future
• Based on these scenarios, we have updated
our view of material climate-related
opportunities and risks that could affect
our business
• Material climate-related opportunities have
been identified as those arising from:
– Increase in electricity demand from
decarbonisation
– Investor desire for renewable generation
• Material climate-related risks have been
identified as those arising from:
– Greater variability in weather patterns
leading to changes in generation profile
– Growing intensity of atmospheric conditions
(including storm events) leading to damage
to assets or damage to transmission and
distribution assets
– Government Policy settings failing
to balance the energy trilemma and
leading to a decline in electricity demand
growth, a loss of investor confidence in
the electricity sector, increased costs for
the sector and/or delays in generation
development
– Supply chain constraints driven by rising
global demand for renewable electricity
generation equipment.
We are currently considering the further
actions we can take to reduce our own
emissions to ensure we are doing our part
to mitigate climate change. Further details
of these actions are outlined in our Climate
Transition Action Plan.
DISCLAIMER
Mercury has used best efforts in the preparation of this
Climate-Related Disclosure to provide accurate information
as at 21 August 2023, but cautions reliance being placed on
representations that are necessarily subject to significant
risks, uncertainties or assumptions.
This report contains forward-looking statements, including
climate-related metrics, climate scenarios, estimated climate
projections, targets, assumptions, forecasts and statements
of Mercury’s future intentions. These statements necessarily
involve assumptions, forecasts and projections about
Mercury’s present and future strategies and the environment
in which Mercury will operate in the future, which are
inherently uncertain and subject to limitations, particularly
as to inputs, available data and information which is likely
to change. Mercury has used its best efforts to provide a
reasonable basis for forward-looking statements but is
constrained by the novel and developing nature
of this subject matter. Climate-related forward-looking
statements may therefore be less reliable than other
statements Mercury may make in its annual reporting.
Descriptions of the qualitative and quantitative current
and anticipated impacts and financial impacts of climate
change draw on and/or represent estimated figures only.
In particular, the risks and opportunities described in this
report, and the forecast emissions reductions,
may not eventuate or may be more or less significant
than anticipated. There are many factors that could cause
Mercury’s actual results, performance or achievement
of climate-related metrics (including targets) to differ
materially from that described, including climatic,
government, consumer, and market factors outside of
Mercury’s control.
Nothing in this report should be interpreted as capital
growth, earnings or any other legal, financial tax or other
advice or guidance.
INTRODUCTION.
Aratiatia rapids.
MERCURY INTEGRATED REPORT 2023
CLIMATE S
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61
BOARD
Our Board is responsible for overseeing the
management of risks and opportunities for
Mercury including those related to climate
change. Responsibilities are set out in the
Board Charter, and include:
• establishing clear strategic goals with
appropriate supporting business plans
and resources
• monitoring strategy implementation,
financial performance and the integrity
of reporting
• ensuring that effective audit, risk
management and compliance systems
are in place and monitored.
A committee of the Board - the People and
Performance Committee – supports the
Board to set the approach to remuneration,
including incorporating climate-related
matters in the Short-Term incentive
component of remuneration.
RISK ASSURANCE AND AUDIT COMMITTEE
(RAAC)
A committee of the Board – The Risk Assurance
and Audit Committee (RAAC) supports the
Board in overseeing climate-related risks.
The Board itself has responsibility for climate-
related opportunities. Members of the EMT also
attend RAAC meetings to ensure appropriate
support for the RAAC and facilitate feedback
and discussion. The RAAC meets at least
quarterly and is responsible for overseeing,
reviewing and making recommendations to
the Board on our risk management policy and
processes, including climate-related risks and
opportunities. The Committee reviews progress
against our risk management framework.
In FY23, the relevant RAAC meetings were
as follows:
• July and August 2022; review and
endorsement of FY22 TCFD report
• February 2023; update on climate-related
disclosures pre-assurance review by EY
• May 2023; update on FY23 climate scenario
analysis and risk and opportunity identification
- including updated climate scenarios for
meeting the requirements of NZ CS1
And in FY24:
• July and August 2023; review and
endorsement of the FY23 Climate Statement
The RAAC provides feedback to management
and back up to the wider Board. At each Board
meeting that follows a RAAC meeting the RAAC
Chair updates the Board on discussions that
took place and decisions reached. Mercury does
not currently consider it necessary to establish
a separate sustainability sub-committee of
the board as sustainability and Kaitiakitanga/
Stewardship are inherent in Mercury’s business
operating model and strategy and are therefore
addressed within existing governance structures.
RISK MANAGEMENT FRAMEwORK
Our risk management framework meets New
Zealand standard AS/NZS ISO 31000 Risk
Management – Principles and guidelines.
Our risk management framework helps us to
identify different categories of risk – compliance
risks, operational risks, reputational risks, financial
risks and people risks. Climate-related risks show
up across many of these categories and are
treated in the same way as other risks across
these categories. More information on our risk
management framework can be found in the
Corporate Governance Statement.
SKILLS AND COMPETENCIES TO PROVIDE
OVERSIGHT OF CLIMATE-RELATED RISKS
AND OPPORTUNITIES
The Board skills matrix specifically includes
climate change. In FY20 the Board reviewed
whether our risk management framework
supported our integrated business planning
process and whether climate-related risks
were adequately captured within this risk
management framework. Given the potential
impact of climate change across Mercury, the
Board amplified climate-related risks within
our consolidated risk register.
In FY21, the Board held an externally
facilitated deep dive into regulatory, economic
and legal aspects of climate-related risks and
opportunities. In May 2021, management
presented its first climate change scenario
analysis report and the outcome of its review
of climate-related risks and opportunities to
the RAAC.
In FY22 and FY23, a cross-functional team
from across the business conducted more in-
depth scenario analysis to highlight emerging
risks and opportunities.
GOVERNANCE.
Ngā Awa Pūrua geothermal station.
MERCURY INTEGRATED REPORT 2023
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The Board seeks internal and external expertise
and advice relating to climate change as required
to ensure that it has up to date information and
can provide appropriate oversight of climate-
related risks and opportunities.
MANAGEMENT’S ROLE IN ASSESSING
AND MANAGING CLIMATE-RELATED RISKS
AND OPPORTUNITIES
The Board delegates to the Chief Executive
and the EMT, responsibility for developing, and
recommending to the Board, strategies to
identify, assess and manage climate-related
risks and opportunities (refer to the Leadership
and Governance section of the FY23 Integrated
Report for further detail). The EMT is also
charged with fostering improved reporting
and disclosure of these risks and opportunities
including the identification of metrics and
targets. Mercury’s management is responsible
for ensuring the business is identifying,
assessing and managing climate-related risks
and opportunities. Mercury’s annual climate-
related risk disclosure process is prepared
by Management with a primary governance
pathway via the RAAC to the Board.
RISK MANAGEMENT COMMITTEE
Our management operates a Risk Management
Committee (RMC) whose mandate is (1) to
promote risk awareness and appropriate risk
management to all Mercury people; and (2) to
monitor and review risk activities as required.
Membership of the RMC is the EMT and is
chaired by the Chief Executive.
The RMC meets prior to every RAAC meeting
and reviews Mercury's risks. This includes
reviewing its approach to climate-related risks
and opportunities which is carried out at least
annually. In FY23 the RMC met six times with
climate-related risks being considered at the
following meetings:
• Twice in July 22 to review FY22 climate risk
disclosures
• Jan 23 to discuss outcomes of a third-
party pre-assurance review of Mercury’s
FY22 climate-related disclosures, and
• April and June 23 to review FY23 climate-
related risks, opportunities and disclosures
In FY23, the RMC endorsed updates to the
company’s climate change scenarios, and
subsequent updates to the climate-related
risks and opportunities.
(Please refer to table on the following page for
more information on specific responsibilities.)
CLIMATE-RELATED RISKS AND
OPPORTUNITIES ARE INCORPORATED INTO
COMPANY STRATEGY DEVELOPMENT
Climate-related risks and opportunities are
also actively considered in the context of
management’s periodic reviews of Mercury’s
strategic framework. The reviews form a
key element of regular stock takes of any
significant market context changes that could
result in either identification of new risks and
opportunities or re-assessment of existing
risks and opportunities, that is, a change in the
likelihood and/or consequence of their impact.
A cross functional business team co-ordinates
contributions from across the business led by the
Sustainability Team reporting through the GM
Sustainability. This work feeds into our updates
to our future scenarios which provide context
when setting our 3-year objectives and long-term
aspirations. These scenarios are reviewed each
quarter by the EMT and the Board. The EMT
undertook these reviews in Aug and Oct 2022
and in Jan, April and May 2023.
MANAGEMENT REMUNERATION IS LINKED
TO MANAGEMENT OF CLIMATE-RELATED
RISKS AND OPPORTUNITIES
The remuneration of the Chief Executive and the
EMT is linked to Mercury’s strategic objectives,
purpose and goals. The Short-Term Incentive
(STI) component of remuneration is set as a
percentage of the executive’s base salary and for
FY23 was set at 60% for the Chief Executive and
up to 35% for other EMT members.
A proportion (70% for the Chief Executive and
50% for other EMT members) of the STI is
related to a shared set of Group Key Performance
Indicators (KPIs) which are aligned to our three
year objectives. The climate-related objectives
and their related KPIs are shown below.
F Y22 & 23
CROSS-FUNCTIONAL TEAM
CONDUCTS FURTHER IN-
DEPTH SCENARIO ANALYSIS TO
HIGHLIGHT EMERGING CLIMATE
RISKS AND OPPORTUNITIES
F Y21 (MAY)
FIRST CLIMATE CHANGE
SCENARIO ANALYSIS REPORT
PRESENTED TO BOARD
FY21
MERCURY BOARD ENGAGES IN
DEEP DIVE ON REGULATORY,
ECONOMIC AND LEGAL ASPECTS
OF CLIMATE-RELATED RISKS AND
OPPORTUNITIES
Ngā Tamariki geothermal station.
More information on the responsibilities and
remuneration of the Chief Executive and the
Executive Management Team can be found
in our Corporate Governance Statement and
Remuneration Report.
Three-Year ObjectiveFY23 KPI FY24 KPI
Play a leading role in New
Zealand’s successful transition
to a low carbon economy
Progress on future
development pipeline
Role in electricity sector
transition progress
Create executable options
for new growth
Clear path to carbon reduction Progress non-condensable
gas reinjection
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BOARD
MERCURY BOARD
Establishes the purpose and strategic direction, oversees and approves risk management strategy and risk appetite and monitors progress against climate-related risks, metrics and targets. Climate-related risks
and opportunities form an integral part of Mercury’s overall risk management framework. All key climate-related risks and opportunities are approved by the Board. In addition to reporting from the
Risk Assurance and Audit Committee (RAAC), the Board receives quarterly updates on key sustainability trends and issues.
RISK ASSURANCE AND AUDIT COMMITTEE
A sub-committee of the Board, the RAAC supports the Board in overseeing risks and opportunities including climate-related risks and opportunities and on the assurance of the CRDs in relation to compliance with the NZ Climate Standards.
Periodically reviews Mercury’s Risk Management Policy and Framework,
to ensure these remain fit for purpose, with appropriate and
effective risk management strategies in place.
Quarterly review of risk reports from management. Each year, the May quarter review
includes climate-related risk assessments and endorsing updated scenarios used in
Mercury’s identification of key climate-related risks and opportunities.
Reports to the Board on the outcomes of RAAC meetings, including discussion
concerning risks and making recommendations to the Board.
EXECUTIVE
CHIEF EXECUTIVE AND EXECUTIVE MANAGEMENT TEAM
Overall accountability for actions and commitments to embed climate change into risk management, business strategy and planning, budgeting processes and frameworks.
Includes identifying, considering and monitoring climate-related risks and opportunities and reporting to the RAAC and the Board.
RISK MANAGEMENT COMMITTEE
The Risk Management Committee (RMC) is a committee of the Executive Management Team (EMT) chaired by the Chief Executive. It meets quarterly.
Promotes risk awareness and appropriate risk management to staff. Monitors
and reviews risk activities at its quarterly meetings.
Reporting is primarily developed by Mercury’s internal experts through the
Risk Assurance Team which includes a Risk Assurance Officer to co-ordinate
management of all company risks. Climate-related risks and opportunities are
reported to the RMC through facilitation by the Sustainability Team.
When appropriate, management engages third-party experts for services
such as auditing, specific climate research or strategic
management consultants.
EXECUTIVE
Ensures the risks in each business area are identified, understood and managed and monitored and escalated appropriately.
Implements risk mitigation strategies approved by
the RMC and RAAC, and where applicable the Board.
Reviews quarterly sustainability updates.
Monitors emerging and developing risks.
For climate-related risks and opportunities this is
facilitated by Mercury’s Sustainability Team which reports
to the General Manager Sustainability. Oversight of risk
reporting is performed by the risk assurance team which
reports to the Chief Financial Officer.
Preparation and presentation of climate-related risk
reports to the RAAC. These reports include action taken to
mitigate risks previously disclosed.
Management remuneration includes incentives tied to climate-related risks and opportunities.
OPERATIONS
At an operational level the identification and day-to-day management of climate-related risks is dispersed throughout Mercury.
OVERVIEw AND RELATIONSHIP BETwEEN RESPONSIBILITIES OF MERCURY BOARD, SUB-COMMITTEES AND MANAGEMENT.
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wHAT wE ARE SEEING
Mercury recognises that climate change is currently impacting the way we operate in the following ways:
CURRENT PHYSICAL CLIMATE IMPACTS
PHYSICAL IMPACTS
Extreme weather events in FY23, such as the Auckland Anniversary weekend floods and Cyclone Gabrielle,
caused widespread flooding and property damage. Over 225,000 homes lost power including ~25,000
Mercury customers. The financial impact on Mercury was immaterial from this event but the impact on
some of our customers lives was significant. Recognising these circumstances we elected to delay the
implementation of customer price changes and also issued customer credits of ~$200,000.
Extremely wet weather events throughout the year have resulted in the Taupō catchment receiving inflows of
6,243GWh, the highest aggregated inflows for any 12 month period ending 30 June since records began
in 1927. Hydro generation across the Waikato Hydro Scheme over the same period was 5,209 GWh, the
third highest since records began in 1980. It has not been possible to quantify the impact the changing
climate has played in this outcome.
CURRENT TRANSITION CLIMATE IMPACTS
TRANSITION IMPACTS
Stakeholder desire for greater clarity and understanding of climate impacts on business has led to
increasing climate-related disclosure standards
Mercury engages with regulators and other stakeholders on climate-related initiatives, such as the NZ
Battery Project
1
(sometimes referred to as discussions on Onslow or pumped hydro), seeking to enable
the best pathway for New Zealand to transition to a low-carbon economy
As a participant in the New Zealand Emissions Trading Scheme (ETS), Mercury surrenders emissions
credits for its geothermal fugitive emissions and natural gas sales
Mercury is currently sequestering ~8,000tCO2e p.a. of fugitive geothermal greenhouse gas emissions by
reinjecting non condensable gases from one unit at our Ngā Tamariki geothermal station (about 25% of
the total).
2
We are investigating further opportunities at Ngā Tamariki and other geothermal sites.
As part of its asset management programme, Mercury reviews the capabilities of its hydro structures
against future changes in flood levels due to climate-induced changes in weather patterns
LOOKING FORwARD
SCENARIO ANALYSIS
To help improve our understanding of climate-
related risks and opportunities over the current,
short, medium and long-term and to test the
resilience of our strategy, we undertake scenario
analysis on a regular basis and will continue
to refine and adapt our processes as things
continue to change.
Mercury has previously used external third-party
consultants for guidance, however in FY23 no
external partners or stakeholders were involved
in the scenario analysis process. This was
internally-led as a standalone process developed
by management to comply with NZ CS1 where
a cross-functional workgroup consisting of
representatives from across each of Mercury’s
business units was formed to update and
refresh our climate scenarios. Once complete,
the climate scenarios we developed were closely
aligned to three of our company strategic
scenarios so we amended those strategic
scenarios to incorporate climate-related drivers.
In following this process, Mercury developed a
single set of company scenarios that are used
to identify both strategic and climate-related
risks and opportunities and inform our strategic
decision-making.
The RAAC and the RMC provided governance
oversight of the scenario analysis process
through receiving updates from management
at meetings in February and May 23. These
included reviews of the selected scenarios and
material climate-related risks and opportunities
where feedback was sought by management
and provided.
The Board was also updated on scenario analysis
development and the identification of material
climate-related risks and opportunities as,
after each RAAC meeting, the Chair of the
RAAC provided updates at subsequent Board
meetings.
In accordance with NZ CS1, three scenarios
were analysed – one where global temperature
increase is limited to 1.5 ̊C (with an emissions
reductions pathway aligned to RCP1.5), another
where the temperature rise is greater than 4 ̊C
(aligned to RCP8.5) and a third scenario where
global temperature increase was limited to
1.5-2 ̊C (aligned to RCP2.0). These scenarios
and their associated pathways were chosen to
fulfil the NZ CS1 requirement for a 1.5 degrees
Celsius climate-related scenario, a 3 degrees
Celsius or greater climate-related scenario, and
a third climate-related scenario. In Mercury’s
case, the third scenario was chosen for its
alignment with Mercury’s strategic scenarios.
It provides an alternative view of how New
Zealand could successfully transition to a low-
carbon economy in order to assess the resilience
of Mercury’s business model and strategy to
climate-related risks and opportunities.
Data sources including Transpower demand
forecasts, NIWA
3
temperature and rainfall
forecasts and global predictions of carbon price
rises were used in the creation of these scenarios.
We also considered advice from the Climate
Change Commission and the government’s
Emissions Reduction Plan in shaping our view
of how the economy and the energy sector
could transition towards Net-Zero carbon.
Mercury did not undertake its own modelling
in the construction of its scenarios.
In FY23 Mercury has chosen not to financially quantify the current financial impacts of climate change due to the significant
uncertainty in apportioning impacts to climate but will look to do so in future years where practical.
1
The NZ Battery Project is a climate change initiative being led by the NZ Government to investigate the ability of pumped
hydro, and alternative technologies, to address New Zealand’s dry year electricity problem.
2
Please refer to our GHG Emissions Inventory Report for details on calculation of our emissions.
3
NIWA is the National Institute of Water and Atmospheric Research, a Crown Research Institute of New Zealand.
The boundary for Mercury’s scenario analysis
was the whole of the organisation, including our
subsidiaries. We also considered the impacts on
the upstream and downstream phases of our value
chain, e.g. key suppliers, partners and customers.
Our scenario analysis was framed using the
focal question: “What climate-related risks and
opportunities are affecting Mercury now and could
plausibly affect Mercury over the short, medium
and long terms?”. Our time frames were defined,
in alignment with Mercury’s business planning, as
current: <1 year, short-term: 1 to 3 years, medium-
term: 3 to 10 years, and long-term: 10-30 years.
The endpoint of these time frames are aligned with:
• Current and short-term: Mercury’s 3-year
objectives
• Medium-term: Mercury’s long-term strategy
and strategic scenarios
• Long-term: The expected useful life of new
generation development
Following the establishment of the focal question
and timeframes, the STEEP (Social / Technological
/ Economic / Environmental / Political) framework
was used to build out our climate scenarios and
draft our scenario narratives described on the
following page.
As noted above, the climate scenario narratives
were closely aligned to three of our company
strategic scenarios so we incorporated these
together into a single set of company scenarios that
are used to identify both strategic and climate-
related risks and opportunities and inform our
strategic decision-making.
STRATEGY.
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CLIMATE
SCENARIOS
ORDERLY TRANSITION SCENARIO (TEAL SCENARIO)
Global temperature increases are limited to 1.5 degrees.
DISORDERLY TRANSITION SCENARIO (AMBER SCENARIO)
Global temperature increases are limited to 1.5-2 degrees.
4+ DEGREE wARMING SCENARIO (MAROON SCENARIO)
Global temperature increases by 4+ degrees.
CLIMATE IMPACTSLowest to medium physical climate risk. We are able to navigate to
a 1.5 future and new technologies have emerged to help adapt and
largely mitigate any disruption caused. Extreme weather events are only
moderately higher than historical norms.
We are able to navigate to a 1.5 to 2 future, however when climate events
do occur, they are expensive and disruptive as technological solutions are
not adequate to help adapt and mitigate the disruption caused.
Highest physical climate risk. We have been unable to navigate to a 1.5
future, with warming on track to realise a 4+ degree future. Incidents
of disruptive and expensive damage to infrastructure are growing in
frequency. The retreat from the ocean has begun.
ENERGY PATHwAYS:
Grid Demand
High demand driven from industry and decarbonisation. Peak shaving and
smart demand response are used efficiently to help manage the grid.
High demand driven from industry and decarbonisation. Demand side
flexibility is minimal and only used in emergencies (much like today).
Most fossil gas has been displaced by electricity.
Electricity demand has been stagnant to declining. Gas is still used quite
extensively.
ENERGY PATHwAYS:
Grid Supply
Fossil fuels have been retired. Demand growth has been met by grid-scale
renewable generation. Wholesale prices decrease.
100% renewable has been achieved through deployment of grid scale
wind and other renewable solutions.
Fossil Fuels remain with limited growth in renewables.
MACROECONOMIC TRENDS:
Resource and technology
constraints
Goods and knowledge are affordable, and flow freely. Technology allows
a high degree of sustainable use of natural resources. New Zealand is
attractive for investment.
Physical resources were challenging to access due to global demand,
however, are now readily available from global sources.
Access to knowledge and technology is difficult and expensive.
POLICY AND
SOCIOECONOMIC
ASSUMPTIONS:
Consumer needs
AI powered digital assistants enrich consumers lives. Consumers have
a high work/life balance and discretionary spend on entertainment and
other luxuries.
Many are struggling and looking for deals on the basics.
This is mixed with an expanding older wealthy segment looking for
entertainment and life’s comforts.
Financial hardship has created a large price sensitive segment focussed
on the basics. There is a culture of conserving, repairing, and reusing
limited resources.
In contrast to the majority, there is a small segment seeking luxury,
who have created off-grid sanctuaries.
POLICY & SOCIOECONOMIC
ASSUMPTIONS:
Competition / new entrants /
disrupters
Benign wholesale conditions drive retail competition in the energy
sector. Retail is sophisticated providing innovative products and services.
Incumbents are delivering efficiently to meet growth. Successful new
entrants exist in niches.
Competition in retail and wholesale is strong with competitive prices. New
entrants and novel business models emerge.
Competition in energy is very limited. The market is easy to enter and
new entrants with a novel bundle appear from time to time but typically
struggle to compete with the scale of the incumbents.
POLICY AND
SOCIOECONOMIC
ASSUMPTIONS:
Future of work
Industry is adapting to shorter working weeks, and an ageing workforce.
Employers value employees with attitude and aptitude to keep up with the
pace of change. Young employees want to work for businesses that have
embraced these changes and are leading further advancements.
New Zealand has suffered from a “brain drain” making talent hard to
secure. Young employees have for the most part gone overseas where
wages are higher and the cost of living lower. Those that remain have
secured senior high-paying jobs.
The highly skilled enjoy flexible working conditions. The majority work hard
for low wages. Young employees are looking for the opportunity that will
give them a leg up to better job prospects.
CARBON SEQUESTRATION
FROM AFFORESTATION
Carbon sequestration from afforestation has been utilised for emissions
reduction to a limited extent, being displaced by technological and nature-
based solutions as they become available.
Carbon sequestration from afforestation has been widely deployed, being
gradually superseded by technological and nature-based solutions.
Carbon sequestration from afforestation is utilised at a local level, without
effective global coordination and certification.
NATURE-BASED SOLUTIONSNature-based solutions have been developed and form part of a broad
portfolio of emissions reductions solutions.
Nature-based solutions have been developed and form part of a broad
portfolio of emissions reductions solutions.
Nature-based solutions have been developed but have had limited impact
on reducing emissions.
NEGATIVE EMISSIONS
TECHNOLOGY
Effective negative emissions technology has been developed and
widely deployed.
The development of negative emissions technology was slower than
expected, leading to its delayed deployment.
Negative emissions reductions technology has been developed but has
had a limited impact on removing emissions.
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Climate-related risks and opportunities were then identified from the scenario
narratives and assessed. To assess which of these were material, the climate
scenario workgroup used Mercury’s risk matrix, which required consideration of
both quantitative impacts, e.g. loss of revenue or increases in costs, and qualitative
impacts, e.g. loss of social license to operate or reputational impacts.
Inclusion of non-financial impacts in assessing materiality aligns with the
materiality principles described in the NZ CS. These principles recognise
CLIMATE-RELATED RISKS
AND OPPORTUNITIES.
SML
SML
RISKRISK TYPE:
Time Horizons
TIME HORIZON OVER wHICH
RISK BECOMES MATERIAL,
LIKELIHOOD AND CONSEQUENCE
IMPLICATIONSASSESSMENT METHODOLOGY MANAGEMENT RESPONSE
GREATER VARIABILITY IN wEATHER
PATTERNS (INCLUDING MORE
FREQUENT HIGH INFLOw EVENTS
AND DROUGHTS) REDUCES HYDRO
GENERATION FLEXIBILITY AND
PROFITABILITY
Chronic Physical:
Current, Short, Medium, Long-term
In the long-term, i.e. in 10-30 years’ time,
this risk is assessed as being highly likely
(10-30% probability in any given year) to
materialise and may have a significant
financial impact, i.e. between $7.5m and
$75m.
Changing weather profile could lead to
reduced energy margin during droughts,
(as Mercury may have to buy from
competitors to supplement its own hydro
generation output), and also during high
inflow events because abundant supply
results in low market prices.
Assess changes in average rainfall and
min/max inflow profiles to determine
decrease in long-run hydro generation
earnings and profile factor.
• Mercury manages its peak customer
sales commitments by taking a portfolio
approach to generation development,
existing and operations and financial
hedging. We look to balance sales with
our physical generation and financial
contract purchases.
• Mercury’s environmental and planning
teams engage with governing and
consenting bodies to manage the
operational impacts of lake storage levels
and preserve operational flexibility on the
Waikato Hydro System.
• Lake Taupō may be held at lower average
storage levels to provide buffer for large
inflow events.
GROwING INTENSITY OF
ATMOSPHERIC CONDITIONS
(INCLUDING STORM EVENTS)
THAT CAUSE ASSET DAMAGE
Acute Physical:
Current, Short, Medium, Long-term
In the long-term, i.e. in 10-30 years’
time, this risk is assessed as being likely
(1-10% probability in any given year)
to materialise and may have a major
financial impact, i.e. between $75m and
$750m.
Increasing intensity of storm events,
floods and high wind events may lead to
physical damage to generation assets
resulting in costs to repair and lost
generation revenue.
Increasing storm intensities and/or higher
likelihood of heating and fires and/or
other extreme atmospheric conditions
may lead to severe damage to electricity
transmission and distribution systems
resulting in Mercury being unable to
export from stations.
Greater of estimate of cost to repair
generation assets or lost generation
revenue from transmission outages.
• Mercury regularly assesses physical
risks to generating plant and assets as
a reasonable and prudent asset owner/
operator and will mitigate risks of
damage as they arise.
• Mercury has a dam safety programme,
including annual and 5-yearly reviews,
and is working to gain insight into the
impacts of climate change on flood risks.
• Mercury maintains a geographically
dispersed and fuel diverse generation
fleet which reduces impacts arising from
locational-specific storm events that
could cause asset damage.
• Mercury carries insurance cover that
mitigates the financial impact of
replacing damaged assets and for
business interruption.
that quantitative assessment of climate-related risks and opportunities is not
always possible and thus broader judgement is required in assessing whether risks and
opportunities are material.
A description of the identified material climate risks and opportunities and their
current and anticipated impacts (both financial and non-financial) are shown
in the tables below.
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CLIMATE-RELATED RISKS
AND OPPORTUNITIES.
LHHH
SML
HM
SML
RISKRISK TYPE:
Time Horizons
TIME HORIZON OVER wHICH
RISK BECOMES MATERIAL,
LIKELIHOOD AND CONSEQUENCE
IMPLICATIONSASSESSMENT METHODOLOGY MANAGEMENT RESPONSE
SUPPLY CHAIN CONSTRAINTSAcute Transition:
Short, Medium, Long-term
In the medium-term, i.e. in 3-10 years’ time,
this risk is assessed as being almost certain
(>30% probability in any given year) to
materialise and may have a major financial
impact, i.e. between $75m and $750m.
Constrained global supply of renewable
generation technology (i.e. wind turbines
and solar panels) may cause construction
delays and capital cost overruns.
Estimated cost increases between 20-50%
in generation development.
Longer lead times result in
commissioning delays.
• Mercury manages its supplier
relationships to support its generation
development pipeline including executing
procurement processes with sufficient
lead time to minimise construction delays.
GOVERNMENT POLICY SETTINGS
FAIL TO BALANCE THE ENERGY
TRILEMMA AND LEAD TO A DECLINE
IN ELECTRICITY DEMAND GROwTH
AND/OR A LOSS OF INVESTOR
CONFIDENCE IN THE ELECTRICITY
SECTOR, INCREASED COSTS FOR
THE SECTOR, AND/OR DELAYED
DEVELOPMENT OF RENEwABLE
ELECTRICITY GENERATION CAPACITY
Chronic Transition:
Medium, Long-term
In the medium-term, i.e. in 3-10 years’
time, this risk is assessed as being likely
(1-10% probability in any given year) to
materialise and may have a major financial
impact, i.e. between $75m and $750m.
Without clear and considered government
policy setting, the rate of electrification
of industrial process heat and transport
could fall behind projections, resulting
in a reduced need for new investment
in renewable generation developments.
Government response to climate change
leads to market intervention which
negatively impacts asset valuations.
Resource Management Act reforms may
favour environmental protection over
mitigating climate impacts and renewable
electricity generation consents could be
declined or delayed, constraining and
adversely impacting Mercury’s generation
development pipeline.
Reduction in average wholesale price for
Mercury’s generation;
Reduced revenue from delays in
supplying renewable electricity
generation to the NZ market.
Reduced enterprise value of the company.
• Engage on policy settings that will support
a successful transition for Aotearoa.
• Maintain a pipeline of potential large
commercial and industrial customers
including new forms of demand
(e.g. hydrogen, data centres).
• Maintain a broad range of renewable
electricity generation development
options that can be brought to market
in different demand scenarios.
• Mercury actively engages with regulators
and other external stakeholders to
increase the understanding that
renewable electricity is a key enabler of the
transition to a low-carbon economy and
promote regulatory settings that support
the development of renewable electricity.
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CLIMATE-RELATED RISKS
AND OPPORTUNITIES.
LHHH
SML
HM
SML
OPPORTUNITYOPPORTUNITY TYPE:
Opportunity Time Horizons
TIME HORIZON OVER wHICH
OPPORTUNITY BECOMES
MATERIAL, LIKELIHOOD AND
CONSEQUENCE
IMPLICATIONSASSESSMENT METHODOLOGY MANAGEMENT RESPONSE
LOw-CARBON TRANSITION LIFTS
ELECTRICITY DEMAND
Chronic Transition:
Medium, Long-term
In the medium and long-terms, i.e.
in 3-30 years’ time, this opportunity
is assessed as being almost certain
(>30% probability in any given year) to
materialise and may have a significant
financial impact, i.e. between $7.5m
and $75m.
Increased demand for renewable
electricity due to decarbonisation of
transport and process heat may provide
greater opportunities to build renewable
generation capacity and increase
sales volumes.
Increased generation revenue from new
generation development.
• Mercury looks to secure resource consents
for generation development projects
ahead of expected increases in demand.
• Ensure a broad pipeline of
development opportunities and
maintain strong relationships with
generation equipment suppliers.
CAPITAL MARKETS TILT TOwARDS
INVESTING IN LOw-CARBON
GENERATION
Chronic Transition:
Short, Medium, Long-term
In the long-term, i.e. in 10-30 years’ time,
this opportunity is assessed as being
likely (1-10% probability in any given year)
to materialise and may have a major
reputational impact.
Mercury’s profile as a renewable electricity
generator may lead to reduced capital costs
through increased share price support and
cheaper borrowing costs as equity investors
and debt issuers seek exposure to climate-
resilient investments, reflecting societal
desire to invest in the transition to a low
carbon economy.
Impact of reduced cost of borrowing.• Mercury has looked to leverage its
renewable profile in issuing Green
Bonds and promotes its low-carbon
generation profile to research analysts
and sustainability rating agencies.
In FY23 Mercury has chosen not to undertake financial quantification of the material risks and
opportunities from climate change due to the uncertainty associated with estimating modelling
parameters across the medium and long-terms but will look to do so in future years where practical.
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RESILIENCE OF STRATEGY.
Actions described above for each of these
climate-related risks and opportunities are
reflected in our planning processes through:
• the setting of strategic objectives and
performance incentives in the Executive
Scorecard each financial year;
• the application of our Risk Management
Framework to assess physical risks to
generating plant and assets and prioritising
any required mitigation work in business plans;
• the deployment of capital and funding for
the development of new renewable
generation; and
• the consideration of portfolio risks when
progressing new generation development.
When making capital allocation decisions we
consider climate-related transition impacts, such
as decarbonisation initiatives and emissions
reductions pathways, given the significance
these have on future electricity demand growth.
We also consider the impacts of climate-related
risks and opportunities over different time
horizons in developing our capital investment
plans. In FY23, over 90% of Mercury’s growth
capital expenditure was allocated to renewable
generation development.
TRANSITION PLAN ASPECTS
OF STRATEGY
Our business model and strategy are described
in our FY23 Integrated Report. We test the
resilience of our strategy through the lens of our
material climate-related risks and opportunities.
TRANSITION TO A LOw-CARBON
ECONOMY
As the Climate Change Commission recognised
in its draft advice to inform the strategic direction
of the Government’s second emission reduction
plan, the largest share of emissions reductions
in the second emissions reduction period is
expected to come from energy and industry.
Therefore, getting the settings right to support
electrification is crucial. The Commission
recommendations include prioritising and
accelerating renewable electricity generation
build. Aotearoa has one of the lowest emissions
electricity sectors in the world. This electricity
can be used to reduce emissions economy-wide
through electrifying transport, industrial process
heat and space heating. The Commission
recommended setting a target so that 50% of
all energy consumed comes from renewable
sources by 2035, and this has now been
adopted by the government in its Emissions
Reduction Plan. For context, in CY2022,
Aotearoa’s renewable share of final energy
consumption was 30%.
As a fundamental element of our strategy, we
consider the role that we can play in supporting
this decarbonisation of New Zealand. In addition
to significant investments made in renewable
generation development (to help reduce
emissions from the electricity sector itself and
other sectors), we also consider the role we can
play in supporting the decarbonisation of
other sectors.
We are also working on how we can reduce our
own emissions. We are currently sequestering
~8,000 tonnes per annum of CO2e at Ngā
Tamariki and are looking to expand CO2
capture and reinjection across this and other
geothermal sites.
DEMAND
Electricity demand is a fundamental value driver
for our business. Ensuring ongoing resilience
of our business model requires an approach to
strategy that takes into account an increasingly
uncertain future. We improve the resilience of
our strategy by ensuring that we are positioned
for a range of different outcomes related to
demand and taking action to attract new
sources of demand to New Zealand such as
offering Power Purchase Agreements (PPAs)
for new infrastructure such as Data Centres.
PORTFOLIO APPROACH
The rapid growth of new renewable electricity
generation development is key to Mercury’s
contribution to New Zealand’s transition to a
low-carbon economy. We recognise the risks
involved in bringing large-scale, complex projects
to market while balancing the energy trilemma
needs of security, affordability and renewability.
In addition to ensuring new generation is
delivered on time to meet demand for electricity,
the intermittency of new renewable generation
sources such as wind and solar, also provides a
challenge in balancing day-to-day peak loads.
Mercury approaches these risks using a portfolio
approach to its generation fleet, utilising the
flexibility provided by its existing assets to enable
the integration of intermittent new generation
and looking towards market-based solutions
through offtake agreements. A portfolio
approach to new generation development,
looking at both fuel types and locational risks
(considering the vulnerabilities caused by the co-
location of generation assets) is also employed
when prioritising new development.
PHYSICAL ASSETS
Underpinning our strategy is a long-term
approach to the management of our physical
assets. One element of this is that our
management of dam safety risks assumes a
value for Probable Maximum Flood (PMF).
This is a measure of the possible volume and
flow rate of the Waikato River in the event of an
extreme flood. Our PMF values are prudently
conservative. We are mindful that it is possible
that in a changing climate PMF values may need
to be increased over time. Based on currently
available data and analysis, our risk management
practices and mitigants are appropriate. Through
our ongoing dam safety work programme and
hydrological studies, we continue to seek out
additional information to ensure resilience of
our strategy. We are currently working alongside
other dam infrastructure owners in New Zealand
to review the PMF assumptions including
considering if these need to be updated to reflect
the changing climate.
We have also reinvested hundreds of millions of
dollars into a hydro refurbishment programme
over the past 10+ years to ensure the assets can
continue to generate renewable energy for many
years to come. For example, we are currently
working on a
~$90 million refurbishment
of the Karāpiro Hydro Power Station that will
extend the asset’s life by a further 50 years
and make it more efficient.
Ōhakuri hydro station.
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PROCESSES FOR IDENTIFYING AND
ASSESSING CLIMATE-RELATED RISKS
Risk management is an integral part of Mercury’s
business. We have an overarching Risk Management
Policy supported by a suite of risk management
policies appropriate for our business.
The purpose of the Risk Management Policy is
to embed a comprehensive capability in risk
management which provides a consistent
method for identification, assessment, control,
monitoring and reporting of existing and
potential risks to our business and to the
achievement of its plans.
Our risk management framework meets New
Zealand standard AS/NZS ISO 31000 Risk
Management – Principles and guidelines and
applies to all risks at Mercury and is used across
the organisation. This framework provides for
the integration of risk across our material value
drivers– including financial, non-financial, social,
environmental and climate-related risks.
A cross-functional group consisting of
representatives from the relevant business
functions supports the identification of climate-
related risks through scenario analysis (see
Scenario Analysis section in this Climate
Statement). This group utilises information and
data to understand whether potential risks are
real, and to inform our view of the likelihood and
impact of these risks.
Climate-related risks and opportunities are
then classified and assessed relative to other
types of risks using a common methodology
(the risk matrix – shown below). Mercury’s risk
matrix requires consideration of both estimated
quantitative impacts, e.g. loss of revenue or
increases in costs, and qualitative impacts,
e.g. loss of license to operate or reputational
impacts to classify and assess the materiality
of climate-related risks and opportunities.
Material climate-related risks and opportunities
are assessed as falling within the red and black
portions of the risk matrix. From FY23, following
assessment under our risk management
framework, the RMC and RAAC review climate-
related risks which will be incorporated into our
existing risk framework through being recorded
in our risk register system and assigned to
relevant business units.
The climate-related risks and opportunities
included in this year’s climate statement have
been identified by considering our three climate
change scenarios over a 30-year time horizon.
In doing so, we considered all phases of our value
chain (without any exclusions).
MANAGING CLIMATE-RELATED RISKS
The day-to-day management of climate-related
risks, opportunities occurs across Sustainability,
Finance, Generation, Portfolio, Customer
Operations and Commercial Operations with
cascading responsibilities up to the RMC and
the RAAC. The RAAC provides an assessment
of whether the business is managing our
climate risks and responsibilities appropriately
and ensures there are effective policies and
procedures in place.
As an example, when the dam safety team
considers the risks faced by their business
function, potential impacts from climate
change are one of the factors that they take into
account. The dam safety team work with the
GM Generation to build an approach to manage
these risks and develop their forward plans.
Where material, issues are escalated to the RMC,
the RAAC and the Board. The responsibilities
of business functions, the RMC, and the RAAC
are described in more detail in the Governance
section in this Climate Statement.
In relation to markets, our Portfolio
and Finance teams manage risks and
opportunities presented by:
• the electricity market – we continually
model scenarios of resource availability,
electricity market supply and demand
and adjust our approach accordingly
• the carbon market – we are involved in
forest carbon investments and have long-
term contracts in place
RISK MANAGEMENT.
IMPACT
InsignificantMinorModerateSignificantMajorFundamental
PROBABILITY
Almost Certain
Highly Likely
Likely
Possibly
Unlikely
Rare
MERCURY INTEGRATED REPORT 2023
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RISK MANAGEMENT.
Regulatory risks and opportunities are managed
by our Government and Industry Relations team
in conjunction with External Communications.
Submissions have been made recently on the
Climate Change Commission’s 2023 draft
advice to inform the strategic direction of the
government’s second Emissions Reduction Plan.
Physical risks and opportunities from climate
change fall into acute (already impacting the
business, e.g. extended periods of drought
and likely to increase in the medium term)
and chronic (not currently impacting the
business but likely to impact over the medium
to long-term). We have continued to monitor
proposed methodologies for climate change
risk assessment and adaptation planning, both
nationally and internationally.
We have models of storm events experienced
within the Waikato hydro catchment and we
work in partnership with the Waikato Regional
Council to engage in training exercises and flood
simulations to educate and familiarise Mercury
and council staff on the management of storms
and flood risks.
We continue to refine and mature our climate-
related scenario analysis to assess the impacts of
our changing climate on our assets and business
and are working with a research organisation,
Bodeker Scientific, to improve the quality of our
climate data including potential future inflows to
the Waikato Hydro Scheme. Currently available
regional level datasets are too high level to
provide the robust and detailed outputs required
for long-term investment decisions for
hydro assets.
DATASETS & MODELS USED
Modelling has been undertaken by the National
Institute of Water and Atmospheric Research
(NIWA) for many of the physical risks associated
with a changing climate. The outputs from this
NIWA modelling, and other specific studies
related to impacts on the electricity sector, have
informed this Statement.
We have drawn on the Climate Change
Commission's advice to the government
and the government’s Emissions Reduction
Plan to better understand how the economy,
the broader energy system and the electricity
sector will likely evolve towards Net-Zero carbon.
In particular, the Commission’s modelling of
its “demonstration path” has influenced our
expectations of future electricity demand.
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METRICS & TARGETS.
MEASURING OUR IMPACT - EMISSIONS
Mercury produces an annual GHG Emissions Inventory Report in accordance
with the Greenhouse Gas Protocol which is available on our website.
A summary of our FY23 and prior years GHG emissions and emissions
intensity is shown below:
FY23 (tCO2e)FY2022 (tCO2e)
Scope 1213,645222,736
Scope 2 (location-based)6321,108
Scope 3 134,77884,909
As can be seen from the table and graphics above, our gross emissions
are dominated by Scope 1 emissions, which account for 61% of the entire
emissions profile currently and have reduced by 60% over the past eight years.
This is due to the elimination of our emissions from thermal electricity power
generation by decommissioning the Southdown gas-fired power station in
FY16, the natural decline in fugitive geothermal emissions over time and our
investment in geothermal greenhouse gas reinjection.
Our Scope 3 emissions from the sale of gas to our domestic dual fuel
customers now represent 38% of our total gross emissions and increased
by 58% (on an annual basis) over the past year due to the acquisition
of Trustpower’s gas customer base.
The emissions intensity calculation uses gross Scope 1 emissions and total
generation output figures from all our power stations. No adjustments have
been made to reflect Mercury’s part-ownership of two of our geothermal
power stations nor have any adjustments been made in relation to carbon
credit surrenders or trading conducted under the NZ ETS.
Note:
Under the NZ ETS, Mercury surrenders certified forestry-backed carbon
units, purchased under long-term agreements with forest owners, to the
NZ Government which cover all of our geothermal emissions and,
to the NZ Government or to our gas supplier, for gas sales related emissions.
Consistent with a reduction in our gross emissions over time, our emission
intensity has also reduced including over the past two years where the
impact of our increase in wind generation from both new builds and
acquisitions is having measurable impacts.
Our Climate Transition Action Plan outlines in detail the actions that we are
taking to ensure we are acting consistently with a 1.5 degree future and
are playing our part in reducing greenhouse gas emissions.
0
100,000
200,000
300,000
400,000
500,000
600,000
T
o
nne
s
C
O
2
e
Financial Year
201520162017201820192020
20212022
Scope 1Scope 2Scope 3
2023
201520162017201820192020
E
m
i
s
s
i
o
n
s
i
n
t
e
n
s
i
t
y
(kg C
O
2
e
/kWh)
Financial Year
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
Generation (GWh)
0
4,000
2,000
6,000
8,000
12,000
202120222023
Emissions IntensityNZ Grid AverageGeneration (RHS)
10,000
wE ARE RELEASING OUR CLIMATE
TRANSITION ACTION PLAN wHICH SETS
OUT HOw wE ARE PLAYING OUR PART
IN REDUCING OUR GHG EMISSIONS.
MEASURING OUR IMPACT –
wATER USE AND OTHER ACTIVITY METRICS
In addition to emissions metrics, Mercury has looked to the International
Sustainability Standards Board (ISSB) sector metrics for Electric Utilities & Power
Generators for general and industry-based metrics for the management
of climate-related risks and opportunities. These metrics have been assessed
for their materiality to Mercury and the relevant metrics are disclosed below.
wATER USEFY23FY2022
Geothermal
Water extracted (Mm3)2425
Water reinjected at source (Mm3)1313
Hydro
Non-consumptive water use (Mm3)11,5296,465
Mercury extracts and reinjects geothermal water for geothermal generation
and is a non-consumptive user of water through its hydro power stations.
Mercury does not extract any water from regions with High or Extremely
High Baseline Water Stress and in FY23 did not have any incidents
of non-compliance with water quantity and/or quality permits, standards,
and regulations.
Other material Activity Metrics are described in the Our Business
Model section of our FY23 Integrated Report and disclosed in our
Operating Statistics.
MERCURY INTEGRATED REPORT 2023
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METRICS & TARGETS.
IMPACTS OF THE CHANGING CLIMATE ON
OUR ASSETS AND BUSINESS ACTIVITIES
Mercury’s assets and business activities are vulnerable
to transition risks as described below:
• Our geothermal generation assets, comprising
~27% of Mercury’s equity-weighted generation
in FY23, produce fugitive emissions which are
vulnerable to transition risks in the form of rising
NZU prices in the event that geothermal emissions
are unable to be captured and/or reinjected.
• Our entire generation portfolio is vulnerable to
climate transition risk from regulatory settings
impacting the energy trilemma, e.g. through
influencing carbon pricing in the NZ ETS which
directly impacts the spot price of electricity.
• Our generation development portfolio is vulnerable
to risks arising from regulatory settings constraining
renewable electricity development.
• Our gas sales activities, comprising 1% of FY23
revenue, are vulnerable to changes in regulatory
settings and/or changes in consumer preferences
away from fossil fuels.
Mercury considers all, i.e. 100%, of its generation
assets are vulnerable to the physical risks of climate
change such as extreme wind, floods and fires, with
detail on identified material risks disclosed earlier in
this Climate Statement.
All, i.e. 100%, of Mercury’s existing electricity
generation assets are considered aligned with
climate-related opportunities as enablers in
New Zealand’s low carbon transition. Increasing
demand for renewable electricity due to
decarbonisation of transport and process heat
has been identified as a material climate-related
opportunity from which 100% of Mercury’s
renewable generation assets stand to benefit.
The majority of Mercury’s capital deployment is
also aligned with climate-related opportunities
as in FY23 $155m of growth capital expenditure
was allocated to new renewable generation
development. Mercury is also pursuing climate-
related opportunities to reduce emissions through
developing reinjection of geothermal non-
condensable gases. In assessing and valuing these
opportunities, Mercury does not use a fixed internal
emissions price but assesses a range of outcomes
under various emissions pricing scenarios.
The alignment of management remuneration
to these climate-related risks and opportunities
is discussed in the Governance section of this
Climate Statement.
CLIMATE TARGETS
Mercury has committed to set the following near
and long-term company-wide emission reduction
targets in line with science-based Net-Zero with
the Science Based Targets Initiative (SBTi). These
targets have been developed using tools provided
by the SBTi. The SBTi framework uses a sectoral
decarbonisation approach to align emissions
reductions in each industry to a global emissions
reductions pathway consistent with limiting
global warming to 1.5 degrees Celsius compared
to pre-industrial revolution times. The base year for
these targets is FY2022 and they are described
to the right:
Near-Term / Interim TargetLong-Term Target
Scope 1Target Year: FY2030
70% reduction in emissions
intensity (in kgCO2e/kWh) from
base year
Target Year: FY2040
70% reduction in emissions
intensity (in kgCO2e/kWh) from
base year
Scope 2Target Year: FY2030
42% absolute reduction from base
year
Target Year: FY2040
90% absolute reduction from
base year
Scope 3 – Use of Sold
Products (Natural Gas Sales)
Target Year: FY2030
42% absolute reduction from base
year
Target Year: FY2040
90% absolute reduction from
base year
Note: These targets are subject to change through the validation process with SBTi.
Mercury does not currently use emissions offsets and, in alignment with the SBTi framework, does not
intend to use offsets to achieve interim targets. Offsets may be used for persistent emissions that are
unable to be abated for final targets, or for broader purposes outside of achieving interim targets.
In FY23, Mercury’s progress against these targets was:
FY23
Scope 118% decrease in emissions intensity
Scope 2476 tCO2e decrease
Scope 3 – Use of Sold Products48,932 tCO2e increase
The reduction in the Scope 1 emissions intensity between the FY22 base year and FY23 was due to a
significant increase in the amount of renewable electricity we generated over the base year. This was
achieved through the commissioning of the Turitea Wind Farm and a significant increase in the amount
of hydro electricity generated on the Waikato Hydro Scheme.
As noted earlier, the increase in Scope 3 gross emissions was primarily due to the acquisition of the
Trustpower retail business which included ~44,000 new natural gas connections.
74
LEADERSHIP & GOVERNANCE
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MERCURY INTEGRATED REPORT 2023
LEADERSHIP
& GOVERNANCE.
TE TĀTAKI ME TE wHAKAHAERE.
In this section we introduce our Board and Executive Management Team and
present our corporate governance statement. We also share our remuneration
policy and report, directors’ disclosures and other disclosures, information for
security holders, sustainability index, directory information and a glossary.
Craig Lusty and Katy Scoullar.
MERCURY INTEGRATED REPORT 2023
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YOUR BOARD OF DIRECTORS.
PRUE FLACKS CHAIR
Tenure:First Appointed: 1 May 2010
(Chair since Sep 2019)
Last Elected: 28 Sep 2021
Key Skills*: Governance; commercial experience;
stakeholder relationships; people leadership.
Prue is a professional director with experience across a
range of industries. Formerly a commercial lawyer and
partner in the national law firm Russell McVeagh for 20
years, her expertise included corporate and regulatory
matters, corporate finance, capital markets and business
restructuring. Prue is a chartered member of the Institute
of Directors, and was formerly a director of Chorus Limited,
Bank of New Zealand and chair of Queenstown
Airport Corporation.
JAMES MILLER DIRECTOR
Tenure:First Appointed: 2 May 2012
Last Elected: 22 Sep 2022
Key Skills*: M&A and capital structure; investment
analysis; audit and risk management; energy industry.
James is an experienced company director and
Chair of company Audit and Risk Committees. He has
specialist expertise in utility economics and 15 years'
experience in capital markets. He is currently Chair of
Channel Infrastructure NZ Limited and is a director of
Vista Group and Ryman Healthcare. James' prior roles
have included Chair of NZX, Deputy Chair of Accident
Compensation Corporation and board positions with
Auckland International Airport, the Financial Markets
Authority and Vector.
James is a qualified Chartered Accountant and is a
Fellow of the Institute of Chartered Accountants and
Institute of Finance Professionals.
HANNAH HAMLING DIRECTOR
Tenure:First Appointed: 1 Feb 2020
Last Elected: 24 Sep 2020
Key Skills*: Natural resource management (including
water and climate change); health & safety; risk
management.
Hannah is an environmental scientist with a particular
interest in sustainable development and resilience.
Until January 2020, she was President of the Asia
Pacific Region and Global Sustainable Development
Leader for Golder, a Canadian global ground
engineering and environmental science company.
Before joining Golder, Hannah was Managing Director
of New Zealand environmental consultancy firm
Kingett Mitchell. Hannah has extensive background
in consulting, management and board roles across
various sectors including electricity, construction
and water management.
SUSAN PETERSON DIRECTOR
Te nure:First Appointed: 1 Sep 2022
Last Elected: 22 Sep 2022
Key Skills*: Commercial experience; AI; automation
and digitisation; customer relationships; large
organisation and cultural leadership experience.
Susan is an experienced director and business leader with
a particular interest in helping companies drive growth
through technology, innovative customer solutions and
organisational culture. She currently chairs Vista Group,
is an independent director of Xero, Arvida and Craigs
Investment Partners and is a Trustee on the Board of
Global Women. Susan is a past director of Trustpower,
ASB Bank, The New Zealand Merino Company, Compaq
Sorting and Property for Industry.
Susan is a lawyer whose professional career primarily
involved several senior roles in the ANZ Bank group.
* Key Skills are defined as the particular skills each director
brings to the Mercury Board, and which we consider in our
succession planning.
RP
NRRN
P
Committee Membership Key:
N
Nominations Committee
P
People and Performance Committee
R
Risk Assurance and Audit Committee
Chair of the committee
Tenure Key:
< 3 years
3-6 years
6
+
years
MERCURY INTEGRATED REPORT 2023
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YOUR BOARD OF DIRECTORS.
MIKE TAITOKO DIRECTOR
Tenure:First Appointed: 28 Aug 2015
Last Elected: 23 Sep 2021
Key Skills*: Iwi and other stakeholder relationships;
natural resource management (including water and
climate change); digitisation.
Mike is a leading advisor on Māori economic development
and has well-established networks in Māoridom.
Mike has strong commercial skills in the application of
digital technologies. He is the co-founder and CEO of
Takiwa Limited and a co-founder and director of Toha
Foundry Limited, technology companies commercialising
cloud-based geospatial analytics services. He was
formerly a Director of Auckland Tourism Events and
Economic Development (ATEED).
PATRICK STRANGE DIRECTOR
Tenure:First Appointed: 1 Feb 2014
Last Elected: 24 Sep 2020
Key Skills*: Energy industry; major project investment;
health and safety.
Patrick was previously a Mercury director in 2006-2007
before being appointed Chief Executive of New Zealand’s
transmission owner and operator, Transpower, a position
he held for more than six years. Patrick currently chairs
Auckland International Airport and is a director of
Transgrid. He was previously a Director of NZX Limited
and Essential Energy, Australia. Patrick has announced
his retirement from Mercury after the September 2023
Annual Shareholders’ meeting.
LORRAINE wITTEN DIRECTOR
Tenure:First Appointed: 1 Sep 2022
Last Elected: 22 Sep 2022
Key Skills*: Governance; commercial experience; audit
and risk management; innovation.
Lorraine is an experienced director and business leader
with an extensive background in the telco, technology
and ICT sectors. Lorraine currently chairs MOVe Logistics
Group and Rakon, and is a director of VWORK. Lorraine
has energy sector experience, having been a director of
Horizon Energy Group.
Lorraine’s previous appointments include as an Advisory
Board Member and Audit Committee Chair of the
Department of Corrections, Board member WREDA,
director of Pushpay Holdings and director and chair of
Kordia Group for several years.
N
PR
P
R
Committee Membership Key:
N
Nominations Committee
P
People and Performance Committee
R
Risk Assurance and Audit Committee
Chair of the committee
SCOTT ST JOHN DIRECTOR
Tenure:First Appointed: 1 Sep 2017
Last Elected: 24 Sep 2020
Key Skills*: M&A and capital structure; stakeholder
relationships; commercial experience; people leadership.
Scott has an extensive background in investment
advisory and capital markets. Scott is Chair of Fisher
& Paykel Healthcare Corporation and a director of
Fonterra Cooperative Group, ANZ Bank New Zealand,
and Next Foundation. He was formerly a member of
the Capital Markets Development Taskforce and the
Financial Markets Authority Establishment Board, and
was Chancellor of the University of Auckland. He was the
Chief Executive of First NZ Capital from 2002 to 2017.
* Key Skills are defined as the particular skills each director
brings to the Mercury Board, and which we consider in our
succession planning.
Tenure Key:
< 3 years
3-6 years
6
+
years
MERCURY INTEGRATED REPORT 2023
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YOUR BOARD OF DIRECTORS.
DENNIS BARNES DIRECTOR
1
Tenure:First Appointed: 1 Sep 2021
Last Elected: 23 Sep 2021
Resigned: 16 May 2023
Key Skills*: Energy industry; people leadership; major
project investment.
Dennis was most recently Chief Executive of Contact
Energy, a nine year role during which he led Contact
Energy’s investment in renewable energy and flexible
generation (including construction of the Te Mihi
geothermal power station, the development of the
Tauhara field and the introduction in 2011 of the
Ahuroa gas storage facility and Stratford peaking
plant). Dennis retired from the Mercury Board on 16
May 2023 to take up a chief executive role in Australia.
MARK BINNS DIRECTOR
3
Tenure:First Appointed: With effect
from 1 Sep 2023
Key Skills*: Energy industry; wholesale markets trading;
commercial experience; major project investment.
Mark brings significant energy experience to Mercury.
Mark was CEO of Meridian Energy from 2012 – 2017 and
before that spent 22 years with Fletcher Building, including
15 years as CEO of the Construction and Infrastructure
division. He currently chairs Crown Infrastructure Partners
and Hynds Limited and is a director of Auckland
International Airport.
ADRIAN LITTLEwOOD DIRECTOR
2
Tenure:First Appointed: 1 Aug 2023
Key Skills*: Commercial experience; large organisation
and cultural leadership experience; major project
investment; stakeholder relationships.
Adrian brings deep executive experience to Mercury’s
board. Adrian’s executive career included 12 years
at Auckland International Airport, nine of these as
CEO. Before that he held senior roles across strategy,
operations, product and marketing with Telecom New
Zealand. Previous governance roles include acting as
the New Zealand chair of the Australia/New Zealand
Leadership Forum, chair of the NZ Airports Association,
a director of North Queensland Airports and Tourism
Industry Aotearoa.
* Key Skills are defined as the particular skills each director
brings to the Mercury Board, and which we consider in our
succession planning.
1
Dennis was a director of Mercury from 1 September 2021
until 16 May 2023.
R
2
Adrian was not a director during the reporting period. Adrian
joined the Board on 1 August 2023 and will stand for election
at the 2023 ASM in September.
3
Mark was not a director during the reporting period. Mark
joins the Board on 1 September 2023 and will stand for
election at the 2023 ASM in September.
Committee Membership Key:
N
Nominations Committee
P
People and Performance Committee
R
Risk Assurance and Audit Committee
Chair of the committee
Tenure Key:
< 3 years
3-6 years
6
+
years
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YOUR EXECUTIVE
MANAGEMENT TEAM.
VINCE HAwKSwORTH //
CHIEF EXECUTIVE
LUCIE DRUMMOND //
GENERAL MANAGER
SUSTAINABILITY
PHIL GIBSON //
GENERAL MANAGER
PORTFOLIO
FIONA SMITH //
GENERAL MANAGER
CUSTOMER OPERATIONS
MARLENE STRAwSON //
GENERAL MANAGER
PEOPLE & PERFORMANCE
STEwART HAMILTON //
GENERAL MANAGER GENERATION
wILLIAM MEEK //
CHIEF FINANCIAL OFFICER
CRAIG NEUSTROSKI //
GENERAL MANAGER
COMMERCIAL OPERATIONS
The Executive Management Team leads our business
to deliver on strategy, ensuring we continue to succeed
while also positioning us for future opportunities and
challenges. The team bring enterprise-wide leadership
capability, together with deep subject knowledge
expertise. Together, they provide leadership for our
people and more widely in a changing environment.
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Dear Shareholder
It is my pleasure to present our corporate
governance statement for the year ended
30 June 2023.
This corporate governance statement outlines Mercury’s Corporate
Governance Framework, including information about the composition,
characteristics and function of Mercury’s Board, the ways in which we ensure
that we act ethically and responsibly at Mercury, our approach to risk,
and inclusion and diversity.
FY23 has been another year of significant activity for Mercury and
consequently for Mercury’s Board. This letter highlights some of
that activity.
The Board has overseen: the advancement of Mercury’s generation
development pipeline including approving investment decisions for
the Kaiwera Downs I wind farm and the expansion of the Ngā Tamariki
geothermal power station; completion of the Turitea North and
South projects; and delivery of the next phase of the Trustpower retail
acquisition by the integration of the Mercury and Trustpower brands.
In May, Mercury committed to the new purpose that is showcased
in this report, Taking care of tomorrow; connecting people and place
today, which further drives our long-term ambitions.
We have made significant progress with another of our strategic
convictions which is how Mercury ensures it will be a great partner with iwi.
This has included feedback from our iwi partners as to how they view their
relationships with us, and reflection on who we are and what we stand for,
with the objective of establishing some key principles to underpin how we
approach our relationships with iwi, hapū, whānau and landowners.
PRUE FLACKS
CHAIR
CLIMAT E
In FY23, Mercury published climate related disclosure in accordance with
the NZ climate standards, and updated its Climate Change Management
Plan. In August 2023, Mercury is publishing its first Climate Transition
Action Plan. This has involved aligning our climate scenarios with our
strategic scenarios and has been an important focus for the Board,
supported by the Risk Assurance and Audit Committee. During the
year Mercury issued a further $150m green bonds to assist in financing
projects and expenditure relating to renewable energy and other eligible
projects. The bond issue was fully subscribed, and the strong response
from the market demonstrates continued confidence in Mercury’s
business performance and long term outlook.
BOARD CHANGES AND SUCCESSION PLANNING
Last year I highlighted the importance of Board succession planning. Susan
Peterson and Lorraine Witten joined the Board on 1 September 2022. Andy
Lark stepped down from the Board on 22 September 2022 after 8 years’
service. Dennis Barnes also stepped down from the Board on 16 May 2023
to take up a full-time executive role in Australia. We are grateful for Dennis
and Andy’s contributions.
Patrick Strange will retire at the Annual Shareholders’ Meeting (ASM) this
year after a total of 11 years of service. Patrick’s operational experience
and deep industry knowledge has been invaluable to the continued
progress of Mercury. His inputs into large projects, health and safety,
and the development of robust risk management strategies have been
deeply appreciated by the Board and management. On behalf of the
Board, I would like to thank Patrick for his outstanding service to the
Board and to Mercury.
Adrian Littlewood joined the Board on 1 August and Mark Binns will
be joining the Board from 1 September. Adrian and Mark bring broad
executive experience to the Mercury Board, including capital management,
risk management, major project investment and large organisation
leadership. Mark also has the deep operational experience in the energy
industry previously provided by Patrick Strange and Dennis Barnes.
The appointment of Adrian and Mark in 2023, Susan and Lorraine in 2022,
and Hannah in 2020, gives the Board refreshed perspectives and ensures
the Mercury Board has a strong cohort of directors to take the business
forward over the medium to longer term.
Mercury continues to take part in the Future Directors programme
established by the Institute of Directors. The process for appointing
the next “Future Director” is currently underway.
ANNUAL SHAREHOLDERS' MEETING
Our ASM will be held in a hybrid format again this year, with shareholders
being able to join in person or remotely via video link. This approach
was successful in 2022 and Mercury is aligned with the New Zealand
Shareholders' Association’s principles of maximising meaningful shareholder
participation and quality engagement. I look forward to seeing you there.
LETTER FROM OUR CHAIR.
GOVERNANCE AT MERCURY.
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GOVERNANCE AT MERCURY.
At Mercury, we are committed to the highest standards of corporate governance,
business behaviour and transparency to protect and enhance the interests
of our owners. Our corporate governance framework includes robust policies
and processes which are fundamental to all of Mercury’s foundational pillars.
Our corporate governance framework underpins the maintenance of strong
relationships with our stakeholders and our ability to create long-term value.
It also ensures Board accountability to our shareholders and provides for an
appropriate delegation of responsibilities to our people.
The Board regularly reviews our corporate governance policies and practices to
ensure compliance with NZX and ASX standards (Mercury is an ASX Foreign
Exempt Listed company) as well as reflecting positive contemporary corporate
governance trends in New Zealand and Australia.
Over the reporting period, our corporate governance practices were in
substantial compliance with the NZX Corporate Governance Code. The only
exceptions relate to Recommendation 3.3 (Remuneration Committee), where
the governance of remuneration at Mercury is split between the People and
Performance Committee and the Nominations Committee (see the Board
Committees section of this report for a full explanation of this exception); and
Recommendation 5.1 (Director Remuneration), where Mercury does not have
a specific policy for director remuneration (see the Remuneration Report for
a full explanation of this exception).
While not required due to our ASX foreign exempt listing status, we also endeavour
to comply with ASX Corporate Governance Principles and Recommendations
(fourth edition).
We consider that governance at Mercury generally aligns with the BlackRock
Investment Stewardship Global Principles published in January 2023.
We consider our practices and procedures substantially reflect the guidelines
and principles from the International Corporate Governance Network (ICGN)
Global Governance Principles and the Organisation for Economic Cooperation
and Development (OECD).
CORPORATE GOVERNANCE FRAMEwORK.
This corporate governance statement (comprising pages 75 to 94 of this
report) has been prepared in accordance with NZX Listing Rule 3.8.1 and
was approved by the Board of Mercury NZ Limited on 21 August 2023.
The information contained in this corporate governance statement is current
as at that date. Some information in the corporate governance statement is
expressed to be current at another date, for example the FY23 balance date
of 30 June 2023. This corporate governance statement reports against the
NZX Corporate Governance Code dated 1 April 2023.
SHAREHOLDERS
CHIEF EXECUTIVE
EXECUTIVE
MANAGEMENT TEAM
RISK ASSURANCE &
AUDIT COMMITTEE
PEOPLE & PERFORMANCE
COMMITTEE
NOMINATIONS
COMMITTEE
MERCURY PEOPLE
MERCURY BOARD
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BOARD COMPOSITION & CHARACTERISTICS
Structure of the Board
The Board typically comprises eight directors although this number
may vary as required to ensure effective succession.
To enable Mercury to achieve its strategic goals, the Board strives to
include an effective combination and diversity of skills, backgrounds
and experiences. The Board also focuses on ensuring that its culture
reflects Mercury’s values, to foster alignment with the wider business.
There is a brief bio of each director at the beginning of this section.
Chair
Prue Flacks is the Chair of the Board. First appointed as a director in
2010, she was appointed as Chair in 2019. Prue is an independent,
non-executive director. The Chair’s overarching responsibilities are
to provide leadership to the Board and to ensure the Board is well
informed and effective. More information about the role of the Chair
is contained in the Mercury Board Charter (found on the Corporate
Governance section of our website).
Future Director
The Institute of Directors’ Future Directors Programme provides
people with governance potential and ambition with mentorship and
the opportunity to participate on a board. It aims to increase the next
generation of board- ready directors in New Zealand. The Mercury
Board is a supporter and active participant in the programme having
welcomed four future directors. Mercury is currently undertaking
a future director search.
Future Directors are invited to attend Mercury Board meetings
and Committee meetings, although they do not participate in
decision making.
The Board is structured to ensure that as a collective group it has
the skills, experience, knowledge, diversity and perspective to fulfil
its purpose and responsibilities.
INDEPENDENCE
All of Mercury’s directors, including the Chair, are considered by the
Board to be “independent” directors, in that they are non-executive
directors who are not substantial shareholders and who are free
of any interest, business or other relationship that would materially
interfere with, or could reasonably be seen to materially interfere with,
the independent exercise of their judgement.
The Mercury Board takes director tenure into account in considering
independence. The NZX recommends that issuers consider the
effect of tenure on independence after 12 years’ service. The Board
has determined Prue Flacks to be independent. Mercury values the
experience and deep understanding of Mercury’s business and the
industry which Prue brings to the Board. While Prue has been on the
Board since 2010, she has been Chair only since 2019. Considering
these factors, the Board has determined that Prue’s independence
is not affected by her tenure.
CONFLICTS
Mercury maintains a directors’ interests register. The interests’ register
is reviewed at each Board meeting to ensure it is up to date and to
determine if any directors are interested in any current or proposed
transaction in which Mercury is or may become involved. If a director
is interested in a transaction, this is discussed with the Chair and
the Company Secretary and actively managed. A management
plan is established and periodically reviewed as necessary. More
details on the Board’s approach to conflicts of interest can
be found in Mercury’s Board Charter. Information on current
directors’ interests can be found under Directors’ Disclosures.
RESPONSIBILITIES
The Board is responsible for Mercury’s strategic direction and
operation and has delegated certain responsibilities to the
Chief Executive and the Executive Management Team (EMT).
The Board’s responsibilities are set out in the Board Charter, which
is reviewed at least every two years, and include:
Strategy and Planning• establishing clear strategic
goals with appropriate
supporting business plans and
resources
• monitoring strategy
implementation
Environmental and Health
& Safety
• ensuring Mercury’s environmental
and health and safety culture
and practices comply with all
legal requirements, reflect best
practice in New Zealand and
are recognised by employees
and other stakeholders as key
priorities
Financial Performance and
Integrity
• monitoring financial
performance and the integrity
of reporting
Executive Authority • setting delegated authority levels
for the Chief Executive and EMT
Risk and Audit• ensuring that effective audit, risk
management and compliance
systems are in place and
monitored to protect Mercury’s
assets and to minimise the
possibility of Mercury operating
beyond legal or regulatory
requirements or beyond
acceptable risk parameters as
determined by the Board
Ethics and Corporate
Behaviour
• ensuring Mercury adheres to
high standards of corporate
behaviour, responsibility and
ethics
The Chief Executive and EMT are responsible for:
• developing and making recommendations to the
Board on Mercury strategies and associated initiatives
• managing and implementing strategies approved by
the Board
• formulating and implementing policies and reporting
procedures for management
• decision making compatible with Mercury’s
Delegations Policy
• managing business risk
• the day-to-day management of Mercury
The Chief Executive and EMT have appropriate employment
agreements setting out their roles and conditions of
employment.
Chief Executive and EMT performance are reviewed regularly
against objectives and measures set by the Board in annual
performance scorecards. The Chief Executive’s and each EMT
member’s performance were evaluated during the reporting
period on this basis. Further details are contained in the
Remuneration Report.
GOVERNANCE AT MERCURY.
MERCURY’S BOARD.
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ACCESS TO ADVICE &
COMPANY SECRETARY
Directors may access such information and
seek such independent advice as they consider
necessary or desirable, individually or collectively,
to fulfil their responsibilities and permit independent
judgement in decision making. They are entitled
to have access to internal and external auditors
without management present and, with the Chair’s
consent, seek independent professional advice
at Mercury’s expense.
All directors have access to the advice and services
of the Company Secretary for the purposes of the
Board’s affairs. The Company Secretary is appointed
on the recommendation of the Chief Executive and
must be approved by the Board. The Company
Secretary is accountable to the Board, through the
Chair, on all governance matters. As at the date of this
Corporate Governance Statement, Howard Thomas
is the Company Secretary.
SELECTION, NOMINATION
& APPOINTMENT
All directors are elected by Mercury’s shareholders
(other than directors appointed by the Board to fill
casual vacancies, who must retire and stand for
election at the next meeting of shareholders) with
rotation and retirement determined in line with
the NZX Listing Rules. The Board is responsible
for considering and appointing directors to the
Board after candidates have been identified by the
Nominations Committee (see Board Committees).
Mercury notifies shareholders of their right to
nominate a candidate for election as a director
by notice on the NZX and ASX.
Where any director election or re-election is to occur
at a shareholder meeting, the Notice of Meeting
includes all information on candidates for director
election or re-election that the Board considers may
be useful to shareholders. Directors must retire every
three years and, if desired, seek re-election.
Hannah Hamling and Scott St John, having served
for three years since their last re-elections, will retire at
the September 2023 annual shareholders’ meeting
and stand for re-election in accordance with the NZX
Listing Rules. Patrick Strange will step down from
the Board on 19 September 2023 after more than
nine years of service.
The Board and Nominations Committee carry out
appropriate due diligence before appointing a director
or nominating a candidate for election as a director in
accordance with our governance processes.
Mercury has a written agreement with each director
set out in a letter of appointment containing the
terms and conditions of their appointment. A copy
of the standard form of this letter is available in
the Corporate Governance section of our website.
In addition, Mercury also enters into deeds of
indemnity and insurance with each director, in
terms of which Mercury indemnifies and provides
insurance to, directors in accordance with the
Companies Act 1993.
INDUCTION & DEVELOPMENT
All new directors participate in a comprehensive
induction programme to familiarise them with
Mercury’s business and the energy and
telecommunications industries. The induction
programme covers key Mercury policies and
GOVERNANCE AT MERCURY.
internal frameworks and includes sessions run
by EMT members on their business areas and
important projects happening within Mercury.
New directors may request further induction
training as needed.
The Board receives regular briefings on Mercury’s
business operations from senior managers. Regular
Board strategy days are held to consider matters
of strategic importance to Mercury, and Board and
management run scenario thinking sessions for key
issues. Visits to Mercury’s facilities keep the Board
informed of Mercury’s assets and operations and
in particular with respect to health and safety and
wellness matters.
The Board has an ongoing programme to enhance
the effectiveness of directors. This involves both
deep-dives into aspects of Mercury’s business,
and sessions focusing on the broader environment
including future trends and innovation. Sessions
run during FY23 included dam safety, process
safety, and climate. Directors are also encouraged
and supported to continue their own professional
development through individual learning
opportunities.
It is essential to Mercury that directors commit
sufficient time to prepare and perform their duties
properly and effectively. The Board has considered
this issue during the reporting period and is satisfied
that, taking into account all of their commitments,
each director had sufficient time to perform their
duties for Mercury.
KEY BOARD STATS
1
:
6
+
YEARS
5/9
FEMALE
4/9
3-6 YEARS
1/9
MALE
5/9
< 3 YEARS
3/9
GENDER DIVERSE
0/9
56%
44%
11%
56%
33%
0%
TENURE
GENDER
1
Dennis Barnes is included in this data for FY23 as he was a director for the majority of the year.
Adrian Littlewood and Mark Binns are not included in this data.
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GOVERNANCE AT MERCURY.
BOARD SKILLS MATRIX
Through the Nominations Committee, the Board regularly
assesses its skills and competencies in the context of key
outputs required, including:
• setting risk parameters for both value
creation and value protection;
• cultural leadership to reflect our values, environmental
kaitiakitanga and social licence to operate; and
• strategy development in an environment of
disruption, requiring courage to challenge,
resilience and agility to respond.
During the reporting period, the Nominations Committee has
considered and reviewed the skills of the Board and updated the
Board skills matrix
4
. Recognising that how well the Board performs
is a function of the skills and experience of individual directors and
how the directors work together as a whole, we consider that
addressing the level of skills and experience collectively is a
better indicator of overall Board capability.
Although the Board fosters collaborative and open discussion
and each director is expected to contribute broadly, the key skills
which individual directors contribute to the Mercury Board are
indicated in the director profiles. The purpose of identifying key
skills at an individual level is to signal the skills which would need
to be considered when a director retires. This is important for
succession planning purposes.
SKILL & EXPERIENCE CATEGORYCOMBINED BOARDSKILL & EXPERIENCE CATEGORYCOMBINED BOARDSKILL & EXPERIENCE CATEGORYCOMBINED BOARD
STRATEGY & RISK SETTINGSSTAKEHOLDERSGOVERNANCE & RISK MANAGEMENT
Significant commercial
experience across
different industries and
economic cycles
Customer relationships
across market segments and
demographics
Governance experience,
including listed companies
Major project investment
and experience
Government relationships
Finance/accounting/audit
committee experience
M&A and capital
structure experience
Shareholder/investment
community relationships
Risk management process
and experience, including
cyber security, climate related,
structural asset integrity
AI, automation, digitisation,
disruption and innovation in
energy and other sectors
Iwi relationships/connectivity
Hononga ā-iwi/hononga
PEOPLE LEADERSHIP
Health and safety
experience
ENERGY INDUSTRY
Climate Change and natural
resource management
(including water)
Energy industry experience
Large organisation and cultural
leadership experience
RE TAIL
Understanding key drivers of
value in a customer facing
business, through governance
or operational experience
Wholesale markets
trading (energy and/or
other commodities)
Medium
Some
Substantial
4
The skills matrix presented here includes data for all current directors as at
the date of this Integrated Report as well as Adrian Littlewood (joined the
Board on 1 August 2023) and Mark Binns (to join the Board on 1 September
2023). It does not include data for Dennis Barnes (left the Board on 16 May
2023) or Andy Lark (left the Board on 22 September 2022).
KEY
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REVIEwING PERFORMANCE
The performance of the directors (individually and
collectively), and the effectiveness of Board processes
and committees, are regularly evaluated using a
variety of techniques including external consultants,
questionnaires and Board discussion. A performance
review led by the Chair was carried out during the
reporting period. A performance review by an external
facilitator will be carried out during FY24.
DIRECTORS’ MERCURY
SHAREHOLDINGS
The Board encourages the alignment of directors’
interests with those of shareholders and with
Mercury’s strategic aims. To improve this alignment,
the Board encourages directors to accumulate
meaningful shareholdings in Mercury. Further details
of directors’ shareholdings in Mercury are set out in
Directors’ Disclosures.
BOARD COMMITTEES
The Board has three standing committees: the Risk
Assurance and Audit Committee (RAAC), the People
and Performance Committee and the Nominations
Committee. Each Committee focuses on specific
areas of governance. Together, they strengthen the
Board’s oversight of Mercury. Committee meetings
are scheduled to coordinate with the Board meeting
cycle. Each Committee reports to the Board
at the subsequent Board meeting and makes
recommendations to the Board for consideration
as appropriate.
As an exception to the NZX Corporate
Governance Code, Mercury does not comply with
Recommendation 3.3 because it does not have a
separate remuneration committee. This exception
has been approved by the Board. The functions
that would ordinarily be allocated to a remuneration
committee are shared between the People and
Performance Committee in respect of the Chief
Executive and the EMT, and the Nominations
Committee in respect of the directors.
Each standing Committee operates in accordance
with a written Charter approved by the Board and
reviewed as required and at least every two years.
The Committee Charters are available in the
Corporate Governance section of our website.
GOVERNANCE AT MERCURY.
ADDITIONAL COMMITTEES
Mercury assesses on a regular basis whether
additional standing or ad hoc committees are
required. Additional temporary committees are
established from time to time, including as required
to provide governance oversight on short-term
projects. As at the date of this statement, Mercury
has considered that no other standing committees
are required.
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People and Performance Committee
Risk Assurance and Audit Committee
Nominations Committee
Membership & Meetings
Members as at
30 June 2023:
At least three
directors, majority
independent.
Meetings in FY23:
At least 3 annually
Aug 22Nov 22Apr 23Jun 23
Scott St John (Chair)
Mike Taitoko
Susan Peterson
5
N/A
Andy Lark
6
N/AN/AN/A
Prue Flacks
7
Apology
Members as at
30 June 2023:
At least three
directors, each
independent non-
executives. At least
one with accounting /
financial background.
Board Chair not
eligible to be RAAC
Chair.
Meetings in FY23:
At least 3 annually
Aug 22Nov 22Feb 23May 23
James Miller (Chair)
Hannah Hamling
Patrick Strange
Lorraine Witten
8
N/AApology
Dennis Barnes
9
ObserverApology
Prue Flacks
7
Members as at
30 June 2023:
At least three directors, majority
independent.
Meetings in FY23:
At least annually
Jun 23
Prue Flacks (Chair)
James Miller
Scott St John
Patrick Strange
10
N/A
Due to the nature of the Nominations Committee's role, its activity varies each reporting
period depending on the requirements of the Board. While the Nominations Committee
Charter only requires one formal meeting annually, the Committee meets more
frequently as required. In addition to the minimum annual meeting, the Committee
convened on several occasions during FY23 to discuss necessary matters.
Purpose
Assisting the Board to fulfil its people and performance responsibilities relating to:
• Mercury’s People and Performance strategy and plan
• review of inclusion and diversity objectives and progress against objectives
• the remuneration and performance of the Chief Executive and EMT
• People and performance policies and practices
Monitoring and providing guidance to management on people and performance
related matters.
Overseeing, reviewing and advising the Board on Mercury’s:
• risk management policy and processes (which include oversight of Health &
Safety assurance and climate-related risks and opportunities)
• internal control mechanisms and internal and external audit functions
• compliance with legislation and regulation
• financial information prepared by management for publication
Management retains responsibility for the implementation and operation of
adequate risk assurance, internal control and audit systems. Management only
attend RAAC meetings by invitation. The Board has delegated to the RAAC the
authority to oversee and monitor these activities.
Ensuring the Board and its committees are structured appropriately and composed
of suitably qualified individuals to support the Board’s effectiveness in discharging its
duties and responsibilities and adding value through good governance.
The Nominations Committee plays an important role in identifying, for the Board to
consider, people with the necessary expertise, experience, diversity and perspectives
for selection as potential directors to be nominated for election at the next annual
shareholder meeting or to fill a casual vacancy on the Board.
GOVERNANCE AT MERCURY.
5
Susan Peterson became a member of the People and Performance Committee following her
appointment as a director on 1 September 2022.
6
Andy Lark was a member of the People and Performance Committee until he ceased to be a director
on 22 September 2022.
7
Prue Flacks is a member of both the People and Performance and Risk Assurance and Audit
Committees by virtue of her position as Board Chair.
8
Lorraine Witten became a member of the Risk Assurance and Audit Committee following her
appointment as a director on 1 September 2022.
9
Dennis Barnes was a member of the Risk Assurance and Audit Committee until he ceased to be a
director on 16 May 2023.
10
Patrick Strange was a member of the Nominations Committee until 1 October 2022.
PNR
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AUDIT PLAN & ROLE OF AUDITOR
As a public entity under the Public Audit Act 2001,
the Auditor General is the independent auditor of
Mercury and each of our subsidiaries (together, the
‘Group’). The Auditor-General appointed Lloyd
Bunyan of Ernst & Young to carry out the FY23 audit
on his behalf. The NZX Listing Rules require rotation
of the key audit partner at least every five years.
The provision of external audit services is guided
by the Audit Independence Policy available on the
Corporate Governance section of our website.
The external auditor attends the Annual Shareholders’
Meeting and is available to shareholders to answer
questions relevant to the audit.
INTERNAL AUDIT
& RISK ASSURANCE
Mercury has a comprehensive internal audit and
risk assurance plan, which take a holistic view of
Mercury’s culture, practices and procedures
and include periodic reviews of relevant areas of
Mercury’s operations. The internal audit plan is
designed, updated and approved by the RAAC in
consultation with the Risk Assurance Officer and
the Internal Auditor (currently made up of an internal
team, Deloitte and other internal audit and process
specialists appointed on an outsourced basis) who
report on progress and the results of internal audit
reviews at each RAAC meeting. The Internal Auditor
has access to management and the right to seek
information and explanations.
The RAAC meets with the Internal Auditor at least
once each year without management present.
During FY23, the focus of the RAAC was compliance
(regulatory), reputation, financial (including climate),
operational and health & safety, which were trending
or elevated risks for the Group.
TIMELY & BALANCED
DISCLOSURE
Shareholders & Markets
Mercury is committed to maintaining a fully
informed market through effective communication
with the NZX and ASX, our shareholders and
investors, analysts, media and other interested
parties. Mercury provides all stakeholders with
equal and timely access to material information
that is accurate, balanced, meaningful and
consistent. Where Mercury provides a new and
substantive investor or analyst presentation, it
ensures the presentation materials are released
to the NZX and ASX ahead of the presentation.
The Market Disclosure Policy is designed to ensure
this occurs in compliance with Mercury’s continuous
disclosure obligations under the NZX Listing Rules.
The Policy is available in the Corporate Governance
section of our website.
The Board has appointed the Company Secretary
as the Disclosure Officer who is responsible for
administering the Policy. The Disclosure Committee
(made up of the Board Chair, RAAC Chair, Chief
Executive, Chief Financial Officer and Disclosure
Officer) is responsible for ensuring that Mercury
complies with its disclosure obligations.
The Chief Executive and EMT are responsible for
providing the Disclosure Officer with all material
information relating to their areas of responsibility.
Information which, in the opinion of the Disclosure
Officer, may require disclosure is provided to the
Disclosure Committee for decision.
Disclosures relating to the annual and interim financial
statements must be reviewed by the RAAC before
being approved by the Board. Once approved for
disclosure, the Disclosure Officer is responsible
for releasing material information to the market.
Directors consider at each Board meeting whether
there is any material information which should be
disclosed to the market.
Integrity of Reporting
The Chief Executive and the Chief Financial Officer
are required each half year and full year to provide
a letter of representation to the Board confirming
that the financial statements have been prepared
in accordance with legal requirements, comply with
generally accepted accounting practice, and present
fairly, in all material respects, the financial position
of Mercury and the results of its operations and its
cash flows.
A letter of representation confirming those
matters was received by the Board with respect
to the Group’s FY23 financial statements.
We report on non-financial information in our
Integrated Report. Material environmental, social
and governance matters are covered in this report,
corporate governance statement and the Climate
Statement. To provide this information in a format
accessible to our stakeholders we take guidance from
both the Global Reporting Initiative (GRI) standards
and the International Integrated Reporting Council
(IIRC) Integrated Reporting <IR> framework.
We obtain independent limited assurance from
EY on our Greenhouse Gas Emissions Inventory.
OUR KEY RISKS
Safety Risks
Mercury undertakes activities that potentially
involve significant safety risks including electrified
equipment, handling of iso-pentane, steam field
operations, well drilling, operating large generation
equipment, dam safety, power station construction
and medically dependent customer management.
A key risk for Mercury is that an incident occurs
causing a fatality or serious injury to our staff,
contractors, customers or the public.
Compliance Risks
Legislative & regulatory changes
Regulatory changes to the current wholesale and
retail market structure and pricing regimes may affect
how Mercury manages its integrated business
model of generation and retailing electricity, gas and
telco and could adversely impact on Mercury’s ability
to create value. Legislative or regulatory changes,
including Treaty of Waitangi claims, changes to
consent conditions, or levies on the use of natural
resources, may result in Mercury facing direct or
indirect restrictions, conditions or additional costs
on Mercury’s access to freshwater or geothermal
resources and its hydro, wind and geothermal
generation activities.
Operational Risks
Fuel security & supply
Mercury’s generation depends upon the availability
of water for hydro generation, wind for wind
generation, and geothermal fluid for geothermal
generation. The principal risks include the inability
to generate expected levels of electricity due to
either temporarily or permanently reduced fuel
supplies, loss of access to supply, or increased
costs to secure the necessary fuel, all of which
may adversely affect Mercury’s earnings.
GOVERNANCE AT MERCURY.
ASSURANCE & MANAGING RISK.
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Electricity market exposure
In the short run, our ability to manage our electricity
portfolio risk depends upon our ability to purchase
and sell electricity in the wholesale electricity market
which could be impacted by:
• short-term changes in supply and demand
• national fuel availability based on hydrological
and thermal conditions (including extended
national drought)
• competitor behaviour
• significant reduction or ceasing of electricity
consumption (for example the New Zealand
Aluminium Smelter or other large
industrial companies)
• constrained transmission and distribution
of electricity
In the long run, wholesale prices are determined
by the level of national demand relative to supply
from power generation and can be affected by
levels of activity in the industrial sector, population
size, economic conditions, competitor behaviour,
generation build or retirement, technological changes
or new sources of energy, and regulatory changes.
We could also be adversely affected if a large
group of customers, one or more major customers,
or a New Zealand market participant were to
default on payment for electricity provided or
for hedge settlements.
Broadband and Mobile services
Mercury now retails broadband and mobile
telecommunication services to residential and
commercial customers. Broadband and mobile
both introduce different operational challenges
(e.g. network availability, cyber-security) that if not
well managed can jeopardise Mercury's capacity
to supply telecommunication services to customers.
Power station availability
Our ability to generate electricity depends upon the
continued efficient operation of our power stations.
The viability, efficiency or operability of our power
stations could be adversely affected by a range of
factors including:
• catastrophic events such as a major earthquake,
volcanic eruption, or other natural perils that could
cause failure of one or more of our power stations
• material failure of turbines, transformers, key
infrastructure, or geothermal wells that results in
unplanned power station outages that necessitate
replacement or repair and could be influenced by
supply chain delays
• unexpected events impacting on the short-term
availability of key people required to operate
stations, provide hydro control or trading oversight
• cyberattacks upon our power stations that
could result in a plant failure or sustained loss
of control.
Information security
We depend on many computer systems for our
continued operations. There is a risk that the security
of critical systems may be compromised and/or
information accessed, copied, deleted or corrupted,
impacting on our ability to operate critical systems.
Such an event could result in costs to resolve or repair;
potential downtime of operations; potential breaches
of our customers’ privacy, including unauthorised
access and disclosure of their personal information;
and reputational impacts from any loss of service,
or resulting impacts on safety, our environment
or community.
Financial Risks
Insurance
Mercury is insured through a comprehensive
programme including cover for generation property,
plant and equipment and business interruption with a
combined limit of $1 billion. Some catastrophic events
are uninsurable, or we have chosen not to insure
against them as the cost of cover is prohibitive.
In the event of a severe catastrophic event, it is
possible that the insurance portfolio will not provide
sufficient cover, impacting future operational
performance and the financial condition of Mercury.
We estimate that the maximum foreseeable loss
to which the Group could potentially be exposed
(cascade dam failure causing significant flooding,
business interruption, direct reinstatement costs and
potential loss of life) is approximately $13 billion
with an assessed likelihood of occurrence of 1
in 100,000 years.
We review the level and nature of our insurance
cover annually. Following a third-party risk tolerance
analysis which considered several key financial metrics
specific to Mercury, the decision was previously made
to retain additional financial risk in the event of an
insurable loss to our generation assets. Side C cover,
which insures the company against liabilities arising
out of securities market conduct breaches, was also
removed from our directors’ and officers’
insurance policy.
Climate Change Risks
For details of our key climate-related risks and
how we manage them – please see our Climate
Statement.
Growth & Development
Growth and development projects are subject to
risks that may affect expected financial returns or
outcomes:
• major generation development projects during
construction give rise to risks including cost
over-runs, commissioning delays, environmental
impacts and employee/ contractor safety
• political and regulatory uncertainty, high interest
rates and poor economic conditions may limit
our development choices or adversely affect the
viability or costs of future developments.
Liquidity and Earnings
A deterioration of our financial condition or
instability in capital markets could increase our cost
of capital, affect our ability to raise debt, or reduce
our cash liquidity thereby impacting our financial
performance, pursuit of our strategic objectives or
result in insolvency.
The Crown’s shareholding and the provisions of
the Public Finance Act may limit our ability to raise
equity capital.
There is a risk that foreign currency or interest rate
movements may impact our earnings by increasing
the cost for imported goods and services and the
cost of debt.
Reputational Risks
Our reputation with investors, partners, customers
and the broader community is one of our most
significant assets. In addition to the risks mentioned
elsewhere in this statement, the following events
could threaten that reputation and could lead to
negative publicity resulting in the loss of business
revenues or reduction in Mercury’s value:
• errors in customer connections, billing or general
customer communications
• errors by directors, management, contractors or
related industry operators negatively reflecting
on Mercury
• adverse environmental impact caused by, or
perceived to be caused by, Mercury’s operations
• health and safety incidents under the operational
control of Mercury
• a reduction in standards of how we treat the
communities that we operate in.
GOVERNANCE AT MERCURY.
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RISK MANAGEMENT FRAMEwORK
& RAAC RESPONSIBILITIES
Risk management is an integral part of our business.
We have an overarching Risk Management Policy in place
(see the Corporate Governance section of our website)
supported by a suite of risk management tools appropriate
for our business, including our Risk Appetite Statement,
the Mercury Code, an Energy Markets Risk Management
Policy, a Treasury Policy and a Delegations Policy.
The purpose of the Risk Management Policy is to embed
a comprehensive, holistic, Group-wide capability in risk
management which provides a consistent method
of identifying, assessing, controlling, monitoring and
reporting existing and potential risks to our business
and to the achievement of its plans. The Policy sets out
the risk management objectives and requirements of
Mercury within which management is expected to operate.
The Policy applies to all business activities of the Group
including Mercury-controlled joint ventures and is reviewed
annually by the RAAC and approved by the Board.
The risk management framework supports a
comprehensive approach to risk, encompassing
financial, strategic, environmental, operational, regulatory,
reputational, social and governance risks. This includes
assessing and managing climate-related risks.
The framework involves actively identifying and managing
risk and taking measures to reduce the likelihood of risk,
contain potential hazards and take mitigating action to
reduce impacts in line with risk tolerances. This approach
is consistent with the precautionary principle.
We must accept some risks to achieve our strategic
objectives and to deliver shareholder value. Our tolerance
for risks is embodied in our Risk Appetite Statement
which are set and regularly reviewed by the Board. As part
of the current Risk Appetite Statement, Mercury targets
a long-term credit profile of BBB+ (bbb on a stand-alone
basis) from S&P Global (or its equivalent).
GOVERNANCE AT MERCURY.
We have a Risk Assurance Officer who has the
independence to determine the effectiveness of risk
management, assurance and internal audit. The Risk
Assurance Officer has a dual reporting line to the Chief
Financial Officer and the RAAC Chair. The RAAC tasks
the Risk Assurance Officer to ensure healthy and robust
debate and interaction between management, risk
assurance and audit providers.
Our management operates a Risk Management
Committee, whose mandate is to raise risk awareness
and adequate risk management among all employees,
as well as to monitor and review risk actions as
circumstances and our strategic and operational
goals change. Membership of the Risk Management
Committee is made up of representatives from the
Executive Management Team and is chaired by the
Chief Executive. The Risk Management Committee
meets at least four times each year.
In addition to these risk management processes several
measures are employed to manage risks, including
employee awareness, incident training, due diligence,
financial risk mitigation tools, active involvement in the
regulatory environment and established whistle blower
policy and procedures.
As noted above, the RAAC is responsible for overseeing,
reviewing and providing advice to the Board on Mercury’s
risk management policies and processes. The Risk
Assurance Officer reports regularly to the RAAC on the
effectiveness of our management of material business
risks. In addition, the RAAC annually reviews the risk
management framework. The last review of the risk
management framework took place in August 2023.
Mercury’s Constitution, and relevant Charters and
Policies are available in the Corporate Governance
section of Mercury’s website.
GOVERNANCE
RISK MANAGEMENT FRAMEwORK
BUSINESS FUNCTIONS
GOVERNANCE
RISK MANAGEMENT
COMMITTEE
Establishes, promotes
and implements risk
management (controls
and systems)
RISK ASSURANCE
& AUDIT COMMITTEE
Oversees and monitors risk
management framework
BOARD
Accountable for
managing risk
CHIEF EXECUTIVE
Responsible for
managing risk
Consolidated
Risk Report
Risk Matrix
Risk Appetite
Statements
Risk Management
Policy
RISK ASSURANCE OFFICER
Monitors implementation
of risk management
framework, promotes risk
awareness and mitigations,
and tests controls
ALL BUSINESS UNITS
Owns and manages day to
day risks and controls
REPORTS
DELEGATES
MANAGEMENT COMMITTEE
ENDORSES
APPROVES
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OUR INVESTOR RELATIONS
PROGRAMME
We are committed to open and effective
communication with our stakeholders and owners
by providing comprehensive relevant information.
Mercury takes the steps set out in our Market
Disclosure Policy to achieve this.
We communicate with our investors in various ways,
including the Investor section of our website, annual
shareholders’ meetings (ASM) and webcasts, our
annual and interim reports, regular information
disclosures, and analyst and investor briefings
and road shows. Mercury aims to provide clear
communication of our strategic direction, including
articulating our strategic priorities and how these
leverage Mercury’s competitive advantages.
We also run a programme to build understanding
and appropriate measurement of Mercury’s
performance among investors and research
analysts. That programme aims to be responsive,
clear, timely, consistent, even-handed and accurate,
and is designed to ensure appropriate access to
management and directors.
Summary records of matters discussed at meetings
with investors and analysts are kept for internal use,
unless a recording or transcript of the presentation
is published on our website.
wEBSITE
Mercury’s website contains a comprehensive set of
investor-related information and data including stock
exchange and media releases, interim and annual
reports, investor presentations and webcasts, and
shareholder meeting materials. Mercury will continue
to build environmental, social and governance (ESG)
website content to meet the increasing demand for
transparent disclosures of its performance across
these areas and the management of long-term risks
and opportunities.
Shareholders can direct questions and comments
to Mercury through the website or contact
investor@mercury.co.nz.
ANNUAL SHAREHOLDERS’
MEETINGS & wEBCASTS
An ASM is held in New Zealand at a time and
location which aims to maximise participation by
shareholders. Mercury’s eleventh ASM since listing
on the NZX Main Board and ASX will be held in
Auckland on 19 September 2023 and once again
will be held in a hybrid format (in person and online).
This approach was successful at the 2022 ASM and
is considered by the New Zealand Shareholders’
Association as the most effective approach to
enable meaningful shareholder participation.
GOVERNANCE AT MERCURY.
ENGAGING wITH INVESTORS.
ELECTRONIC COMMUNICATIONS
We encourage shareholders to provide email
addresses to enable them to receive shareholder
materials electronically. Communicating electronically
is faster and more cost- effective. Most of our
shareholders receive information electronically.
However, we understand that this does not suit
everyone and we also provide hard copy reports
to shareholders who wish to receive them.
MERCURY INVESTOR DAY 2023
Mercury hosted an Investor Day in Palmerston
North on 15 March 2023.
The day included presentations on generation
asset management, energy transition and
climate, future ready retail and integration
and Mercury’s portfolio and generation
development. Feedback from the day was
positive and Mercury intends to hold another
Investor Day in FY24.
GOVERNANCE ROADSHOwS
Mercury held a series of investor meetings
during July 2022 and again during August
2023, primarily with institutional investors.
The governance roadshows aim to provide
an overview of Mercury’s activities and
significant governance matters during the
year. Materials from the roadshows can be
found on our website.
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GOVERNANCE AT MERCURY.
ACTING ETHICALLY & RESPONSIBLY.
TE NGĀKAU TAPATAHI ME TE HAEPAPA.
Mercury people strive to do what’s right.
We have put in place the Mercury Code to ensure
that our people know what the ‘right thing to do’
is. The Mercury Code documents the behaviours
we require to embed and sustain our culture to
successfully deliver our strategy and achieve our
Purpose of taking care of tomorrow: connecting
people and place today.
MERCURY ATTITUDE
A Mercury employee is expected to apply the
Mercury Attitude. This attitude shapes our decisions,
our actions and our interactions with each other.
Our Mercury Attitude aligns our direction to achieve
our Purpose.
THE MERCURY CODE & OUR
POLICY FRAMEwORK
The Mercury Code, which is reviewed by our Board
at least every 2 years, is our version of a code of
conduct and ethics. The Mercury Code underpins
everything we do. It requires all Mercury people,
including directors and employees, to act honestly
and with integrity and fairness at all times, and
to strive to foster those standards within Mercury.
The Mercury Code is available in the Corporate
Governance section of our website. Mercury
employees are required to complete training
on the Mercury Code at least annually.
The Mercury Code and the policy framework described
below support our promises to each other and define
our commitment to our customers, our people and
community and our investors.
Directors are required, in the performance of their
duties, to give proper attention to the matters before
them and to act in the best interests of Mercury at
all times.
We also want to ensure that we work with suppliers
who share our commitment to acting ethically and
doing the right thing. Our Supplier Code of Conduct
describes the way we work with our suppliers and what
we expect in return. The Supplier Code of Conduct
includes our commitments and our expectations
in relation to social responsibility, health and safety,
compliance with all applicable modern slavery laws,
environmental responsibility, and business integrity.
The Supplier Code of Conduct is available in the
Corporate Governance section of our website.
Mercury acknowledges the importance of assessing
and addressing the risk of modern slavery in our
operations and supply chain. We continue to publish
a modern slavery statement, consistent with our
obligations under the Australian Modern Slavery
Act 2018.
The areas set out in the table on the next page are
of fundamental importance to Mercury to ensure
good governance and responsible business practices
are followed.
CARE / TAURIMA
Doing what's right.
Te mahi i te mea tika.
COMMIT / KĪ TAUR ANGI
Taking ownership.
Rangatiratanga.
CONNECT / HONONGA
Working together.
Te mahi tahi.
CURIOUS / PĀKIKI
Exploring possibilities.
Te wherawhera i ngā āheinga.
C
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•
•
C
O
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M
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•
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•
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Our Governance & Responsible Business Practices
ConflictsConflicts of interest must be avoided, except with the prior consent of Mercury. Mercury people are encouraged
to discuss possible conflicts with their manager. Mercury takes practical, preventative action wherever possible, for
example by substituting project managers in circumstances of possible conflict with contractors and suppliers.
Our directors declare all potential conflicts of interest prior to appointment and if applicable, at each Board
meeting in relation to specific agenda items.
BriberyThe acceptance of bribes, including gifts or personal benefits of material value which could reasonably be
perceived as influencing decisions, is prohibited under the Mercury Code. Under Mercury’s Delegations Policy,
donations to political parties are prohibited.
Use of
Mercury Assets
The Mercury Code places restrictions on the use of corporate information, assets and property. All persons
covered by the Mercury Code are encouraged to report any breach or suspected breach of the Code.
whistleblowingWe provide a framework for the protection of employees wishing to disclose serious wrongdoing. This is described
in Mercury’s Whistleblowing Policy.
Employees are also encouraged to voice with their manager, the HR team, the General Counsel, other
managers or directors any concern over ethical or irresponsible behaviour, even if not reaching the threshold
of serious wrongdoing.
During FY23, the Whistleblowing Policy was updated to reflect legislative changes and to provide a third-party
whistleblowing hotline.
Trading In
Company Securities
Mercury’s Trading in Company Securities Policy sets out the rules and restrictions relating to trading in Mercury
securities by directors and employees and contractors, including the prohibition on insider trading. The Policy is
closely monitored by the Company Secretary and is overseen by the RAAC.
The Chief Executive and EMT members are prohibited, by the Trading in Company Securities Policy, from
entering into transactions in associated products which limit the economic risk of participating in unvested
entitlements under Mercury’s Long-Term Incentive Plans.
During FY23, the Trading in Company Securities Policy was updated to reflect the Company Secretary’s ability
to “call in” additional classes of restricted persons.
Market DisclosuresOur Market Disclosure Policy ensures we maintain a fully informed market through communication with the
markets, investors and stakeholders and by giving them equal and timely access to material information.
During FY23, the Market Disclosure Policy was updated to reflect who is authorised to speak on behalf of
Mercury when dealing with non-material information.
GOVERNANCE AT MERCURY.
Our Governance & Responsible Business Practices
SustainabilityOur Sustainability Policy sets out the core principles and values that promote ethical and responsible
decision-making.
We recognise that our reputation, our operational and financial results, and success in creating long-term value
for our shareholders depend on maintaining confidence in: how the Company acts and conducts its business; our
approach to managing natural resources, meeting environmental standards, responding and adapting to climate
change and playing a leading role in the decarbonisation of Aotearoa New Zealand; our health and safety and
wellbeing culture and practices; the service we provide for our customers; the employment experience we
offer our people; the relationships we have with our business partners and the communities within which we
operate; and broader measures of economic, environmental and social performance.
Under the Policy, we commit to integrating sustainability through principles relating to our five-pillar strategy:
Customers, Partnerships, Kaitiakitanga, People, Commercial.
During FY23, the Sustainability Policy (previously the Integrated Sustainability Policy) was updated to simplify
the name, clarify the purpose of the policy, reflect changes made to our strategic framework and include iwi
and stakeholder engagement provisions.
PrivacyWe are committed to the safeguarding and proper use of personal information. We have a comprehensive
Privacy Policy, which is reviewed every two years, and a robust privacy framework. Privacy is afforded significant
consideration within Mercury and is managed in accordance with our risk management framework.
Our General Counsel is Mercury’s Privacy Officer and is responsible for implementing our Privacy Policy, promoting
awareness of privacy matters, monitoring matters on a day-to-day basis, and escalating matters as required
to our Chief Executive, with notification to our Risk Management Committee. Privacy issues are reported to the
Risk Management Committee on a quarterly basis. We also have a Group Information Security Manager who
is responsible for ensuring that appropriate systems and processes are in place for the storage and security of
personal information.
Environmental Our Environmental Policy recognises that our generation activities rely on access to natural resources that
we know are highly valued by our communities. We strive to maintain this trust by working with partners to
deliver renewable electricity and make a long-term difference New Zealand’s environmental health.
We work responsibly to deliver today and sustainably for future generations and will achieve this by focussing
on: Kaitiakitanga, challenging our performance, promoting awareness, complying with requirements, and
setting objectives and targets.
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Our Governance & Responsible Business Practices
Modern SlaveryDuring the reporting period we prepared and reported our Modern Slavery Statement in line with our obligations
under the Australian Modern Slavery Act 2018.
Our statement outlines the work undertaken during FY22 to assess and address the risk of modern slavery in
our operations and supply chain and identified the following key focus areas for FY23: integrating supply chain
data from the Trustpower retail business and reviewing specific Trustpower suppliers, working with maintenance
suppliers to assess modern slavery risks in their supply chains, looking at Energy Source Minerals, a
California-based company in which Mercury holds an equity interest, and a continued focus on improving
our spend visibility.
Climate-related
Disclosures and
Carbon Emissions
Reporting
Since 2018, Mercury has been publishing reports outlining climate-related risks and opportunities faced by the
business. In previous years, we have reported in line with the framework set out by the Financial Stability Board
Taskforce on Climate Related Financial Disclosures (TCFD). In FY23, we have prepared a Climate Statement in
accordance with the Aotearoa New Zealand Climate Standards, which are aligned with the TCFD framework.
The Climate Statement includes disclosure of the potential impacts of climate-related risks and opportunities
on Mercury’s business and details about Mercury’s carbon emissions profile. Refer to the Climate Statement.
We have also prepared a Greenhouse Gas Emissions Inventory report which outlines in detail each of Mercury’s
main emissions sources and how these have tracked over time.
Takeover Response
Policy
We have a Takeover Response Policy to guide the Board and management if the Company receives a takeover
notice or the Company becomes aware that a takeover offer in respect of the Company (or an analogous
scheme of arrangement) is, or is likely to be, proposed by another person.
The Mercury Code, Modern Slavery Statement, and all Policies referred to in the table above are available on the Corporate
Governance section of our website.
GOVERNANCE AT MERCURY.
Mercury, Newmarket, Auckland.
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Being inclusive of individuals with different
backgrounds, views, experience and capability
working together makes us stronger and better
as an organisation. We are committed to recruiting
and retaining people who respect each other, our
customers, our stakeholders and our partners
and have a broad range of skills, experiences and
frames of reference to drive innovation, deliver
improved financial performance and help us
to achieve our ambition.
Our commitment to diversity, equity and inclusion
starts with our Diversity, Equity and Inclusion Policy
and framework. A copy of this policy is available in
the Corporate Governance section of our website.
Our approach takes a strategic view that to build
diversity, equity and inclusion at Mercury, we must
align a variety of initiatives that enable and involve
our people, build external partnerships, grow
capability, and ensure our work environment and
structure support a diverse, equitable and inclusive
culture. The activity we undertake across these
areas of focus is aligned to the following principles:
• pursue diversity of our people at all levels,
• create a flexible and inclusive work
environment that values difference
and enhances business outcomes,
• harness diversity of thought and capitalise
on individual differences,
• embrace leadership behaviours that reflect our
belief in the value of diversity, equity and inclusion,
• attract and retain a talented workforce through
increasing the diversity of the candidate pool and
maintaining a recruitment strategy that is attractive
to all candidates, and
• recognise the importance of investing in creating
a greater sense of belonging for our people.
This approach will be practically achieved across
our business by:
• providing learning opportunities that raise
awareness of the benefits of diversity, equity
and inclusion, improve understanding of the
biases that hinder progress, and support leaders
to create safe, supportive, and equitable spaces
where team members of all backgrounds and
experiences belong,
• ensuring our recruitment and selection,
development and talent management
approaches are equitable and enable inclusion
and diversity at all levels,
• regularly reviewing and enhancing processes
and policies to encourage greater flexibility and
diversity and enable an inclusive and equitable
environment where everyone can belong,
• embedding diversity, equity and inclusion in our
culture through engaging internal communications
and events, active employee led network groups
that promote awareness, and seeking diverse
perspectives on issues that matter to our people,
• regularly tracking progress towards a diverse
workforce at all levels against specific targets,
• engaging with educational institutions and partners
in our communities to address inequity and promote
and encourage wide talent pools for the industry.
In addition to the actions we undertake, we also support
a diverse, equitable and inclusive workplace through not
permitting or condoning any harassment, discrimination
or victimisation. Our Anti Bullying, Harassment and
Discrimination Policy outlines our approach to this.
Our progress against diversity and inclusion goals
is measured against objectives set by the Board.
These objectives are made up of a mixture of targets
and benchmarks. Generally, targets exist where we
believe that achieving diversity in that area is aided by
us working towards a specific measure. In other areas,
we use benchmarks where comparison against those
identified data points will help inform our view of how our
work towards diversity in that area is progressing. Diversity,
Equity and Inclusion is also covered in the Ngā Tāngata/
People section, with details of specific initiatives underway.
GOVERNANCE AT MERCURY.
Mercury embraces and celebrates diversity in all its forms.
When we care, commit, connect and bring our curiosity,
we make a real difference.
DIVERSITY, EQUITY & INCLUSION.
REREKĒTANGA, MANA ŌRITE ME TE wHAKAURU.
Lucie Drummond, GM Sustainability
together with Diverse Emerging
Leader participants Nico Lumangtad,
Commercial Services Specialist and
Nickkita Lau, Internal Communications
and Engagement Manager.
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GOVERNANCE AT MERCURY.
ObjectivesFuture years - targetsPrior years - actuals and targets
Gender
We have clear and simple targets for gender diversity of 40:40:20 at all levels.
This means we aim for a minimum of 40% female and 40% male, with the balance
being any gender.
Pay Equity
We ensure that everyone is rewarded fairly for their work.
Employee GroupFY24FY25FY26
June 2022
Target
(Female)
June 2022
Actuals
(Female/Male)
June 2023
Target
(Female)
June 2023
Actuals
(Female/Male)
All Employees40:40:2040:40:2040:40:2045%39% / 61%45%51% / 49%
People Leaders40:40:2040:40:2040:40:2035%35% / 65%35%47% / 53%
EMT40:40:2040:40:2040:40:20>40%44% / 56%>40%37.5% / 62.5%
Board40:40:2040:40:2040:40:20>40%25% / 75%>40%50% / 50%
Pay EquityOur target is 100% Pay Equity.100%94.9%100%97.1%
Ethnicity
Aligned to our goal of having clear & simple targets, we have simplified long-term
targets for ethnicity of 15:15:10. This means we aim for a minimum of 15% Māori,
15% Asian and 10% Pasifika at all levels (these are closely aligned to our population
demographics and are minimums).
EthnicityFY24FY25FY26
June 2022
Target
June 2022
Actuals
June 2023
Target
June 2023
Actuals*
Māori
Employees
People Leaders
15%
15%
15%
15%
15%
15%
7%
6%
4%
2%
15%
15%
7%
6%
Asian
Employees
People Leaders
15%
15%
15%
15%
15%
15%
23%
13%
23%
14%
15%
15%
17%
10%
Pasifika
Employees
People Leaders
10%
10%
10%
10%
10%
10%
10%
5%
5%
1%
10%
10%
5%
2%
Age
To ensure our business is diverse in a range of ways, we monitor our age profile to
check that we are aligned to the national median.The median age of the NZ workforce is 41.8 years
(National Labour Force projections, 2023)
Benchmark against
national median
age of the labour
force in New Zealand
National Labour
Force projections
41.7, consistent with
national labour force
projections
Benchmark against
national median
age of the labour
force in New Zealand
National Labour
Force projections
41.2, slightly below
national labour force
projections
At 30 June 2023, the proportion of women on the EMT (including the Chief Executive)
was 37.5%, or three out of eight (as at 30 June 2022 this was 44% or four out of nine).
The proportion of women on the Board at balance date was 50%, or four out of eight,
including the Chair (as at 30 June 2022 this was 25%, or two out of eight). At 30 June
2023, no Directors or EMT self-identify as gender diverse (as was the case as at 30
June 2022).
During FY23 we have improved our collection of ethnicity information by expanding from
one to three ethnicity fields. In order to maintain consistency of measurement against our
targets, we have adopted the Stats NZ prioritised ethnic groups.
This involves each person being allocated to a single ethnic group based on the groups they
have identified with, which are, in order of priority: Māori, Pacific, Asian and European/Other.
At 30 June 2023, our gender pay equity was 97.1% (as at 30 June 2022 this was 94.9%).
Gender pay equity is calculated as the average position in range (relative to the role’s band
midpoint) of female fixed remuneration compared with the average position in range of male
fixed remuneration. Our gender pay gap which compares the median hourly rate between
males and females was 41.9% (as at 30 June 2022 this was 21.7%).
Pay equity by ethnicity compared to “other” ethnicity was Māori 99.9%; Asian 98.6% and Pasifika
97.6%. The ethnicity pay gap which compares the median hourly rate between each ethnicity and
“other” ethnicity was Māori 32%; Asian -2.7% and 37.7% for Pasifika.
The Board believes that for this reporting period Mercury has continued to make progress towards
achieving our inclusiveness, equity, and diversity objectives and against our Diversity, Equity and
Inclusion Policy generally. However, the Board notes that continued focus is required for us to
achieve our FY24 diversity target.
* We acknowledge there are gaps and we are addressing these through programmes such as the Diverse
Emerging Leaders programme
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SCOTT ST JOHN
CHAIR, PEOPLE & PERFORMANCE COMMITTEE
Executive Remuneration Governance
Mercury’s Board is committed to a remuneration
framework that promotes a high-performance
culture and that aligns executive reward to the
achievement of strategies and objectives to create
sustainable value for our shareholders. The Board
is committed to demonstrating transparency in its
remuneration policy and practice.
The purpose of the PPC is to assist Mercury’s Board
in fulfilling its responsibilities relating to Mercury’s
People and Performance strategy and plan, People
and Performance policies and practices and the
remuneration of the Chief Executive.
Dear Shareholder
As Chair of the People and Performance Committee
(PPC) of the Board, it is my pleasure to present
our Remuneration Report for the year ended
30 June 2023.
This report outlines Mercury’s strategy and approach
to remuneration, in particular for its executives. It sets
out remuneration information for the Chief Executive,
Chief Financial Officer and directors.
The Board reviewed management performance
against the short-term incentives (STIs) Key
Performance Indicators (KPIs). The Board determined
that stretch targets were met for Commercial, Retail
and Climate KPIs, that the Adapative Organisation
and Relationships KPIs were partially met and the
Generation KPIs were not met. The Company STI
was awarded at 82% of maximum. This year we
have provided more details on our FY23 STI Group
scorecard assessment on page 96.
In FY23, we extended the Long-term performance
incentives policy to be available to four senior
managers who were deemed to have the potential
to succeed into a general management position
within Mercury.
With the increase in inflation and living costs for
New Zealanders, this year we focussed on higher
salary movements for those employees on
lower salaries.
Our continued focus on diversity, equity and
inclusiveness has resulted in some positive shifts
towards achieving our objectives. We have increased
female representation across our employees, in our
People Leadership group and our Board and have
reached our gender diversity targets this year.
We saw an increase in our gender pay gap this
year to 41.9%, which was not unexpected with
the higher number of female employees coming
across in customer service, sales representative
and administration positions from Trustpower into
Mercury. However, when comparing comparable roles
across the business we were able to close our pay
equity gap by 2.2% this year, taking this up to 97.1%.
Moreover, we are pleased that considerable progress
was made in closing ethnicity pay equity gaps this
year across all our ethnicity groups of Māori (99.9%),
Asian (98.6%) and Pasifika (97.6%). As part of the
FY23 remuneration review, we identified and
addressed gender or ethnicity salary gaps with 24
employees salaries being uplifted to further close
those gaps.
Our commitment to providing equitable opportunities
for growth and development is reflected in our high
employee internal appointments and our ongoing
commitment to pay equity.
I want to acknowledge our Executive Management
Team (EMT) in the way they looked after employees
and customers through the severe weather events
that New Zealander’s faced this year. Not only did they
support financially those employees and customers
impacted by events, but also thanked employees
for their hard mahi by giving them an additional
“Thank you day” off. In addition, to recognise the
outstanding contribution of our employees in
delivering this year’s performance, we are awarding
all of our part-time and full-time permanent
employees with a $1,000 one off payment.
REMUNERATION REPORT.
The PPC reviews the annual performance appraisal
outcomes for all members of the EMT and approves
the outcomes for all EMT members other than the
Chief Executive. The Chief Executive’s remuneration
is approved by the Board on the recommendation
of the PPC. Annual remuneration reviews take into
account external benchmarking to ensure
competitiveness with comparable market peers, along
with consideration of an individual’s performance,
skills, expertise and experience.
Executive remuneration
Mercury’s Executive remuneration policy is founded on three guiding principles:
Sustainable shareholder valueAlignment to performanceSimplicity
Remuneration is aligned to
long-term sustainable
shareholder value
Remuneration for EMT reflects
the level of performance and
delivery of successful outcomes
Design is kept simple and easy
to understand
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REMUNERATION REPORT.
Executive remuneration components
Total remuneration for all EMT is made up of three components: fixed remuneration, short-term performance incentives and long-term
performance incentives. Mercury’s remuneration philosophy is to pay for performance and there is an opportunity for executives to
receive, where performance has been exceptional, a total remuneration package in the upper quartile for equivalent market-matched roles.
Fixed RemunerationShort-term IncentivesLong-Term Incentives
PurposeAttract and retain Executives of a
high calibre and experience to deliver
our strategy.
To motivate and reward employees for
performance over the financial year.
Reward the achievement of
performance measured over the
longer term aligning Executive reward
with shareholder returns.
FY23
and FY24
approach
Fixed remuneration consists of base
salary and benefits. Mercury’s policy
is to pay fixed remuneration with
reference to the fixed pay market
median.
Performance assessed against a
Company scorecard of predetermined
financial and non-financial objectives
over the course of the financial year.
Criteria closely aligned with Mercury’s
strategic objectives, purpose and goals.
Performance measured by total
shareholder return against (1) an
industry peer group and (2) the
cost of equity, in each case over the
vesting period.
Short-term performance incentives
Short-term incentives (STIs) are at-risk payments designed to motivate and reward for performance fairly in that financial year.
The target value of an STI payment is set annually as a percentage of the executive’s base salary. For FY23 the relevant target
percentage for the Chief Executive was 60% and up to 35% for other EMT members.
A proportion (70% for the Chief Executive and 50% for other EMT members) of the STI is related to a shared set of Group Key
Performance Indicators (KPIs) based on business priorities for the next 12 months, with the objective of aligning the EMT’s focus
with the company’s priorities. The balance of the STI for the Chief Executive is related to individual performance measures set
by the Board. In the case of other EMT members, the balance is related to business unit and individual performance measures.
The target STI opportunity for all Executives is 100% and maximum STI opportunity is 160%.
Breakdown of STI performance (KPI) measures for FY23
0%10%20%30%40%50%60%70%80%90%100%
Chief Executive
Other EMT
Business Unit
Group ScorecardIndividual
FY23 STI Group scorecard assessment
Aligning to our three year goals, 12 Key Performance Indicators (KPIs) were selected for the FY23 Group Scorecard. The Scorecard
consisted of on-target KPIs (aligned to 100% of the KPI) and stretch KPIs (aligned to 160% of the KPI) and appropriately weighted in
terms of value. In assessing overall performance the Board carefully considers delivery and achievement against each KPI and where
the Board deems necessary, applies discretion both upwards and downwards to agree the final outcome.
FY23
Scorecard
KPIsAlignment to 3 year ObjectivesKPI outcome
Commercial
40%
1. EBITDAF
1
target achieved
2. EBITDAF target exceeded
• Increase the value of our business to
$800m EBITDAF
1. EBITDAF target of $720m
exceeded by $17m
2. EBITDAF target of $727m
exceeded by $10m
Retail
12.5%
3. Retail consolidation of
Trustpower and Mercury
4. Lift in total connections
• Enhance our licence to operate through
collaborative work with our stakeholders
• Increase the value of our business to
$800m EBITDAF
3. Achieved. Required
milestones met
4. Achieved. Target of 20,000
connections exceeded by 16,000
Adaptive
Organisation
10%
5. Lift in safety majority
and culture
6. Increased ethnicity
in leadership roles
• Unleash the full potential of our people
through transforming culture
• Be adaptive and resilient organisation,
responsive to future needs
5. Part achieved. Overall very
positive progress made
6. Part achieved. Good progress
made, not all milestones met
Generation
Growth
10%
7. Successful execution of
the Karāpiro rehab project
8. Lift in drilling capability
• Enhance our licence to operate through
collaborative work with our stakeholders
• Increase the value of our business to
$800m EBITDAF
7. Not achieved. Milestones not met
8. Not achieved. Milestones not met
Relationships
12.5%
9. Deepening of partner
relationships
10. Growth in cultural knowledge
and capability
• Enhance our licence to operate through
collaborative work with our stakeholders
• Unleash the full potential of our people
through transforming culture
9. Part achieved. Positive
progress made which will
be built on in FY24
10. Part achieved. Good progress
made
Climate
15%
11. Progress on future
development pipeline
12. Clear path to carbon
reduction
• Play a leading role in New Zealand’s
successful transition to a low carbon
economy
• Create executable options for new growth
11. Achieved. Required
milestones met
12. Achieved. Required
milestones met
1
EBITDAF normalised for positive and negative annual variations in hydrology. For FY23 normalised EBITDAF was $737m.
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REMUNERATION REPORT.
The Board assessed and awarded the Group
Scorecard outcome for FY23 at 82% of maximum.
This recognises achievement of a mix of ‘on-target’,
‘stretch’ performance and those KPIs that were not
achieved.
The Board determined that stretch targets were
met for Commercial, Retail and Climate KPIs.
The Board agreed that the Adapative Organisation
and Relationships were partially met and therefore
was reduced. For the Generation KPIs the target
was not met.
FY24 Group Scorecard
The FY24 Group Scorecard aligns to our three year
goals, with 12 Key Performance Indicators (KPIs).
The Scorecard consists of on-target KPIs and
stretch KPIs and appropriately weighted in terms
of value.
ScorecardKPI’sAlignment to 3 year ObjectivesPerformance levelsMaximum amount payable
FY24
On-target and Stretch EBITDAF worth 40%
On-target and Stretch non-financial goals worth 10-15% each
Commercial1. EBITDAF target achieved
2. EBITDAF target exceeded
• Increase the value of our business to $800m
EBITDAF
6 KPIs were set at an ‘on-target’ level
and 6 KPIs were set at a ‘stretch’ level.
On-target aligned to 100% of the KPI
achieved and Stretch aligned to 160%
of the KPI achieved.
160% of the STI on-target
Retail3. New propositions piloted
4. Successful retail integration delivery
• Create executable options for new growth
• Increase the value of our business to $800m
EBITDAF
Adaptive Organisation5. Increased internal movement
6. Safety critical element verification completion
• Unleash the full potential of our people through
transforming culture
• Be adaptive and resilient organisation, responsive
to future needs
Generation Growth7. Pipeline of new renewables options
8. Reduce unplanned/forced outages
• Increase the value of our business to $800m
EBITDAF
• Create executable options for new growth
Relationships9. Deepening of partner relationships
10. Work closely with iwi partners
• Enhance our licence to operate through
collaborative work with our stakeholders
• Be adaptive and resilient organisation, responsive
to future needs
Climate11. Role in electricity sector transition progress
12. Progress non-condensable gas reinjection
• Play a leading role in New Zealand’s successful
transition to a low carbon economy
• Enhance our licence to operate through
collaborative work with our stakeholders
For FY23 and FY24 Group Scorecards, the
Commercial goal is normalised for positive and
negative annual variations in hydrology as these
are beyond management’s control.
The stretch performance levels within each goal
allowed employees to be rewarded for exceptional
performance. The maximum amount of an STI
payment for an EMT member for the shared KPIs
was 160% of the STI on-target amount.
In the event all on-target KPIs are not met on
the Scorecard, no STI payment will be made.
The Board retains discretion to ensure the
final outcome of STI payments fairly reflects
performance over the relevant financial year.
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Long-term performance incentives
Long-term performance incentives (LTIs) are at-risk
payments designed to align the reward of executives with the
enhancement of shareholder value over a multi-year period.
Under the LTI plan, grants are made annually with performance
measured over a three-year period. The LTI plan is a dividend
protected share rights plan and executives are granted a number
of share rights determined by dividing the face value of the
grant by the value of one Mercury share at the date of the grant.
At vesting, subject to meeting the performance hurdles, each
share right is converted to one ordinary share. The LTI outcome
opportunity is capped at 100%, though executives may also
receive additional shares representing the value of dividends
paid over the vesting period. The executive is liable for tax on
the shares received at this point.
Each grant under the LTI plan has two tranches with different
performance hurdles:
TranchePerformance hurdle
Tranche 150% of the grant is based on Mercury’s
Total Shareholder Return (TSR) relative to
the performance of an industry peer group
comprising Meridian Energy, Genesis Energy,
Contact Energy and Manawa Energy. There
is no positive TSR performance gate on this
tranche but Mercury’s TSR must be at the
50th percentile of the comparator group for
any award to be made on this component.
Tranche 250% of the grant is based on Mercury’s absolute
TSR against the company’s cost of equity over
the vesting period, plus 1%.
For the FY23 grant period commencing 1 July 2022, the
value represented 75% of the Chief Executive base salary and
between 25% to 35% of base salary for other EMT members.
The Board retains discretion over the final outcome of the LTI
plan, to allow appropriate adjustments where unanticipated
circumstances may impact performance, positively or negatively,
over a three-year period.
REMUNERATION REPORT.
Geothermal pipeline, Rotokawa power station.
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Chief Executive's remuneration (FY23 & FY22)
Salary
2
$Benefits
3
$Subtotal $Pay for performance $
Total remuneration
$
STILTISubtotal
Chief Executive – Vince Hawksworth
FY231,391,38573,0111,464,396993,588899,997
4
1,893,5853, 357,981
FY221,263,97657,5 431,321,519750,924N/A750,9242,072,443
2
Actual salary paid includes holiday pay paid as per NZ legislation. The base salary for Vince Hawksworth for FY22 was $1,224,000 and $1,285,200 for FY23.
3
Benefits include KiwiSaver and insurance.
4
The LTI value relates to the grant for the FY21-FY23 performance period ending 30 June 2023. The value shown is the total value of the share rights issued to
Vince at the time of the grant on 7 October 2020. 100% of the share rights for the FY21-FY23 grant will transfer to Vince after this integrated report is published.
The market value of the vested share rights will be calculated at transfer date and will be reported in our FY24 integrated report.
Five-year summary – Chief Executive's remuneration
Total
remuneration
paid
5
$
Percentage
STI against
maximum
6
%
Percentage
vested LTI against
maximum %
Span of LTI
performance
period
Chief Executive –
Vince HawksworthFY233, 357,981811002020 - 2023
FY222,072,44377Not eligibleNot eligible
FY211,799,51550Not eligibleNot eligible
FY20513,94051Not eligibleNot eligible
Chief Executive –
Fraser WhinerayFY201,653,47669872017 – 2020
FY191,975,71565502016 – 2019
5
Total remuneration paid including Salary, Benefits, STI and LTI payments.
6
For FY23 and FY22 the Maximum STI was 160% of ‘on-target’ performance pay. All other years the Maximum STI was 178% of ‘on-target’ performance pay.
Breakdown of Chief Executive's pay for performance (FY23)
DescriptionPerformance measures
Percentage
achieved by
Vince Hawksworth
STI
7
Set at 60% of base salary. Based
on a combination of key financial
and non-financial performance
measures
70% based on the six Company Shared goals
(weighted 10-40%)
82%
30% based on individual measures78%
LTI
8
FY21-FY23 grant set at 75% of
base salary. Share rights issued at
7 October 2020 with value of
$899,997. Volume weighted average
price (V WAP)
9
of 4.6997.
50% relative TSR performance against Peer Group100%
50% absolute TSR against the company’s cost of
equity over the vesting period, plus 1%.
100%
7
The above STI percentages achieved by Vince is the percentage STI against the maximum STI percentage of 160%.
The above STI for FY23 will be paid in FY24.
8
The above LTI outcome for FY21-FY23 will be issued in shares in FY24.
9
The volume weighted average price calculated across the 10 trading days including and after the Commencement Date of 1 July 2020.
Chief Executive’s long-term performance incentives
LTI TranchePerformance
Period
Grant yearNumber of share
rights issued on
grant
Value of share
rights on grant
date
Number of
share rights
vested including
dividend shares
10
Value of shares
transferred
FY21-FY23
1 July 2020 to
30 June 2023FY21191,501$899,997214,805
To be determined
on transfer date
FY22-FY24
1 July 2021 to
30 June 2024FY22137,014$917,994
To be determined
after vesting date
To be determined
on transfer date
FY23-FY25
1 July 2022 to
30 June 2025FY23167,111$963,896
To be determined
after vesting date
To be determined
on transfer date
FY24-FY26
1 July 2023 to
30 June 2026F Y2483,178$539,784
To be determined
after vesting date
To be determined
on transfer date
10
Vesting is subject to the performance hurdles being met. See page 98 for the performance hurdles.
CHIEF EXECUTIVE’S REMUNERATION.
REMUNERATION REPORT.
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KiwiSaver
The Chief Executive is a member of KiwiSaver. As a member of this scheme, the Chief Executive is eligible to contribute and receive
a company contribution of 3% of gross taxable earnings (including short- and long-term incentives). For FY23, the company’s
contribution for Vince Hawksworth was $64,269.
FY24 CHIEF EXECUTIVE’S REMUNERATION STRUCTURE
The Board has elected, in the interests of transparency, to disclose in advance the structure and package that will apply for FY24.
FY24Base Salary $Benefits
11
$Subtotal $Pay for performance 'on-target' $Total remuneration $
STILTI granted
12
Subtotal
Chief Executive1,349,46049, 2261,398,686809,676539,7841,349,4602,748,146
11
Benefits include KiwiSaver and insurance.
12
This LTI will be granted in FY24 and, if hurdles are met, paid in shares in 2026.
REMUNERATION REPORT.
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$000
FixedOn-planMaximum
Long-term Incentives Granted (2026 vesting)
Annual Variable
Base Salary & Benefits
Chief Executive’s remuneration performance pay for FY24
CHIEF FINANCIAL OFFICER’S REMUNERATION
In the interests of providing greater transparency of executive remuneration, the Board has elected to provide details regarding total
remuneration paid to the Chief Financial Officer in FY23.
FY23Base Salary
13
$Benefits
14
$Subtotal $Pay for performance $
15
Total remuneration $
STILTISubtotal
Chief Financial
Officer539,43129,607569,038211,772169,998381,770950,808
13
Actual salary paid includes holiday pay paid as per NZ legislation.
14
Benefits include superannuation and insurance.
15
The STI payment relates to FY23 but to be paid in FY24. The LTI value above relates to the grant for the FY21-FY23 performance period ending
30 June 2023. The value shown is the total value of the share rights issued to the Chief Financial Officer (CFO) at the time of the grant on
7 October 2020. 100% of the share rights for the FY21-FY23 grant will transfer to the CFO after this integrated report is published. The market
value of the vested share rights will be calculated at transfer date.
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
30 June 201930 June 202030 June 202130 June 202230 June 2023
Peer
MCY
-20.00%
-10.00%
TSR %
Five-year summary – TSR Performance (company vs peer group)
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SHARE OwNERSHIP
The Chief Executive and Chief Financial Officer’s ownership of Mercury shares as at 30 June 2023 are:
Executive
Number of shares owned (excludes shares
held in trust for the LTI scheme)
Change in shares owned
since 30 June 2022
Chief Executive43,716
16
11,205
Chief Financial Officer042,182
17
Balance of EMT223,716
18
59, 319
16
Chief Executive shares include shares held in personal capacity as well as those held in trust. The Chief Executive also has a beneficial interest in 100,000
MCY040 bonds and 30,000 MCY060 bonds held in trust.
17
The Chief Financial Officer disclosed in an Ongoing Disclosure Notice to the market dated 8 September 2022 a transfer of 42,182 shares to Tracey Meek,
the Chief Financial Officer’s wife. The Chief Financial Officer ceased to have a relevant interest in these shares upon transfer to Tracey Meek.
18
Balance of shares owned by other EMT members as at 30 June 2023, excluding shares owned by the Chief Executive and Chief Financial Officer.
This includes shares in which a beneficial interest is held. This includes shares owned by Julia Jack who left Mercury in April 2023.
EMPLOYEE REMUNERATION
During the FY23 year the Group paid remuneration in excess of $100,000 including benefits to 602 employees (not including directors) in
the following remuneration bands:
Remuneration band
19
Currently employed No longer
employed
Total
$100,001-$110,00074680
$110,001-$120,00074478
$120,001-$130,00079483
$130,001-$140,00067471
$140,001-$150,00048351
$150,001-$160,00044-44
$160,001-$170,00045550
$170,001-$180,00022224
$180,001-$190,00014317
$190,001-$200,00021-21
$200,001-$210,00012214
$210,001-$220,00015-15
$220,001-$230,0006-6
$230,001-$240,000617
$250,001-$260,000314
Remuneration band
19
Currently employed No longer
employed
Total
$260,001-$270,000415
$270,001-$280,0003-3
$300,001-$310,0003-3
$320,001-$330,000112
$330,001-$340,0003-3
$340,001-$350,000314
$370,001-$380,0001-1
$420,001-$430,000112
$430,001-$440,0001-1
$580,001-$590,0001-1
$590,001-$600,0001-1
$660,001-$670,0001-1
$680,001-$690,0001-1
$710,001-$720,0001-1
$770,001-$780,000-11
$880,001-$890,0001-1
$1,040,001-$1,050,0001-1
$2,210,001-$2,220,0001-1
Total56240602
19
The remuneration bands above include 13 employees who received redundancy payments in FY23.
REMUNERATION REPORT.
TOTAL REMUNERATION RATIO
The total remuneration ratio for FY23 between employee (median) and Chief Executive was
1:48. This is based on, for employees, actual remuneration paid in FY23 (employee median was
$70,501) and for the Chief Executive, the amount specified in the table on page 99, $3,357,981.
1:48
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DirectorBoard
Risk Assurance &
Audit Committee
People &
Performance
Committee
Nominations
CommitteeTotal
4
No. of meetings9441
2
18
Fees $
Meetings
Attended Fees $
Meetings
Attended Fees $
Meetings
Attended Fees $
Meetings
Attended Fees $
Prue Flacks
205,000
3
(Chair)
9431205,000
Dennis Barnes
6
60,08387,5833
5
2
5
67,666
Hannah Hamling
103,000
913,0004116,000
Andy Lark
7
25,750
22,500128,250
James Miller
103,000
9
28,000
(Chair)
46,0001137,000
Scott St John
103,000
94
5
20,400
(Chair)
44,5001127,900
Patrick Strange
103,000
913,00041,500
9
117,500
Mike Taitoko
103,000
910,0004113,000
Lorraine Witten
8
85,833
9
5
9,750295,583
Susan Peterson
8
85,833
81
5
7,500393,333
Total97 7,49971,33340,40012,0001,101,232
1
1
The total directors’ fee pool as at 30 June 2023 was $1,085,400. Under Rule 2.11.3 of the NZX Listing Rules, the Board may, without shareholder approval, proportionately increase the total pool of
directors’ fees to accommodate an increase in the number of directors from the number of directors in office when the fee pool was last approved by shareholders. During FY23, the number of
directors on the Board increased from eight to 10 when Lorraine Witten and Susan Peterson became directors, decreased to nine following Andy Lark’s retirement and then decreased to eight
again following Dennis Barnes’ retirement. The total directors’ fee pool, as adjusted for the changing number of directors throughout the FY23, was not fully exhausted.
2
Due to the nature of the Nominations Committee's role, its activity varies each reporting period depending on the requirements of the Board. While the Nominations Committee Charter only
requires one formal meeting annually, the Committee meets more frequently as required. In addition to the minimum annual meeting, the Committee convened on several occasions during
FY23 to discuss necessary matters.
3
Prue Flacks’ fees cover attendance at all Committee meetings.
4
Disclosure Committee is not reported on as these occur as ad-hoc and on an as required basis.
5
Dennis Barnes attended one Risk Assurance and Audit Committee meeting and two People and Performance Committee meetings as an observer. Scott St John attended four Risk Assurance
and Audit Committee meetings as an observer. Lorraine Witten attended one Board meeting as an observer. Susan Peterson attended one Risk Assurance and Audit Committee meeting as an
observer.
6
Dennis Barnes retired as a director on 16 May 2023. The fees paid are representative of part-year payments.
7
Andy Lark retired as a director on 22 September 2022. The fees paid are representative of part-year payments
8
Lorraine Witten and Susan Peterson became directors on 1 September 2022. The fees paid are representative of part-year payments.
9
Patrick Strange was a member of the Nominations Committee until 1 October 2022. This payment in FY23 relates to his membership in the period from July to September 2022.
For reference: Future Director Kim Gordon was paid $8,333 in relation to her role as future director in FY23. Kim Gordon’s position as future director ended on 1 November 2022.
DIRECTOR REMUNERATION
The directors’ remuneration is paid in the form of directors’ fees. Additional fees are
paid to the Chair and in respect of work carried out by directors on various Board
committees to reflect the additional time involved and responsibilities of these
positions. As an exception to the NZX Corporate Governance Code, Mercury does
not fully comply with Recommendation 5.1 because it does not have a director
remuneration policy. Instead, the components of director remuneration are set out
in the Board Charter (found on the Corporate Governance section of our website)
and described in this section.
The total pool of fees able to be paid to directors is subject to shareholder approval
and currently stands at $1,085,400 for a Board of eight directors. Directors’ fees
were last reviewed in 2021, with the increase taking effect from 1 October 2021.
These fees are set following consultation with key stakeholders and having
considered independent remuneration benchmarking advice. Under the NZX
Listing Rules, the size of the total pool of directors’ fees may increase from time to
time as the number of directors on the Board increases. Mercury meets directors’
reasonable travel and other costs associated with Mercury business. Mercury does
not pay any retirement benefits to non-executive directors. The following people
held office as directors during the year to 30 June 2023 and the remuneration set
out in the following table was approved during the period. The number of meetings
and attendance rate by directors during the year to 30 June 2023 was as follows:
REMUNERATION REPORT.
MERCURY INTEGRATED REPORT 2023
LEADERSHIP & GOVERNANCE
MENU
103
NZX CORPORATE GOVERNANCE CODE INDEX.
NXZ CGC RecommendationSection titleLocation
PRINCIPLE 1 – ETHICAL STANDARDS
1.1 Code of ethicsActing Ethically & Responsibly
The Mercury Code & Our Policy Framework, p90-92
1.2 Financial product dealing policyActing Ethically & Responsibly
The Mercury Code & Our Policy Framework, p91
PRINCIPLE 2 – BOARD COMPOSITION & PERFORMANCE
2.1 Board charterMercury’s Board
Responsibilities, p81
2.2 Board nomination and
appointment
Mercury’s Board
Selection, Nomination & Appointment, p82
2.3 Director agreementsMercury’s Board
Selection, Nomination & Appointment, p82
2.4 a. Director profiles, tenure and
ownership interests
Your Board of Directors
Directors’ Disclosures
p75-77
Interests register, p104
b. Director meeting attendanceRemuneration Report
Director Remuneration, p102
c. Director independenceMercury’s Board
Independence, p81
2.5 Diversity policyDiversity & Inclusion
p93-94
2.6 Director trainingMercury’s Board
Induction & Development, p82
2.7 Director performanceMercury’s Board
Board Skills Matrix, p83
Reviewing Performance, p84
2.8 Majority independent directorsMercury’s Board
Independence, p81
2.9 Independent chairMercury’s Board
Independence, p81
2.10 Chair / CEO separationYour Board of Directors
Your Executive Management Team
p75-77
p78
PRINCIPLE 3 – BOARD COMMITTEES
3.1 Audit committeeMercury’s Board
Board Committees, p84-85
3.2 Attendance at audit committee
by employees by invitation
Mercury’s Board
Board Committees, p85
3.3 Remuneration committeeMercury’s Board
Board Committees, p84
As an exception to the NZX Corporate Governance Code, Mercury does not comply with
Recommendation 3.3 because it does not have a separate remuneration committee.
See the Board Committees section of this report for a full explanation of this exception.
3.4 Nomination committeeMercury’s BoardBoard Committees, p85
3.5 Other standing committeesMercury’s Board
Board Committees, p84-85
3.6 Takeover protocolActing Ethically & Responsibly
The Mercury Code & Our Policy Framework, p92
NXZ CGC RecommendationSection titleLocation
PRINCIPLE 4 – REPORTING & DISCLOSURE
4.1 Continuous disclosure policyActing Ethically & Responsibly
The Mercury Code & Our Policy Framework, p91
4.2 Code of ethics, charters and
policies on website
Acting Ethically & Responsibly
www.mercury.co.nz/investors/corporate-
governance
The Mercury Code & Our Policy Framework, p90
4.3 Balanced, clear and objective
financial reporting
Notes to the Consolidated Financial Statements
p36-57
4.4 Non-financial disclosureClimate Statement
p58-73
PRINCIPLE 5 - REMUNERATION
5.1 Director remuneration policyRemuneration Report
Director Remuneration, p102
As an exception to the NZX Corporate Governance Code, Mercury does not fully comply with
Recommendation 5.1 because it does not have a specific policy for director remuneration.
See the Remuneration Report for a full explanation of this exception.
5.2 Executive remuneration policyRemuneration ReportExecutive Remuneration, p95-101
5.3 CEO remunerationRemuneration Report
Chief Executive’s Remuneration, p99-101
PRINCIPLE 6 – RISK MANAGEMENT
6.1 Risk managementAssurance & Managing Risk
The Risks We Face
Risk Management Framework & RAAC
Responsibilities, p86-88
Our Key Risks, p13
6.2 Health and safety risksThe Risks We Face
4. Ngā Tāngata / People
Our Key Risks, p13
Lifting Health, Safety and wellbeing, p24
PRINCIPLE 7 - AUDITORS
7.1 Audit frameworkAssurance & Managing Risk
Audit Plan & Role of Auditor, p86
7.2 External auditor attends annual
meeting
Assurance & Managing Risk
Audit Plan & Role of Auditor, p86
7.3 Internal auditAssurance & Managing Risk
Internal Audit & Risk Assurance, p86
PRINCIPLE 8 – SHAREHOLDER RIGHTS & RELATIONS
8.1 Investor website
www.mercury.co.nz/investors
8.2 Shareholder communicationsEngaging With Investors
p89
8.3 Right to voteOther Disclosures
Information About Mercury NZ Limited Ordinary
Shares, p113
8.4 Pro rata offersN/A during the reporting period
8.5 Notice of meetingSee the Notice of Meeting for 2023 released
on NZX and posted on our website
MERCURY INTEGRATED REPORT 2023
LEADERSHIP & GOVERNANCE
104
MENU
INTERESTS REGISTER
Disclosure of Directors’ Interests
Section 140(1) of the New Zealand Companies Act 1993 requires a
director of a company to disclose certain interests. Under subsection
(2) a director can make disclosure by giving a general notice in
writing to the Company of a position held by a director in another
named company or entity. The following are particulars included
in the Company’s Interests Register as at 30 June 2023:
Prue Flacks
None
Hannah Hamling
Burgundy Holdco LimitedDirector
1
ArcActive LimitedShareholder
1
James Miller
Channel Infrastructure NZ Limited Chair
1
(previously
Director)
Vista Group International LimitedDirector
Ryman Healthcare LimitedDirector
1
NZX LimitedChair
2
Scott St John
Fisher & Paykel Healthcare Corporation
Limited
Chair /
Shareholder
Fonterra Co-operative Group LimitedDirector
Next Foundation (and associated vehicles)Director
ANZ Bank New Zealand LimitedDirector
Patrick Strange
Auckland International Airport Limited Chair
TransgridDirector
1
Chorus LimitedChair
2
Mike Taitoko
Takiw a L imi te d Director /
Shareholder
Waiora Consulting LimitedDirector /
Shareholder
Toha Foundry LimitedDirector /
Shareholder
Takiwā NZ LimitedDirector /
Shareholder
Maratini Holdings LimitedDirector /
Shareholder
2
Canvasland Holdings LimitedDirector /
Shareholder
2
Susan Peterson
Vista Group International LimitedChair /
Shareholder
1
Craigs Investment Partners LimitedDirector
1
CIP Holdings LimitedDirector /
Shareholder
1
Arvida Group LimitedDirector /
Shareholder
1
Xero LimitedDirector /
Shareholder
1
Lorraine witten
VWORK LimitedDirector /
Shareholder
1
Move Investments Limited
Move Logistics Group Limited
Chair /
Shareholder
1
Rakon LimitedChair /
Shareholder
1
Rakon ESOP Trustee Limited
Rakon PPS Trustee Limited
Director /
Shareholder
1
Pushpay Limited
Pushpay (New Zealand) Limited
Pushpay IP Limited
Pushpay Holdings Limited
Director /
Shareholder
1,2
Simply Security LimitedDirector /
Shareholder
1,2
Nelson Property Group LimitedDirector /
Shareholder
1,2
1
Entries added by notices given by the directors during the year ended
30 June 2023
2
Entries removed by notices given by the directors during the year ended
30 June 2023
Retired during the reporting period
Andy Lark retired as a director during the period on 22 September
2022 and Dennis Barnes retired as a director during the period on
16 May 2023. The following are particulars included against their
names in the Company’s Interest Register during the period.
Andy Lark
Group Lark Pty LimitedChair
Dubber Pty LimitedChief
Marketing
and Strategy
Officer
Dennis Barnes
Contact Energy LimitedShareholder
Snowy Hydro Ltd and associated companiesManaging
Director
1
Tilt Renewables (Australia) and subsidiariesDirector
2
PARF Company 1 - 10 Pty Ltd (multiple)Director
2
PARF FinCo 1 Pty LtdDirector
2
PARF Silverton FinCo Pty LtdDirector
2
PARF Coopers Gap FinCo Pty LtdDirector
2
PISA Acquisition Finance Company Pty LtdDirector
2
PISA Hold Co 1 Pty LtdDirector
2
PARF Company 2 Pty LtdDirector
2
DIRECTORS’ DISCLOSURES.
MERCURY INTEGRATED REPORT 2023
LEADERSHIP & GOVERNANCE
105
MENU
DIRECTORS’ DISCLOSURES.
Directors’ and Officers’ Indemnities
Indemnities have been given to and insurance has been effected for, directors and senior managers of the Group to cover acts
or omissions of those persons in carrying out their duties and responsibilities as directors and senior managers.
Disclosure of Directors’ Interests in Share and Bond Transactions
Directors disclosed, pursuant to section 148 of the New Zealand Companies Act 1993, the following acquisitions and disposals
of relevant interests in shares and bonds during the period to 30 June 2023:
Name of director
Date of acquisition/
disposal of relevant
interestNature of relevant interestConsideration (NZD)
Securities
in which
a relevant
interest was
acquired/
(disposed)
Prue Flacks30 September 2022Transfer of ordinary shares as a
result of participation in Mercury’s
Dividend Reinvestment Plan
$5,086.21862
Scott St John 30 September 2022Transfer of ordinary shares as a
result of participation in Mercury’s
Dividend Reinvestment Plan
$5,476.41928
Susan Peterson7 October 2022On-market acquisition of ordinary
shares in Mercury NZ Limited
$29,830.145,400
Prue Flacks3 April 2023Transfer of ordinary shares as a
result of participation in Mercury’s
Dividend Reinvestment Plan
$3,759.87617
Scott St John3 April 2023Transfer of ordinary shares as a
result of participation in Mercury’s
Dividend Reinvestment Plan
$4,052.38665
Disclosure of Directors’ Interests in Shares and Bonds
Directors disclosed the following relevant interests in shares and bonds as at 30 June 2023:
Director
Number of Shares in which
a relevant interest is heldNumber of bondsChange since 30 June 2022
Prue Flacks47,05 438,000 MCY020 Capital Bonds
69,000 MCY030 Green Bonds
200,000 MCY050 Capital Bonds
1,479 shares
Hannah Hamling16,300––
James Miller40,320––
Scott St John 47, 239–1,593 shares
Patrick Strange39,160––
Mike Taitoko2,200––
Dennis Barnes50,000––
Susan Peterson5,400–5,400 shares
Disclosure of Subsidiary Directors’ Interests
The following are particulars included in the Interests Register for Mercury’s subsidiary companies as at 30 June 2023:
DirectorInterest Entity
Prue Flacks
1
Phil GibsonNil
Stewart HamiltonNil
Vincent Hawksworth
2
Chief Executive DirectorMercury NZ Limited
Julia JackShareholderPower to the Pedal Limited
James Miller
1
William Meek
2
Chief Financial OfficerMercury NZ Limited
Mike Taitoko
1
Marlene StrawsonNil
Howard Thomas
2
Nil
Tim AynsleyNil
1
Refer to Disclosure of Directors’ Interests.
2
This person is a Director of more than one subsidiary of Mercury NZ Limited, please refer to Company Disclosures.
MERCURY INTEGRATED REPORT 2023
LEADERSHIP & GOVERNANCE
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MENU
Twenty largest registered shareholders as at 30 June 2023
1
Name
Number
of shares
% of shares
2
The Sovereign in Right of New Zealand 716,140,52851.15
HSBC Nominees (New Zealand) Limited60,162,8524.30
HSBC Nominees (New Zealand) Limited A/C State Street 59,356,8254.24
JPMorgan Chase Bank N.A. NZ Branch-Segregated Clients ACCT 44,285,0783.16
Citibank Nominees (New Zealand) Limited 40,131,5382.87
Custodial Services Limited37,361,6222.67
BNP Paribas Nominees (NZ) Limited 32,291,2362.31
Accident Compensation Corporation 23,022,6341.64
National Nominees Limited 19,6 45, 2911.40
FNZ Custodians Limited15,462,1851.10
New Zealand Depository Nominee Limited 13,846,9070.99
Mercury NZ Limited
3
13, 219,6370.94
JBWere (NZ) Nominees Limited 13,147,5590.94
BNP Paribas Nominees (NZ) Limited 9,261,4260.66
Generate KiwiSaver Public Trust Nominees Limited 9,220,4690.66
HSBC Nominees A/C NZ Superannuation Fund Nominees Limited 9,104, 3800.65
Forsyth Barr Custodians Limited 7,718,7230.55
Tea Custodians Limited Client Property Trust Account 7,152,4980.51
ANZ Wholesale Australasian Share Fund 7,090,2180.51
Simplicity Nominees Limited 5,666,4200.40
Total1,143,288,02681.66
1
As required by the NZX Listing Rules, New Zealand Central Securities Depository (NZCSD) holdings are included above and not detailed separately.
2
Percentage calculated on the basis of Mercury having 1,400,012,517 ordinary shares on issue as at 30 June 2023, which included 13,219,637 ordinary shares held
as treasury shares.
3
Held as treasury shares.
Distribution of shareholders & holdings as at 30 June 2023
Size of holding
Number of
shareholders
% of
shareholders
1
Number of
shares
Holding
quantity %
1
1 to 1,00027,98138.9318,770,3041.34
1,001 to 5,00034,90748.5680,554,3985.75
5,001 to 10,0005,7287.9741,922,2812.99
10,001 to 100,0003,1524.3965,510,1844.68
100,001 and above 1100.151,193,255,35085.23
Total71,8781001,400,012,517100
1
Rounding applied.
Substantial product holders as at 30 June 2023
Class of Securities
Number of Securities
in Substantial Holding
Total Number of
Securities in Class
The Sovereign in Right of New ZealandOrdinary shares725,581,340
1
1,400,012,517
2
1
This comprises (a) 716,140,528 shares held by the Crown on its own account; (b) 9,372,812 shares forming part of the New Zealand Superannuation Fund which
are the property of the Crown; and (c) 68,000 shares held by Public Trust on trust for the Crown and certain iwi.
2
As at 30 June 2023, Mercury had 1,400,012,517 ordinary shares on issue, which included 13,219,637 ordinary shares held as treasury shares.
SHAREHOLDER INFORMATION
SECURITY HOLDER INFORMATION.
MERCURY INTEGRATED REPORT 2023
LEADERSHIP & GOVERNANCE
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MENU
Twenty largest registered holders of MCY020 capital bonds (3.60%) as at 30 June 2023
1
Name
Number of
MCY020
capital bonds
% of MCY020
capital bonds
2
Forsyth Barr Custodians Limited 96,141,00032.05
Custodial Services Limited 55,873,00018.62
JBWere (NZ) Nominees Limited 33,846,00011.28
Hobson Wealth Custodian Limited 21,110,0007.0 4
FNZ Custodians Limited14,419,0004.81
Forsyth Barr Custodians Limited 7,373,0002.46
Generate KiwiSaver Public Trust Nominees Limited 3,387,0001.13
Forsyth Barr Custodians Limited 3,300,0001.10
Public Trus t 3,000,0001.00
Best Farm Limited2,900,0000.97
Citibank Nominees (New Zealand) Limited 2,815,0000.94
The Tindall Foundation Inc1,800,0000.60
CML Shares Limited1,700,0000.57
Hobson Wealth Custodian Limited 1,436,0000.48
Masfen Securities Limited1,200,0000.40
Robert Murray Solloway1,025,0000.34
Richard Barton Adams & Allison Ruth Adams 1,000,0000.33
Hobson Wealth Custodian Limited 986,0000.33
JBWere (NZ) Nominees Limited 750,0000.25
Custodial Services Limited 737,0000.25
Total254,798,00084.93
1
As required by the NZX Listing Rules, New Zealand Central Securities Depository (NZCSD) holdings are included above and not detailed separately.
2
Percentage calculated on the basis of Mercury having 300,000,000 MCY020 capital bonds on issue as at 30 June 2023.
Distribution of MCY020 (3.60%) capital bondholders and holdings as at 30 June 2023
Size of holding
Number of MCY020
capital bondholders
% of MCY020 capital
bondholders
1
Number of MCY020
capital bonds
Holding
quantity %
1
1,001 to 5,000775.97385,0000.13
5,001 to 10,00024819.222,404,0000.80
10,001 to 100,00089068.9930,023,00010.01
100,001 and above755.81267,188,00089.06
Total1,290100300,000,000100
1
Rounding applied.
BONDHOLDER INFORMATION
SECURITY HOLDER INFORMATION.
MERCURY INTEGRATED REPORT 2023
LEADERSHIP & GOVERNANCE
108
MENU
Twenty largest registered holders of MCY030 green bonds (1.56%) as at 30 June 2023
1
Name
Number of
MCY030
green bonds
% of MCY030
green bonds
2
Custodial Services Limited 36,838,00018.42
Forsyth Barr Custodians Limited 14,198,0007.10
BNP Paribas Nominees (NZ) Limited 13,260,0006.63
Tea Custodians Limited Client Property Trust Account 12,900,0006.45
ANZ Wholesale NZ Fixed Interest Fund 12,250,0006.13
FNZ Custodians Limited11,362,0005.68
HSBC Nominees (New Zealand) Limited8,500,0004.25
JBWere (NZ) Nominees Limited 8,397,0004.20
National Nominees Limited 7,967,0003.98
Adminis Custodial Nominees Limited6,000,0003.00
Mint Nominees Limited 5,937,0002.97
BNP Paribas Nominees (NZ) Limited 5,600,0002.80
Queen Street Nominees ACF PIE Funds 5,487,0002.74
Generate Kiwisaver Public Trust Nominees Limited 5,410,0002.7 1
MT Nominees Limited 4,448,0002.22
ANZ Custodial Services New Zealand Limited 4,417,0002.21
HSBC Nominees (New Zealand) Limited A/C State Street 3,715,0001.86
FNZ Custodians Limited 3,467,0001.73
Citibank Nominees (New Zealand) Limited 2,416,0001.21
BGLIR Trustee Limited 2,000,0001.00
Total174,569,00087. 28
1
As required by the NZX Listing Rules, New Zealand Central Securities Depository (NZCSD) holdings are included above and not detailed separately.
2
Percentage calculated on the basis of Mercury having 200,000,000 MCY030 green bonds on issue as at 30 June 2023.
Distribution of MCY030 (1.56%) green bondholders and holdings as at 30 June 2023
Size of holding
Number of MCY030
green bondholders
% of MCY030 green
bondholders
1
Number of MCY030
green bonds
Holding
quantity %
1
1,001 to 5,000175.2385,0000.04
5,001 to 10,0006219.08569,0000.28
10,001 to 100,00019359.387,130,0003.57
100,001 and above5316.31192,216,00096.11
Total325100200,000,000100
1
Rounding applied.
SECURITY HOLDER INFORMATION.
MERCURY INTEGRATED REPORT 2023
LEADERSHIP & GOVERNANCE
109
MENU
Twenty largest registered holders of MCY040 green bonds (2.16%) as at 30 June 2023
1
Name
Number of
MCY040
green bonds
% of MCY040
green bonds
2
Custodial Services Limited 46,359,00023.18
FNZ Custodians Limited31,026,00015.51
BNP Paribas Nominees (NZ) Limited 16,996,0008.50
Forsyth Barr Custodians Limited 15,720,0007.86
HSBC Nominees (New Zealand) Limited 11,875,0005.94
Southland Building Society 9,250,0004.63
Pin Twenty Limited 7,178,0003.59
Citibank Nominees (New Zealand) Limited 6,705,0003.35
NZX WT Nominees Limited 4,167,0002.08
Tea Custodians Limited Client Property Trust Account 3,334,0001.67
FNZ Custodians Limited 3,329,0001.66
Dunedin City Council3,000,0001.50
MT Nominees Limited 3,000,000 1.50
Hobson Wealth Custodian Limited 2,995,0001.50
Mint Nominees Limited 2,800,0001.40
Forsyth Barr Custodians Limited 2,565,0001.28
BNP Paribas Nominees (NZ) Limited 2,500,0001.25
JBWere (NZ) Nominees Limited 2,013,0001.01
Investment Custodial Services Limited 1,964,0000.98
Forsyth Barr Custodians Limited 1,861,0000.93
Total178,637,00089.32
1
As required by the NZX Listing Rules, New Zealand Central Securities Depository (NZCSD) holdings are included above and not detailed separately.
2
Percentage calculated on the basis of Mercury having 200,000,000 MCY040 green bonds on issue as at 30 June 2023.
Distribution of MCY040 (2.16%) green bondholders and holdings as at 30 June 2023
Size of holding
Number of MCY040
green bondholders
% of MCY040 green
bondholders
1
Number of MCY040
green bonds
Holding
quantity %
1
1,001 to 5,000217.12105,0000.05
5,001 to 10,0006421.69619,0000.31
10,001 to 100,00016455.596,522,0003.26
100,001 and above4615.59192,754,00096.38
Total295100200,000,000100
1
Rounding applied.
SECURITY HOLDER INFORMATION.
MERCURY INTEGRATED REPORT 2023
LEADERSHIP & GOVERNANCE
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Twenty largest registered holders of MCY050 capital bonds (5.73%) as at 30 June 2023
1,3
Name
Number of
MCY050
capital bonds
% of MCY050
capital bonds
2
Forsyth Barr Custodians Limited 66,853,00026.74
JBWere (NZ) Nominees Limited 31,744,00012.70
National Nominees Limited 22,108,0008.84
Custodial Services Limited 18,916,0007.57
Hobson Wealth Custodian Limited 17,736,0007.09
Citibank Nominees (New Zealand) Limited 11,550,0004.62
Generate KiwiSaver Public Trust Nominees Limited 7, 337,0002.93
FNZ Custodians Limited5,692,0002.28
Forsyth Barr Custodians Limited 4,059,0001.62
Adminis Custodial Nominees Limited3,800,0001.52
CML Shares Limited3,655,0001.46
Forsyth Barr Custodians Limited 3,010,0001.20
Millar Capital Fund Limited3,000,0001.20
Investment Custodial Services Limited 2,306,0000.92
Masfen Securities Limited2,000,0000.80
Best Farm Limited1,500,0000.60
Bank of New Zealand – Treasury Support 1,219,0000.49
Hobson Wealth Custodian Limited 1,186,0000.47
Fletcher Building Educational Fund Limited1,000,0000.40
JBWere (NZ) Nominees Limited 1,000,0000.40
Robert William Bentley Morrison & Andrew James Stewart & Anthony James
William Howard
1,000,0000.40
Total210,671,00084.27
1
As required by the NZX Listing Rules, New Zealand Central Securities Depository (NZCSD) holdings are included above and not detailed separately.
2
Percentage calculated on the basis of Mercury having 250,000,000 MCY050 capital bonds on issue as at 30 June 2023.
3
The table above reports the top 21 bondholders as there are three holders sharing the 19th position.
Distribution of MCY050 (5.73%) capital bondholders and holdings as at 30 June 2023
Size of holding
Number of MCY050
capital bondholders
% of MCY050 capital
bondholders
1
Number of MCY050
capital bonds
Holding
quantity %
1
1,001 to 5,00012111.17605,0000.24
5,001 to 10,00023221.422,204,0000.88
10,001 to 100,00065060.0221,197,0008.48
100,001 and above807. 39225,994,00090.40
Total1083100250,000,000100
1
Rounding applied.
SECURITY HOLDER INFORMATION.
MERCURY INTEGRATED REPORT 2023
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Twenty largest registered holders of MCY060 green bonds (5.64%) as at 30 June 2023
1,3
Name
Number of
MCY060
green bonds
% of MCY060
green bonds
2
Custodial Services Limited 62,059,00041.37
National Nominees Limited 16,350,00010.90
Forsyth Barr Custodians Limited 12,942,0008.63
BNP Paribas Nominees (NZ) Limited 7,110,0004.74
FNZ Custodians Limited6,833,0004.56
Queen Street Nominees ACF PIE Funds 5,900,0003.93
Generate Kiwisaver Public Trust Nominees Limited5,890,0003.93
JBWere (NZ) Nominees Limited 4,335,0002.89
HSBC Nominees (New Zealand) Limited 4,250,0002.83
ANZ Fixed Interest Fund 2,950,0001.97
NZPT Custodians (Grosvenor) Limited 2,500,0001.67
Forsyth Barr Custodians 2,254,0001.50
Investment Custodial Services Limited 1,826,0001.22
Hobson Wealth Custodian Limited 840,0000.56
Fletcher Building Educational Fund Limited670,0000.45
HSBC Nominees (New Zealand) Limited A/C State Street 600,0000.40
ANZ Custodial Services New Zealand Limited 582,0000.39
Omega Investments Limited550,0000.37
Tea Custodians Limited Client Property Trust Account540,0000.36
BNP Paribas Nominees (NZ) Limited 500,0000.33
Citibank Nominees (New Zealand) Limited 500,0000.33
Lee Paterson Family Trust Company Limited500,0000.33
Total140,481,00093.65
1
As required by the NZX Listing Rules, New Zealand Central Securities Depository (NZCSD) holdings are included above and not detailed separately.
2
Percentage calculated on the basis of Mercury having 150,000,000 MCY060 green bonds on issue as at 30 June 2023.
3
The table above reports the top 22 bondholders as there are three holders sharing the 20th position.
Distribution of MCY060 (5.64%) green bondholders and holdings as at 30 June 2023
Size of holding
Number of MCY060
green bondholders
% of MCY060 green
bondholders
1
Number of MCY060
green bonds
Holding
quantity %
1
1,001 to 5,000279.34135,0000.09
5,001 to 10,0005418.69512,0000.34
10,001 to 100,00017058.825,098,0003.40
100,001 and above3813.15144,255,00096.17
Total289100150,000,000100
1
Rounding applied.
SECURITY HOLDER INFORMATION.
MERCURY INTEGRATED REPORT 2023
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STOCK EXCHANGE LISTINGS
Mercury NZ Limited (referred to in this section as “Mercury”
or “the Company”) is listed on the New Zealand stock exchange
and as an ASX Foreign Exempt Listing on the Australian stock
exchange.
In New Zealand, Mercury is listed with a “non-standard” (NS)
designation. This is due to particular provisions of the Constitution,
including the requirements regulating ownership and transfer of
Ordinary Shares.
ASX approved a change in Mercury NZ Limited’s ASX admission
category from an ASX Listing to an ASX Foreign Exempt Listing,
effective from the commencement of trading on 19 February 2016.
The Company continues to have a full listing on the NZX Main
Board, and the Company’s shares are still quoted on the ASX.
The Company is primarily regulated by the NZX, complies with
the NZX Listing Rules, and is exempt from complying with most
of the ASX Listing Rules (based on the principle of substituted
compliance).
MERCURY NZ LIMITED
The following persons held office as Directors of Mercury NZ
Limited during the 2023 financial year and as at the end of the
2023 financial year, being 30 June 2023: Prue Flacks (Chair),
Hannah Hamling, Andy Lark
1
, James Miller, Scott St John, Patrick
Strange, Mike Taitoko, Lorraine Witten
2
, Susan Peterson
2
and
Dennis Barnes
1
.
SUBSIDIARY COMPANIES
The following persons held office as directors of subsidiaries
of Mercury NZ Limited during FY23:
Company nameDirectors
Mercury SPV Limited Vincent Hawksworth
William Meek
Howard Thomas
Mercury Wind Limited Vincent Hawksworth
William Meek
Howard Thomas
Mighty Geothermal Power
International Limited
Vincent Hawksworth
William Meek
Howard Thomas
Mighty Geothermal Power Limited Vincent Hawksworth
William Meek
Howard Thomas
Mighty River Power Limited Vincent Hawksworth
William Meek
Howard Thomas
Ngātamariki Geothermal Limited Vincent Hawksworth
William Meek
Howard Thomas
NOW New Zealand Limited
3
Timothy Aynsley
Vincent Hawksworth
Paul Callow
Hamish White
Rotokawa Generation LimitedWilliam Meek
Phil Gibson
Stewart Hamilton
Rotokawa Geothermal Limited Vincent Hawksworth
William Meek
Howard Thomas
Special General Partner Limited Vincent Hawksworth
William Meek
Howard Thomas
Tararua Wind Power Limited Vincent Hawksworth
William Meek
Howard Thomas
Company nameDirectors
Blockchain Energy Limited Vincent Hawksworth
William Meek
Howard Thomas
Bosco Connect LimitedVincent Hawksworth
William Meek
Howard Thomas
Glo-Bug LimitedVincent Hawksworth
William Meek
Howard Thomas
Kawerau Geothermal LimitedVincent Hawksworth
William Meek
Howard Thomas
Mercury Drive LimitedVincent Hawksworth
2
William Meek
2
Howard Thomas
2
Julia Jack
1
Mercury Energy LimitedVincent Hawksworth
William Meek
Howard Thomas
Mercury ESPP LimitedWilliam Meek
Marlene Strawson
Howard Thomas
Mercury Geothermal LimitedVincent Hawksworth
William Meek
Howard Thomas
Mercury Insurance
Captive Limited
4
James Miller
Vincent Hawksworth
William Meek
Howard Thomas
Mercury LTI Limited Prue Flacks
Mike Taitoko
Howard Thomas
Mercury Solar LimitedVincent Hawksworth
William Meek
Howard Thomas
Company nameDirectors
Waverley Wind Farm (NZ) Holding
Limited
Vincent Hawksworth
William Meek
Howard Thomas
Waverley Wind Farm Limited Vincent Hawksworth
William Meek
Howard Thomas
What Power Crisis (2016) Limited Vincent Hawksworth
William Meek
Howard Thomas
1
Directors who resigned during FY23.
2
Directors appointed during FY23.
3
New Subsidiaries added during FY23
4
Subsidiaries removed during FY23. Mercury Insurance Captive Limited
amalgamated with What Power Crisis (2016) Limited on 28 October
2022 and has been removed from the companies register.
COMPANY DISCLOSURES.
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wAIVERS FROM THE NEw
ZEALAND AND AUSTRALIAN
STOCK EXCHANGES
NZX
Mercury NZ Limited (referred to in this section
as “Mercury” or “the Company”) has a waiver
in respect of NZX Listing Rule 8.1.5. This waiver
permits Mercury’s Constitution (“Constitution”)
to contain provisions allowing:
• the Crown and Mercury to enforce the
10% limit; and
• Mercury to suspend dividend and voting rights
attached to Mercury ordinary shares where the
10% limit is breached.
ASX
ASX has granted the Company waivers in respect
of the ASX Listing Rules to allow the Constitution
to contain provisions reflecting the ownership
restrictions imposed by the New Zealand Public
Finance Act 1989 (“Public Finance Act”) and to allow
the Crown to cancel the sale of shares to applicants
who acquire shares under the General Offer and are
not New Zealand applicants.
The majority of the waivers that ASX previously
granted to Mercury are no longer relevant following
the change of the Company’s admission category to
an ASX Foreign Exempt Listing in February 2016.
The waivers from ASX Listing Rules 8.10 and 8.11
continue to apply. These waivers permit the
Constitution to contain provisions:
• allowing the Crown and Mercury to enforce the
10% limit; and
• enabling Mercury to prevent shareholders who
acquired shares under the General Offer and are
not New Zealand applicants from transferring those
shares and to enable Mercury to sell those shares.
Restrictions on ownership and
transfer
The Public Finance Act includes restrictions on the
ownership of certain types of securities issued by
Mercury and consequences for breaching those
restrictions. The Constitution incorporates these
restrictions and mechanisms for monitoring and
enforcing them.
A summary of the restrictions on the ownership
of shares under the Public Finance Act and the
Constitution is set out below. If Mercury issues
any other class of shares, or other securities which
confer voting rights, in the future, the restrictions
summarised below would also apply to those
other classes of shares or voting securities.
51% Holding
The Crown must hold at least 51% of the shares
on issue.
The Company must not issue, acquire or redeem any
shares if such issue, acquisition or redemption would
result in the Crown falling below this 51% holding.
On 10 December 2018, Mercury entered into an
agreement with the Crown, under which the Crown
agrees to participate in any future dividend
reinvestment plan or share buyback of the Company,
in each case only to the extent required to maintain
the Crown’s proportionate shareholding following the
dividend reinvestment plan or share buyback. A copy
of the Crown Participation Agreement is available
on the Treasury’s website.
10% Limit
No person (other than the Crown) may have a
‘relevant interest’ in more than 10% of the shares
on issue (“10% Limit”).
INFORMATION ABOUT
MERCURY NZ LIMITED
ORDINARY SHARES
This statement sets out information about the
rights, privileges, conditions, and limitations,
including restrictions on transfer, that attach
to shares in Mercury.
Rights and privileges
Under the Constitution and the New Zealand
Companies Act 1993 (“Companies Act”), each
share gives the holder a right to:
• attend and vote at a meeting of shareholders,
including the right to cast one vote per share on
a poll on any resolution, such as a resolution to:
–appoint or remove a director;
–adopt, revoke or alter the Constitution;
–approve a major transaction (as that
term is defined in the Companies Act);
–approve the amalgamation of the
Company under section 221 of the
Companies Act; or
–place the Company in liquidation;
• receive an equal share in any distribution, including
dividends, if any, authorised by the Board and
declared and paid by the Company in respect of
that share;
• receive an equal share with other shareholders in
the distribution of surplus assets in any liquidation
of the Company;
• be sent certain information, including notices
of meeting and the Company reports sent to
shareholders generally; and
• exercise the other rights conferred upon
a shareholder by the Companies Act and
the Constitution.
The Company must not issue, acquire or redeem any
shares if it has actual knowledge that such issue,
acquisition or redemption will result in any person
other than the Crown exceeding the 10% Limit.
Ascertaining whether a breach has
occurred
If a holder of shares breaches the 10% Limit or knows
or believes that a person who has a relevant interest in
shares held by that holder may have a relevant interest
in shares in breach of the 10% Limit, the holder must
notify Mercury of the breach or potential breach.
Mercury may require a holder of shares to provide
it with a statutory declaration if the Board knows or
believes that a person is, or is likely to be, in breach of
the 10% Limit. That statutory declaration is required
to include, where applicable, details of all persons who
have a relevant interest in any shares held by
that holder.
Determining whether a breach has
occurred
Mercury has the power to determine whether a
breach of the 10% Limit has occurred and, if so,
to enforce the 10% Limit. In broad terms, if:
• Mercury considers that a person may be in
breach of the 10% Limit; or
• a holder of shares fails to lodge a statutory
declaration when required to do so or lodges
a declaration that has not been completed to
the reasonable satisfaction of the Company,
then Mercury is required to determine whether or
not the 10% Limit has been breached and, if so,
whether or not that breach was inadvertent. Mercury
must give the affected shareholder the opportunity
to make representations to the Company before it
makes a determination on these matters.
OTHER DISCLOSURES.
Effect of exceeding the 10% Limit
A person who is in breach of the 10% Limit must:
• comply with any notice received from Mercury
requiring them to dispose of shares or their
relevant interest in shares, or take any other
steps that are specified in the notice, for the
purpose of remedying the breach; and
• ensure that they are no longer in breach within 60
days after the date on which they became aware,
or ought to have been aware, of the breach. If the
breach is not remedied within that timeframe,
Mercury may arrange for the sale of the relevant
number of shares on behalf of the relevant holder.
In those circumstances, the Company will pay the
net proceeds of sale, after the deduction of any
other costs incurred by the Company in connection
with the sale (including brokerage and the costs of
investigating the breach of the 10% Limit), to the
relevant holder as soon as practicable after the sale
has been completed.
If a relevant interest is held in any shares in breach
of the 10% Limit then, for so long as that breach
continues:
• no votes may be cast in respect of any of the
shares in which a relevant interest is held in
excess of the 10% Limit; and
• the registered holder(s) of shares in which a
relevant interest is held in breach of the 10%
Limit will not be entitled to receive, in respect of
the shares in which a relevant interest is held in
excess of the 10% Limit, any dividend or other
distribution authorised by the Board in respect
of the shares.
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However, if the Board determines that a breach
of the 10% Limit was not inadvertent, or that it
does not have sufficient information to determine
that the breach was not inadvertent, the registered
holder may not exercise the votes attached to, and
will not be entitled to receive any dividends or other
distributions in respect of, any of its shares.
An exercise of a voting right attached to a share held
in breach of the 10% Limit must be disregarded in
counting the votes concerned. However, a resolution
passed at a meeting is not invalid where votes
exercised in breach of the voting restriction were
counted by the Company in good faith and without
knowledge of the breach.
The Board may refuse to register a transfer of shares
if it knows or believes that the transfer will result in a
breach of the 10% Limit or where the transferee has
failed to lodge a statutory declaration requested from
it by the Board within the prescribed timeframe.
Crown directions
The Crown has the power to direct the Board to
exercise certain of the powers conferred on it under
the Constitution (for example, where the Crown
suspects that the 10% Limit has been breached
but the Board has not taken steps to investigate
the suspected breach).
Trustee corporations and nominee
companies
Trustee corporations and nominee companies
(that hold securities on behalf of a large number of
separate underlying beneficial holders) are exempt
from the 10% Limit provided that certain conditions
are satisfied.
• The residue, if any, must be paid to the person
who was the holder immediately before the sale
or his or her executors, administrators or assigns.
Cancellation of sale of shares
The Crown may cancel the sale of shares to an
applicant under the offer of shares by the Crown
(“the Offer”) in the Mighty River Power Share Offer
Investment Statement and Prospectus if the applicant
misrepresented its entitlement to be allocated shares
under the Offer as a ‘New Zealand Applicant’
(as that term is defined in the Share Offer Investment
Statement and Prospectus). If the Crown cancels a
sale of shares on those grounds:
• Mercury must sell shares held by that applicant, up
to the number of shares sold to it under the Offer,
irrespective of whether or not those shares were
acquired by the applicant under the Offer (unless
the applicant had previously sold, transferred or
disposed of all of its shares to a person who was
not an associated person of the applicant); and
• the applicant will receive from the sale the lesser of:
–the sale price for the shares less the costs
incurred by the Crown and the Company; and
–the aggregate price paid for the shares less
those costs, with any excess amount being
payable to the Crown.
If an applicant who misrepresented their entitlement
to shares has sold, transferred or otherwise disposed
of shares to an associated person, then the power
of sale will extend to shares held by that associated
person, up to the number of shares transferred, sold
or otherwise disposed of to the associated person by
the relevant applicant.
Share cancellation
In certain circumstances, shares could be
cancelled by the Company through a reduction
of capital, share buy-back or other form of capital
reconstruction approved by the Board and, where
applicable, the shareholders.
Sale of less than a Minimum Holding
Mercury may, at any time, give notice to a
shareholder holding less than a Minimum Holding
of shares (as that term is defined in the NZX Listing
Rules) that if, at the end of three months after the
date the notice is given, shares then registered in
the name of the holder are less than a Minimum
Holding, Mercury may sell those shares on market
(including through a broker acting on Mercury’s
behalf), and the holder is deemed to have authorised
Mercury to act on behalf of the holder and to sign all
necessary documents relating to the sale.
For the purposes of the sale and of Rule 5.12 of
the ASX Settlement Operating Rules, where the
Company has given a notice that complies with Rule
5.12.2 of the ASX Settlement Operating Rules, the
Company may, after the end of the time specified
in the notice, initiate a Holding Adjustment to move
the relevant shares from that CHESS Holding to
an Issuer Sponsored Holding (as those terms are
defined in the ASX Settlement Operating Rules)
or to take any other action the Company considers
necessary or desirable to effect the sale.
The proceeds of the sale of any shares sold for
being less than a Minimum Holding will be applied
as follows:
• First, in payment of any reasonable sale expenses.
• Second, in satisfaction of any unpaid calls or
any other amounts owing to the Company in
respect of the shares.
PUBLIC ENTITY
Mercury is a public entity under the Public Audit
Act 2001, and the Group's independent auditor is
the Auditor-General.
DONATIONS
Donations of $228,125 were made by the Group
during the year ended 30 June 2023 ($79,199
during the year ended 30 June 2022). Under
Mercury’s Delegations Policy, donations to political
parties are prohibited.
OTHER DISCLOSURES
Mercury NZ Limited is incorporated in New Zealand
and is not subject to Chapters 6, 6A, 6B and 6C of
the Corporations Act 2001 (Australia). Mercury will
not acquire any classified assets in circumstances in
which the ASX Listing Rules would require the issue
of restricted securities, without the written consent
of ASX.
On 21 August 2023 the Board declared a fully
imputed final dividend of 13.1 cents per share to
all shareholders who are on the Company’s share
register at 5pm on the record date of 14 September
2023. The dividends will be imputed at a corporate
tax rate of 28%, which amounts to an imputation
credit of 5.1 cents per share for the final dividend.
Mercury will also pay a supplementary dividend of
2.3 cents per share relating to the final dividend to
non-resident shareholders. The Company will receive
from the New Zealand Inland Revenue Department
a tax credit equivalent to supplementary dividends.
These dividends, together with the interim dividend of
$120 million (8.7 cents per share) paid to shareholders
on 3 April 2023, brings the total declared dividends to
$302 million (or 21.8 cents per share).
OTHER DISCLOSURES.
As at the date of this annual report, the Company has
a S&P Global BBB+ rating with a stable outlook.
The Company benefits from a one-notch uplift due
to the Crown’s majority ownership.
Mercury’s Net Tangible Assets per Share
(excluding treasury stock) as at 30 June 2023
was $3.40, compared with $3.35 at 30 June 2022.
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STANDARD CORE REPORTING
GRI standardDisclosure title LocationComments
GENERAL DISCLOSURES
ORGANISATIONAL PROFILE
GRI 2: General Disclosures 2021
2-1Organisational detailsFront cover, Company Disclosures (p112),
Directory (p119), Who We are & Our
Business Model (p3, 5)
2-2Entities included in the organisation's
sustainability reporting
Notes to the Consolidated Financial
Statements p36
2-3Reporting period, frequency and
contact point
Front Cover, Directory (p119)
2-4Restatements of informationRestatements of greenhouse gas
emissions in prior years are described
in our FY23 GHG Emissions Inventory
Report
2-5External assuranceOur FY2023 Climate Statement has
not been externally assured
2-6Activities, value chain and other
business relationships
Who We Are & Our Business Model pp3,
5-6
2-7EmployeesOur Business Model p5
2-8Workers who are not employeesInformation unavailable
2-9Governance structure and
composition
Climate Statement p58-73
Governance at Mercury p79-92
2-10Nomination and selection of the
highest governance body
Governance at Mercury p79-92
2-11Chair of the highest governance bodyYour Board of Directors p75-77
2-12, 2-13, 2-14Role of the highest governance body
in overseeing the management of
impacts
Delegation of responsibility for
managing impacts
Role of the highest governance body
in sustainability reporting
Climate Statement p58-73
GRI standardDisclosure title LocationComments
2-15Conflicts of interestDirectors' Disclosures p104-105
2-16Communication of critical concernsThe Risks We Face p13
Climate Statement p58-73
Governance At Mercury p86-88
2-17Collective knowledge of the highest
governance body
Governance at Mercury p83
2-18Evaluation of the performance of the
highest governance body
Governance at Mercury p81-85
2-19, 2-20, 2-21Remuneration policies
Process to determine remuneration
Annual total compensation ratio
Remuneration Report p95-102
2-22Statement on sustainable
development practices
Chair and Chief Executive Update p8-10
Governance at Mercury p90-92
2-23Policy commitmentsGovernance at Mercury p90-92
The Mercury Code
Supplier Code of Conduct
Sustainability Policy
These policies can be found in the
Corporate Governance section of our
company website
2-24Embedding policy commitmentsGovernance at Mercury p90-92
2-25Processes to remediate negative
impacts
Governance at Mercury p90-91
2-26Mechanisms for seeking advice and
raising concerns
Governance at Mercury p91
2-27Compliance with laws and regulationsHow We Deliver Value p18
Climate Statement p72
2-28Membership associationsCompany website - Partnerships
2-29Approach to stakeholder
engagement
What Matters Most p12-14
2-30Collective bargaining agreements Information unavailable
GRI 3: Material Topics 2021
3-1Process to determine material topicsWhat Matters Most p12-14
3-2List of material topicsWhat Matters Most p12-14
Climate Statement p66-68
3-3Management of material topicsWhat Matters Most p12-14
Climate Statement p66-73
GLOBAL REPORTING INITIATIVE (GRI) INDEX.
MERCURY INTEGRATED REPORT 2023
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TOPIC STANDARDS
GRI StandardDescriptionLocationComments
GRI 201: Economic Performance 2016
201-1Direct economic value generated
and distributed
Our Business Model p4-5
Looking At The Numbers p28-29
201-2Financial implications and other
risks and opportunities due to
climate change
Climate Statement p61-68
GRI 204: Procurement Practices 2016
204-1
Proportion of spending on local
suppliers
Company website - Corporate Governance
- Modern Slavery Statement
GRI 207: Tax 2019
2 07-1
Approach to taxLooking At The Numbers, Note A3: Taxation
p41
GRI 303: Water and Effluents 2018
303-3, 303-4, 303-5Water withdrawal
Water discharge
Water consumption
Climate Statement p67Mercury extracts and
reinjects geothermal
water for geothermal
generation (some of
which is consumed
during the generation
process) and is a
non-consumptive user
of water through its
hydro power stations.
GRI 305: Emissions 2016
305-1Direct (Scope 1) GHG emissionsClimate Statement p72For further detail, see
our FY23 GHG
Emissions Inventory
Report available from
our company website
305-2Energy indirect (Scope 2)
GHG emissions
Climate Statement p72
305-3Other indirect (Scope 3)
GHG emissions
Climate Statement p72
305-4Emissions intensityClimate Statement p72
GRI StandardDescriptionLocationComments
GRI 401: Employment 2016
401-1New employee hires and
employee turnover
Progress Towards Our FY22-24 Objectives p6Mercury had 454 new
permanent staff
commence
employment in FY23.
Voluntary turnover for
permanent staff was
14.6%.
401-2Benefits provided to full-time
employees that are not provided
to temporary or part-time
employees
Company website - Careers
GRI 403: Occupational Health and
Safety 2018
403-1Occupational health and safety
management system
Company website - Health, Safety &
Wellbeing
403-4Worker participation, consultation,
and communication on
occupational health and safety
Workers' representatives hold a range of
positions on health and safety committees
including joint chair of the generation
committee
403-9Work-related injuriesProgress Towards Our FY22-24 Objectives p6
Chair and CE Update p10
GRI 405: Diversity and Equal
Opportunity 2016
405-1Diversity of governance bodies
and employees
Diversity & Inclusion p94
405-2Ratio of basic salary and
remuneration of women to men
Diversity & Inclusion p94
GLOBAL REPORTING INITIATIVE (GRI) INDEX.
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SECTOR SPECIFIC: ELECTRIC UTILITIES
GRI StandardDescriptionLocationComments
Sector Specific Generation
Standard Disclosures
EU1Installed capacityOur Business Model p5Mercury owns or has
interests in power
stations with installed
capacity of: Hydro
1,115MW, Geothermal
470MW, Wind 552MW
EU2Net energy outputOur Business Model p5
EU3Number of residential, industrial,
institutional and commercial
customer accounts
Our Business Model p5
EU5Allocation of CO
2
e allowancesClimate Statement p72-73
Access
EU27Number of disconnections
for non-payment
There were a total of
452 residential
disconnections in FY23
due to non-payment.
GLOBAL REPORTING INITIATIVE (GRI) INDEX.
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Shareholder enquiries
You can view your investment portfolio, change your
address, supply your email, update your details or
payment instructions online:
www.investorcentre.com/nz.
You will need your CSN and FIN to access this service.
Enquiries may also be addressed to the Share
Registrar (see Directory for contact details).
Investor information
Our website at mercury.co.nz is an excellent
source of information about what’s happening
within the company.
Our Investor Centre allows you to view all regular
investor communications, information on our latest
operating and financial results, dividend payments,
news and share price history.
Electronic shareholder
communication
It is quick and easy to make the change to receiving
your reports electronically. This can be done either:
• Online at www.investorcentre.com/nz by using
your CSN and FIN (when you log in for the first
time). Select ‘My Profile’ and ‘Communication
Preferences’ to update your details; or
• By contacting Computershare Investor Services
Limited (see Directory for contact details).
Paper & ink information
Our Integrated Report is printed on Eco-100
Natural paper. This environmentally-responsible,
carbon-neutral paper is produced using FSC®
(Forest Stewardship Council) certified 100%
Post Consumer Recycled, Process Chlorine
Free (PCF) pulp from Responsible Sources -
and manufactured under the strict ISO14001
Environmental Management System. It carries
the internationally-recognised Blue Angel, Nordic
Swan, Austrian Environmental Label and the
NAPM (National Association of Paper Merchants)
Recycled Mark.
The inks used are mineral-oil-free and are
manufactured from vegetable oils and fatty
acid alkyl-esters (modified vegetable oils) which
are all derived from renewable resources. They
all conform to the EuPIA (European Printing Ink
Association) exclusion list, so do not contain any
carcinogenic, mutagenic, or toxic substances
according to the Dangerous substances directive
67/548/EEC. They therefore are biodegradable
and will break down when disposed of in suitable
waste streams with extremely minimal effect on
the environment.
As you’re reading, you may notice some specks
and imperfections - these are natural attributes of
non-chlorine-bleached, recycled paper. When you’re
finished with this report, please recycle it responsibly.
INFORMATION FOR SHAREHOLDERS.
MERCURY INTEGRATED REPORT 2023
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Board of Directors
Prue Flacks, Chair
Mark Binns
1
Hannah Hamling
Adrian Littlewood
James Miller
Susan Peterson
Scott St John
Patrick Strange
Mike Taitoko
Lorraine Witten
Executive Management Team
Vince Hawksworth,
Chief Executive
Lucie Drummond,
General Manager Sustainability
Phil Gibson,
General Manager Portfolio
Stewart Hamilton,
General Manager Generation
William Meek,
Chief Financial Officer
Craig Neustroski,
General Manager Commercial
Operations
Fiona Smith,
General Manager Customer Operations
Marlene Strawson,
General Manager People & Performance
Company Secretary
Howard Thomas,
General Counsel and Company Secretary
Investor Relations & Sustainability Enquiries
Paul Ruediger,
Head of Business Performance &
Investor Relations
Phone: +64 27 517 3470
Email: investor@mercury.co.nz
Registered Office in New Zealand
Mercury NZ Limited
33 Broadway, Newmarket, Auckland 1023
P O Box 90399
Auckland 1142
New Zealand
Registered Office in Australia
c/– TMF Corporate Services (Australia) Pty Limited
Suite 1, Level 11, 66 Goulburn Street,
Sydney, NSW 2000
Phone: +61 2 8988 5800
Legal Advisors
Chapman Tripp
Level 34
PwC Tower at Commercial Bay
15 Customs Street West
Auckland 1010
PO Box 2206
Auckland 1140
Phone: +64 9 357 9000
Bankers
ANZ Bank
ASB Bank
Bank of China
Bank of New Zealand
China Construction Bank
Commonwealth Bank of Australia
Industrial and Commercial Bank of China
MUFG Bank
Mizuho Bank
Westpac
Credit Rating (re-affirmed April 2023)
Long-term: BBB+
Outlook: Stable
Share Registrar – New Zealand
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road, Takapuna,
Auckland 0622
Private Bag 92119
Victoria Street West
Auckland 1142, New Zealand
Phone: +64 9 488 8777
Email: enquiry@computershare.co.nz
Web: www.investorcentre.com/nz
Share Registrar – Australia
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street, Abbotsford,
VIC 3067
GPO Box 3329, Melbourne, VIC 3001, Australia
Phone: 1 800 501 366 (within Australia)
Phone: +61 3 9415 4083 (outside Australia)
Email: enquiry@computershare.co.nz
DIRECTORY.
1
Appointment is effective 1 September 2023
MERCURY INTEGRATED REPORT 2023
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CO
2
E
The universal unit of measurement to indicate the
global warming potential of each greenhouse gas
(GWP), expressed in terms of the GWP of one unit
of carbon dioxide.
CPS
Cents per share.
EBITDAF (or Operating Earnings)
Earnings before net interest expense, tax expense,
depreciation, amortisation, change in the fair value
of financial instruments, gain/(loss) on disposal
and impairments.
Free Cash Flow
Net cash flow from operating activities less
stay-in business capital expenditure.
Fugitive Emissions
Direct discharges of greenhouse gases that occur
during geothermal electricity generation processes.
Growth Capital Expenditure (CAPEX)
Capital expenditure incurred by the company
to create new assets and revenue.
Gwh
Gigawatt hour. One gigawatt hour is equal to
one million kilowatt hours.
Mwh
Megawatt hour. One megawatt hour is equal
to one thousand kilowatt hours.
Net Debt
Total borrowings (both current and non-current)
less cash and cash equivalents.
Operating Costs
Represents employee compensation and benefits,
maintenance expenses and other expenses.
Other Income
Earnings of associates and other revenue,
less direct costs of other revenue.
Stay-in-Business (SIB) Capital Expenditure
(CAPEX)
Capital expenditure incurred by the company
to maintain its assets in good working order.
Total Recordable Injury Frequency Rate (TRIFR)
A record of the number of reported medical
treatment, restricted work, lost time and serious
harm injuries per 200,000 hours, including
employees and on-site contractors.
Total Shareholder Return (TSR)
The financial gain or loss resulting from the change
in share price plus any dividends paid expressed as
a percentage of the initial share price.
Trading Margin
Sales from electricity generation, derivatives
and sales of electricity, gas and telco services
to customers, less energy costs, lines charges,
telco and other direct costs of sales and third
party metering.
Mercury presents certain non-GAAP
(Generally Accepted Accounting
Practice) financial information
throughout this integrated report.
This is provided where we believe it
will provide greater clarity to users
of the information. It also provides
consistency across reporting periods
and comparability amongst
industry peers.
GLOSSARY.
120
KARĀPIRO
ARAPUNI
wAIPĀPA
MARAETAI I
AND II
wHAKAMARU
ŌHAKURI
ĀTIAMURI
ARATIATIA
NGĀ TAMARIKI
NGĀ AwA
PŪRUA
+
LAKE TAUPŌ
ROTOKAwA
+
MŌKAI
+
KAwERAU
MAHINERANGI
KAIwERA
DOwNS++
TURITEA
TARARUA
wAIPIPI
+ not 100% owned by Mercury
++ under construction
HYDRO STATIONS
GEOTHERMAL STATIONS
wIND FARMS
MERCURY INTEGRATED REPORT 2023
LEADERSHIP & GOVERNANCE
121
MENU
Arapuni
“Ara” means path and “puni” means either
blocked up or campsite. The meaning may be
either “pathway to campsite” or “blocked path”.
Aratiatia
Aratiatia means a series of pegs stuck into a steep
ascent in a zig-zag pattern to make climbing easier.
It may also refer to the travels of the ancestral explorer
Tia of the Arawa canoe who made his way to these
rapids while exploring the Waikato River.
Ātiamuri
A-Tia-Muri literally means turned back and refers
to Tia of the Arawa canoe. This intrepid traveller had
to turn back at the Ātiamuri Rapids in his early
explorations of the Waikato River. Legend also
says that Tia was petrified into a large stone in
the river rapids.
Karāpiro
The name Karāpiro is ‘karā’ meaning rock, and ‘piro’
meaning putrid smell. In the 1820s the Ngāti Maru
tribe from the Hauraki Gulf were driven south by
Northland’s Ngāpuhi tribe. Ngāti Maru were given
refuge in the Waikato by the Ngāti Haua tribe, but
tensions mounted between them. This culminated
in the battle of Taumatawīwī in 1830. The cremation
of dead warriors took place on rocks beside the
Waikato River.
Kaiwera Downs
Named for nearby Kaiwera Downs farmland.
Kawerau
The name Kawerau means "carrier of leaves"
(and was the name of an ancient Māori chief).
Mahinerangi
Named after Lake Mahinerangi, the adjacent
Manawa hydro asset lake.
Maraetai
The name means meeting place by the sea, from
"Marae” (meeting place) and “Tai” (tide or shore).
This name was possibly transplanted from
somewhere on the coast.
Mōkai
Meaning slave or captive (i.e. captured in battle).
Nga Awa Pūrua
The station was named after the rapids, located
nearby on the Waikato River. Ngā Awa Pūrua
means "where the waters meet".
Ngā Tamariki
“The children”.
Ōhakuri
“Oha” means keepsake or relic and “kuri” means
dog. This name may refer to a prized dogskin cloak.
Rotokawa
From “kawa” meaning bitter and “roto” meaning
lake or wetlands/swamp.
Tararua
The name is taken from the range where the
wind farm is located. The metaphorical union
between people and the land, Papatūānuku, is
seen in places named after parts of the human
body. The Tararua Range was declared to be Te
Tuarātapu-o-Te Rangihaeata (the sacred back
of Te Rangihaeata) to commemorate a peace
arrangement between Ngāti Toa and Ngāti
Kahungunu. The range became a dividing line
between Ngāti Toa on the west side and Ngāti
Kahungunu on the east.
Turitea
“Bright clear water."
waipāpa
“Wai” means water, “papa” means flat or flat
rock. The name possibly means the “stream
across the plain” or “stream of the flat rock”.
waipipi
Waipipi Stream runs through the site and the
Iwi land is known as Waipipi.
whakamaru
Whakamaru means to give shelter to, or safeguard.
The power stations and wind farms generating renewable energy for New Zealand
homes and businesses have names reflecting past stories and histories.
OUR POwER STATIONS AND wIND FARMS.
RĀRANGI INGOA LIST OF NAMES.
Turitea wind farm.
ELECTRICITY, GAS,
BROADBAND...
YOU’LL FEEL RIGHT
AT HOME.
---
Distribution Notice
Section 1: Issuer information
Name of issuer Mercury NZ Limited
Financial product name/description Mercury NZ Limited ordinary shares
NZX ticker code MCY
ISIN (If unknown, check on NZX
website)
NZMRPE0001S2
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year X Quarterly
Half Year Special
DRP applies X
Record date 14/09/2023
Ex-Date (one business day before the
Record Date)
13/09/2023
Payment date (and allotment date for
DRP)
29/09/2023
Total monies associated with the
distribution
$ 181,669,867
Source of distribution (for example,
retained earnings)
Income available for distribution
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution $ 0.18194444
Gross taxable amount $ 0.18194444
Total cash distribution $ 0.13100000
Excluded amount (applicable to listed
PIEs)
N/A
Supplementary distribution amount $ 0.02311765
Section 3: Imputation credits and Resident Withholding Tax
Is the distribution imputed Fully imputed
If fully or partially imputed, please
state imputation rate as % applied
28%
Imputation tax credits per financial
product
$ 0.05094444
Resident Withholding Tax per
financial product
$ 0.00909722
Section 4: Distribution re-investment plan
DRP % discount (if any)
2.0%
Start date and end date for
determining market price for DRP
18/09/2023 22/09/2023
Date strike price to be announced (if
not available at this time)
25/09/2023
Specify source of financial products
to be issued under DRP programme
(new issue or to be bought on
market)
Treasury Stock
DRP strike price per financial product
TBC
Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
15/09/2023
Section 5: Authority for this announcement
Name of person
authorised to make
this announcement
Howard Thomas, Company Secretary
Contact person for this
announcement
Howard Thomas, Company Secretary
Contact phone number +64 9 308 8200
Contact email address Howard.Thomas@Mercury.co.nz
Date of release through MAP
21/08/2023
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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