Chorus submits 2023 fibre regulatory report

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

Email: company.secretary@chorus.co.nz



STOCK EXCHANGE ANNOUNCEMENT

31 May 2024

Chorus submits 2023 fibre regulatory report

Chorus has today published its Information Disclosure for fibre fixed line access services (FFLAS) for
the 2023 disclosure year. This disclosure will also be submitted to the Commerce Commission.
As part of this process Chorus has calculated that the regulated asset base (RAB) increased from $5.7
billion to $5.9 billion during 2023.

While annual RAB movements do not affect the maximum allowable revenue (MAR) in the current
regulatory period, the RAB closing value will be the basis of the opening RAB for the next regulatory
period from January 2025.

As expected, Chorus has calculated that it under-earnt its total allowable revenue for 2023 and this
resulted in a 2023 wash-up balance of $54 million. This means there is total balance of $105 million
from 2022 and 2023 that will be carried forward to 2025.

Details of these calculations and other summary financial information are provided in the attached
presentation summary.

All calculations are subject to Commerce Commission review.

The full Information Disclosure reporting schedules are available at:
https://company.chorus.co.nz/disclosures

Authorised by:
Mark Aue
Chief Executive Officer

ENDS

For further information:
Vicki Gan
Media & Content Manager
Mobile: +64 22 075 0159
Email. vicki.gan@chorus.co.nz

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

---

Information Disclosure update
31 May 2024

31 May 2024
Disclaimer
This presentation:
• Is provided for general information purposes and does not constitute investment advice or an offer of or invitation to purchase Chorus
securities.
• Includes forward-looking statements. These statements are not guarantees or predictions of future performance. They involve known
and unknown risks, uncertainties and other factors, many of which are beyond Chorus’ control, and which may cause actual results to
differ materially from those contained in this presentation.
• Includes statements relating to past performance which should not be regarded as reliable indicators of future performance.
• Is current at the date of this presentation, unless otherwise stated. Except as required by law or the NZX Main Board and ASX listing
rules, Chorus is not under any obligation to update this presentation, whether as a result of new information, future events or otherwise.
• Should be read in conjunction with Chorus’ audited consolidated financial statements for the year to 30 June 2023 and NZX and ASX
market releases.
• Includes non-GAAP financial measures such as "EBITDA”. These measures do not have a standardised meaning prescribed by GAAP and
therefore may not be comparable to similar financial information presented by other entities. They should not be used in substitution for,
or isolation of, Chorus' audited consolidated financial statements. We monitor EBITDA as a key performance indicator and we believe it
assists investors in assessing the performance of the core operations of our business.
• Has been prepared with due care and attention. However, Chorus and its directors and employees accept no liability for any errors or
omissions.
• Contains information from third parties Chorus believes reliable. However, no representations or warranties (express or implied) are
made as to the accuracy or completeness of such information.
INFORMATION DISCLOSURE UPDATE
2

31 May 2024
INFORMATION DISCLOSURE UPDATE
Information Disclosure overview
Chorus has published a range of schedules required under the Commerce Commission’s Information Disclosure
(ID) Determination – these detailed schedules are available at https://company.chorus.co.nz/disclosures
Please note that:
▪ID reporting is on the basis of disclosure (calendar) year. Chorus has provided regulatory information in the
presentation on a six-monthly basis to assist investors with financial year comparisons.
▪regulatory cost categories are different from Chorus’ financial reporting categories (see Appendix for summary).
▪all historical financial numbers are nominal. Forecast numbers in the schedules are nominal and constant.
▪ID reporting requires forecasts for connections, operating and capital expenditure. Forecasts in the 2023 disclosures
reflect Chorus’ submitted PQP2 expenditure proposal, as updated in February 2024. The PQP2 process is ongoing.
▪while ID reporting references a 2023 vanilla WACC of 7.90%, this is for reporting purposes only and does not reflect
the vanilla WACC of 4.72% that Chorus must apply for the 2022-2024 regulatory period (PQP1).
▪RAB and wash-up movement calculations are subject to Commerce Commission review.
▪care should be taken when reading Information Disclosure schedules because they include varying combinations of PQ
FFLAS and ID only FFLAS data:
3
PQ FFLAS:
Chorus fibre fixed line access
services/assets subject to
price-quality RAB and MAR
regime
ID only FFLAS:
Chorus fibre fixed line access
services/assets not subject to
price-quality regime but
requiring information
disclosure (e.g. assets in other
local fibre company areas)

31 May 2024
INFORMATION DISCLOSURE UPDATE
4
Regulated Asset Base (RAB) grows to $5.9 billion
4,444
4,771
1,283
-492
266
358
53
1,141
2023 RAB movement ($m)
Core RABFinancial Loss Asset
5,727
5,912
>Chorus’ fibre RAB grew from $5.7 billion* to $5.9 billion in 2023
▪core RAB grew $327m to $4.77 billion
▪financial loss asset reduced by $142m to $1.14 billion
▪*the opening 2023 RAB is $17m higher than the closing 2022
RAB due to asset allocator updates (see next slide)
>depreciation reduced from $511m to $492m in 2023, largely
because of the reduced value of the Financial Loss Asset which is
being depreciated at an accelerated rate
>investment in the RAB was consistent with $358m of assets
commissioned in 2023, compared to $356m in 2022
>the reduction in inflation from 7.2% to 4.66% saw revaluations
reduce from $389m in 2022 to $266m
>$53m of shared assets were added to the core RAB, up from $28m
in 2022

31 May 2024
INFORMATION DISCLOSURE UPDATE
RAB movements for 2023 ID year
Table that shows starting RAB (split Core vs FLA?) and a waterfall for movements in period (e.g.
final RAB, depreciation, new assets (net of contrib?), CPI = end of 2022 RAB
ComponentCore RAB
$m (nominal)
Financial Loss
Asset (FLA)
$m (nominal)
Notes
Opening RAB (1 January 2023)4,4441,283
The closing RAB at 31 Dec 2022 included a forecast asset allocator
adjustment. The opening RAB at 1 Jan 2023 is $17m higher due to updates
for actual asset allocators.
less Depreciation(290)(202)
FLA depreciation is diminishing value and the core RAB is straight-
line. Assets start depreciating the regulatory year after commissioning.
plus Revaluations20660
4.66% actual inflation in the December quarter versus forecast 2.20% used
in the final decision for 2023 MAR. The ID RAB rolls forward into PQP2 and
will be reflected in the PQP2 MAR.
plus Assets commissioned3580
Amount is net of $41m capital contributions
plus Adjustment resulting from
asset allocation
530
An upwards adjustment reflects a greater proportion of shared assets being
attributable to fibre (due to differences in allocations drivers such as
revenues and connections) than was forecast for the opening RAB in 2023.
Total closing RAB value
(31 Dec 2023)
4,7711,141
NOTE: RAB movements do not affect the PQP1 MAR. The ID RAB closing value will be the basis of the opening RAB for PQP2.
5
Closing RAB of $5,912m

31 May 2024
INFORMATION DISCLOSURE UPDATE
PQP1 MAR wash-up balance of $105.6m
6
DescriptionWash-up
$m (nominal)
Revenue
$m (nominal)
Notes
Building blocks revenue
Pass-through costs
Forecast total allowable revenue 2023
732.9
14.5
747.4
For the purposes of the wash-up 2023 MAR was set on the basis of
2021 forecasts for pass through costs and CPI.
CPI on the price path for 2023 26.6Forecast CPI of 2.17% updated with 5.73% actuals via in-period
smoothing.
Cost allocators18.9Previously forecast cost inputs (e.g. totex, connections and data
traffic) updated for actuals in the period.
Initial RAB true-up9.2MAR adjustment to reflect increased allocation of shared assets in the
final RAB decision: $17m for CY22/CY23, with a further ~$10m in
CY24.
Individual capex proposal for 20231.3Commission approved individual capex proposal for customer
incentives for 2023.
Crown financing benefit0.1Reflects lower Crown financing balance than forecast.
Pass through costs over-forecast(0.2)Actual pass-through costs of $14.7m versus forecast $14.9m.
Subtotal of 2023 wash-ups55.955.9
Updated total allowable revenue 2023803.3
Less 2023 FFLAS revenue received(749.3)
2023 wash-up balance
2022 wash-up balance: smoothed
54.0
51.6
The 2022 wash-up balance was adjusted as part of the in-period
smoothing process.
TOTAL PQP1 wash-up carried forward105.6The wash-up balance is rolled forward each year using the post-tax
WACC as the time-value of money to preserve NPV neutrality.

>inflation and accelerating migration of copper connections drove
an increase in attributable FFLAS opex from $172m (2022) to
$194m (2023) when including pass through costs
▪$194m represents 61% of 2023 reported opex
▪the 2023 opex outcome uses the same cost allocator updates applied
in 2022 and accepted by the Commerce Commission in its draft PQP2
expenditure decision (18 April)
>2023 opex shows 2022 was an efficient base year for forecasting
PQP2 expenditure levels
▪Chorus’ PQP2 proposal used a base-step-trend methodology
consistent with other regulated utilities and proposed step changes to
reflect one-off cost changes in 2022
▪2023 actuals are broadly consistent with the 2022 base year plus
step-change adjustments, demonstrating that 2022 is a reasonable
basis for forecasting PQP2 opex allowances
▪Chorus also proposed shifting to a revenue allocator, from totex, for
shared costs in PQP1 to better reflect the accelerating withdrawal of
copper services
▪the Commission’s draft PQP2 expenditure decision did not accept all
step changes, or the shift to a totex allocator, and applied a large
downward ‘efficiency’ adjustment
▪consequently, the draft decision understates Chorus’ fibre operating
costs and the acceleration of copper withdrawal now evident in 2023
data
31 May 2024
INFORMATION DISCLOSURE UPDATE
7
2023 opex shows 2022 was an efficient base year
$m
156
179
16
15
199
208
214
220
0
50
100
150
200
250
2022202320242025202620272028
Chorus FFLAS opex
Chorus PQP2 FFLAS forecast (excl pass through costs)
Pass through costs
FFLAS opex - Chorus actual
FFLAS opex - Commerce Commission (draft PQP2 decision)

31 May 2024
INFORMATION DISCLOSURE UPDATE
Operating Expenditure
Opex
categoriesSub-categories
H1
2022
H2
2022
H1
2023
H2
2023
Customer ▪Customer operations
(3)(4)
(3)(3)
▪Product, Sales &
Marketing
1113
1414
Network▪Maintenance
1414
1818
▪Network operations
89
1113
▪Operating costs
44
44
Support▪Asset management
1111
1111
▪Corporate
2021
2322
▪Technology
1310
1111
TOTAL ($m)
7878
8990
Pass through
costs ($m)
88
78
8
Note: The starting PQP1 opex allowance for 2023 was $158m excluding pass through costs. See next slide for reconciliation between ID reporting
and starting allowances.
>regulatory/calendar year
>the credit reflects capitalised labour costs that are
offset in other opex lines.
>some cyclone-related costs in H1 2023; growing
fibre volumes/allocations and inflation on costs
>increasing as fibre activity/allocations grow and
inflation drives added cost

31 May 2024
INFORMATION DISCLOSURE UPDATE
9
Opex reconciliation to allowances
2022
$m
2023
$m
Notes
Opex – as reported for ID156179Excludes pass through costs
Less RAB true-up wash-up(2)(2)RAB true-up wash-up would increase annual total opex allowance by this
amount. Recovered via annual MAR wash-up.
Less Cost allocator wash-up(3)(8)Cost allocator wash-up would increase total opex allowance by this
amount. Recovered via annual MAR wash-up.
Less Allocator type changes(8)(8)Allocator type changes made as part of the 2022 ID process are
expected to apply in PQP2 based on the draft expenditure decision (18
April), but are not applied in the current PQP1 MAR wash-up process.
Opex – adjusted143161Adjusted to reflect allowances at start of PQP1
Less PQP1 opex allowance(160)(158)Excludes pass through costs.
(Under)/Over-spend vs PQP1
allowance
(17)3Chorus over-spent its allowance by $3m in 2023, although this is offset
by the 2022 under-spend and the MAR wash-up for 2023 includes a CPI
uplift on the price path.

>greenfields development, net of contributions
31 May 2024
INFORMATION DISCLOSURE UPDATE
10
Capex
Sub-categories
H1
2022
H2
2022
H1
2023
H2
2023
Extending the
network
▪Augmentation3244
▪New property developments8141213
▪UFB communal29500
Installations▪Complex1122
▪Standard79837284
IT and support▪Business IT571110
▪Corporate3-10
▪Network & Customer10141313
Network
capacity
▪Access992516
▪Aggregation712418
▪Transport4755
Network
sustain &
enhance
▪Field sustain74112
▪Relocations1222
▪Resilience1281
▪Site sustain7798
TOTAL ($m)
174169179178
>regulatory/calendar year
>equipment upgrades to enable multi-gigabit services
>lifecycle spend and investment to support growing
bandwidth demand
>West Coast fibre backhaul project in 2023, with ~$8m
government contribution netted off capex in H2
>HY amounts include leases of ~$3m for regulatory
reporting

31 May 2024
INFORMATION DISCLOSURE UPDATE
Indicative EBITDA & capex
PQ FFLASH1
2022
H2
2022
H1
2023
H2
2023
Revenue323344362387
Opex(78)(78)(89)(90)
Pass through costs(8)(8)(7)(8)
EBITDA237258266289
Capex (net of capital
contributions and leases)
172167176175
Capital contributions25271724
OtherH1
2022
H2
2022
H1
2023
H2
2023
Revenue159143131116
Opex(68)(59)(67)(58)
EBITDA91846458
Capex (net of capital
contributions)
30263627
Capital
contributions
2236
11
>the tables below provide an indicative split of EBITDA and capital expenditure between regulated Price-Quality FFLAS
(PQ FFLAS) and Other (i.e. non-PQ FFLAS) activity over the 2022 and 2023 calendar years
>capital contributions are deducted from asset values for PQ-FFLAS and are included as Other revenue together with non-
FFLAS capital contributions
>Chorus expects the PQ FFLAS share of total opex to increase as fibre activity grows and copper connections reduce. The
Commission's decision on shared cost allocators for PQP2 will also influence this. Where the rate of copper withdrawal is
faster than forecast, the difference in attributable or shared costs will be calculated as part of the annual ID wash-up
process for FFLAS revenue.

31 May 2024
INFORMATION DISCLOSURE UPDATE
Appendix: ID vs financial reporting categories
12

31 May 2024
INFORMATION DISCLOSURE UPDATE
13