Chair and CEO - Annual Meeting speeches and presentation

Market Release
26 September 2024
Vector Limited Annual Meeting of Shareholders
Speaking Notes


Chair, Doug McKay

Tena koutou katoa.

Good afternoon and welcome to this meeting. My name is Doug McKay, and I am Vector’s
Chair.

I’d like to acknowledge Ngāti Whātua Ōrākei as mana whenua for central Auckland, where we
are today.

As we have a quorum and it’s 2:00pm, I will now declare open the 2024 Annual Meeting of
Vector Limited shareholders.

We’re starting today with ordinary business, which includes short addresses from myself and
Simon and three resolutions. As part of these resolutions, you will also hear short addresses
from the directors who are seeking re-election.

After that we’ll move to general business, Q&A, and voting.

Today’s meeting is a hybrid meeting, where shareholders can participate here in the room and
online.

As this is a shareholder meeting, we ask that you please do not use the time for asking specific
operational, or customer service, questions. Members of our customer team are available here
in the room and will be happy after the meeting to take these types of questions.

We encourage shareholder questions and will indicate question time after the presentations.
We’ll have microphones available for you. Once you’ve asked your question, please give the
microphone back so that others can have their turn.

If you still have more questions, group chief executive Simon Mackenzie and I will be available
after the meeting.

While we welcome the media to our meeting today as observers, please hold your questions
until after the meeting. If you would like to talk to Simon or myself, then please make yourself
known to one of our communications team, who are at the back of the room, or call our usual
media phone number.

If you’re online and you’d like some help, you can type your query and one of the
Computershare team will assist you.

Voting today will be conducted by way of a poll.

If you’re here in the room, you can mark your voting paper at any time, and a team member
from Computershare will collect the voting forms before the end of the meeting.

Vector market release 26 September 2024 page 2 of 7
If you’re online, you will be able to cast your vote under the Vote tab, once I declare voting
open.

I will indicate when voting will close, so that you have a final opportunity to cast your vote.

With those instructions now complete, I declare voting open.

The proxy appointments are shown on screen.

It's now my pleasure to introduce my fellow directors: Alastair Bell, Dr Paul Hutchison, Dame
Paula Rebstock, Bruce Turner, and Anne Urlwin. Also at the table we have Group Chief
Executive Simon Mackenzie and John Rodger, Chief Legal & Assurance Officer and Company
Secretary. Vector’s Chief Financial Officer, Jason Hollingworth, and external auditor Graeme
Edwards from KPMG are seated in the front row.

Our full year results, announced in August, reflect a strong financial performance underlined
by solid business results across the group. I’m pleased with the group’s performance across
non-financial areas too, such as customer and network.

This is gratifying because, since I’ve joined the board, I’ve become well aware of the challenges
facing Vector within the energy transition.

A strong focus for the board this year has been to work closely with our chief executive Simon
Mackenzie and his executive team, our 75 per cent shareholder Entrust, and our regulator, to
drive sound results for our shareholders, whilst wrestling with the energy transition and
reshaping the business to facilitate a sharper focus where we believe profitable growth can be
achieved.

Adjusted earnings for the group before interest, tax depreciation and amortisation, for
continuing operations, were up 14% to $365.2 million. This includes positive results from our
regulated business and the gas trading segments performing very well. This gas trading
segment saw a year-on-year increase, which was driven by lower LPG input costs, plus higher
prices and volumes.

Group net profit after tax was $79.9 million, with underlying profit excluding an impairment of
the gas distribution business, of $139.9 million. The impairment, which we announced with our
interim results, is for the gas distribution business and was driven by the Commerce
Commission’s regulatory decision to lower future returns to owners of gas distribution networks
by lowering the WACC percentile, and interest rate changes. The result also includes a
reduction in net interest costs of $93 million, reflecting lower levels of debt, and interest
received on cash held during the year.

The electricity network performed within the regulatory quality standard limits for the duration
and frequency of outages, which you may know as SAIDI and SAIFI. These measure the
duration and frequency of customer outages. We acknowledge the impact of power outages
on our customers, and we understand the importance of reliable energy supply to Auckland
homes and businesses. My thanks to the Vector team and field service providers who work so
hard to keep the lights on for Aucklanders.

We’re continuing to enable growth and electrification across Auckland and have added around
16,000 new electricity connections this year.

From the board’s point of view a highlight of the year has been the positive and constructive
engagement we’ve had with the Commerce Commission as they have worked to set the terms
of what is known as DPP4. The Default Price Path number 4 is the next 5-year regulatory
period in which the price and quality of service for electricity networks is set. Simon will talk

Vector market release 26 September 2024 page 3 of 7
more about what this means for you as a shareholder, and as a Vector customer. This is a
critical setting for Vector with the final outcome due in November.

We’ve announced an unimputed final dividend of 13 cents per share, plus a special dividend
of 1.75 cents per share. This takes the full year dividend to 24 cents per share.

In the context of the dividend, it’s important to note that Vector is more than just a regulated
lines company. Vector has a portfolio of businesses and investments which contribute
earnings, which includes our investment in Bluecurrent. The group’s overall performance is
considered during deliberations about an appropriate dividend. Importantly, we have
significantly reduced our level of debt following the sale of 50% of what was at the time the
Vector Metering business in July 2023, now known as Bluecurrent.

As we have indicated previously, the board will review the dividend policy once the Commerce
Commission’s final decision on the DPP4 regulatory period is made. As mentioned earlier, this
determines the revenue we can earn from our regulated electricity business over the next five
years, and so it’s a significant factor in setting a dividend policy.

I’d like to thank Simon and his executive team, and everyone else at Vector for their work
throughout the year. It’s been a strong year for the group, and we’re very proud of what we’ve
achieved.


CEO, Simon Mackenzie

Thank you Doug.

In the past year, our business has changed shape, initially with the 50% sale of Vector metering
in FY2023. We have now concluded the sale of the remaining contracts of our natural gas
trading business and have a conditional agreement for the sale of Ongas and our shareholding
in Liquigas. As a portfolio business, we regularly assess our businesses and pursue
opportunities that make sense strategically and for our shareholders.

Today I’d like to share with you some highlights of the year including examples of how we are
bringing our strategy to life, some key issues facing Vector and the wider sector, and then a
brief perspective of what we see ahead.

As you’ve heard, the Commerce Commission will finalise the DPP4 for electricity distribution
businesses in November. This is when the Commission sets our revenue limits for the next
five years. This future revenue, and the debt we can raise based on it, is a critical factor in
determining how much we can invest in the network, what customers pay in their line charges,
and what return we can offer our shareholders.

When the Commission announced their draft decision earlier this year, they acknowledged the
new revenue limits they set will lead to price increases on lines charges. A key driver for this
is interest rates, which were at historic lows five years ago, when the last reset - DPP3 -
occurred. Interest rates today are significantly different, as anyone looking to roll over a
mortgage or a term deposit will tell you, and this change in interest rates will have a major
impact on the next period, due to the way the Commission’s model works.

In this context it’s more important than ever to ensure our investments are delivering value for
money for our customers and are being made at the right time and not imposing unnecessary
costs on our customers.

Our approach is to avoid committing to high levels of capital investment where there is
significant uncertainty, such as the rate of EV growth, or what level of resilience investment is
appropriate for the electricity network. We take this approach because our capital investment

Vector market release 26 September 2024 page 4 of 7
ultimately flows through to customer pricing through the Commission’s model. We consider it’s
not in the best interests of our customers to lock in high levels of investment where the scale
and timing of need is not yet certain, or indeed there are other more efficient and less costly
solutions enabled by regulatory change or technology.

Instead, we have taken a prudent approach and will re-engage with the Commerce
Commission as these uncertainties and/or lower cost options are better understood.

We believe the way to achieve long-term affordability for customers, is to invest as efficiently
as possible, using digital solutions, to manage demand, growth, and electrification, at the least
cost to consumers. The alternative is to rely only on costly investment in traditional
infrastructure, which we do not accept as the right approach for the energy transition. However,
we do not have the policy settings yet to fully support this approach.

Total capital expenditure for the year was $510.1 million, or more than half a billion dollars.
That’s a significant level of investment to support a strongly growing Auckland, as well as to
enable increasing electrification such as with public transport. Of this figure, $195.2 million was
paid for directly by customers.

These customer contributions fund the cost of their connection to the network, and include a
system growth charge which covers any upstream impact they have that requires network
reinforcement.

In other words, our approach is to ensure all new customers are paying their way when they
want to connect to the network. This includes commercial customers, such as residential or
commercial developers, or public EV charging providers.

We believe this is an equitable approach. The alternative is for the costs associated with new
connections to be subsidised across all customers. We don’t think it’s appropriate for
households to have to pay more to subsidise a commercial operation connecting to the
network.

This approach is currently under review and consultation by the Electricity Authority. The EA
is looking into regulating and standardising connection charges, which would prevent us from
recovering connection costs from those who are directly responsible for them – with the costs
being spread across, and therefore subsidised by, all customers.

We’ve researched what consumers think about this, and they are overwhelmingly supportive
that commercial operators, such as public commercial EV charging providers, should continue
to pay their way. We will be advocating against a move by the EA that restricts our ability to
set fair and equitable connection charges.

Moving now to some of the highlights from the year and how we are bringing our Symphony
strategy to life.

Our Symphony strategy encompasses our approach to navigating the energy transition by
creating energy infrastructure, alongside digital solutions equipped to manage the complex
demands of the future, and that provide choices for customers. It includes a strong focus on
data, customers, and our own people as enablers. Our continued focus is on safe, reliable and
affordable energy for all our customers.

Over the past year, we’ve continued to engage with experts from New Zealand and around the
world, to further our understanding and develop strategies around network resilience
challenges, using data and advanced climate modelling.

This has included working closely with NIWA and Fire and Emergency New Zealand to model
extreme dry year risk, which was predicted last summer, and map the associated fire risk

Vector market release 26 September 2024 page 5 of 7
against our assets, which is what you can see on screen. We’ve gone further with this analysis
to map this against the potential impact to customers.

To complement this work, we’ve also engaged with US-based electricity network businesses
to learn from their significant experiences in managing wildfire risk. This helps us prepare for
these types of events, and look at how these utilities communicate effectively with customers
around extreme heat days.

We’ve also worked alongside external specialists to develop detailed flood modelling at our
zone substations. We’ve used this to forecast not only where inundation may occur, but also
the depth of inundation. We’ve integrated this analysis into our resilience planning to manage
this climate-change related risk to our strategic assets.

This work has contributed to a significant project in Ngataringa Bay in Devonport, which is
notable for addressing a number of challenges typical of what we see at a wider scale. This
includes sustained growth from residential development, the electrification of public transport
requiring capacity upgrades, and climate change modelling that shows a risk from sea-level
rise. The project will see the network reconfigured to also enable the disestablishment of the
Ngataringa Bay zone substation to mitigate the risk of inundation, as well as responding to the
other challenges in the area.

These two examples are around network resilience, and in particular resilience to the impacts
of climate change. Another part of our climate change work is to reduce our carbon emissions
against our science aligned target, and I’m pleased to report that we’ve seen continued
progress against plans we set in prior years to achieve cost-efficient reductions.

As a result, we achieved a greenhouse gas emissions reduction of 38% against our FY2020
baseline. This is largely through a reduction in natural gas fugitive emissions, which we have
been able to influence through our proactive detection programme involving specialised trucks
to ‘sniff’ small gas leaks. We’ve increased the frequency of routine surveys this year, which
has led to leaks being found and fixed more quickly, reducing our emissions as well as
continuing to drive safety benefits.

We’ve continued to be innovative in how we think about the challenges we’re facing in the
energy transition, and how we can deliver the best outcomes for our customers and
shareholders.

We’ve extended our strategic alliance with Amazon Web Services, with whom we co-
developed Diverge. Diverge is an energy data platform that breaks down data siloes and
unlocks access to energy data, enabling insights and analytics that are vital to meeting new
energy challenges. Diverge is currently used by Vector, as well as Bluecurrent, and is under
active consideration by other, offshore utilities.

We’ve extended our contribution to the project being run by Google X, known as Tapestry. In
this project we’re one of a select group of global partners collaborating on next generation
platforms for network management. These tools include ‘GridAware’, which uses new
technology including drones, machine learning and modern AI processes to survey and guide
maintenance of the network. And the ‘Grid Planning Tool’, which creates robust network
simulations that incorporate optimised solutions for new technology and the growth of
customer-owned devices like batteries and EV chargers, to ensure an efficient network, as well
as efficient capital deployment.

Bluecurrent is a recent example of successful innovation. We had the foresight more than 15
years ago to see the role of data, and efficient data processing in the energy sector with smart
meters as the key enabler. As you know, the successful sale last year further reinforced the
need and desirability of the services offered through Bluecurrent.

Vector market release 26 September 2024 page 6 of 7
Our investment in Bluecurrent has performed in line with expectations, and we’re benefiting
from the complementary skills, common objectives and strong alignment of purpose we
identified when selecting QIC as a joint venture partner.

I want to highlight where to look in our annual report to see the impact of our investment in
Bluecurrent, since this is a significant investment for Vector.

This financial recognition is governed by our alignment with New Zealand Generally Accepted
Accounting Practise.

Firstly, our 50% share of Bluecurrent’s net profit is reported as a single line in the Profit and
Loss under 'Share of net profit or loss in Joint Ventures'. In FY24 our share of their net loss
was minus -$24.9 million. This net loss is a result of interest costs on debt to fund installation
of new meters, depreciation of meter assets and amortisation of intangible assets attributed to
customer contracts.

Second, is the cash we have received as a return on this investment. These cash payments
to Vector show in the cashflow statement as part of 'Interest received' and 'Repayments of
loans advanced'. In relation to their FY24 performance we have received a total of $50.5m in
cash distributions.

We’ve made good progress on our smart meter data programme, which makes use of the data
we receive from some of the smart meters installed on our network.

With this data we are developing innovative ways to benefit our customers. These include
monitoring the adoption of EVs through our ‘EV tracker’. This looks at where EVs are appearing
at a suburb level, helping us analyse and plan for the network impact of EV growth. This is
what you can see on screen, with the different colour dots representing denser EV adoption.

Through this tracker we’ve identified that it’s not just single EVs we need to look out for, there
are now more than 150 households around Auckland with two EVs. The charging requirements
for EVs can significantly impact demand on the local low voltage network, making this sort of
analysis even more important so we can see the potential for constraints before they happen,
and ideally be able to orchestrate charging so that it doesn’t cause an issue.

In closing, I’ll talk about the year ahead and the energy sector more broadly.

We expect Auckland electricity network connection growth to slow over the next year to around
12,000 new connections, on top of the existing 624,000 connections. This reflects a reduction
in connection requests over the past 6 months, and the broader economic slowdown. Gas
connection growth is uncertain, partly because of the uncertainty of future natural gas
availability.

On 26 July, which is after balance date for our financial results, we announced the conditional
sale for $150 million of Vector Ongas, and our shareholding in Liquigas. The carrying value of
the Ongas and Liquigas disposal group, as at 30 June, was $136 million. We and Elgas are
seeking to satisfy the sale conditions and expect this could take 4-6 months.

Both Doug and I have signalled the importance of the Commerce Commission’s decision on
the next default price-quality path, DPP4, which is due in November. We’ll provide guidance
for FY25 in February, after we’ve received this decision.

There has been a lot of commentary over recent weeks on high energy prices and lack of
generation to supply the energy market. Our long-held view is that the energy system is going
through a significant transition with the need for more capacity, changing customer needs, new
technology, and climate change.

Vector market release 26 September 2024 page 7 of 7
We’ve long called for an energy strategy that takes a whole of system approach, rather than
piecemeal approach. This is because no part of the system can operate in isolation anymore,
to deliver secure, reliable, affordable energy to meet consumer needs now and into the future.

The industry changes made in the late 1990s, known as the ‘Bradford reforms’, might have
been right for their time, but we believe this is no longer the case in a rapidly changing world.
New Zealand urgently needs an energy strategy to inform policy and regulatory settings and
enable the industry to effectively manage the energy transition. Given what we’ve seen
recently with the closure of several businesses as a result of high energy prices, it’s not clear
what else would need to happen before we see action from the government to drive meaningful
change.

Finally, I’d like to thank all our staff, Field Service Providers and Telnet, for their huge efforts
every day to deliver for our customers, and to Doug and the board for their support and
challenge.

Thank you.


ENDS

Investor contact
Jason Hollingworth, Chief Financial Officer, Vector
Jason.hollingworth@vector.co.nz, 021 312 928

Media contact
Matthew Britton, Communications Manager, Vector
Matthew.britton@vector.co.nz, 021 224 2966



About Vector
Vector is an innovative New Zealand energy and digital solutions company, which runs a
portfolio of businesses delivering energy, technology and communication services to more
than 620,000 residential and commercial customers across New Zealand. Vector has a leading
role in creating a new energy future through its Symphony strategy which puts customers at
the heart of the energy system. Vector is listed on the New Zealand Stock Exchange with ticker
symbol VCT. Our majority shareholder, with voting rights of 75.1%, is Entrust. For further
information, visit www.vector.co.nz

---

26 SEPTEMBER 2024
Annual Meeting

This presentation contains forward-looking statements.
Forward-looking statements often include words such as "anticipates",
"estimates", "expects", "intends", "plans", "believes“ and similar words in
connection with discussions of future operating or financial performance.
The forward-looking statements are based on management's and
directors’ current expectations and assumptions regarding Vector’s
businesses and performance, the economy and other future conditions,
circumstances and results.
As with any projection or forecast, forward-looking statements are
inherently susceptible to uncertainty and changes in circumstances.
Vector’s actual results may vary materially from those expressed or implied
in its forward-looking statements.
Disclaimer
2

Doug
McKay
Chair
3

•Instructions for voting and asking questions
•Ordinary business
•Chair’s address
•Group chief executive’s address
•Election and re-election of directors
•Appointment and remuneration of auditor
•General business and shareholder questions
•Final chance for voting
•Meeting closes
Agenda
4

Questions may be asked at the relevant time
during the meeting.
Two questions only per person. The chair, CEO
and staff will be available after the meeting for
other questions.
Online questions can be submitted at any
time.
Asking questions
5

You may mark your voting paper at any time.
A team member from Computershare will collect
the voting forms at the conclusion of the meeting.
The Chair will indicate the final opportunity for
voting before the papers are collected.
Online voting can be changed at any time,
until voting closes.
Voting
6

843 shareholders, holding a total of more than 846,276,181
shares, have appointed proxies.
Doug McKay, in his capacity as Chair and in his own name,
holds proxies for 371 shareholders, representing 841,607,949
shares. Included in these proxies are 751,000,000 shares held
by Entrust, our majority shareholder.
Voting is open
7

Strong performance
320
+36
+11-1
365
FY23Regulated
Networks
Gas
Trading
Corporate
and Other*
FY24
*Corporate and Other includes Corporate, VTS, HRV, PowerSmartand Vector Fibre. Corporate and Other is not a reportable segment
Adjusted EBITDA ($M)
102
+45
+7-26
+93-60
-25
-56
80
FY23
Adj. EBITDA
Capital
Contributions
Depreciation
and
Amortisation
Net Interest
Impairment
Share of
Associates
Tax &
Other
FY24
NPAT ($M)
8

Dividend
Dividend (cents per share)
6.50
6.75
7.00
7.25
7.507.50
7.75
8.00
8.258.258.258.258.258.25
9.25
7.50
7.50
7.50
7.75
7.75
8.00
8.00
8.00
8.00
8.258.25
8.508.508.50
13.00
5.50
1.75
14.00
14.25
14.50
15.00
15.25
15.50
15.75
16.00
16.25
16.5016.50
16.7516.75
22.25
24.00
FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
InterimFinalSpecialTotal
9

Simon
Mackenzie
Group chief executive
10

11

12

Electricity assets in high and
extreme fire risk areas,
before mapping against
customer impact
13

Innovation
14

Bluecurrent
Vector received $30.6m in cash
distributions from Bluecurrentin FY24
which is shown in the cash flow
statement. Plus $19.9m received post
balance date, to total $50.5m related
to their FY24 result.
Profit or Loss Statement (p57)
Cash Flow Statement (p60)
Share of net profit in
joint ventures
Repayments of loans
advanced
Interest
received
Vector’s 50% equity accounted share
of Bluecurrent’sFY24 net loss was
$24.9m. This is shown in the profit or
loss statement.
15

EVs are not evenly spread.
Example:
Suburb 1: 1,187 (highest)
Suburb 2: 45 (lowest)
There are now more than 150
households in Auckland with two EVs.
EV uptake
16

17

Doug
McKay
Chair
18

Questions on chair and CEO
report and financial statements
19

Election and
re-election of directors
20

Bruce
Turner
Director
21

Re-election of
Bruce Turner
Proxy votingVotes
For
833,962,171
Against
7,502,052
Discretionary
4,816,897
Abstain
24,723
22

Anne
Urlwin
Director
23

Re-election of
Anne Urlwin
Proxy votingVotes
For
836,722,398
Against
4,737,800
Discretionary
4,821,338
Abstain
24,307
24

Appointment and
remuneration of auditor
25

Appointment and
remuneration of auditor
Proxy votingVotes
For
840,924,358
Against
455,927
Discretionary
4,915,894
Abstain
9,664
26

General business and Q&A
27

Final chance for voting
28

Thank you
29