Three months ended 30 September 2016
>> QUARTERLY HIGHLIGHTS
BRAND LAUNCH
LOW CHURN
4,250GWh
SUCCESSFUL LAUNCH OF THE NEW MERCURY BRAND IN JULY
LOWEST CUSTOMER SWITCHING RATE OF THE MAJOR RETAILERS
HYDRO GENERATION FORECAST UP 100GWh FOR FY2017 ON HIGHER INFLOWS
>> COMMENTARY CUSTOMER NUMBERS LIFT AND CHURN REDUCES WITH BRAND LAUNCH Following the well-received launch of the new Mercury brand in July, customer gains reached a four-year high in August with a net increase of more than 5,000 for the three months ended 30 September. Overall customer numbers at 30 September 2016 were flat compared to the same time last year. While customer switching rates across the industry continued at near-record levels, Mercury’s focus on rewarding loyalty has resulted in high customer engagement around campaigns such as Free Power Days with almost 100,000 taken up during the period. Such loyalty initiatives contributed to the company’s switching rate (churn) for the quarter being 1.0% lower than the average of 5.4% for all other major retailers. As guided with the release of Mercury’s FY2016 results, the average energy price to customers was down 1.5% to $117.46/MWh reflecting the continued roll-off of higher priced commercial contracts. FAVOURABLE HYDRO CONDITIONS; LIFT IN EXPECTED ANNUAL HYDRO GENERATION Similar to the same time last year, hydrological conditions have been favourable in the Waikato catchment with Taupo storage ending the quarter at 140%. Total hydro generation was above average for the quarter at 1,256GWh, though 52GWh lower than the prior year. LWAP/GWAP was 1.04, slightly favourable to the prior comparable period of 1.05. This ratio continues to reflect above average hydro generation in the market and the consequential dampening of wholesale price volatility. Due to the favourable hydrological conditions experienced throughout the quarter, Mercury has updated its mid-point FY2017 hydro generation forecast to 4,250GWh (up 100GWh on earlier guidance). INDUSTRIAL DOWN, OTHER SEGMENT GROWTH CONTINUES The closure of several industrial users of electricity within the last twelve months has extended a decade long trend of falling demand from this segment. However, growth continues across all other segments driven by strong underlying fundamentals, such as GDP growth and record net migration. After adjusting for temperature, national demand was down 0.2% but up 0.8% across all segments excluding industrial.
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
01
>> OPERATING STATISTICS
OPERATING INFORMATION ELECTRICITY SALES FPVV sales to customers
Three months ended 30 September 2016 VWAP1 ($/MWh)
Volume (GWh)
VWAP1 ($/MWh)
Volume (GWh)
117.46
1,307
119.24
1,253
FPVV sales to residential customers FPVV sales to business customers FPVV purchases from market Spot customer purchases Total NZEM Purchases
Three months ended 30 September 2015
60.38
748
786
559
467
1,380
1,323
224
287
1,604
57.70
1,610
ELECTRICITY CUSTOMERS (‘000)
381
381
North Island Customers
341
346
South Island Customers
40
35
Dual Fuel Customers
42
42
Volume (GWh)
Volume (GWh)
Buy CfD
509
471
Sell CfD
896
1,026
326
392
387
555
CONTRACTS FOR DIFFERENCE
End User CFD 2
Net Sell CfD
ELECTRICITY GENERATION Hydro Gas Geothermal (consolidated) Geothermal (equity accounted)4
3
Total
VWAP ($/MWh)
Volume (GWh)
VWAP ($/MWh)
Volume (GWh)
60.32
1,256
55.91
1,308
-
-
64.93
101
54.69
634
51.99
631
54.79
55
52.53
59
58.33
1,945
55.07
2,099
LWAP/GWAP
1.04
1.05
GAS PURCHASES
$/GJ
PJ
$/GJ
PJ
Retail purchases5
6.34
0.38
9.22
0.42
-
7.63
1.16
Generation purchases CARBON EMISSIONS (‘000 TONNES CO2E) METRIX AMI METERS (‘000)
-
96
151
398
393
1
VWAP is volume weighed average energy only price sold to FPVV customers after lines, metering and fees Includes Virtual Asset Swap volumes in both Buy and Sell CfD volumes of 176 GWh for the 3 months ended 30 September 2016 and 176 GWh for the 3 months ended 30 September 2015 3 Includes Mercury’s 65% share of Nga Awa Purua generation 4 Tuaropaki Power Company (Mokai) equity share 5 Price exclude fixed transmission charges 2
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
02
>> MARKET DATA
> ELECTRICITY GENERATION BY COMPANY FOR THE THREE MONTHS ENDED 30 SEPTEMBER
MERCURY
Financial Year Q1 2016
Financial Year Q1 2017
MERIDIAN ENERGY CONTACT ENERGY GENESIS ENERGY TRUSTPOWER
5%
6%
5%
18%
6% 19%
OTHER
14%
16%
35%
22%
31% 23%
Source: Electricity Authority
> SHARE OF ELECTRICITY SALES (GWh) FOR THE THREE MONTHS ENDED 30 SEPTEMBER Financial Year Q1 2017
Financial Year Q1 2016
MERCURY OTHER
15%
85%
15%
85%
Source: Mercury Purchases and Transpower SCADA
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
03
> OTAHUHU WHOLESALE PRICE AND NATIONAL HYDRO STORAGE LEVELS AVERAGE NATIONAL STORAGE FY 2016 STORAGE NATIONAL AVERAGE FY2017 NATIONAL STORAGE
STORAGE FY 2015FY2016 NATIONAL ROLLING 12 MONTH AVERAGE OTA PRICE ROLLING 12 MONTH AVERAGE OTA PRICE
5000
80
4000
$80
4500
4000 3500 75 3500
3000
$75
2000
$/MWh
2000
70
$70
$/MWh
GWh
2500 2500
GWh
3000
1500 65
1500 1000
1000 500
$65
0
60
500
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Jan
Feb
Mar
Feb
Mar
Apr
May
Jun
Jul
0
$60 Jul
Aug
Sep
Oct
Nov
Dec
Jan
Apr
May
Jun
> TAUPO STORAGE
AVERAGE SINCE 1999
FY2016
FY2017
600
500
GWh
400
300
200
100
0 Jul
Aug
Sep
Oct
Nov
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
Dec
Jan
Feb
Mar
Apr
May
Jun
04
$70
$80.38
$79.59
$78.05
$78.15
$77.88
$80.06
$76.66
$80
$67.15
$90
$71.49
AS AT 30 SEPTEMBER 2016
$74.23
AS AT 31 MARCH 2016
AS AT 30 JUNE 2016 $80.08
AS AT 31 DECEMBER 2015
$81.16
> OTAHUHU ASX FUTURES SETTLEMENT PRICE
$60
$/MWh
$50 $40 $30 $20 $10 $0 FY17
FY18 Financial Year
FY19
$72.45
$74.79
$73.03
$72.69
$72.75
$71.54
$60.20
$75.64
AS AT 30 SEPTEMBER 2016
$63.70
$70
AS AT 30 JUNE 2016
$67.30
$80
AS AT 31 MARCH 2016
$76.05
$90
AS AT 31 DECEMBER 2015
$76.10
> BENMORE ASX FUTURES SETTLEMENT PRICE
$60
$/MWh
$50 $40 $30 $20 $10 $0 FY17
FY18
FY19
Financial Year
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
05
> NATIONAL CONSUMPTION (NON-TEMPERATURE ADJUSTED) NATIONAL CONSUMPTION
TIWAI POINT ALUMINIUM SMELTER CONSUMPTION
12,000 10,000
1,373
1,202
1,238
1,250
1,268
1,267
9,467
9,350
9,132
9,386
9,573
9,430
Q1 12
Q1 13
Q1 14 Q1 15 Financial Year
Q1 16
Q1 17
GWh
8,000 6,000 4,000 2,000 -
Source: Transpower Information Exchange
> NATIONAL CLIMATE SUMMARY (ยบC) FINANCIAL YEAR
Q1
Q2
Q3
Q4
2017
12.1
-
-
-
2016
11.4
16.0
20.6
15.3
2015
11.9
15.9
19.9
14.3
2014
12.3
16.7
18.9
14.8
2013
12.3
16.5
19.6
14.4
Historical Average (since 1999)
11.9
16.1
19.4
14.2
Source: NIWA, Met Service
> MONTHLY TOTAL CONSUMER RETAIL SWITCHING (ICPs) ANNUAL NZ MARKET CHURN % (RHS)
50,000
25%
40,000
20%
30,000
15%
20,000
10%
10,000
5%
Jul-16
Jan-16
Jul-15
Jan-15
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
0% Jul-07
-
% Churn
Monthly ICPs
NZ MARKET CHURN (LHS)
Source: Electricity Authority
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
06