QUARTERLY OPERATIONAL UPDATE Three months ended 30 September 2018
>> QUARTERLY HIGHLIGHTS
STRONG HYDR0 GENERATION
COMPETITIVE RETAIL MARKET
4,200 GWh
HYDRO GENERATION 1,446GWh AT 84TH PERCENTILE; 255GWh ABOVE AVERAGE
MARKET CHURN AT 21.1% MERCURY BRAND CHURN AT 16.8%
NO CHANGE TO HYDRO GENERATION FORECAST
>> COMMENTARY GENERATION ABOVE-AVERAGE; HYDRO GWAP IMPROVES WITH INCREASED HYDRO FLEXIBILITY Mercury's strong starting storage position enabled hydro generation of 1,446GWh during the quarter. This fell from record quarterly generation in the prior comparable period but remained at the 84th percentile1, contributing to total generation of 2,179GWh including stable geothermal output. Mercury's LWAP/GWAP ratio moved favourably to 1.07 versus 1.09 in the same quarter last year as the timing of inflows enabled Mercury to utilise its hydro asset flexibility, shown through the increase in the relative value of our hydro generation with hydro GWAP/TWAP being 1.09 versus 1.07. Average wholesale prices for the quarter were $87/MWh at Otahuhu and $77/MWh at Benmore, decreasing by $6/MWh and $19/MWh respectively from Q1-FY2018 (which was affected by dry hydrological conditions). Prices increased over the quarter as national hydro storage declined from 103% to 85% of average. Wholesale market conditions were further impacted by an ongoing Pohokura gas outage commencing in September which is expected to last till late November. Short-term futures prices responded strongly to the changes in wholesale market conditions with the FY2019 Otahuhu price lifting more than $14/MWh from $73.91/MWh at the start of the quarter to $88.17/MWh by the end of the quarter (with a further increase to $141.38/MWh as at 15 October 2018). Longer-term futures prices remained largely unchanged despite the tightening supply and demand dynamic and the increased volatility observed in wholesale prices. SUSTAINED HIGH COMPETITION INCREASES CHURN Strong competition, especially in the North Island, resulted in Mercury's customer numbers across all brands decreasing by 2,000 to 386,000 at the end of the quarter. As at 30 September 2018, Mercury group churn increased to 20.0%2 which remains below market churn at 21.1%2; churn for the Mercury brand also increased to 16.8%2 (from 14.7%2 as at 30 September 2017). Mercury churn levels for the quarter were impacted by the transfer of customers from Tiny Mighty Power to the main Mercury brand (which will also impact churn in the following quarter). Mass Market electricity sales VWAP was higher at $127.04/MWh. IFRS changes relating to the treatment of customer credit acquisition costs have reduced this yield by $1.41/MWh compared to the previous standard with the Commercial & Industrial segment VWAP being unaffected. URBAN AND RURAL SECTORS LEAD UNDERLYING DEMAND GROWTH National demand continues to grow despite warmer than average temperatures, increasing by 1.4% on a temperature-adjusted basis (+1.1% on an unadjusted basis) versus the prior comparable period. This increase was primarily driven by the urban (+0.5%) and rural (+0.5%) sectors with the dairy sector (+0.2%) also contributing.
1 2
For quarters ended 30 September since 1999 12-monthly rolling average
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
01
>> OPERATING STATISTICS Statistics have been modified to separately disclose Mass Market and C&I sales segments with restatement of prior years on page 7 Three months ended 30 September 2018
OPERATING INFORMATION
ELECTRICITY SALES Mass Market Commercial & Industrial FPVV End User CfD FPVV purchases from market Spot customer purchases
2
VWAP 1 ($/MWh) 127.04 82.76
3
Total NZEM Purchases
91.53
Hydro Geothermal (consolidated) Geothermal (equity accounted)
6
Total
302 316 1,349 244 99.01
1,593
VWAP ($/MWh) 89.07 79.59 80.51
343 43 48 Volume (GWh) 664 Volume (GWh) 1,446 678 55
VWAP ($/MWh) 93.40 85.83 92.57
349 44 46 Volume (GWh) 697 Volume (GWh) 1,522 689 47
85.90
2,179
91.07
2,258
LWAP/GWAP CARBON EMISSIONS ('000 TONNES CO2)
1,541
Volume (GWh) 975
393
4
5
VWAP 1 ($/MWh) 123.53 84.14
386
CONTRACTS FOR DIFFERENCE
ELECTRICITY GENERATION
Volume (GWh) 955 297 291 1,316 225
ELECTRICITY CUSTOMERS ('000) North Island Customers South Island Customers Dual Fuel Customers
Net Sell CfD
Three months ended 30 September 2017
1.07
1.09
93
102
415
406
7
METRIX AMI METERS ('000)
1
VWAP is volume weighted average energy-only price sold to customers after lines, metering and fees. Mass Market VWAP is higher than C&I due to the additional cost to serve, losses, location and usage profile associated with the Mass Market segment
2
Mass market includes residential segments and non time-of-use commercial customers Fixed-price, variable-volume (FPVV) sales to time-of-use commercial customers Includes Virtual Asset Swap volumes in both Buy and Sell CfD volumes of 151 GWh for the 3 months ended 30 September 2018 and 176 GWh for the 3 months ended 30 September 2017. Includes End User CfD volumes.
3 4
5 6 7
Includes Mercury's 65% share of Nga Awa Purua generation Tuaropaki Power Company (Mokai) equity share Includes carbon emissions from Mercury gas sales, wholly owned geothermals and proportionate emissions from the Mokai and Nga Awa Purua stations
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
02
>> MARKET DATA > ELECTRICITY GENERATION BY COMPANY FOR THE THREE MONTHS ENDED 30 SEPTEMBER Financial Year Q1 2019
MERCURY MERIDIAN ENERGY CONTACT ENERGY GENESIS ENERGY TRUSTPOWER / TILT OTHER
4%
Financial Year Q1 2018
6%
8% 20%
21%
6%
16% 19%
25% 32%
22%
21%
Source: Electricity Authority
> SHARE OF ELECTRICITY SALES (GWh) FOR THE THREE MONTHS ENDED 30 SEPTEMBER (EXCLUDING CFDs) MERCURY OTHER
Financial Year Q1 2019
Financial Year Q1 2018
15%
14%
86%
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 FY2019 NATIONAL STORAGE ROLLING 12 MONTH AVERAGE BEN PRICE
FY2018 NATIONAL STORAGE ROLLING 12 MONTH AVERAGE OTA PRICE
$100
4,000 3,500
$90 3,000 $80
$70
2,000
$/MWh
GWh
2,500
1,500 $60 1,000 $50 500 0
$40 Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Source: NZX Hydro and NZEM Pricing Manager (NZX)
> TAUPO STORAGE
AVERAGE SINCE 1999
FY2018
FY2019
600
500
GWh
400
300
200
100
0 Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Source: NZX Hydro
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
04
> OTAHUHU ASX FUTURES SETTLEMENT PRICE
$77.26
$75.54
$78.83
AS AT 30 SEPTEMBER 2018
$74.43
$79.89
AS AT 30 JUNE 2018
$77.23
$73.91
$80
$73.68
$74.70
$90
$76.60
$88.17
$100
AS AT 31 MARCH 2018
$78.79
AS AT 30 SEPTEMBER 2017
$70
$/MWh
$60 $50 $40 $30 $20 $10 $0 FY19
FY20 Financial Year
FY21
Source: ASX
> BENMORE ASX FUTURES SETTLEMENT PRICE
$73.33
$69.94
$70.94
AS AT 30 SEPTEMBER 2018
$68.70
$70.04
$73.90
AS AT 30 JUNE 2018
$71.00
$71.38
$66.45
$67.53
$70
$71.26
$90 $80
AS AT 31 MARCH 2018 $82.93
AS AT 30 SEPTEMBER 2017
$/MWh
$60 $50 $40 $30 $20 $10 $0 FY19
FY20 Financial Year
FY21
Source: ASX
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
05
> NATIONAL CONSUMPTION (NON-TEMPERATURE ADJUSTED) NATIONAL CONSUMPTION
TIWAI POINT ALUMINIUM SMELTER CONSUMPTION
12,000 10,000
1,238
1,250
1,268
1,267
1,251
1,263
9,132
9,386
9,573
9,430
9,451
9,554
Q1 2014
Q1 2015
Q1 2016
Q1 2017
Q1 2018
Q1 2019
GWh
8,000 6,000 4,000 2,000 0
Source: Transpower Information Exchange
> AUCKLAND CLIMATE SUMMARY ( ⁰C) Q1
Q2
Q3
2019
FINANCIAL YEAR
12.1
-
-
Q4 -
2018
12.3
17.2
20.7
14.3
2017
12.1
16.1
19.3
14.3
2016
11.4
16.0
20.6
15.3
2015
11.9
15.9
19.9
14.3
Historical Average (since 1999)
11.9
16.2
19.3
14.2
Source: Met Service
> MONTHLY TOTAL CONSUMER RETAIL SWITCHING (ICPs) NZ MARKET CHURN (LHS)
ANNUAL NZ MARKET CHURN % (RHS) 25%
50,000 45,000
20%
40,000
15%
30,000 25,000
10%
20,000
% Churn
Monthly ICPs
35,000
15,000 5%
10,000 5,000
0% Jul-18
Jan-18
Jul-17
Jan-17
Jul-16
Jan-16
Jul-15
Jan-15
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
0
Source: Electricity Authority
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
06
>> TWO YEAR HISTORY OF OPERATING STATISTICS
Statistics are presented in the same form as those on page 2
OPERATING INFORMATION
ELECTRICITY SALES Mass Market Commercial & Industrial FPVV End User CfD FPVV purchases from market Spot customer purchases Total NZEM Purchases
Three months ended Three months ended Three months ended Three months ended Three months ended Three months ended Three months ended Three months ended Three months ended 30 September 2018 30 June 2018 31 March 2018 30 September 2017 31 December 2017 30 June 2017 31 December 2016 30 September 2016 31 March 2017 VWAP ($/MWh) 127.04 82.76
91.53
ELECTRICITY CUSTOMERS ('000) North Island Customers South Island Customers Dual Fuel Customers
Net Sell CfD
Hydro Geothermal (consolidated) Geothermal (equity accounted) Total LWAP/GWAP CARBON EMISSIONS ('000 TONNES CO2) METRIX AMI METERS ('000)
1,541
83.48
386
CONTRACTS FOR DIFFERENCE
ELECTRICITY GENERATION
Volume VWAP (GWh) ($/MWh) 127.61 955 84.67 297 291 1,316 225
VWAP ($/MWh) 89.07 79.59 80.51 85.90
1,416
87.92
388
343 43 48 Volume (GWh) 664 VWAP Volume (GWh) ($/MWh) 84.42 1,446 71.76 678 74.40 55 2,179
Volume VWAP (GWh) ($/MWh) 125.44 855 80.27 289 288 1,207 209
79.84
1,266
94.93
391
345 43 48 Volume (GWh) 516 VWAP Volume (GWh) ($/MWh) 87.34 1,218 75.39 656 78.21 52 1,926
Volume VWAP (GWh) ($/MWh) 120.35 689 72.79 310 296 1,055 211
82.87
1,345
99.01
393
348 43 48 Volume (GWh) 401 VWAP Volume (GWh) ($/MWh) 91.34 1,035 87.09 591 89.30 45 1,671
Volume VWAP (GWh) ($/MWh) 123.53 759 84.14 299 325 1,118 227
89.84
1,593
80.23
393
350 43 47 Volume (GWh) 496 VWAP Volume (GWh) ($/MWh) 93.40 1,172 85.83 627 92.57 49 1,848
Volume VWAP (GWh) ($/MWh) 124.49 975 86.25 302 316 1,349 244
91.07
1,467
53.70
392
349 44 46 Volume (GWh) 697 VWAP Volume (GWh) ($/MWh) 72.50 1,522 68.02 689 68.98 47 2,258
Volume VWAP (GWh) ($/MWh) 121.34 851 78.94 325 331 1,241 226
71.00
1,312
48.38
390
349 43 45 Volume (GWh) 639 VWAP Volume (GWh) ($/MWh) 55.21 1,402 49.41 668 50.30 55 2,125
Volume VWAP (GWh) ($/MWh) 117.18 711 74.54 325 324 1,094 218
52.82
Volume (GWh) 973
60.38
1,604
1,381 387
348 42 44 Volume (GWh) 423 VWAP Volume (GWh) ($/MWh) 49.28 954 42.94 628 44.97 54 1,636
Volume VWAP (GWh) ($/MWh) 122.04 773 87.82 316 346 1,150 231
46.87
333 326 1,380 224
381
346 41 43 Volume (GWh) 510 VWAP Volume (GWh) ($/MWh) 60.32 1,112 54.69 657 54.79 58
341 40 42 Volume (GWh) 387 Volume (GWh) 1,256 634 55
58.32
1,945
1,827
1.07
1.05
1.08
1.06
1.09
1.13
1.02
1.03
1.04
93
85
68
86
102
93
80
90
96
415
413
410
408
406
403
401
399
398
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
07