QUARTERLY OPERATIONAL UPDATE Three months ended 31 December 2017
>> QUARTERLY HIGHLIGHTS
RECORD Q2 GENERATION
WHOLESALE PRICES RISING
1,848 GWh GENERATED INCLUDING 1,172 GWh FROM HYDRO
HIGHEST Q2 WHOLESALE PRICE SINCE FY2006
4,550 GWh
FULL YEAR HYDRO GENERATION FORECAST UP 150GWh
>> COMMENTARY ELEVATED WHOLESALE PRICES; RECORD GENERATION; HYDRO GENERATION FORECAST UP Wholesale prices for the quarter ending 31 December 2017, of $93/MWh at Otahuhu and $90/MWh at Benmore, almost reached the record highs set in FY2006. These prices were up significantly on the prior comparable period by $45/MWh and $50/MWh respectively. South Island inflows were 68% of average (or almost 1,800 GWh below average) contributing to wholesale prices increasing from $59/MWh at Otahuhu and $53/MWh at Benmore in October to be $121/MWh and $122/MWh respectively in December. Low inflows into the South Island hydro catchments resulted in total South Island hydro storage falling from 120% of average at the start of the quarter to end at 77%1 (or almost 600 GWh below average). In contrast to the South Island, hydro inflows into the Waikato Hydro Catchment were near normal contributing to the second consecutive quarter of record output from our renewable generation fleet of 1,848 GWh. Mercury utilised storage within Lake Taupo to generate 1,172 GWh from the Waikato Hydro Scheme, optimising generation with rising wholesale prices. Lake Taupo storage fell from 130% of average to 85% at the end of the quarter1 (or 70 GWh below average). Geothermal generation was down 39 GWh to 676 GWh as scheduled maintenance outages were completed at the Nga Awa Purua and Mokai power stations. The quarter illustrated the value to Mercury of the low level of correlation between wholesale prices and inflows into the Waikato Hydro Catchment. Mercury was able to benefit from the coincidence of high hydro generation and high wholesale prices (unlike what is typical for South Island hydro operators). With higher than average inflows into the Waikato Hydro Catchment since 31 December 2017, Mercury has updated its FY2018 midpoint hydro generation forecast to 4,550GWh (up 150GWh on the forecast provided with the previous Quarterly Operational Update). CONTINUED BELOW MARKET CHURN; MODERATE END-USER PRICE GROWTH Mercury's rate of customer churn was again below market average as the company continues to focus on rewarding, inspiring and making it easy for our customers. For the quarter, Mercury's annualised churn for all brands of 19.4% was 1.2% below the market average of 20.6%. Trader churn for all Mercury brands for the quarter increased to market levels. The company's churn advantage over the twelve months to 31 December 2017 contributed in customer numbers increasing by 6,000 to 393,000 as fewer customers switched from Mercury. The company experienced customer growth in both the North (+4,000) and South Islands (+2,000) and for dual fuel customers (+4,000). The average energy price to customers was up (to $108.20/MWh) compared to the same period last year ($106.11/MWh). This increase partially reflects loyalty offerings redeemed in the prior period associated with the Mercury brand launch. UNDERLYING DEMAND GROWTH After adjusting for temperature, national demand was up 3.7% compared to the same quarter last year (or up 3.0% on an unadjusted basis). This increase in demand was impacted by a normalisation of irrigation and dairy load due to wet conditions in the prior period (1.8%). Positive signs of underlying demand growth were again observed with continued growth in the urban (0.8%) and rural (0.7%) sectors. 1 Average
since 1999
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
01
>> OPERATING STATISTICS Three months ended 31 December 2017
OPERATING INFORMATION
VWAP 1 ($/MWh) 108.2
ELECTRICITY SALES FPVV sales to customers
Three months ended 31 December 2016
Volume (GWh) 1,058
VWAP 1 ($/MWh) 106.11
Volume (GWh) 1,088
Six months ended 31 December 2017
Six months ended 31 December 2016
VWAP 1 ($/MWh) 113.58
VWAP 1 ($/MWh) 112.3
Volume (GWh) 2,335
Volume (GWh) 2,395
FPVV sales to residential customers
541
554
1,304
1,302
FPVV sales to business customers
517
534
1,031
1,093
1,118 227
1,150 231
2,468 471
2,529 454
FPVV purchases from market Spot customer purchases Total NZEM Purchases
94.93
ELECTRICITY CUSTOMERS ('000) North Island Customers South Island Customers Dual Fuel Customers
Hydro Geothermal (consolidated) Geothermal (equity accounted) Total
3 4
1,381
97.14
2,939
387
VWAP ($/MWh) 91.34 87.09 89.30
350 43 47 Volume (GWh) 394 890 325 496 Volume (GWh) 1,172 627 49
VWAP ($/MWh) 49.28 42.94 44.97
346 41 43 Volume (GWh) 395 905 346 510 Volume (GWh) 1,112 657 58
VWAP ($/MWh) 92.50 86.43 90.89
Volume (GWh) 718 1,911 642 1,193 Volume (GWh) 2,694 1,317 96
89.84
1,848
46.87
1,827
90.52
4,107
2
ELECTRICITY GENERATION
48.38
393
CONTRACTS FOR DIFFERENCE Buy CfD Sell CfD End User CfD Net Sell CfD
1,345
LWAP/GWAP CARBON EMISSIONS ('000 TONNES CO2) METRIX AMI METERS ('000)
54.83
2,983
VWAP ($/MWh) 55.14 48.71 49.77
Volume (GWh) 904 1,801 673 897 Volume (GWh) 2,367 1,290 113
52.78
3,770
1.06
1.03
1.07
1.04
86
90
188
186
408
399
1
VWAP is volume weighed average energy only price sold to FPVV customers after lines, metering and fees
2
Includes Virtual Asset Swap volumes in both Buy and Sell CfD volumes of 176 GWh for the 3 months ended 31 December 2017 and 176 GWh for the 3 months ended 31 December 2016 and of 352 GWh for the 6 months ended 31 December 2017 and 352 GWh for the 6 months ended 31 December 2016
3
Includes Mercury’s 65% share of Nga Awa Purua generation
4
Tuaropaki Power Company (Mokai) equity share
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
02
>> MARKET DATA > ELECTRICITY GENERATION BY COMPANY FOR THE THREE MONTHS ENDED 31 DECEMBER Financial Year Q2 2018
MERCURY MERIDIAN ENERGY CONTACT ENERGY GENESIS ENERGY TRUSTPOWER / TILT OTHER
Financial Year Q2 2017
7%
7% 5%
19%
5%
19%
14% 18%
31%
34%
21% 20%
Source: Electricity Authority
> SHARE OF ELECTRICITY SALES (GWh) FOR THE THREE MONTHS ENDED 31 DECEMBER (EXCLUDING CFDs) MERCURY OTHER
Financial Year Q2 2018
Financial Year Q2 2017
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 FY2018 NATIONAL STORAGE ROLLING 12 MONTH AVERAGE BEN PRICE
FY2017 NATIONAL STORAGE ROLLING 12 MONTH AVERAGE OTA PRICE
4500
$90
4000
$85
3500
$80
3000
$70 2000
$/MWh
GWh
$75 2500
$65 1500 $60
1000
$55
500 0
$50 Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
> TAUPO STORAGE
AVERAGE SINCE 1999
FY2017
FY2018
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
> OTAHUHU ASX FUTURES SETTLEMENT PRICE
AS AT 31 DECEMBER 2016
AS AT 30 JUNE 2017
AS AT 30 SEPTEMBER 2017
AS AT 31 DECEMBER 2017
$/MWh
$79.81
$76.60
$79.86
$77.35
$80.50
$74.70
$80.00
$77.99
$86.35
$70.83
$80
$74.26
$100
$96.29
$120
$60
$40
$20
$0 FY18
FY19 Financial Year
FY20
> BENMORE ASX FUTURES SETTLEMENT PRICE
AS AT 31 DECEMBER 2016
AS AT 30 JUNE 2017
AS AT 30 SEPTEMBER 2017
AS AT 31 DECEMBER 2017
$/MWh
$73.65
$71.38
$73.24
$70.06
$77.59
$71.26
$74.71
$70.31
$67.06
$68.10
$80
$86.41
$100
$96.04
$120
$60
$40
$20
$0 FY18
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
FY19 Financial Year
FY20
05
> NATIONAL CONSUMPTION (NON-TEMPERATURE ADJUSTED) NATIONAL CONSUMPTION
TIWAI POINT ALUMINIUM SMELTER CONSUMPTION
12,000 10,000 1,231
1,269
1,252
1,265
8,363
8,299
8,550
Q2 2013
Q2 2014
Q2 2015
1,264
1,263
8,609
8,257
8,541
Q2 2016
Q2 2017
Q2 2018
GWh
8,000 6,000 4,000 2,000 0
Source: Transpower Information Exchange
> AUCKLAND CLIMATE SUMMARY ( ⁰C) Q1
Q2
Q3
2018
12.3
17.2
-
-
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
2014
12.3
16.7
18.8
14.8
Historical Average (since 1999)
11.9
16.1
19.4
14.1
FINANCIAL YEAR
Q4
Source: Met Service
> MONTHLY TOTAL CONSUMER RETAIL SWITCHING (ICPs) NZ MARKET CHURN (LHS)
ANNUAL NZ MARKET CHURN % (RHS)
50000
25%
45000 40000
20%
30000
15%
25000 20000
10%
% Churn
Monthly ICPs
35000
15000 10000
5%
5000 0 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
Jan-09
Jul-08
0%
Source: Electricity Authority MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
06