QUARTERLY OPERATIONAL UPDATE Three months ended 31 March 2019
>> QUARTERLY HIGHLIGHTS
RECORD SPOT PRICES
DEMAND UP 3%
RECORD SPOT PRICES DUE TO LOW HYDRO STORAGE AND THERMAL GENERATION CONSTRAINTS
NATIONAL DEMAND UP 3% FROM INCREASES IN IRRIGATION AND INDUSTRIAL SECTORS
4,000 GWh HYDRO
FY2019 HYDRO GENERATION FORECAST DOWN 150GWh TO LONG-RUN AVERAGE
>> COMMENTARY SUSTAINED DRY HYDROLOGICAL CONDITIONS AND THERMAL GENERATION CONSTRAINTS LED TO RECORD SPOT PRICES Record spot prices were observed over the quarter as the market responded to limited thermal fuel and plant availability and national hydro storage tracking below-average until the last week of March. Average spot prices for the quarter increased versus the prior comparable period by $77/MWh to $162/MWh at Otahuhu and by $67/MWh to $145/MWh at Benmore. HYDRO GENERATION DECREASE PARTIALLY OFFSET BY IMPROVED GEOTHERMAL AVAILABILITY Waikato catchment inflows were 9th percentile1 (or 270GWh below average) in the most recent quarter leading to hydro generation decreasing by 273GWh from 1,035GWh in Q3-FY2018 to 762GWh in Q3-FY2019. Mercury's full year hydro generation forecast has been reduced by 150GWh to 4,000GWh, the long-run annual average. Mercury made the most of limited hydro generation as the hydro GWAP/TWAP ratio increased to 1.10 in Q3-FY2019 from 1.08 in the prior comparable period. This, combined with steady geothermal generation, led to the LWAP/GWAP ratio decreasing from 1.06 in Q3-FY2018 to 1.05 in Q3-FY2019. Mercury's geothermal generation for the quarter was 710GWh, an increase of 74GWh compared to the same period in FY2018 due to planned maintenance outages conducted in that period. These outages enabled Mercury's geothermal fleet to provide reliable baseload generation at 98% availability versus 91% in the same period last year. FUTURES PRICES INCREASE ON THERMAL FUEL UNCERTAINTY; LONGER-TERM PRICES MODERATED BY NEW DEVELOPMENT Ongoing uncertainty regarding thermal fuel and plant availability flowed through to the futures market with the Otahuhu futures price for FY2019 increasing by $15/MWh during the quarter to $150/MWh and for FY2020 by $17/MWh to $112/MWh. New generation developmen t, heralded by Mercury's Turitea wind farm announcement, moderated the lift in longer-term futures prices with the Otahuhu FY2021 price rising by $8/MWh to $93/MWh over the quarter. MERCURY CONTINUES TO PURSUE VALUE IN RETAIL MARKET The volume-weighted average price received for Mass Market sales was flat year-on-year at $125/MWh as VWAP in Q3-FY2018 was elevated due to a one-off wash-up of lines charges. Mercury's continued focus on customer value has seen the Mass Market VWAP for the nine months to 31 March 2019 increase by $3.2/MWh or 2.6% compared to the same period in FY2018. Market churn fell for the first time in four quarters, decreasing from 21.3% 2 at the end of Q2-FY2019 to 20.7%2 as at 31 March 2019. Mercury group churn also fell from 20.3% 2 to 19.7%2 over the same period. DRY CONDITIONS INCREASE IRRIGATION AND RURAL DEMAND; TIWAI POTLINE DRIVES INDUSTRIAL DEMAND HIGHER Temperature-adjusted national demand increased by 3.0% (3.1% on an unadjusted basis) versus the prior comparable period, mainly due to significant increases in irrigation load (+1.4%) and in the rural (+0.9%) and dairy (+0.2%) sectors which also include some irrigation demand. Industrial sector demand (+0.8%) also increased following the first full quarter of operations for NZAS 4th potline which increased average Tiwai demand from 572MW in the quarter ended 31 March 2018 to 610MW in the latest quarter; excluding Tiwai, industrial sector demand decreased by 1.0%. These increases were slightly offset by a decrease (-0.3%) in urban sector demand. 1 2
For quarters ended 31 March since 1927 12-monthly rolling average
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
01
>> OPERATING STATISTICS Three months ended 31 March 2019
OPERATING INFORMATION
ELECTRICITY SALES Mass Market Commercial & Industrial FPVV End User CfD FPVV purchases from market Spot customer purchases
2
VWAP 1 ($/MWh) 125.02 81.68
169.00
Hydro Geothermal (consolidated) Geothermal (equity accounted)
6
Total
1 2 3 4
VWAP 1 ($/MWh) 126.31 79.57
310 296 1,055 211 87.92
1,266
Volume (GWh) 2,382
VWAP 1 ($/MWh) 123.08 79.02
966 894 3,519 600 153.54
4,119
VWAP ($/MWh) 168.82 151.69 153.01
335 44 48 Volume (GWh) 228 Volume (GWh) 762 660 50
VWAP ($/MWh) 87.34 75.39 78.21
348 43 48 Volume (GWh) 401 Volume (GWh) 1,035 591 45
VWAP ($/MWh) 147.40 140.59 127.40
Volume (GWh) 1,325 Volume (GWh) 3,210 2,017 147
160.61
1,472
82.87
1,671
144.31
5,374
LWAP/GWAP CARBON EMISSIONS ('000 TONNES CO2)
Volume (GWh) 689
Nine months ended 31 March 2018
391
4
5
1,269
Nine months ended 31 March 2019
379
CONTRACTS FOR DIFFERENCE
ELECTRICITY GENERATION
VWAP 1 ($/MWh) 125.44 80.27
350 307 1,081 188
ELECTRICITY CUSTOMERS ('000) North Island Customers South Island Customers Dual Fuel Customers
Net Sell CfD
Volume (GWh) 679
3
Total NZEM Purchases
Three months ended 31 March 2018
911 938 3,522 681 94.36
4,203
VWAP ($/MWh) 91.07 83.01 86.83
Volume (GWh) 1,593 Volume (GWh) 3,729 1,908 141
88.31
5,778
1.05
1.06
1.06
1.07
70
68
247
256
7
VWAP is volume weighted average energy-only price sold to customers after lines, metering and fees 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 148 GWh for the 3 months ended 31 March 2019 and 148 GWh for the 3 months ended 31 March 2018 and of 450 GWh for the 9 months ended 31 March 2019 and 500 GWh for the 9 months ended 31 March 2018. Includes End User CfD volumes
5
Includes Mercury's 65% share of Nga Awa Purua generation
6
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
7
Volume (GWh) 2,423
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
02
>> MARKET DATA > ELECTRICITY GENERATION BY COMPANY FOR THE THREE MONTHS ENDED 31 MARCH Financial Year Q3 2019
MERCURY MERIDIAN ENERGY CONTACT ENERGY GENESIS ENERGY TRUSTPOWER / TILT OTHER
9%
Financial Year Q3 2018
15%
4%
5%
7%
18%
17%
18%
34%
32% 21%
20%
Source: Electricity Authority
> SHARE OF ELECTRICITY SALES (GWh) FOR THE THREE MONTHS ENDED 31 MARCH (EXCLUDING CFDs) MERCURY OTHER
Financial Year Q3 2019
Financial Year Q3 2018
14%
13%
87%
86%
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
4,000
$140 $130
3,500
$120 3,000
$110 $100
2,000
$90
$/MWh
GWh
2,500
$80
1,500
$70
1,000 $60 500
$50
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
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> OTAHUHU ASX FUTURES SETTLEMENT PRICE
$92.54
$84.25
$77.26
$78.83
$79.89
$78.79
$73.68
$/MWh
$80
$88.17
$120
$100
AS AT 31 MARCH 2019
$111.81
$140
AS AT 31 DECEMBER 2018
$94.50
$134.59
$160
AS AT 30 SEPTEMBER 2018
$150.30
AS AT 31 MARCH 2018
$60 $40 $20
$0 FY19
FY20 Financial Year
FY21
Source: ASX
> BENMORE ASX FUTURES SETTLEMENT PRICE
$83.13
$80.36
$87.44
$73.33
$70.94
$71.00
$82.93 $67.53
$/MWh
$80
$73.90
$120
$100
AS AT 31 MARCH 2019
$98.30
$140
AS AT 31 DECEMBER 2018
$130.11
AS AT 30 SEPTEMBER 2018
$122.45
AS AT 31 MARCH 2018
$60
$40
$20
$0 FY19
FY20 Financial Year
FY21
Source: ASX
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
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> NATIONAL CONSUMPTION (NON-TEMPERATURE ADJUSTED) NATIONAL CONSUMPTION
TIWAI POINT ALUMINIUM SMELTER CONSUMPTION
12,000 10,000
GWh
8,000
1,234
1,240
1,256
1,237
1,235
1,320
8,021
8,233
8,240
8,185
8,045
8,244
Q3 2014
Q3 2015
Q3 2016
Q3 2017
Q3 2018
Q3 2019
6,000 4,000 2,000 0
Source: Transpower Information Exchange
> AUCKLAND CLIMATE SUMMARY ( ⁰C) Q1
Q2
Q3
2019
12.1
16.3
20.2
-
2018
12.3
17.2
20.7
14.3
FINANCIAL YEAR
Q4
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)
50,000
25%
45,000 40,000
20%
30,000
15%
25,000 20,000
10%
% Churn
Monthly ICPs
35,000
15,000 10,000
5%
5,000
Jan-19
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
0%
Jul-09
0
Source: Electricity Authority
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
06