Quarterly Operational Update

Quarterly Operational Update for the three months ended 31 March 2021

>DRY CONDITIONS CONTINUE - national inflows 1,636GWh below average in Q3, at 10th percentile; 9 month inflows at 27th percentile.

>FUTURES PRICES LIFT - FY2022 Otahuhu futures prices increased to $193/MWh.

>3,800GWh - FY2021 hydro generation forecast remains 3,800GWh; potential to impact FY2022.


HYDRO GENERATION LIFTS DESPITE BELOW AVERAGE INFLOWS; GEOTHERMAL GENERATION MAINTAINED

Mercury's FY2021-Q3 hydro generation increased versus the prior comparable period by 71GWh to 910GWh as Mercury responded to high spot prices. This was achieved, despite Waikato catchment inflows being 168GWh below average, through drawing down storage in Lake Taupo which is now expected to be below average by the end of FY2021. Mercury's FY2021 hydro generation forecast remains 3,800GWh.

Geothermal generation of 658GWh in FY2021-Q3 was equal to the prior comparable period but increased on a normalised basis.

DRY CONDITIONS AND CONTINUED THERMAL FUEL CONSTRAINTS SEE RECORD PRICES

National hydro inflows during FY2021-Q3 were 1,636GWh below average, causing total hydro storage to decline to 1,914GWh (1,181GWh below average) by the end of the quarter. Low inflows, coinciding with continued thermal fuel constraints at the Pohokura and Kupe gas fields, saw spot prices lift to record levels. FY2021-Q3 average spot prices increased to $206/MWh and $203/MWh at Otahuhu and Benmore respectively versus $82/MWh and $52/MWh in the prior comparable period (which was affected by the Level 4 COVID-19 lockdown).

Reduced fuel availability in the approach to the winter months saw the FY2022 futures price increase by $74/MWh at Otahuhu to $193/MWh and by $76/MWh to $177MWh at Benmore. The FY2023 futures prices also lifted during the quarter from $103/MWh to $143/MWh at Otahuhu with longer-term demand expectations firmed by the Tiwai Point aluminium smelter contract extension announced during the quarter.

SALES PORTFOLIO TILTS TOWARDS COMMERCIAL AND INDUSTRIAL SEGMENT

Mercury's sales portfolio further tilted towards Commercial and Industrial with total sales volumes in that segment (including both physical and financial sales) increasing from 739GWh in FY2020-Q3 to 858GWh in the most recent quarter. Decreasing customer connections, which fell by 5,000 across the quarter to 331,000, resulted in Mass Market physical sales declining from 602GWh in FY2020-Q3 to 544GWh in FY2021-Q3.

A continued focus on customer value saw sales yields in the Mass Market segment lift by 9.6%, from $129/MWh in FY2020-Q3 to $141/MWh in FY2021-Q3. The Commercial and Industrial sales yield increased by 1.9%, from $92/MWh to $94/MWh.

REDUCED INDUSTRIAL SEGMENT LOAD LEADS DEMAND DOWN

National demand decreased by 1.4% (normalised for temperature and the difference in days) in FY2021-Q3 compared to FY2020-Q3 with significant decreases seen in the industrial (-0.9%) and irrigation (-0.4%) sectors and smaller shifts in the urban (-0.1%), rural (-0.2%) and dairy (+0.2%) sectors.  The primary drivers behind the decrease in industrial demand were reduced load at the Tiwai Point aluminium smelter, which decreased from an average 591MW in FY2020-Q3 to 566MW in the current quarter, and a month-long maintenance outage at the Marsden Point refinery.

[For charts, refer to attached quarterly operational update]

ENDS

Howard Thomas
General Counsel and Company Secretary
Mercury NZ Limited

For investor relations queries, please contact:
Tim Thompson
Head of Treasury and Investor Relations
0275 173 470

For media queries, please contact:
Shannon Goldstone
Communications Manager
0272 105 337

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