Quarterly Operational Update

MKTUPDTE

Thu, Jul 20 2023 08:30 am

Quarterly Operational Update for the three months ended 30 June 2023.

QUARTERLY HIGHLIGHTS

> 9TWh TOTAL GENERATION IN FY2023 - With new Turitea wind farm and record hydro generation of 5,209GWh

> "INTER-GREATING" RETAIL - All propositions merged under a single brand

> STRONG ELECTRICITY YIELD GROWTH - Yield growth in both mass market & C&I

COMMENTARY

MARKET SUMMARY
High national hydro storage and inflows during the quarter and financial year were reflected in lower spot electricity prices averaging $87/MWh and $86/MWh respectively in Auckland. Forward prices remain high but have eased to $156/MWh in Auckland for calendar years 2024 and 2025, reflecting a reduction in thermal generation input costs.

HIGH HYDRO GENERATION WAS PARTIALLY OFFSET BY LOWER GEOTHERMAL GENERATION
Wet conditions over the quarter and financial year saw Q4 hydro generation lift to 1,254GWh (329GWh, 36% higher than PCP) and to 5,209GWh for the year (42% higher than PCP), the highest annual Waikato hydro generation since 1996. Hydro spill was significant totalling 1,025GWh. Planned and unplanned outages at our Kawerau and Rotokawa stations reduced quarterly geothermal generation by 179GWh (-28% lower than PCP). Turitea South wind farm became fully operational during the quarter, lifting Mercury’s FY23 total generation over 9TWh for the first time. Most additional generation from higher inflows was hedged through various short term channels to lock in higher prices compared to spot, resulting in a net square portfolio position for the quarter and higher other sell CfD yields ($134/MWh versus PCP of $105/MWh for the quarter, and $124/MWh in FY23 versus $99/MWh in FY22).

RETAIL CONNECTION GROWTH CONTINUED WHILE WE TRANSITIONED TO ONE BRAND
Significant progress was made during FY23 “interGREATing” our Trustpower and Mercury employees, customers, brands processes and systems. All Trustpower customers rebranded to Mercury in June with a refreshed Gentrack stack, loyalty programme, new bill, website, and app. Total connections lifted to 860k by year end, 61k higher than a year ago. Commercial & Industrial yield growth (physical and end-user CfDs) was $22/MWh and $14/MWh higher for the quarter and financial year relative to PCP because of contract repricing to a sustained higher electricity forward curve. Mass Market yield was $155/MWh for the quarter, $1/MWh lower than PCP primarily from deferred price changes, including the flood impacted areas, and customer mix changes. Mass Market yield for the financial year was $154/MWh, $7/MWh higher than PCP largely as a result of the change in customer mix following the Trustpower acquisition in May 2022.

NATIONAL DEMAND MARGINALLY HIGHER FROM URBAN DEMAND OFFSETTING LOWER INDUSTRIAL DEMAND
National demand was 0.3% and 0.1% higher for the quarter and financial year to date relative to PCP. For the financial year, main urban centre demand increased by 0.8% versus PCP, partially offset by 9.2% lower industrial demand. NZAS load remained relatively flat. Lower industrial demand was a result of the full year impact of Marsden Point Refinery closure in April 2022, Cyclone Gabrielle impact on Pan Pac timber mill and a reduction in demand at the Glenbrook steel mill.

[For Operational Statistics and Charts, please refer to the attached]

ENDS

Howard Thomas
General Counsel and Company Secretary
Mercury NZ Limited

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