Mercury NZ : QUARTERLY OPERATIONAL UPDATE.

QUARTERLY OPERATIONAL UPDATE

Three months ended 30 June 2020

>> QUARTERLY HIGHLIGHTS

	HIGH
SUSTAINED	SPOT PRICES	TIWAI EXIT
LOW INFLOWS	POST COVID	ANNOUNCED
	LOCKDOWN
HYDRO GENERATION DOWN 69GWh	REFLECTING DECLINING HYDRO STORAGE	ELECTRICITY FUTURES PRICES
DUE TO LOWEST WAIKATO CATCHMENT	AND DEMAND CLOSE TO NORMAL LEVELS	FALL FROM FY2022
INFLOW SEQUENCE FROM SEPTEMBER

>> COMMENTARY

BUSINESS ACTIVITY RESUMES, REFURBISHMENT COMPLETED AT WHAKAMARU AND ARATIATIA

Mercury successfully executed a staged return to normal operations in Q4-FY2020, following the nationwide COVID-19 lockdown, with office-based staff returning and construction resuming at the Turitea wind farm. Maintenance at our generation sites continued with major refurbishments completed at Whakamaru and at Aratiatia early in July.

HYDRO GENERATION LOWER DUE TO DROUGHT; GEOTHERMAL STEADY

Mercury's hydro generation decreased from 796GWh in Q4-FY2019 to 727GWh in the most recent quarter due to exceptionally dry hydrology with Q4-FY2020 Waikato catchment inflows at the 1stpercentile1. Low rainfall in the quarter continued a sequence of low hydrological conditions with inflows in H2-FY2020 also being at the 1stpercentile2, resulting in full-year hydro generation decreasing from 4,006GWh in FY2019 to 3,712GWh in FY2020. Lake Taupo hydro storage tracked below-average during the quarter ending at 193GWh, 82GWh below average3.

Geothermal generation was maintained at 671GWh in Q4-FY2020 versus 679GWh in the same quarter in FY2019 seeing full year geothermal production 3% lower than FY2019 due to major maintenance.

SALES YIELDS LIFT AS MERCURY FOCUSES ON CUSTOMER VALUE

Mercury's customer value focus saw Commercial & Industrial segment sales volumes increase from 666GWh in Q4 -FY2019 to 731GWh in Q4-FY2020 with the average sales yield (including both physical and financial sales) also lifting by 8.3% (from $86/MWh to $93/MWh). The Mass Market segment yield increased by 6.4% from $128/MWh to $136/MWh with reduced acquisition activity resulting in lowe r volumes.

POST-LOCKDOWN SPOT PRICES REFLECT RETURN TO NORMALITY AND DECLINING NATIONAL HYDRO STORAGE

Demand in the most recent quarter decreased by 4.2% on a temperature-adjusted basis (4.8% on an unadjusted basis) due to the COVID- 19 lockdown. National demand was 14% lower than the pcp in April, when activity restrictions were most severe, but returned to similar levels to the pcp in May and June as lockdown restrictions eased.

Spot prices in the quarter followed demand, being significantly below-average at $48/MWh at Otahuhu and $42/MWh at Benmore in April. The easing of lockdown restrictions combined with declining national hydro storage saw spot prices recover strongly, resultin g in a quarterly average spot price of $115/MWh in Auckland, in line with the prior comparable period.

HIGH FUTURES PRICES CHECKED BY TIWAI EXIT ANNOUNCEMENT

As at 30 June, FY2022 futures were $96/MWh and $80/MWh at Otahuhu and Benmore. Following the announcement of the Tiwai aluminium smelter exit, FY2022 futures have reduced to $79/MWh and $53/MWh respectively, severely impacting the South Island due to known transmission constraints.

1. For quarters ended 30 June since 1927
2. For6-monthly periods ended 30 June since 1927
3. For quarters ended 30 June since 1999

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE	01

>> OPERATING STATISTICS

OPERATING INFORMATION		Three months ended	Three months ended	Twelve months ended	Twelve months ended
	30 June 2020	30 June 2019		30 June 2020	30 June 2019
ELECTRICITY CUSTOMERS			348				373
('000s ICPs)
North Island Customers			307				330
South Island Customers			41				43
Dual Fuel Customers			47				47
		VWAP 1	Volume	VWAP 1	Volume	VWAP 1	Volume	VWAP 1	Volume
		($/MWh)	(GWh)	($/MWh)	(GWh)	($/MWh)	(GWh)	($/MWh)	(GWh)
ELECTRICITY SALES
Physical		124.20	1,108	117.45			1,153	118.45	4,361	116.35			4,500
Mass Market	2	136.45	735	128.19			800	130.84	2,892	126.78			3,182
Commercial & Industrial	3	100.05	373	93.07			353	94.05	1,469	86.35			1,318
Network Losses			54				58		213				229
Physical Purchases	4	128.97	1,163	117.19			1,211	115.14	4,573	145.37			4,730
Financial		86.00	807	81.01			781	83.63	3,377	79.60			3,148
	5
End User CfDs		85.79	358	77.87			313	82.15	1,323	75.66			1,206
Other Sell CfDs	6	86.16	449	83.11			468	84.59	2,054	82.04			1,942
Spot Settlement of CfDs		109.24		110.70				101.15		134.04
Spot Customer Purchases		117.16	183	111.78			180	104.12	747	136.99			780
ELECTRICITY GENERATION
Physical		121.59	1,398	117.43			1,475	109.51	6,327	138.75			6,703
Hydro		134.90	727	124.89			796	117.03	3,712	142.93			4,006
Geothermal (consolidated)	7	107.17	671	108.62			679	98.83	2,615	132.54			2,697
Financial		84.28	464	90.86			475	83.69	1478	93.16			1,600
	5
Buy CfDs	6	84.28	464	90.86			475		1478	93.16			1,600
		83.69
Spot Settlement of CfDs		113.97		101.29				98.81		133.37
PORTFOLIO LWAP/GWAP	8		1.01				1.01		1.02				1.02

1. VWAP is volume weighted averageenergy-only price sold to customers after lines, metering and fees
2. Mass market includes residential segments and nontime-of-use commercial customers
3. Fixed-price,variable-volume (FPVV) sales to time-of-use commercial customers
4. Excludes spot customer purchases
5. Excludes FTR and trading ASX positions (including positions held to maturity which were previously disclosed in CfD volumes)
6. Includes Virtual Asset Swap volumes of 149 GWh for the 3 months ended 30 June 2020 and 149 GWh for the 3 months ended 30 June 2019 and of 601 GWh for the 12 months ended 30 June 2020 and 599 GWh for the 12 months ended 30 June 2019
7. Includes Mercury's 65% share of Nga Awa Purua generation
8. Includes all physical and financial buys and sells except spot customer purchases

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE	02

• • MARKET DATA
• ELECTRICITY GENERATION BY COMPANY FOR THE THREE MONTHS ENDED 30 JUNE

MERCURY	Financial Year Q4 2020	Financial Year Q4 2019
MERIDIAN
CONTACT
GENESIS
TRUSTPOWER / TILT		7%	15%		7%
OTHER	4%		15%
	4%
	18%			16%
			35%			34%
	21%			24%

Source: Electricity Authority

> SHARE OF ELECTRICITY SALES (GWh) FOR THE THREE MONTHS ENDED 30 JUNE (EXCLUDING CFDs)

MERCURY	Financial Year Q4 2020	Financial Year Q4 2019
OTHER
	14%	14%

86%

86%

Source: Mercury Purchases and Transpower SCADA

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE	03

> OTAHUHU WHOLESALE PRICE AND NATIONAL HYDRO STORAGE LEVELS

FY2020 NATIONAL STORAGE		FY2019 NATIONAL STORAGE
AVERAGE NATIONAL STORAGE		ROLLING 12 MONTH AVERAGE OTA PRICE
ROLLING 12 MONTH AVERAGE BEN PRICE

	6,000												$160
	5,000												$140
	4,000												$120
GWh	3,000												$100	$/MWh
	2,000												$80
	1,000												$60
	0												$40
	Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun	Jul

Source: NZX Hydro and NZEM Pricing Manager (NZX)

> TAUPO STORAGE

AVERAGE SINCE 1999

FY2019

FY2020

600

500

400

GWh

300

200

100

0

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Source: NZX Hydro

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE	04

> OTAHUHU ASX FUTURES SETTLEMENT PRICE

					AS AT 30 JUNE 2019		AS AT 31 DECEMBER 2019					AS AT 31 MARCH 2020
	$140			$113.71	$122.57	$96.08	$106.18	$98.54	$110.25	$94.10	$114.01
	$100
	$120
$/MWh	$80
$60
	$40
	$20
	$0
						FY20					FY21
										Financial Year
Source: ASX
> BENMORE ASX FUTURES SETTLEMENT PRICE
					AS AT 30 JUNE 2019		AS AT 31 DECEMBER 2019				AS AT 31 MARCH 2020
	$120		$91.00	$95.96	$79.06	$88.43	$86.19	$97.29	$78.63	$104.40
	$100
	$80
$/MWh	$60
	$40
	$20
	$0
						FY20						FY21

Financial Year

Source: ASX

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE

AS AT 30 JUNE 2020

$94.79

$95.68

$93.85

$95.65

FY22

AS AT 30 JUNE 2020

$85.16

$85.11

$70.05

$79.83

FY22

05

> NATIONAL CONSUMPTION (NON-TEMPERATURE ADJUSTED)

NATIONAL CONSUMPTION		TIWAI POINT ALUMINIUM SMELTER CONSUMPTION

GWh

12,000
10,000				1,251	1,252	1,307
		1,255	1,261	1,223
8,000
6,000
4,000		8,778	8,593	8,865	9,022	8,824	8,418
2,000
0
	Q4 2015	Q4 2016	Q4 2017	Q4 2018	Q4 2019	Q4 2020

Source: Transpower Information Exchange

> AUCKLAND CLIMATE SUMMARY ( ⁰C)

FINANCIAL YEAR	Q1	Q2	Q3	Q4
2020	12.3	16.7	19.5	14.4
2019	12.1	16.3	20.2	14.1
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
Historical Average (since 1999)	11.9	16.1	19.4	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%
	35,000
Monthly ICPs	30,000																			15%	% Churn
25,000
20,000																			10%
	15,000
	10,000																			5%
	5,000
	0																			0%
	Jul-10	Jan-11	Jul-11	Jan-12	Jul-12	Jan-13	Jul-13	Jan-14	Jul-14	Jan-15	Jul-15	Jan-16	Jul-16	Jan-17	Jul-17	Jan-18	Jul-18	Jan-19	Jul-19	Jan-20

Source: Electricity Authority

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE	06