NZ Windfarms : 2023 Director Fees Report

DIRECTOR & CHAIR

REMUNERATION

HIGH LEVEL

REPORT

	boarddynamics.nz
SEPTEMBER 29, 2023	88 Shortland Street level 17
Auckland

INTRODUCTION

Board Dynamics has been engaged to provide an independent, high-level report on the current Director remuneration at New Zealand Windfarms (NZ Windfarms) and make recommended changes (if any) to the current fees based on current market and inflation/CPI NZ data since its last review in 2022 (12-month period).

NZ Windfarms is a long-term, specialist, wind farm owner and operator, with its revenue coming from the sale of sustainably generated electricity from its Te Rere Hau wind farm. The Te Rere Hau wind farm is located on North Range Road in the Tararua Ranges outside of Palmerston North. The wind farm has 92 turbines with a nameplate capacity of 46MW, producing sufficient electricity to power approximately 19,000 households.

In benchmarking the NZ Windfarms board remuneration, we have used the electricity industry as the sector of reference in New Zealand.

In addition, we have taken into consideration an NZ inflation increase of 6% over the past 12 months (CPI as of June 2023).

NZ Windfarms Limited (NZWF) is a publicly listed company on the New Zealand Stock Exchange (NZX) and we recognise its commitment to ensuring the remuneration of the board is transparent, fair and reasonable.

NZ WINDFARMS CURRENT BOARD REMUNERATION

Name / Position	Current Annual Fee
Craig Stobo: NZ Windfarms Chair	$160K
Patrick Brockie: Member/ARC Chair	$80K
Christine Spring: ARC Member	$75K
Philip Cory-Wright: ARC Member/Repowering Committee	$85K
Chair

Audit & Financial Risk Committee (ARC)

SUMMARY

NZ Windfarms' board of directors is expecting an increase in workload over the next 12 months in relation to its ongoing large-scale engineering project and ambitious growth trajectory.

In addition, the increasingly complex regulatory environment, including consideration of newer areas of focus such as ESG (Environmental, Social and Governance) and climate change response, along with the usual investment decision-making responsibilities, places additional demands on all its directors and has an impact on future succession planning and the role of remuneration.

The current pool of future directors with the technical knowledge, understanding and governance experience required is limited in New Zealand and fees need to keep pace to ensure the organisation can continue to attract the best and most appropriate talent.

In assessing any increase in board fees for 2023/24, NZX's Corporate Governance guidelines (5.2) comments that remuneration should reflect the time commitment and responsibility of the role.

Further, NZ Windfarm's own Remuneration Policy S. 2.2(a), highlights the importance of attracting, rewarding and retaining high-performing people who are able to enhance the company's performance.

Market data shows that the average board fee increase for directors on the boards of electricity entities 2022/23 was 5.6% (median), despite inflation being 6% in June 2023 and 7.3% the previous year. Noting that the lower quartile rises were around 4.2%.

THE CPI CALCULATION

The table below shows the Consumer Price Index (CPI) rises over the last four years. The relevant figure for NZ Windfarms, given its increase in 2022, is the June 2023 period.

Period

CPI Increase %

June 2020

+1.5

June 2021

+3.3

June 2022

+7.3

June 2023

+6%

Position	CPI Adjusted Fee	Current Fee
(rounded)	(rounded)
Chair	$170K	$160K
Director	$74K	$70K
Chair of Audit & Financial Risk	+ $11K	+ $10K
Committee (ARC)
Chair of Repowering	+ $11k	+$10k
Committee (RC)

Member of ARC

+$5K

+$5K

RECOMMENDED FEE

INCREASE RANGES

The table below shows increases at 4% and our recommended increase at 4.5%.

Position	Remuneration	Remuneration
increase at 4%	Increase at 4.5%
Chair	$166,400	$167,200
Director	$72,800	$73,150
Chair of Audit & Financial Risk	+ $10,400	+10,450
Committee (ARC)
Chair of Repowering Committee	+ $10,400	+ $10,450
(RC)

Member of ARC

+ $5,200

+ $5,225

Conclusion and Recommendation

In our view, the recommended increase represents the Board's initial thinking (4%) but also builds in a further uplift to modestly recognise the market rate in the electricity sector (5.6%) and the inflation rate. in June 2023.

We would recommend a 4.5% increase in fees for the NZ Windfarm Chair and directors based on a balance between the market increase rate and the rate of inflation.

Finally, this document represents the objective recommendation of Board Dynamics regarding board fees at NZ Windfarms. However, any board fee discussion involves a variety of factors of which the information in this document is just one. We suggest using this information as a starting point in a review that should serve to further develop the relationship between the NZ Windfarms Board and Shareholders (AGM).