Mercury NZ : Quarterly Operational Update

STOCK EXCHANGE LISTINGS: NEW ZEALAND (MCY) / AUSTRALIA (MCY)

NEWS RELEASE
onlyQuarterly Operational Update
28 January 2022 - Attached is Mercury's Quarterly Operational Update for the 3 months ended 31 December 2021.
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ENDS
Howard Thomas
General Counsel and Company Secretary
Mercury NZ Limited
For investor relations queries, please contact:	For media queries, please contact:
Tim Thompson	Shannon Goldstone
personalFor	Head of Communications
Head of Treasury and Investor Relations
0275 173 470	Media phone: [phone]

ABOUT MERCURY NZ LIMITED

Mercury's mission is energy freedom. Our purpose is to inspire New Zealanders to enjoy energy in more wonderful ways and our goal is to be New Zealand's leading energy brand. We focus on our customers, our people, our partners and our country; maintain a long-term view of sustainability; and promote wonderful choices. Mercury is energy made wonderful. Visit us at: www.mercury.co.nz

QUARTERLY OPERATIONAL UPDATE

Three months ended 31 December 2021

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>> QUARTERLY HIGHLIGHTS
	HYDRO
	STORAGE
use	MANAGED

LAKE TAUPO HYDRO STORAGE LIFTED, DESPITE DRIER CONDITIONS, TO 75GWh

ABOVE AVERAGE AT END OF Q2

Q2 SPOT

PRICES3,750GWh <$100/MWh

AVERAGE OTAHUHU SPOT PRICE AT	FY2022 HYDRO GENERATION FORECAST
$77/MWh, DOWN VERSUS PCP DUE TO	DECREASED TO 3,750GWh DUE TO
HIGH NATIONAL HYDRO STORAGE	LOW LAKE TAUPO INFLOWS

>> COMMENTARY

personalHYDRO GENERATION UNCHANGED DUE TO LOW INFLOWS AND HYDRO STORAGE MANAGEMENT; TURITEA NORTH OPERATING Mercury's hydro generation was unchanged versus the prior comparable period at 929GWh, 90GWh below average1, due to 29th percentile2

i flows into Lake Taupo. Lower hydro generation also saw hydro storage in Lake Taupo increase across the quarter from 403GWh to 513GWh at the end of the quarter, 75GWh above average1, leaving Mercury well-positioned in advance of the seasonally dry Q3. Mercury's FY2022 hydro generation forecast has been decreased by 150GWh to 3,750GWh.

This quarter also saw the first significant generation volumes of 92GWh3 from Turitea with all 33 turbines in the Northern section now perating. Mercury's PPA-linked wind farms, acquired from Tilt, generated 262GWh during the quarter.

SPOT PRICES DECREASE ON HIGH HYDRO STORAGE, FUTURES FLAT BUT LIFT FOLLOWING THE QUARTER

High national hydro storage (which ended the quarter at 122% of average1) saw average spot prices decrease during the quarter from $117/MWh and $103/MWh at Otahuhu and Benmore in FY2021-Q2 to $77/MWh and $60/MWh respectively in FY2022-Q2. The

p oportion of total generation from renewable sources in the quarter was 91%, increasing from 85% in the pcp and displacing thermal

g neration. This was reflected in short-term futures prices with the FY2022 Otahuhu price decreasing from $133/MWh to $125/MWh and B nmore decreasing from $110/MWh to $103/MWh.

Following the quarter, record low inflows4 have seen national hydro storage trend quickly down to near average levels, resulting in futures rices for the second half of FY2022 increasing at Otahuhu and Benmore from $137/MWh and $115/MWh respectively at the end of FY2022-Q2 to $215/MWh and $188/MWh (as at 26 Jan 2022). Thermal fuel cost and availability pressures also persist with NZU pric es

reaching record levels of $75/unit in January 2022.

MASS MARKET STEADY; COMMERCIAL & INDUSTRIAL YIELDS LIFT ON RE-PRICING AND NORSKE SKOG SETTLEMENT

ForMass Market customer numbers decreased by 1,000 over the quarter from 328,000 to 327,000 as Mercury continues to pursue initiatives

to maintain market share. The Mass Market yield increased by 2.9% from $139/MWh in FY2021-Q2 to $143/MWh in FY2022-Q2.

The Commercial & Industrial segment yield (including both physical and financial sales) increased by 8.4%, from $86/MWh in FY2021-Q2 to $94/MWh in the most recent quarter, due to recent re-contracting and the early exit of the foundation hedge with Norske Skog Tasman.

DEMAND RESILIENT DESPITE COVID-19 LOCKDOWN, DECREASED DUE TO REDUCED IRRIGATION AND INDUSTRIAL LOAD

Demand in FY2022-Q2 remained resilient despite the COVID-19 lockdown during the period, decreasing by 1.2% on a temperature adjusted basis (-1.7% on an unadjusted basis). This was mainly driven by reduced irrigation load (contributing -1.1%) with industrial sector demand also decreasing due to the closure of Norske Skog's Tasman mill and reductions at the Pan Pac mill and Glenbrook steel mill. The contributions from each sector were: irrigation (-1.1%), industrial (-0.7%), rural (-0.1%), urban (+0.7%) dairy (+0.1%).

1. For quarters ended 31 December since 1999
2. For quarters ended 31 December since 1927
3. Due to accounting changes, pre-commissioning generation volumes from Turitea wind farm are now recognised in EBITDAF
4. For periods starting 1 January and ending 26 January (inclusive) since 1927

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE	01

For personal use only

>> OPERATING STATISTICS

OPERATING INFORMATION		Three months ended	Three months ended	Six months ended	Six months ended
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
ELECTRICITY CUSTOMERS			327		336
('000s ICPs)
North Island Customers			290		297
South Island Customers			37		39
Dual Fuel Customers			47		45
		VWAP 1	Volume	VWAP 1	Volume	VWAP 1	Volume	VWAP 1	Volume
		($/MWh)	(GWh)	($/MWh)	(GWh)	($/MWh)	(GWh)	($/MWh)	(GWh)
ELECTRICITY SALES
Physical		120.39	1,117	117.21	1,039	127.09	2,419	121.87	2,296
Mass Market	2	143.34	584	139.36	606	141.61	1,373	138.14	1,438
Commercial & Industrial	3	95.25	533	86.16	433	108.01	1,046	94.60	858
Network Losses			52		49		114		109
Physical Purchases	4	71.54	1,169	120.19	1,088	114.53	2,533	132.02	2,406
Financial	5	91.87	805	86.25	935	94.38	1,579	86.85	1,778
End User CfDs		90.48	270	86.70	377	90.81	562	87.08	753
Other Sell CfDs	6	92.57	535	85.94	558	96.35	1,017	86.68	1,025
Spot Settlement of CfDs		73.48		110.79		107.91		120.20
Spot Customer Purchases		69.73	31	110.72	31	108.65	61	135.43	105
ELECTRICITY GENERATION
Physical		73.67	1,950	114.49	1,589	102.03	3,745	126.39	3,320
Hydro		83.57	929	119.92	930	120.84	1,883	132.73	1,974
Geothermal (consolidated)	7	68.72	667	106.82	659	93.24	1,275	117.09	1,346
Wind	8	54.77	92			57.45	105
Wind PPA	9	57.74	262			61.51	482
Financial		84.14	267	87.01	402	117.47	719	92.44	835
Buy CfDs	6	84.14	267	87.01	402	117.47	719	92.44	835
Spot Settlement of CfDs		65.73		108.33		114.63		118.45
NET POSITION	10		-19		-32		-130		-29

1. VWAP is volume weighted average energy-only price sold to customers after lines, metering and fees
2. Mass market includes residential segments and non time-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
6. Includes Virtual Asset Swap volumes of 151 GWh for the 3 months ended 31 December 2021 and 151 GWh for the 3 months ended 31 December 2020 and of

302 GWh for the 6 months ended 31 December 2021 and 302 GWh for the 6 months ended 31 December 2020

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1. Includes generation from Turitea wind farm. Due to accounting changes, pre-commissioning generation volumes are now recognised in EBITDAF
2. Includes generation from Tararua, Mahinerangi and Waipipi wind farms
3. Net Position is Physical and Financial Generation (excluding Wind PPA volumes) less Physical Purchases and Financial Sales

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE	02

For personal use only

• • MARKET DATA
• ELECTRICITY GENERATION BY COMPANY FOR THE THREE MONTHS ENDED 31 DECEMBER

MERCURY	Financial Year Q2 2022	Financial Year Q2 2021
MERIDIAN ENERGY
CONTACT ENERGY
GENESIS ENERGY
TRUSTPOWER		6%		7%
OTHER	3%		17%
19%	4%
	13%
			17%

21%		36%
	38%
	19%

Source: Electricity Authority

> SHARE OF ELECTRICITY SALES (GWh) FOR THE THREE MONTHS ENDED 31 DECEMBER (EXCLUDING CFDs)

	MERCURY	Financial Year Q2 2022	Financial Year Q2 2021
	OTHER	13%	11%

87%

89%

Source: Mercury Purchases and Transpower SCADA

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE	03

For personal use only

> OTAHUHU WHOLESALE PRICE AND NATIONAL HYDRO STORAGE LEVELS

AVERAGE NATIONAL STORAGE		FY2021 NATIONAL STORAGE
FY2022 NATIONAL STORAGE		ROLLING 12 MONTH AVERAGE OTA PRICE
ROLLING 12 MONTH AVERAGE BEN PRICE

	4500											$200
	4000											$180
	3500											$160
	3000											$140
GWh	2500												$/MWh
											$120
2000
	1500											$100
	1000											$80
	500											$60
	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

FY2021

FY2022

600

500

400

GWh

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	04