QUARTERLY OPERATIONAL UPDATE Three months ended 31 March 2018
>> QUARTERLY HIGHLIGHTS
SECOND HIGHEST Q3 GENERATION1
4,700 GWh
1,035 GWh HYDRO GENERATION; 114% OF AVERAGE
FULL YEAR HYDRO GENERATION FORECAST UP 150GWh
RETAIL COMPETITION INTENSE
ANNUAL CHURN FOR ALL MERCURY BRANDS UP 0.9% VERSUS PCP; MARKET CHURN UP 1.2%
>> COMMENTARY LOW STORAGE LEADS TO RECORD HIGH JANUARY PRICES; CYCLONES ARRIVE FEBRUARY-MARCH Average wholesale prices remained elevated for the quarter ended 31 March 2018 being $85/MWh at Otahuhu and $79/MWh at Benmore, up over $30/MWh on the prior comparable period. However prices varied significantly in the quarter with the January average price hitting a record high due to national storage beginning the quarter at 82% of average and January national inflows being significantly below average. This was contrasted with February and March as large inflows associated with cyclones Fehi and Gita suppressed wholesale prices and pushed national hydro storage to 114% of average by the end of the quarter. ABOVE AVERAGE HYDRO GENERATION OFFSETS GEOTHERMAL OUTAGE Mercury continued to benefit from high inflows into the Waikato catchment with hydro generation in the quarter reaching 114% of average1. The increased hydro contribution offset a reduction in geothermal output at Kawerau due to a planned two-yearly maintenance outage. Favourable hydrological conditions have also lead to our full year hydro generation forecast being lifted to 4,700GWh (up 150GWh on guidance provided with the Q2 FY2018 Operational Update). Mercury's LWAP/GWAP ratio of 1.08, relative to 1.02 in the prior comparable period, was negatively affected by the timing of inflows and by high prices coinciding with scheduled geothermal outages. HIGH LEVELS OF RETAIL COMPETITION; INCREASED MARKET CHURN Customer numbers decreased by 2,000 over the quarter to 391,000 due to intense retail competition with 48 retail brands now competing in the New Zealand market, up 12 from the previous year. The decrease was spread across all Mercury group brands with the Mercury brand itself experiencing its first quarterly decline following six consecutive quarters of growth. Intense retail competition has also impacted churn levels with Mercury's annualised churn for all brands being 19.2% for the year to 28 February 20182 and up 0.9% compared to the same period the year prior. This remains below market with market churn also increasing by 1.2% to 21.1%. Mercury continues to 'Make It Easy' for our customers with 10,000 customers choosing to take up our offer to fix their prices under our 'Beat The Price Rise' campaign. The total number of customers on fixed-term contracts was more than 127,000 at the end of the quarter, however down on the number at the start of the financial year as some customers chose not to re-fix as their fixed terms expired. The average energy VWAP was up 3% to $113.99/MWh as average prices for both residential and commercial customers rose relative to the prior year. URBAN DEMAND GROWTH NEGATED BY REDUCTION IN IRRIGATION AND DAIRY LOAD National demand was down 0.8% versus the prior comparable period after normalising for temperature (down 1.5% on an unadjusted basis). Lower irrigation demand (-1%) was the most negatively impacted sector with lower demand also seen in the dairy (-0.2%), rural (-0.3%) and industrial (-0.2%) sectors. The contraction in these sectors was partially offset by urban demand growth (up 1% after adjusting for temperature). 1
For quarters ended 31 March since 1999 2018 Electricity Authority switching data was not available at the time of release
2 March
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
01
>> OPERATING STATISTICS Three months ended 31 March 2018
OPERATING INFORMATION
VWAP 1 ($/MWh) 113.99
ELECTRICITY SALES FPVV sales to customers
Volume (GWh) 999
FPVV sales to residential customers FPVV sales to business customers FPVV purchases from market Spot customer purchases Total NZEM Purchases
87.92
ELECTRICITY CUSTOMERS ('000) North Island Customers South Island Customers Dual Fuel Customers
Hydro Geothermal (consolidated) Geothermal (equity accounted) Total
3 4
1
3 4
VWAP 1 ($/MWh) 113.70
Volume (GWh) 3,334
VWAP 1 ($/MWh) 111.82
Volume (GWh) 3,431
488
496
1,792
1,798
511
540
1,542
1,633
1,055 211
1,094 218
3,522 681
3,624 672
1,266
53.70
1,312
94.36
4,203
VWAP ($/MWh) 87.34 75.39 78.21
348 43 48 Volume (GWh) 438 839 296 401 Volume (GWh) 1,035 591 45
VWAP ($/MWh) 55.21 49.41 50.30
348 42 44 Volume (GWh) 352 775 324 423 Volume (GWh) 954 628 54
VWAP ($/MWh) 91.07 83.01 86.83
Volume (GWh) 1,157 2,750 938 1,593 Volume (GWh) 3,729 1,908 141
82.87
1,671
52.82
1,636
88.31
5,778
LWAP/GWAP CARBON EMISSIONS ('000 TONNES CO2) METRIX AMI METERS ('000)
2
Volume (GWh) 1,036
Nine months ended 31 March 2017
390
2
ELECTRICITY GENERATION
VWAP 1 ($/MWh) 110.70
Nine months ended 31 March 2018
391
CONTRACTS FOR DIFFERENCE Buy CfD Sell CfD End User CfD Net Sell CfD
Three months ended 31 March 2017
54.48
4,296
VWAP ($/MWh) 55.16 48.94 49.94
Volume (GWh) 1,256 2,576 996 1,320 Volume (GWh) 3,321 1,918 168
52.79
5,407
1.08
1.02
1.07
1.03
68
80
256
266
410
401
VWAP is volume weighted average energy only price sold to FPVV customers after lines, metering and fees Includes Virtual Asset Swap volumes in both Buy and Sell CfD volumes of 148 GWh for the 3 months ended 31 March 2018 and 172 GWh for the 3 months ended 31 March 2017 and of 500 GWh for the 9 months ended 31 March 2018 and 525 GWh for the 9 months ended 31 March 2017 Includes Mercury’s 65% share of Nga Awa Purua generation Tuaropaki Power Company (Mokai) equity share
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
02
>> MARKET DATA > ELECTRICITY GENERATION BY COMPANY FOR THE THREE MONTHS ENDED 31 MARCH Financial Year Q3 2018
MERCURY MERIDIAN ENERGY CONTACT ENERGY GENESIS ENERGY TRUSTPOWER / TILT OTHER
Financial Year Q3 2017
7% 4%
7%
18%
5%
17%
15%
17%
32%
35% 21%
22%
Source: Electricity Authority
> SHARE OF ELECTRICITY SALES (GWh) FOR THE THREE MONTHS ENDED 31 MARCH (EXCLUDING CFDs) MERCURY OTHER
Financial Year Q3 2018
Financial Year Q3 2017
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 AVERAGE NATIONAL STORAGE FY2018 NATIONAL STORAGE ROLLING 12 MONTH AVERAGE BEN PRICE
FY2017 NATIONAL STORAGE ROLLING 12 MONTH AVERAGE OTA PRICE
4500
$90
4000
$85 $80
3500
$75
3000
$65 2000
$/MWh
GWh
$70 2500
$60 1500
$55
1000
$50
500
$45 $40
0 Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
> TAUPO STORAGE
AVERAGE SINCE 1999
FY2017
FY2018
600
500
GWh
400
300
200
100
0 Jul
Aug
Sep
Oct
Nov
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
Dec
Jan
Feb
Mar
Apr
May
Jun
04
> OTAHUHU ASX FUTURES SETTLEMENT PRICE
AS AT 31 MARCH 2017
AS AT 30 SEPTEMBER 2017
AS AT 31 DECEMBER 2017
AS AT 31 MARCH 2018
$/MWh
$78.79
$79.81
$76.60
$78.08
$73.68
$80.50
$74.70
$77.61
$70.83
$80
$70.18
$100
$84.40
$96.29
$120
$60
$40
$20
$0 FY18
FY19 Financial Year
FY20
> BENMORE ASX FUTURES SETTLEMENT PRICE
AS AT 31 MARCH 2017
AS AT 30 SEPTEMBER 2017
AS AT 31 DECEMBER 2017
AS AT 31 MARCH 2018
$/MWh
$71.00
$73.65
$71.38
$71.93
$67.53
$77.59
$71.26
$67.06
$64.25
$80
$80.78
$100
$71.40
$96.04
$120
$60
$40
$20
$0 FY18
MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
FY19 Financial Year
FY20
05
> NATIONAL CONSUMPTION (NON-TEMPERATURE ADJUSTED) NATIONAL CONSUMPTION
TIWAI POINT ALUMINIUM SMELTER CONSUMPTION
10,000 9,000 8,000
1,230
1,234
1,240
1,256
1,237
1,235
7,991
8,021
8,233
8,240
8,185
8,045
Q3 2013
Q3 2014
Q3 2015
Q3 2016
Q3 2017
Q3 2018
7,000 GWh
6,000 5,000 4,000 3,000 2,000 1,000 0
Source: Transpower Information Exchange
> AUCKLAND CLIMATE SUMMARY ( ⁰C) FINANCIAL YEAR 2018 2017 2016 2015 2014 Historical Average (since 1999)
Q1 12.3 12.1 11.4 11.9 12.3 11.9
Q2 17.2 16.1 16.0 15.9 16.7 16.1
Q3 20.7 19.3 20.6 19.9 18.8 19.4
Q4 14.3 15.3 14.3 14.8 14.1
Source: Met Service
> TOTAL CONSUMER RETAIL SWITCHING (ICPs) MONTHLY NZ MARKET CHURN (LHS)
ANNUAL NZ MARKET CHURN % (RHS)
50000
25%
45000 40000
20%
30000
15%
25000 20000
10%
% Churn
Monthly ICPs
35000
15000 10000
5%
5000 0 Jan-18
Jul-17
Jul-16
Jan-17
Jan-16
Jul-15
Jan-15
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
0%
Source: Electricity Authority MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE
06