MCY - Quarterly Operational Update

Friday 21st October 2022

Quarterly Operational Update for the three months ended 30 September 2022.

QUARTERLY HIGHLIGHTS

>FY23 hydro generation forecast at 4,500GWh.

>Retail connection growth steady

>Forward electricity prices lift

COMMENTARY

Mercury's quarterly operating update now includes the impact of the Trustpower retail business resulting in higher mass market connections, volumes and prices versus the prior period.

Generation production across all fuel types lifted versus the prior comparable period (pcp), with Waikato catchment inflows trending at the 98th percentile for the quarter boosting hydro production by 502GWh to 1,455GWh. FY23 hydro generation is now forecast at 4,500GWh based on current storage and production year-to-date. Lake Taupo is 85% full. Hydro spill for the quarter was 289GWh as high Taupo lake levels were managed by increased releases from Taupo. Geothermal generation lifted to 688GWh versus 607GWh in the pcp due mostly to Kawerau turbine outage in July 2021. Total wind generation was 400GWh versus 233GWh in the pcp, reflecting a full quarter of production across all of Mercury's windfarms (ex-Tilt windfarms acquired on 3 August 2021 and Turitea North which achieved full operation in January 2022).

Spot prices retreated during the quarter and were around 50% lower than 1Q22 levels averaging $70/MWh at Otahuhu (Auckland) and $63/MWh at Benmore (central South Island) due to extremely wet conditions nationally (also 99th percentile). This reduced forward pricing for FY23, pulling Auckland futures prices back to $155/MWh. However futures prices remain elevated in FY24-CY26 as high cost thermal generation lifts forward prices, averaging around $190/MWh over FY24-FY25. National demand rose by 1% for the quarter, noting the pcp was adversely affected by Covid and lockdown in Auckland.

Sales to customers rose strongly versus the pcp with the inclusion of the Trustpower retail business lifting mass market sales to 1,325GWh for the quarter. Total connection growth across all products (electricity, gas, telco) lifted by 4,000 over the quarter with electricity customer connections stable at 574k. Sales to C&I (physical and financial) lifted by over 100GWh to 911GWh. Mass market yields were almost $14/MWh higher mostly due to the inclusion of Trustpower retail customers. C&I yields (physical and financial) also rose by $14/MWh to $122/MWh, reflecting the strongly rising forward curve repricing contract renewals. Longer dated supply contracts with C&I customers have become more common to reduce the impact of medium-term energy costs. Other sell CFDs lifted very strongly (up almost 30%) to nearly $130/MWh due to tactical selling into the futures market over Q1 to shore up prices for higher generation against a soft spot price environment.

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

ENDS

Quarterly Operational Update Q1 FY2023

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