NZM - Quarterly Operational Update

Tuesday 19th April 2022

Mercury's hydro generation decreased by 57GWh versus the prior comparable period as inflows into Lake Taupo trended below average at the 19th percentile, 175GWh below average. During the quarter, record low inflows in January were offset by a rain event associated with Cyclone Dovi in mid-February. The Taupo lake level started and ended the last quarter above average, closing at 58% full, 66GWh above average.

Geothermal generation remained steady at 653GWh in FY2022-Q3 (versus 658GWh in FY2021-Q3) and spot price linked wind generation, from Mercury's Turitea North wind farm, was 99GWh. Generation from PPA-linked wind farms was 226GWh.

DECLINING NATIONAL HYDRO STORAGE LIFTS SPOT PRICES

Conditions were dry across both the North and South Islands as 8th percentile inflows saw national hydro storage end the quarter 309GWh below average. South Island inflows were particularly affected with record low inflows in both the January and March months. This was reflected in elevated spot prices in FY2022-Q3 of $176/MWh at Otahuhu and $149/MWh at Benmore, down from $206/MWh and $203/MWh respectively in the prior comparable period but still above historical averages.

FUTURES PRICES LIFT DUE TO FUEL CONSTRAINTS; LONGER-DATED FUTURES REFLECT THERMAL FUEL COST PRESSURES

Futures prices responded strongly to dry hydrological conditions with the FY2022 price increasing at Otahuhu and Benmore from $125/MWh and $103/MWh respectively to $167/MWh and $143/MWh across the quarter. Longer-dated futures also increased with the Otahuhu FY2023 and FY2024 futures lifting by $47/MWh and $34/MWh respectively to $191/MWh and $163/MWh, reflecting increased expectations of thermal costs with carbon prices remaining at historically high levels of ~$75/NZU.

COMMERCIAL & INDUSTRIAL PHYSICAL SALES LIFT TO REPLACE VOLUME FROM NORSKE SKOG SETTLEMENT

The Commercial & Industrial segment average yield (including both physical and financial sales) increased by 14% from $94/MWh in FY2021-Q3 to $107/MWh in FY2022-Q3 due to re-contracting and the early termination of a CfD with Norske Skog Tasman. CfD sales volumes decreased by 127GWh, from 381GWh in FY2021-Q3 to 254GWh in the current quarter, but were offset by an increase in physical sales of 118GWh, from 477GWh to 595GWh.

Mercury continues to look to maintain market share, however mass market customer numbers declined in the quarter, from 327,000 to 324,000, reflected in Mass Market sales volumes decreasing from 544GWh to 528GWh. Mass market yield increased by 2%, from $141/MWh in FY2021-Q3 to $144/MWh in the most recent quarter.

IRRIGATION AND INDUSTIAL SECTORS LEAD DEMAND DOWN

Temperature-adjusted demand decreased by 0.5% (-0.7% on an unadjusted basis) led by decreases in the irrigation (-1.1%) and industrial (-0.6%) sectors. These were partially offset by increases in the urban (+0.8%), dairy (+0.2%) and rural (+0.1%) sectors.

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

ENDS

Quarterly Operational Update Q3 FY22

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