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Mercury Quarterly Operational Update

Three months ended 30 June 2020

BUSINESS ACTIVITY RESUMES, REFURBISHMENT COMPLETED AT WHAKAMARU AND ARATIATIA

Mercury successfully executed a staged return to normal operations in Q4-FY2020, following the nationwide COVID-19 lockdown, with office-based staff returning and construction resuming at the Turitea wind farm. Maintenance at our generation sites continued with major refurbishments completed at Whakamaru and at Aratiatia early in July.

HYDRO GENERATION LOWER DUE TO DROUGHT; GEOTHERMAL STEADY

Mercury's hydro generation decreased from 796GWh in Q4-FY2019 to 727GWh in the most recent quarter due to exceptionally dry hydrology with Q4-FY2020 Waikato catchment inflows at the 1st percentile1. Low rainfall in the quarter continued a sequence of low hydrological conditions with inflows in H2-FY2020 also being at the 1st percentile2, resulting in full-year hydro generation decreasing from 4,006GWh in FY2019 to 3,712GWh in FY2020. Lake Taupo hydro storage tracked below-average during the quarter ending at 193GWh, 82GWh below average3.

Geothermal generation was maintained at 671GWh in Q4-FY2020 versus 679GWh in the same quarter in FY2019 seeing full year geothermal production 3% lower than FY2019 due to major maintenance.

SALES YIELDS LIFT AS MERCURY FOCUSES ON CUSTOMER VALUE

Mercury's customer value focus saw Commercial & Industrial segment sales volumes increase from 666GWh in Q4-FY2019 to 731GWh in Q4-FY2020 with the average sales yield (including both physical and financial sales) also lifting by 8.3% (from $86/MWh to $93/MWh). The Mass Market segment yield increased by 6.4% from $128/MWh to $136/MWh with reduced acquisition activity resulting in lower volumes.

POST-LOCKDOWN SPOT PRICES REFLECT RETURN TO NORMALITY AND DECLINING NATIONAL HYDRO STORAGE

Demand in the most recent quarter decreased by 4.2% on a temperature-adjusted basis (4.8% on an unadjusted basis) due to the COVID-19 lockdown. National demand was 14% lower than the pcp in April, when activity restrictions were most severe, but returned to similar levels to the pcp in May and June as lockdown restrictions eased.

Spot prices in the quarter followed demand, being significantly below-average at $48/MWh at Otahuhu and $42/MWh at Benmore in April. The easing of lockdown restrictions combined with declining national hydro storage saw spot prices recover strongly, resulting in a quarterly average spot price of $115/MWh in Auckland, in line with the prior comparable period.

HIGH FUTURES PRICES CHECKED BY TIWAI EXIT ANNOUNCEMENT

As at 30 June, FY2022 futures were $96/MWh and $80/MWh at Otahuhu and Benmore. Following the announcement of the Tiwai aluminium smelter exit, FY2022 futures have reduced to $79/MWh and $53/MWh respectively, severely impacting the South Island due to known transmission constraints.

1 For quarters ended 30 June since 1927

2 For 6-monthly periods ended 30 June since 1927

3 For quarters ended 30 June since 1999

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