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Mercury Quarterly Operational Update

Three months ended 30 September 2020

HYDRO GENERATION DOWN ON RECORD LOW 12-MONTH INFLOWS; GEOTHERMAL GENERATION STABLE

Mercury's hydro generation in the first quarter of FY2021 was 142GWh below average1, decreasing by 170GWh to 1,044GWh. This reflected continued drought conditions with the Lake Taupo catchment experiencing the lowest 12-month inflow sequence to 30 September2 on record. Mercury announced during the quarter that its FY2021 hydro generation forecast reduced by 200GWh to 3,700GWh, more than 300GWh below average. Geothermal generation was stable versus the prior comparable period.

LOW INFLOWS LIFT SPOT PRICES; FY2022 FUTURES INCREASE ON SPECULATION AROUND TIWAI SMELTER EXIT TIMING

Dry hydrological conditions affected both North and South Islands resulting in national hydro storage tracking more than 500GWh below average until late September before lifting due to South Island rainfall, ending the quarter at 172GWh below average. This was reflected in the average spot price for the quarter reaching a record of $136/MWh at Otahuhu3, increasing from $125/MWh in the prior comparable period. The FY2021 futures price also reflected current dry hydrological conditions, increasing from $114/MWh at Otahuhu and $104/MWh at Benmore at the start of the quarter to $122/MWh and $111/MWh respectively.

Longer-term futures prices increased during the quarter as the market appeared to speculate on the likelihood of the Tiwai smelter operation being extended beyond August 2021. FY2022 futures prices ended the quarter at $100/MWh at Otahuhu and $85/MWh at Benmore after falling as low as $69/MWh and $51/MWh respectively during the quarter.

FOCUS ON CUSTOMER VALUE SEES INCREASED SALES YIELDS

Mercury's continued focus on customer value saw the average Commercial & Industrial sales yield (including both physical and financial sales) increase by 8.6%, from $88/MWh in the prior comparable period to $96/MWh, with sales volumes increasing by 130GWh.

The sales yield in the Mass Market segment increased by 6.6% to $137/MWh with volumes decreasing by 60GWh to 832GWh. Customer connections decreased by 6,000 across the quarter to 342,000, 19,000 lower compared to the end of FY2020-Q1.

DEMAND LOWER DUE TO REDUCED INDUSTRIAL ACTIVITY

Demand decreased by 0.6% on a temperature-adjusted basis as industrial sector load (-1.2%) was affected by the shutdown of the 4th potline at the Tiwai Point aluminium smelter and reduced activity at the Marsden Point refinery. This was partially offset by increased demand from the dairy sector (+0.4%) and irrigation (+0.1%) sectors. Demand from the urban (-0.1%), rural (+0.1%) and other (+0.1%) sectors was flat.

1 For quarters ended 30 September since 1999

2 For 12-month periods ended 30 September since 1928

3 For quarters ended 30 September since 1991

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