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Mercury Quarterly Operational Update

Three months ended 31 December 2020

HYDRO GENERATION FLAT, LAKE TAUPO STORAGE LIFTED PRIOR TO SEASONALLY LOW INFLOW PERIOD

Mercury's hydro generation for the quarter was flat versus the prior comparable period as Mercury lifted hydro storage leading into the historically dry January quarter. Storage in Lake Taupo increased during the quarter from 254GWh to 456GWh at the end of the quarter, 21GWh above average1. Higher than expected inflows also saw Mercury's FY2021 hydro generation forecast increase by 200GWh to 3,900GWh.

Geothermal generation in FY2021-Q2 of 659GWh was 63GWh higher than the prior comparable period which was affected by several maintenance outages.

SPOT PRICES REMAIN ELEVATED DUE TO LOW SOUTH ISLAND INFLOWS AND THERMAL FUEL CONSTRAINTS

South Island hydrological inflows were below-average for the quarter resulting in decreasing national hydro storage, which ended the quarter 639GWh below average1. This combined with thermal fuel constraints saw prices increase from $102/MWh at Otahuhu and $87/MWh at Benmore in FY2020-Q2 to $117/MWh and $103/MWh respectively in the most recent quarter.

FUTURES LIFT REFLECTS HYDROLOGY, THERMAL FUEL CONSTRAINTS AND TIWAI SMELTER CONTRACT EXTENSION

Dry hydrology and thermal fuel concerns saw the FY2021 futures price increase from $122/MWh at Otahuhu and $111/MWh at Benmore at the start of the quarter to $136/MWh and $121/MWh respectively. Longer-dated futures also increased with the FY2022 futures price lifting from $100/MWh to $119/MWh at Otahuhu and from $85/MWh to $101/MWh at Benmore.

Following the quarter, it was announced that the electricity contract behind the Tiwai Point aluminium smelter would be extended to the end of 2024, securing smelter operations. This saw a further lift in FY2022 futures prices which were $130/MWh at Otahuhu and $115/MWh at Benmore as at 20 January 2021.

SALES VOLUMES AND YIELDS LIFT AS MERCURY MAINTAINS FOCUS ON CUSTOMER VALUE

Physical sales volumes increased from 1,002GWh in FY2020-Q2 to 1,039GWh in the most recent quarter. Commercial and Industrial sales volumes increased by 94GWh to 433GWh but were partially offset by Mass Market sales volumes which decreased by 57GWh to 606GWh.

Mercury's focus on customer value saw sales yields in the Mass Market segment increase by 7.7% from $129/MWh to $139/MWh and in the Commercial and Industrial segment by 9.1% from $79/MWh to $86/MWh. Customer connections decreased by 6,000 to 336,000 across the quarter, 20,000 lower compared to the end of FY2020-Q2.

BROAD LIFT IN ADJUSTED DEMAND WITH WEAKER INDUSTRIAL SECTOR LOAD THE EXCEPTION

National demand increased by 0.3% on a temperature-adjusted basis (down -0.4% on an unadjusted basis) with positive contributions from the urban (+0.3%), rural (+0.1%), dairy (+0.2%), irrigation (+0.5%) and other (+0.2%) sectors. Industrial demand decreased (-1.0%) due to reduced load at the Tiwai Point aluminium smelter and other major industrial users.

1 For quarters ended 31 December since 1999

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