2018 INTERIM RESULTS PRESENTATION. MERIDIAN ENERGY LIMITED - PowerPoint PPT Presentation

2018 INTERIM RESULTS PRESENTATION. MERIDIAN ENERGY LIMITED

Opening comments. • Challenges of two significant dry periods in 2017 • 749 GWH of new Australian generation capacity • Retail platform decision in April 2018 • New government’s target of 100% renewable generation by 2035 • Exec changes: Julian Smith and Mike Roan Meridian Energy Limited Interim Results 2018 2

Financial snapshot. Dividend declared Operating Underlying cash flow 7.82cps NPAT 1 NPAT 2 $162m $109m $104m 1% higher 20% lower 21% lower 13% lower NZ energy Aus energy EBITDAF 3 margin 4 margin $452m $329m $57m 7% lower 19% higher 7% lower Operating Transmission Costs Costs $127m $63m 4% higher 5% lower 1. Net profit after tax 2. Net profit after tax adjusted for the effects of of non-cash fair value movements and other one-off items Meridian Energy Limited Interim Results 2018 3 3. Earnings before interest, tax, depreciation, amortisation, changes in fair value of hedges and other significant items 4. See definition on page 32

OUR MARKETS Meridian Energy Limited Interim Results 2018 4

New Zealand. MOVEMENT IN NATIONAL DEMAND 1.1% demand growth in the last 12 months GWh +5 SOUTH • Higher irrigation load CANTER- +32 BURY +7% • Excluding irrigation regions, growth is +145 around 0.7% in the last 12 months +127 +53 41.2k • Growth occurred in all urban areas +70 • Most regions also recorded growth 40.7k • Notable exception was the South Island’s Calendar year Northland/ Waikato Christchurch Canterbury Otago/ Rest of NZ Calendar year West Coast (OceanaGold Reefton mine 2016 Auckland Southland 2017 closure in December 2016) Source: Electricity Authority Meridian Energy Limited Interim Results 2018 5

New Zealand. NATIONAL STORAGE BY ISLAND GWH North Island Actual North Island Average South Island Actual South Island Average Variable rainfall • Central South Island rainfall well below average in 2017 • Upper North Island rainfall well above average in 2017 • Higher North Island hydro generation in Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 1H FY18 Source: NZX, Meridian SOIL MOISTURE ANOMALY 7 DECEMBER 2017 2 FEBRUARY 2018 Ex-cyclone Fehi impacts in early February • Fehi inflows have provided lift in South Island storage (largest Waitaki rain event in five years) • However storage levels still below average • Reduction in irrigation demand Source: NIWA Source: NIWA Meridian Energy Limited Interim Results 2018 6

New Zealand. BENMORE ASX FUTURES SETTLEMENT PRICE Wholesale prices $/MWh 110 • Higher thermal utilisation as wholesale 100 prices rose to signal hydro scarcity 90 80 • No risk to security of supply from lower 70 South Island hydro generation 60 50 • Fehi inflows have seen reduced spot and Q1 2018 Q3 2018 Q1 2019 Q3 2019 Q1 2020 Q3 2020 Q1 2021 Q3 2021 forward wholesale prices 30 June 2017 29 September 2017 30 November 2017 29 December 2017 31 January 2018 7 February 2018 Source: Meridian Meridian Energy Limited Interim Results 2018 7

New Zealand. KEY POINTS OF MERIDIAN’S SUBMISSION Electricity price review • Draft terms of reference published and • NZ market is delivering fair, equitable, efficient and sustainable outcomes for consumers consultation has occurred • the review should focus on: • Scope is broad - “whether the price paid • future regulatory settings (bearing in mind new by end-consumers for electricity is fair technologies and new entrants to sector) and equitable” • review of the Low Fixed Charge Tariff Option • Will consider the entire electricity regulations (a source of inequitable outcomes) market from generation, through • distribution pricing (driving inefficient and transmission and distribution to retail inequitable outcomes) • MBIE is expected to report back to the • the review needs to ensure that outcomes are fair, equitable, efficient and environmentally Minister of Energy in "early 2019” sustainable • Separately, a winter energy payment to • steps to improve regulatory settings need to be superannuitants and beneficiaries has progressed alongside broader social policy to been announced ensure the best outcomes for consumers Meridian Energy Limited Interim Results 2018 8

Australia. National energy guarantee • State support is mixed • Further analysis on multiple fronts • Deadline for final agreement is mid 2018 ACCC report • Preliminary report has concerns about NEM operation and affordability • Final report with reform recommendations in June 2018 Thwaites review (Victoria) • Victorian government is still considering the review panel’s final report • Appears broad support for the nine recommendations which do not advocate re-regulation and these may be advanced first Meridian Energy Limited Interim Results 2018 9

OUR OPERATIONS Meridian Energy Limited Interim Results 2018 10

NZ customers. SALES AVERAGE CUSTOMER SALES Higher customer numbers PRICE 1 CUSTOMER VOLUME NUMBERS (GWH) ($/MWH) • Growth of 3% in the last 6 months 1H FY2018 Residential 188,698 720 12% higher sales volume, 9% excl Agri Small medium business 36,918 477 • In all segments except Residential Agricultural 37,741 606 • Marginal reduction in average price with Large business 17,159 224 higher weighting of agricultural and Total Residential/SMB 280,516 2,027 $118 corporate load Corporate 1,880 1,114 $81 Commercial solar • MoU with Kiwi Property to install 650kW 1H FY2017 of solar across four major shopping malls Residential 185,871 748 Small medium business 34,624 438 Electric vehicles Agricultural 36,582 480 • New EV tariff launched in 6 regions: 20% Large business 16,769 220 discount and one year's free charging Total Residential/SMB 273,846 1,886 $121 • On target to convert 50% of Meridian’s Corporate 1,868 911 $84 passenger fleet to electric by June 2018 Meridian Energy Limited Interim Results 2018 11 1. Including distribution costs, discounts and doubtful debts

NZ customers. MOVEMENT IN RETAIL SEGMENT EBITDAF Segment EBITDAF decline of $6m (11%) $M ENERGY • Higher customers sales: revenue and MARGIN -$1M purchase costs both up; energy margin +22 -23 largely flat -1 -4 • Promotional investment to support this 55 49 customer growth EBITDAF 31 Contracted Cost to Other Operating EBITDAF 31 • Stable cost to serve on a per customer Dec 16 sales supply revenue expenses Dec 17 contracted basis sales Source: Meridian Average market churn rates remain high ICP CHURN • Meridian Retail churn remains below MOVE-IN SWITCH TRADER SWITCH % industry averages 22.2% • Powershop has higher than market average churn, reflecting customer 13.0% 12.7% 11.7% demographics 7.9% 7.0% Meridian Powershop Industry Meridian Powershop Industry Source: Electricity Authority Meridian Energy Limited Interim Results 2018 12

NZ wholesale and generation. COMBINED CATCHMENT INFLOWS % % of monthly average Two dry periods in close succession 153% 140% • Four months of below average inflows 123% prior to July 2017 with each of the last 102% 100% 93% four months also below average 77% 70% 65% 62% 57% 61% 61% • Resulted in a 1H FY18 reduction in 44% physical generation (16% lower) and Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 increase in acquired generation (162% higher) Source: Meridian • Dry and warm South Island temperatures resulted in low seasonal snow storage and 30-year high melt • Long-term climate predictions are for lower snow amounts, rising snowlines, higher winter and overall inflows Source: Meridian Meridian Energy Limited Interim Results 2018 13

Australia. MOVEMENT IN AUSTRALIA SEGMENT EBITDAF Segment EBITDAF +$6M (20%) $M • Higher retail sales volume (+20%) ENERGY • Average generation price +18%, greater MARGIN +$9M +7 exposure to increasing merchant prices -15 +17 -1 -2 Generation acquisitions 36 30 • GSP ($168M ex stamp duty, effective 1 April 2018) EBITDAF 31 Contracted Generation Cost to Transmission Operating EBITDAF 31 Dec 16 sales revenue supply expense expenses Dec 17 • Hume, Burrinjuck and Keepit hydro contracted Source: Meridian sales • Seasonal generation, expected annual output >280GWH AUSTRALIAN CUSTOMERS • Purchase now approved under Australian Foreign Acquisitions and Takeover Act 101,460 100,524 90,631 • PPA’s (466GWH from mid 2018 into 2019) 77,970 • Kiamal solar, Crudine Ridge and Salt 63,673 Creek wind • Tenure to 2030 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Source: Meridian Meridian Energy Limited Interim Results 2018 14

Powershop UK. • 19,500 nPower ICP’s through energy only soft launch • White label offers launched • Dual fuel functionality now delivered, ready for full launch • Customer uptake dependent on nPower’s sales and marketing Meridian Energy Limited Interim Results 2018 15