2020 Interim Results Presentation 26 FEBRUARY 2020
Progress on strategy 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 2
Progress on strategy 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 3
Financial performance 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 4
Dividends Interim dividend declared Interim ordinary dividend declared of 5.70 cps, CPS Ordinary dividend Special dividend Total 86% imputed, unchanged from 1H FY19 10 Capital management interim special dividend 9 8.14 8.14 7.82 7.77 7.54 of 2.44 cps, unimputed 8 7 2.44 2.44 2.44 2.44 Capital management distributions to $625M 2.44 6 since the programme began in August 2015 5 4 Ordinary dividend and capital management 3 5.70 5.70 5.38 5.33 5.10 update later in 2020 2 1 0 2015 2016 2017 2018 2019 Six Months ended 31 December Source: Meridian Dividends declared 1H FY20 1H FY19 cents per share imputation cents per share imputation Ordinary dividends 5.70 86% 5.70 86% Capital management special dividends 2.44 0% 2.44 0% Total 8.14 8.14 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 5
New Zealand energy margin New Zealand energy margin movement Customer and sales volume growth across all $M Physical Financial segments 700 +$94M -$5M Mass market average price flat, upward price +8 pressure in corporate 600 -3 -67 +65 -1 +49 +92 Financial contract, spot generation and -85 +30 hedging revenues all reflected lower 500 wholesale prices 598 Those lower prices also reduced costs in the 510 400 portfolio Higher net physical and lower net financial 300 Energy Res, SMB, C&I sales NZAS sales Generation Cost to Derivative Cost of Net VAS Other Energy positions Margin 31 Agi sales spot supply sales and derivative Margin 31 Dec 18 revenue customers purchases sales and Dec 19 purchases Source: Meridian Refer to pages 38-39 for a further breakdown of New Zealand energy margin 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 6
New Zealand customers Customer sales Customer numbers Sales volume Average price 5% sales volume growth in residential and (ICPs) (GWh) ($/MWh) 10% in small medium business while 1H FY20 maintaining average sales price Residential 205,712 801 Residential, business, agri revenue increased Small medium business 42,308 546 Agricultural 40,661 592 $30M (13%) Large business 21,605 248 39% growth in corporate sales volume at a Total Residential/SMB 310,286 2,187 $116 13% higher average sales price Corporate 3,313 1,474 $93 Corporate sales revenue increased $49M 1H FY19 (57%) Residential 198,740 762 Powershop was the top ranked electricity Small medium business 38,781 496 provider in Consumer NZ’s annual survey Agricultural 37,978 455 Meridian was the top ranked large retailer Large business 18,658 223 Total Residential/SMB 294,157 1,936 $116 Corporate 2,426 1,063 $82 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 7
New Zealand generation NZ average generation price $/MWh 124 150 101 93 Record levels of hydro and wind generation 100 57 44 for a first half financial year 50 Major flood event in early December 2019 0 lifted Meridian’s 1H FY20 inflows to 136% of 2015 2016 2017 2018 2019 Six Months ended 31 December average Source: Meridian Some moderation in wholesale prices during 2020 HVDC capacity Pole 2 Out MW Pole 3 Out 1H FY20, concerns around gas supply remain DC Max: DC Max: 1,400 780MW 500MW Major outages on the HVDC between January Earth Electrode 1,200 Out and April 2020 for reconductoring and DC Max: 1,000 today 400MW replacement works 800 Meridian’s North Island position managed 600 through wind generation and financial 400 contracting 200 Actual level of HVDC transfer depends on 0 North Island reserve availability and pricing 1 8 15 22 29 5 12 19 26 4 11 18 25 1 8 15 22 29 Jan Jan Jan Jan Jan Feb Feb Feb Feb Mar Mar Mar Mar Apr Apr Apr Apr Apr Source: Transpower 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 8
Australian customers Powershop Australia net customer changes Electricity and gas customer growth in all 5,500 states and white label channels electricity gas Reported average electricity sales price 4,500 decline reflects higher amounts paid to 3,500 customers for solar export Average gas sales price decline reflects 2,500 competitive repositioning 1,500 Powershop Australia winner of Roy Morgan’s Electricity Provider of the Year 500 -500 Jan-17 Jun-17 Nov-17 Apr-18 Sep-18 Feb-19 Jul-19 Dec- Source: Meridian 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 9
Australian energy margin Australian energy margin movement Electricity and gas sales have lifted physical $NZ M Physical Financial margin -$7M +$6M 90 Drought conditions and wind farm availability 80 +10 -11 impacted total generation, 13% lower than 1H -13 70 +6 +19 -12 FY19 60 50 Higher net financial position 40 66 65 30 20 10 0 Energy Electricity Gas sales Generation Cost to Derivative Cost of Energy Margin 31 sales spot revenue supply sales and derivative Margin 31 Dec 18 customers purchases sales and Dec 19 purchases Source: Meridian Refer to page 40 for a further breakdown of Australian energy margin 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 10
Operating costs Operating costs Operating costs 6% higher in 1H FY20 Total 31 December 2019 $143m $M Total 31 December 2018 Ōhau refurbishment programme expanded, $135m 2019 2018 60 now $75M (multi-year opex and capex) and 50 48 allows a 10-year deferral of other works 50 49 Growth in Flux UK spend, revenue recovery 44 40 FY20 operating costs expected at the top of 25 30 20 the $280M to $286M range previously 20 24 18 indicated 10 FY20 capex expected at the lower end of the $70M to $80M range previously indicated 0 NZ Wholesale NZ Retail Australia Other IFRS 16 reduction in full year FY20 operating Six Months ended 31 December Source: Meridian costs of $6M (compared to FY19) Offsetting increase in lease costs and depreciation (below EBITDAF) 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 11
EBITDAF Record level of 1H FY20 EBITDAF 1 , +20% on Group EBITDAF movement 1H FY19 supported by higher customer sales $M Higher asset maintenance/refurbishment costs 500 and lower Australian generation -1 -3 0 -8 Transmission costs include $5M Clutha Upper +88 Waitaki Lines Project support 400 Lower 2H FY20 wholesale prices and HVDC outages will weigh on NZ earnings run rate 465 300 389 Group EBITDAF $M Interim Final half-year Total 1,000 838 800 666 657 650 200 449 600 EBITDAF 31 NZ energy Aus energy Other revenue Transmission Operating EBITDAF 31 Dec 18 margin margin expenses expenses Dec 19 303 337 318 Source: Meridian 400 465 200 389 354 332 329 0 2016 2017 2018 2019 2020 1 Earnings before interest, tax, depreciation, amortisation, Financial Year ended 30 June Source: Meridian changes in fair value of hedges and other significant items 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 12
Below EBITDAF 15% increase in depreciation from June 2019 Underlying npat revaluation (+$1B) $M $6M decrease in NPBT 1 from fair value of Interim Final half-year Total 400 electricity hedges from changing forward 333 electricity prices ($20M increase in 1H FY19) 300 $6M increase in NPBT from fair value of 233 221 189 treasury instruments ($15M decrease in 1H 206 200 FY19) 111 90 102 Significant 1H FY20 increases in NPAT 100 184 (+26%) and Underlying NPAT 2 (+28%) 144 131 122 104 Net debt EBITDAF stable at 1.7 times 0 2016 2017 2018 2019 2020 IFRS 16 now adopted, no restatement of Financial Year ended 30 June comparatives, $6M full year EBITDAF Source: Meridian increase 1 Net profit before tax 2 Net profit after tax adjusted for the effects of non-cash fair value movements and other one-off items 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 13
Markets and regulation 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 14
New Zealand wholesale prices Otahuhu ASX futures price settment $/MWh 220 180 Wholesale electricity market continues to price in gas supply concerns 140 Notably OMV’s January 2020 announcement 100 of further, unplanned issues with Pohokura 60 supply Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 Early December 2019 inflow event required 31 August 2018 31 January 2020 actual since September 2018 significant flood management in both Source: ASX Spot wholesale prices and demand catchments GWh $/MWh National demand Otahuhu Benmore 200 130 Late December 2019 to early January 2020 HVDC outage 180 commenced wholesale price declines in line with Christmas 160 120 140 demand reduction 120 100 110 Some price separation since commencement 80 of HVDC outages, most notable in February 60 100 40 2020 20 0 90 1-Dec-19 15-Dec-19 29-Dec-19 12-Jan-20 26-Jan-20 Source: Electricity Authority, Meridian 26 FEBRUARY 2020 2020 INTERIM RESULTS PRESENTATION 15
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