ITS OUR FUTURE. MERIDIAN ENERGY LIMITED 2017 ANNUAL RESULTS - PowerPoint PPT Presentation

Source: https://www.meridianenergy.co.nz/assets/Investors/Reports-and-presentations/Annual-results-and- reports/2017/Meridian-Energy-Annual-Results-presentation-2017.pdf See "VWAP" for weighter cost of generation IT’S OUR FUTURE. MERIDIAN ENERGY LIMITED 2017 ANNUAL RESULTS PRESENTATION

“That we are a sustainable business is increasingly important to all our stakeholders, and offers significant benefits…” Meridian Energy Limited Annual Results 2017 2

GENERATION RETAIL MARKETS GROWTH STRATEGY Sustainability is what we do Financial Assets and technology People and expertise Relationships and reputation RESOURCES Natural resources Reliable & affordable VALUE electricity VALUE Sustainable shareholder TO Renewable energy TO US returns Reduction in NZ’s carbon OTHERS Top notch generation assets footprint Engaged employees NZ’s economic prosperity Strong brand and customer Long-life assets loyalty UNITED Environmental stewardship Social licence to operate NATIONS Respect for Māori in NZ Access to ‘fuel’ Prosperous communities SUSTAINABLE Innovation and growth Satisfying, safe & fair DEVELOPMENT employment Meridian Energy Limited Annual Results 2017 3 GOALS

“In FY17 we had no significant harm injuries and…were a category finalist in the IBM Kenexa Best Places to Work survey...” Meridian Energy Limited Annual Results 2017 4

Financial snapshot. Dividend declared Operating Underlying cash flow 18.91cps NPAT NPAT $470m $197m $218m 3% higher 4% higher 6% lower NZ energy Aus energy EBITDAF margin margin $653m $938m $75m 0.5% higher Operating Transmission Costs Costs $249m $130m stable Meridian Energy Limited Annual Results 2017 5

OUR MARKETS Meridian Energy Limited Annual Results 2017 6

New Zealand. MOVEMENT IN NATIONAL DEMAND GWH +39 -52 Multiple factors resulting in flat demand +20 SOUTH -66 CANTER- BURY • +Positive macro economic indicators -10% -202 • +Cooler winter temperatures (average) 41.2k +8 • -Lower irrigation load from wet spring and summer 40.9k • Efficiency gains are a continuing factor, 2016 Northland Auckland Central NI West Coast Canterbury Rest of NZ 2017 however hard to isolate Source: Electricity Authority BENMORE ASX FUTURES SETTLEMENT PRICE $/MWh More constrained supply may impact 120 forward prices 100 • Spot and near term prices have been highly sensitive to current low storage 80 • Too early to tell if pricing dynamics have 60 moved 40 Q1 2017 Q3 2017 Q1 2018 Q3 2018 Q1 2019 Q3 2019 Q1 2020 Q3 2020 • A dry period has impacted some spot 30 June 2016 30 June 2017 21 August 2017 exposed customers and may change Source: ASX attitudes to risk Meridian Energy Limited Annual Results 2017 7

New Zealand. NZ CONTROLLED STORAGE AND RISK CURVES Storage is moving away from hydro risk GWH As at 21 August 2017 curves 1 • Risk curves are low probability outcomes • North Island storage has remained high • After a record dry period, recent South Island inflows are nearer average -2016 Oct-2016 Jan-2017 Apr-2017 Jul-2017 Oct-2017 Jan-2018 Apr-2018 • Meridian has used a variety of contracting NZ Storage Mean 1% 2% 4% 10% options including the Genesis swaption Source: Transpower, Meridian • Discretionary generation has been GENERATION AND CONTRACTED SALES reduced and retail acquisition unaffected GWH 74% 85% 83% 91% • Meridian’s storage management has been 286 466 efficient and risk appropriate 169 644 3,702 3,398 3,327 3,214 3,221 2,937 2,963 2,887 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Physical generation Acquired generation Contracted sales 1. Hydro risk curves reflect the risk of extended energy shortages. At the 1% line, there is a 1% chance of controlled lake storage falling to its minimum level in the future, Source: Meridian based on the historical record of lake inflows Meridian Energy Limited Annual Results 2017 8

Australia. AVERAGE DAILY WHOLESALE SPOT PRICES $/MWh 250 The market remains volatile and uncertain 200 • Finkel review Clean Energy Target 150 unlikely to be adopted in the near future 100 • Thermal retirement combined with 50 domestic gas shortages, as a result of LNG exports, has led to increases in 0 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 wholesale prices QLD NSW VIC SA • Along with outages and industrial load Source: AEMO shedding • Political uncertainty and differing state and federal responses • Higher wholesale and retail prices may elevate smaller retailer risk positions • Lower customer growth a possible result • Meridian pursuing medium-term PPA opportunities Meridian Energy Limited Annual Results 2017 9

The UK. First two UK milestones delivered • Electricity and white label milestones delivered on time • nPower soft launch with customer acquisition meeting expectations • Dual fuel milestone in early 2018, followed by full launch • Exploring potential mainland Europe opportunities Meridian Energy Limited Annual Results 2017 10

OUR OPERATIONS Meridian Energy Limited Annual Results 2017 11

NZ wholesale and generation. COMBINED CATCHMENT INFLOWS GWh 83 year average Annual inflows Record low February to June inflows • Dragged a healthy half year storage 13,333 13,010 12,902 position at December 2016 down 12,455 12,190 significantly 10,533 • Resulted in Meridian accessing cover 9,093 under the Genesis swaption since June 2011 2012 2013 2014 2015 2016 2017 • August has seen swaption volumes cease Financial Year ended 30 June Source: Meridian • July 2017 inflows were 93% of average, MERIDIAN'S WAITAKI STORAGE helping stabilise lake levels GWh 3,000 • Meridian’s Waitaki storage was 595 GWh (44%) below average at 31 July 2,000 • Above average inflows in August 2017 have lifted Lake Pukaki storage to 73% of 1,000 595 GWH average (261 GWh below average) BELOW AVERAGE 0 • Lakes Manapōuri and Te Anau are 1-Jan 1-Mar 1-May 1-Jul 1-Sep 1-Nov Average 1979- 2012 2013 2014 together now above average 2015 2016 2017 Source: Meridian Meridian Energy Limited Annual Results 2017 12

NZ retail. ICP CHURN Despite 4% lower retail sales, segment MOVE-IN SWITCH TRADER SWITCH % EBITDAF was up 1% 22.2% • 2% irrigation driven decrease in residential and SMB 1 sales, 2% average 13.3% price increase 12.0% 11.7% 7.1% 7.1% • 8% decrease in Corporate sales, 2% average price decrease with large customer signings in 2H FY17 Meridian Powershop Industry Meridian Powershop Industry Source: Electricity Authority • 1% customer growth and strong operational performance DOUBTFUL DEBTS EXPENSE RETAIL SEGMENT COST TO SERVE 2 $/ICP $7M 310 $6M $5M 294 285 $3M 275 $2M 2013 2014 2015 2016 2017 2014 2015 2016 2017 Financial Year ended 30 June Source: Meridian Financial Year ended 30 June Source: Meridian Meridian Energy Limited Annual Results 2017 13 1. Small and medium business 2. Excluding metering costs and including allocation of corporate costs

Australia. MOVEMENT IN AUSTRALIA SEGMENT EBITDAF $5M (17%) increase in EBITDAF $M ENERGY MARGIN • Powershop retail sales volume 147GWh +$7M -7 (38%) higher at higher average prices +30 -16 • Passed 100,000 customer numbers with -1 -1 a 29% increase during FY17 34 29 • Generation volumes 2% lower, with 2H FY17 volumes 22% lower than 2H FY16 FY16 Contracted Generation Cost to Transmission Operating FY17 EBITDAF sales revenue supply expense Expenses EBITDAF • Although wholesale prices rose, contracted sales Meridian’s hedge position meant Source: Meridian generation revenue did not benefit AUSTRALIAN CUSTOMERS • Exposure to merchant price increases 100,524 during FY18 and 1H FY19 77,970 48,208 13,426 2014 2015 2016 2017 Financial Year ended 30 June Source: Meridian Meridian Energy Limited Annual Results 2017 14

DIVIDENDS Meridian Energy Limited Annual Results 2017 15

Dividends. +3% TOTAL DIVIDENDS DECLARED 4% growth in ordinary dividends declared TOTAL CPS • Final ordinary dividend declared of 8.70 18.91 18.38 18.23 cps, 88% imputed • Brings FY17 full year ordinary dividend declared to 14.03 cps, 88% imputed 13.01 • Represents 84% payout of free cash flow • Capital management final special dividend 2014 2015 2016 2017 of 2.44 cps, unimputed Financial Year ended 30 June Source: Meridian • Brings capital management distributions AMOUNT IMPUTATION to $312.5m since the programme began in CPS % August 2015 FY2017 • FY17 TSR of 17% from a 10% share price Ordinary dividends 14.03 88% increase and 18.61 cps of dividends paid Capital management special dividend 4.88 0% during the year Total 18.91 FY2016 Ordinary dividends 13.50 88% Capital management special dividends 4.88 0% Total 18.38 Meridian Energy Limited Annual Results 2017 16

FINANCIAL PERFORMANCE Meridian Energy Limited Annual Results 2017 17

Summary. Managed dry 2H conditions to report record FY EBITDAF and operating cash flo ws FINANCIAL PERFORMANCE AGAINST PRIOR YEAR $M FY17 FY16 1,013 1,009 653 650 485 470 471 452 249 248 233 218 197 185 130 128 55 59 Energy Trans- Asset Dividend Operating Underlying Operating margin mission NPAT cash flows additions declared costs EBITDAF NPAT +0% -6% +4% +2% -7% +3% +0% +0.5% +6% Source: Meridian Meridian Energy Limited Annual Results 2017 18