MERIDIAN ENERGY LIMITED 2019 INTERIM RESULTS PRESENTATION MERIDIAN ENERGY LIMITED 2019 INTERIM RESULTS PRESENTATION
HIGHLIGHTS 18% increase in interim EBITDAF 5.70 ordinary dividend, a 6% increase cents per share 5% increase in NZ customer numbers Meridian Energy Limited 2019 Interim Results Presentation 2
MARKET UPDATE Meridian Energy Limited 2019 Interim Results Presentation 3
NEW ZEALAND WHOLESALE PRICES OTAHUHU DAILY AVERAGE SPOT PRICE Higher spot and forward wholesale prices $/MWh � Higher wholesale prices since October 600 1H FY19 1H FY18 2018 500 � That marked national storage dropping 400 below average for the first time since 300 February 2018 � And commencement of higher 200 consumption by the Tiwai Point Smelter as 100 new cells were cut in on potline 4 0 � With uncertainty around gas supply as 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec Source: Meridian Pohokura offshore capacity was reduced OTAHUHU ASX FUTURES SETTLEMENT PRICE and Maui pipeline issues were discovered $/MWh 150 � Further 30 days of shutdown on Pohokura offshore wells is expected between 130 February and April 2019 110 � Electricity market is experiencing some 90 periodic thermal plant outages 70 � ASX forward price curve has steadily lifted 50 reflecting the shift in underlying supply Q1 2019 Q3 2019 Q1 2020 Q3 2020 Q1 2021 Q3 2021 Q1 2022 Q3 2022 demand balance 29 June 2018 28 September 2018 31 October 2018 30 November 2018 3 January 2019 31 January 2019 Source: Electricity Authority Meridian Energy Limited 2019 Interim Results Presentation 4
NEW ZEALAND DEMAND REGIONAL ELECTRICITY DEMAND 2018 V 2017 Flat demand in 2018 -1% � Despite lower irrigation volumes in 2018 � 2018 was the second equal warmest year +2% on record, average temperatures above +1% 2017 -2% � Underlying demand growth of 1% excluding +2% irrigation 0% -2% -2% +1% Different, positive views on future demand � Medium term economic growth expected +1% � Policy settings should encourage 0% decarbonisation -8% � Assumptions vary on rate of electrification of the wider energy system -2% -13% +1% 0% +1% Source: Electricity Authority Meridian Energy Limited 2019 Interim Results Presentation 5
TIWAI POINT ALUMINIUM SMELTER TIWAI POINT AVERAGE DAILY LOAD 4 th potline restarted MW � Official opening in early December 620 � New cells have been cut in since October 610 600 2018 590 � Tiwai contracts with Meridian now total 580 622MW 570 � 4 th potline contract is for 50MW and 560 550 represents: 540 � a 10% increase in the plant’s production 530 capacity 1-Jul-18 1-Aug-18 1-Sep-18 1-Oct-18 1-Nov-18 1-Dec-18 Source: Meridian � 1% growth in NZ total electricity demand LME ALUMINIUM PRICES growth USD/TONNE 2,300 � LME prices have declined 13% since June 2,200 2018, however remain above 2017 levels 2,100 2,000 1,900 1,800 1,700 1,600 1,500 2-Jul-18 2-Aug-18 2-Sep-18 2-Oct-18 2-Nov-18 2-Dec-18 Meridian Energy Limited 2019 Interim Results Presentation 6
AUSTRALIAN WHOLESALE PRICES AUSTRALIAN LGC PRICES Lower LGC prices $A/MWH Spot CY19 CY20 � LGC markets fell during 1H FY19 with: 100 1H FY19 � Developers looking to lock in contracts, 90 putting downward pressure on prices 80 70 � Retailers under surrendering in front 60 years and meeting carried over 50 obligation by buying back cheaper in 2020 40 30 � Recently black forward prices have 20 increased in the lead up to summer with Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 concerns around system reliability Source: Meridian � Extreme weather in January 2019 has driven demand, spot and forward prices higher Meridian Energy Limited 2019 Interim Results Presentation 7
POLICY AND REGULATION UPDATE Meridian Energy Limited 2019 Interim Results Presentation 8
NEW ZEALAND POLICY AND REGULATION DEMAND FORECASTS Climate change policy TWh NZ Historical Demand 90 � Interim Climate Change Commission Transpower - NZ Inc established to provide analysis on: 80 Transpower - Mobilise � How surrender obligations work if MBIE - High 70 MBIE - Low agricultural emissions enter the ETS Productivity Comm. - High 60 � Planning for the transition to 100% Productivity Comm. - Low renewable energy by 2035 50 � ICCC will be superceded by an 40 Independent Climate Change Commission 30 this year, enabled by the Zero Carbon Bill 1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050 Source: Meridian � That Bill is currently being drafted; intended to go through select committee before June and pass into law late 2019 � Work is also continuing on improvements to the ETS, a second tranche of changes expected to be announced in 2019 � Electricity market will be the key enabler of greater decarbonisation in New Zealand � This policy direction is lifting future electricity demand forecasts Meridian Energy Limited 2019 Interim Results Presentation 9
NEW ZEALAND POLICY AND REGULATION Electricity price review � Second phase of the review is underway � Preliminary options paper is due in February 2019 � That paper will test solutions suggested by stakeholders and panel experts � Final findings and recommendations will then be developed Mar 19 � Jun 19 � Sep 18 Oct 18 Nov 18 Feb 19 First report for released submissions discussion closed Analysis of retail released submissions billing data closed Preliminary planned workshops options paper release followed by submissions Final report and delivered to recommendations Minister Meridian Energy Limited 2019 Interim Results Presentation 10
NEW ZEALAND POLICY AND REGULATION TRANSPOWER HVDC REVENUE Transmission pricing $M � Since June 2018 the EA has been preparing 180 new TPM guidelines, including a new CBA 160 � Update from EA in December 2018: 140 120 � TPM review is a top priority 100 � Existing interconnection and HVDC 80 60 charges will be replaced with a benefit- 40 based charge and a residual charge 20 � Benefit-based charge for new investment 0 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 and selected existing major investments Source: Transpower, Meridian � Residual charge for remaining former investment � Proposal for consultation expected to be released in mid-2019 � Transpower’s RCP3 Proposal plans $60m investment to extend pole 2 operating life rather than complete replacement � HVDC cost reduction expected from 2020, whether TPM review is complete or not Meridian Energy Limited 2019 Interim Results Presentation 11
AUSTRALIAN POLICY AND REGULATION Thwaites Review (Victoria) � A Victorian Default Offer (VDO) will be created from 1 July 2019 to replace current standing offers � The VDO will contain a cost for customer acquisition and retention, unlike the previously Basic Service Offer originally proposed by the Thwaites review ACCC Review (Federal) � Default offer proposal still seeking support of all states Federal Government policy � NEG dumped, reliability mechanisms have been retained � Developed a package to address market concerns and deliver cost savings � Includes proposed legislation that could compel companies to sell off large generation assets, which has been widely criticised Meridian Energy Limited 2019 Interim Results Presentation 12
UK POLICY AND REGULATION Price caps � Legislation passed requiring Ofgem to cap standard variable and default energy tariffs � Cap (ceiling) is in place from the end of 2018 until 2020 � Ofgem will then recommend if the cap should remain up to 2023 � Recent wholesale price increases have led to Ofgem announcing the price cap will rise in April 2019 � Strong acquisition push by the big retailers in the lead up to the cap’s introduction � Including moving customers off default offers and onto fixed price plans (not covered by the cap) Meridian Energy Limited 2019 Interim Results Presentation 13
BUSINESS UPDATE Meridian Energy Limited 2019 Interim Results Presentation 14
NEW ZEALAND CUSTOMERS CUSTOMER SALES CUSTOMER SALES AVERAGE Continued growth PRICE 1 NUMBERS VOLUME � 2% growth in customer numbers (GWH) ($/MWH) � Growth in residential (6%) and small 1H FY19 medium business sales volumes (4%) Residential 198,689 762 � Lower agri sales reflect irrigation demand Small medium business 38,781 496 � First Meridian staff customers migrated Agricultural 37,978 455 onto the Flux platform Large business 18,658 223 � Residential discounts now replaced with simple, lower rates Total Residential/SMB 294,106 1,936 $116 Corporate 2,426 1,063 $82 1H FY18 Residential 188,698 719 Small medium business 36,916 477 Agricultural 37,382 607 Large business 17,159 224 Total Residential/SMB 280,155 2,027 $118 Corporate 2,241 1,114 $81 Meridian Energy Limited 2019 Interim Results Presentation 15 1 Volume weighted average price in $/MWh
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