MERIDIAN ENERGY LIMITED MANAGEMENT PRESENTATION Meridian Energy Limited Management Presentation 1
ABOUT MERIDIAN ENERGY New Zealand’s largest generator, all production from renewable sources Seven big hydro stations – flexible plant with the country’s largest storage; low operating costs and capital needs Five New Zealand wind farms and proven success operating in a high wind environment Backed with more than a decade of construction and operational experience Typical long generation position to manage variable hydro inflows Around 375MW of consented new options Generation portfolio of wind, hydro and renewable offtake in Australia Meridian Energy Limited Management Presentation 2
SHAREHOLDER HIGHLIGHTS Five successive years of earnings and EBITDAF $M dividend growth since listing 700 Double digit shareholder returns every year 666 657 since listing 650 650 High free cash flow, high payout ratio (75- 618 90% of that free cash flow), progressive 600 585 ordinary dividend policy Structured capital management 550 programme running to 2022 2014 2015 2016 2017 2018 Financial Year ended 30 June Source: Meridian TOTAL SHAREHOLDER RETURN % 33% 35% 31% 30% 25% 19% 20% 17% 14% 15% 10% 5% 0% 2014 2015 2016 2017 2018 Financial Year ended 30 June Source: Meridian Meridian Energy Limited Management Presentation 3
OPERATING UPDATE Wholesale prices have reflected ongoing MERIDIAN'S AVERAGE GENERATION PRICE* $/MWh gas supply concerns 285 300 Combined with recent high inflows, has 250 produced very favourable 2H FY19 trading 200 171 157 153 conditions 149 150 128 127 125 99 100 Solid customer growth in NZ and Australia 96 91 83 87 100 77 72 65 56 55 55 54 during FY19 53 50 Meridian customer migration onto the Flux 0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun platform has commenced FY19 FY18 Electricity Price Review final report will be MERIDIAN'S WAITAKI STORAGE GWh 2,500 delivered mid-year MERIDIAN'S CUSTOMER CONNECTIONS 2,000 450 400 106 103 104 350 101 1,500 98 99 99 97 97 97 300 250 1,000 200 301 150 295 296 297 298 299 300 292 293 293 500 100 50 0 0 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 Average 1979- 2013 2015 2016 2017 2018 2019 Australia gas Australia electricity New Zealand electricity Meridian Energy Limited Management Presentation 4
CLIMATE CHANGE We have seen No significant change to catchment inflows over the last 100 years Some seasonal shift in inflows; drier autumns, wetter summers Snowpack and glaciers getting smaller It is projected to get Genesis Energy’s Tekapo B power station Wetter in our catchments, including in winter With bigger individual rain storms Drier in irrigation areas Warmer everywhere Windier at our wind farms, especially in winter Contact Energy’s Clyde Dam Meridian Energy Limited Management Presentation 5
THE NEW ZEALAND ELECTRICITY MARKET Demands for action on climate change are NZ 2016 SECTOR EMISSIONS growing and the New Zealand regulatory 3% 5% landscape is changing 6% Electricity The country is committing to reducing all 17% Road transport non-methane emissions to net zero by Stationary energy* 2050 and up to 47% reduction in methane Agricultural Electrification of existing fossil fuel energy Industrial processes 20% use (largely outside the electricity sector) Waste 49% could significantly lift electricity demand *manufacturing (including milk processing), construction and commercial Depending on the rate of future sectors and domestic heating Source: Ministry for the Environment electrification, significant new generation DEMAND FORECASTS will be needed TWh 90 Full decarbonisation Unsubsidised renewables are likely to form 80 the bulk of new generation; investment timing is uncertain 70 60 50 Partial decarbonisation 40 History 30 FY1997 FY2003 FY2009 FY2015 FY2021 FY2027 FY2033 FY2039 FY2045 Source: Meridian Meridian Energy Limited Management Presentation 6
THE NEW ZEALAND ELECTRICITY MARKET Further thermal and older renewable plant PLANT RETIREMENT SCHEDULE MW closures or repowering are inevitable 500 450 Closures will require new generation and 400 capital spend, adding to growth and in 350 addition to decarbonisation 300 250 Unit costs of newer technologies (wind, 200 solar, batteries) will continue to decline 150 100 Costs of more traditional generation will 50 continue to improve modestly 0 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 Increases in intermittent generation will Source: Meridian create more volatile market prices Value of flexibility will increase over time Consumer-led technology uptake will occur, supplementing rather than displacing grid-level power Meridian Energy Limited Management Presentation 7
MERIDIAN’S INVESTMENT PROPOSITION Strong free NZ retail cash flow load Long term Retail Capital Low capital sustainable platform management needs business changes Potential Income Growth Flux Medium High free Powershop Progressive term new cash flow franchise ordinary DPS generation payout into the UK Customer Continued growth in cost Australia discipline Meridian Energy Limited Management Presentation 8
DISCLAIMER T H E I N F O R M A T I O N I N T H I S S E C U R I T I E S A N D M A Y N O T B E R E L I E D P R E S E N T A T I O N W A S P R E P A R E D B Y U P O N I N C O N N E C T I O N W I T H A N Y M E R I D I A N E N E R G Y W I T H D U E C A R E A N D P U R C H A S E O F M E R I D I A N E N E R G Y A T T E N T I O N . H O W E V E R , T H E S E C U R I T I E S . I N F O R M A T I O N I S S U P P L I E D I N S U M M A R Y T H I S P R E S E N T A T I O N C O N T A I N S A F O R M A N D I S T H E R E F O R E N O T N U M B E R O F N O N - G A A P F I N A N C I A L N E C E S S A R I L Y C O M P L E T E , A N D N O M E A S U R E S , I N C L U D I N G E N E R G Y M A R G I N , R E P R E S E N T A T I O N I S M A D E A S T O T H E E B I T D A F , U N D E R L Y I N G N P A T A N D A C C U R A C Y , C O M P L E T E N E S S O R G E A R I N G . B E C A U S E T H E Y A R E N O T R E L I A B I L I T Y O F T H E I N F O R M A T I O N . I N D E F I N E D B Y G A A P O R I F R S , M E R I D I A N ' S A D D I T I O N , N E I T H E R T H E C O M P A N Y N O R C A L C U L A T I O N O F T H E S E M E A S U R E S M A Y A N Y O F I T S D I R E C T O R S , E M P L O Y E E S , D I F F E R F R O M S I M I L A R L Y T I T L E D S H A R E H O L D E R S N O R A N Y O T H E R P E R S O N M E A S U R E S P R E S E N T E D B Y O T H E R S H A L L H A V E L I A B I L I T Y W H A T S O E V E R T O C O M P A N I E S A N D T H E Y S H O U L D N O T B E A N Y P E R S O N F O R A N Y L O S S C O N S I D E R E D I N I S O L A T I O N F R O M , O R ( I N C L U D I N G , W I T H O U T L I M I T A T I O N , C O N S T R U E D A S A N A L T E R N A T I V E T O , A R I S I N G F R O M A N Y F A U L T O R O T H E R F I N A N C I A L M E A S U R E S N E G L I G E N C E ) A R I S I N G F R O M T H I S D E T E R M I N E D I N A C C O R D A N C E W I T H P R E S E N T A T I O N O R A N Y I N F O R M A T I O N G A A P . A L T H O U G H M E R I D I A N B E L I E V E S S U P P L I E D I N C O N N E C T I O N W I T H I T . T H E Y P R O V I D E U S E F U L I N F O R M A T I O N I N T H I S P R E S E N T A T I O N M A Y C O N T A I N M E A S U R I N G T H E F I N A N C I A L F O R W A R D - L O O K I N G S T A T E M E N T S A N D P E R F O R M A N C E A N D C O N D I T I O N O F P R O J E C T I O N S . T H E S E R E F L E C T M E R I D I A N ' S B U S I N E S S , R E A D E R S A R E M E R I D I A N ’ S C U R R E N T E X P E C T A T I O N S , C A U T I O N E D N O T T O P L A C E U N D U E 9 B A S E D O N W H A T I T T H I N K S A R E R E L I A N C E O N T H E S E N O N - G A A P
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