Announcement

FLLYR: MCY: Mercury results reflect transformative year 08:30am 
MCY
16/08/2022 08:30
FLLYR
PRICE SENSITIVE
REL: 0830 HRS Mercury NZ Limited (NS)

FLLYR: MCY: Mercury results reflect transformative year

FY22 Financial Results Summary

[see table in attached news release]

A year of transformative change has supported Mercury's financial performance
for the year to 30 June 2022.

Mercury celebrated becoming New Zealand's biggest electricity retailer by
customer market share and a truly multi-product utility provider during the
year, following the $467 million acquisition of Trustpower's retail business.

The results also reflect a more diversified generation portfolio, with wind
generation now complementing Mercury's hydro and geothermal generation,
following the acquisition of Tilt's New Zealand wind operations in August and
the commissioning of the northern section of the Turitea wind farm in
December.

"This has been a year like no other. In less than twelve months, we have
become New Zealand's largest wind generator after having no operating wind
generation at the start of the year. We've also become New Zealand's largest
electricity retailer and welcomed 570 new colleagues to the company," said
Mercury Chief Executive, Vince Hawksworth.

"We are embarking on a major period of growth and are well-positioned to
thrive in a rapidly changing world that is increasingly recognising the
urgency with which we must decarbonise."

Mercury Chair Prue Flacks said that the steps the company had taken to build
further diversity and resilience meant the outlook for Mercury remained
bright.

"Decarbonisation will underpin significant growth for Mercury over the coming
decade. With a scale retail business now contributing substantial forward
revenue and a strong portfolio of existing and prospective generation assets,
we expect to meaningfully contribute to emissions reduction," said Ms Flacks.

CHALLENGING CONDITIONS CAREFULLY NAVIGATED DURING THE YEAR

Mostly dry weather until June weighed on performance as Mercury focussed on
prudent dispatch and lake management coming into winter. Elevated electricity
spot pricing persisted during FY2022 but wet conditions across New Zealand
from June have seen spot price levels ease as hydro generation displaces
expensive thermal.

"Forward electricity prices remain high over the medium-term reflecting the
transition away from fossil fuels with high gas and coal prices as well as
rising carbon prices," said Mr Hawksworth.

"High electricity spot prices mean we are focused on completing the southern
section of the Turitea wind farm by mid-2023 and developing new wind and
geothermal generation."

Mercury reported $581 million EBITDAF, $118 million up on the prior year's
$463 million EBITDAF reflecting the addition of wind generation and
performance improvements in the core business.

Operational expenditure was $230 million, up $40 million on the prior year,
primarily due to an increase in operational activity resulting from
acquisitions. Total stay-in-business capital expenditure was $68 million, up
$12 million on the prior year. After normalising for acquisitions and new
activity operational expenditure was broadly flat for its ninth year in a
row.

Mercury's net profit after tax was $469 million, up $328 million on the
previous year, driven by the $367 million net gain on sale of Tilt Renewables
shareholding which was immediately reinvested into the associated acquisition
of Tilt's New Zealand operations and future development options.

OTHER KEY OPERATIONAL RESULTS

o Customer care remained a key focus, with several initiatives launched
during the year including establishing a new 'Here to Help' team specialising
in supporting customers in hardship, and a co-designed pilot aiming to
connect consumers with adverse credit to either Mercury or GLOBUG.

o The nearly $500 million commitment to the ongoing refurbishment of
Mercury's Waikato hydro stations continued, with the first turbine and
generator replacement at Karapiro station now underway.

o A five-year geothermal drilling contract with Iceland Drilling was signed,
with the first phase of the extensive eight well programme underway.

o The 'Thrive' mindset of continuous improvement delivered an $47 million
EBITDAF uplift compared to the $30 million target set last year.

DIVIDEND

The Board has declared a fully imputed final dividend of 12.0 cents per share
(cps). This brings the full-year ordinary dividend to 20.0 cps, up 17.6% from
17.0 cps last year. This is the fourteenth consecutive year of ordinary
dividend growth.

Shareholders can further support our growth by participating in Mercury's
Dividend Reinvestment Plan.

LOOKING FORWARD

"Decarbonisation will shape much of our future activity, and we do not
under-estimate the challenge ahead of us. It will require collaboration
between our industry, Government and officials to ensure that market and
policy settings continue to evolve in a way that enables renewable energy
development at the scale required," said Ms Flacks.

"We are also mindful of the vital role we play in the wellbeing of New
Zealanders and are thinking hard about how we support consumers as we make
our way through the transition.

"While we continue to evolve our approach to meet these challenges, we can
also take heart in the outstanding renewable generation pipeline New Zealand
has. Our country's total electricity supply is expected to be over 90%
renewable in the next 3-5 years. This is a unique position enjoyed by only a
handful of countries.

"The Government's Emissions Reduction Plan sends a clear signal as to the
collective effort that is needed towards the goal of decarbonising the
economy, and we're ready to play our part," said Ms Flacks.

GUIDANCE

Mercury is on track to exceed its three-year objective to increase the value
of our business to $700 million EBITDAF on a normalised basis and we have
increased this target to $800 million EBITDAF.

Noting the strong platforms for growth established over the year and looking
forward to the continued growth in value as these opportunities are realised,
Mercury's FY23 EBITDAF guidance has been set at $580 million ($756 million on
a normalised basis).

Guidance may change and remains subject to any material events, significant
one-off expenses or other unforeseen circumstances including changes to
hydrological conditions.

FY23 stay-in-business capex guidance is $160 million, and FY23 ordinary
dividend guidance is 21.80 cps representing a 9.0% increase on FY22 and the
15th consecutive year of ordinary dividend increases.

ENDS

Howard Thomas
General Counsel and Company Secretary
Mercury NZ Limited

For investor relations queries, please contact:
William Meek
Chief Financial Officer
0275 173 470
investor@mercury.co.nz

For media queries, please contact:
Shannon Goldstone
Head of Communications
027 210 5337
media@mercury.co.nz
End CA:00397010 For:MCY Type:FLLYR Time:2022-08-16 08:30:37

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