Quarterly Operational Update

Quarterly operational update for three months ended 30 September 2020. QUARTERLY HIGHLIGHTS > 3,700GWh - FY2021 hydro generation forecast reduced during the quarter due to continued low inflows. > RECORD SPOT PRICES - record Q1 Otahuhu spot prices as national hydro storage below average. > FUTURES PRICES RECOVER - FY2022 futures prices lift on market speculation regarding Tiwai continuing operations. HYDRO GENERATION DOWN ON RECORD LOW 12-MONTH INFLOWS; GEOTHERMAL GENERATION STABLE Mercury's hydro generation in the first quarter of FY2021 was 142GWh below average, decreasing by 170GWh to 1,044GWh. This reflected continued drought conditions with the Lake Taupo catchment experiencing the lowest 12-month inflow sequence to 30 September on record. Mercury announced during the quarter that its FY2021 hydro generation forecast reduced by 200GWh to 3,700GWh, more than 300GWh below average. Geothermal generation was stable versus the prior comparable period. LOW INFLOWS LIFT SPOT PRICES; FY2022 FUTURES INCREASE ON SPECULATION AROUND TIWAI SMELTER EXIT TIMING Dry hydrological conditions affected both North and South Islands resulting in national hydro storage tracking more than 500GWh below average until late September before lifting due to South Island rainfall, ending the quarter at 172GWh below average. This was reflected in the average spot price for the quarter reaching a record of $136/MWh at Otahuhu, increasing from $125/MWh in the prior comparable period. The FY2021 futures price also reflected current dry hydrological conditions, increasing from $114/MWh at Otahuhu and $104/MWh at Benmore at the start of the quarter to $122/MWh and $111/MWh respectively. Longer-term futures prices increased during the quarter as the market appeared to speculate on the likelihood of the Tiwai smelter operation being extended beyond August 2021. FY2022 futures prices ended the quarter at $100/MWh at Otahuhu and $85/MWh at Benmore after falling as low as $69/MWh and $51/MWh respectively during the quarter. FOCUS ON CUSTOMER VALUE SEES INCREASED SALES YIELDS Mercury's continued focus on customer value saw the average Commercial & Industrial sales yield (including both physical and financial sales) increase by 8.6%, from $88/MWh in the prior comparable period to $96/MWh, with sales volumes increasing by 130GWh. The sales yield in the Mass Market segment increased by 6.6% to $137/MWh with volumes decreasing by 60GWh to 832GWh. Customer connections decreased by 6,000 across the quarter to 342,000, 19,000 lower compared to the end of FY2020-Q1. DEMAND LOWER DUE TO REDUCED INDUSTRIAL ACTIVITY Demand decreased by 0.6% on a temperature-adjusted basis as industrial sector load (-1.2%) was affected by the shutdown of the 4th potline at the Tiwai Point aluminium smelter and reduced activity at the Marsden Point refinery. This was partially offset by increased demand from the dairy sector (+0.4%) and irrigation (+0.1%) sectors. Demand from the urban (-0.1%), rural (+0.1%) and other (+0.1%) sectors was flat. ENDS For further information: Investor Relations - William Meek 0275 173 470 Media - Craig Dowling 0272 105 337 End CA:00361720 For:MCY Type:MKTUPDTE Time:2020-10-20 08:30:58