MERIDIAN ENERGY LIMITED 2019 INTERIM …...Meridian Energy Limited 2019 Interim Results Presentation 10 Electricity price review Second phase of the review is underway Preliminary

M E R I D I A N E N E R G Y L I M I T E D

2 0 1 9 I N T E R I M R E S U L T S P R E S E N T A T I O N

MERIDIAN ENERGY LIMITED 2019 INTERIM RESULTS

PRESENTATION

2

H I G H L I G H T S

Meridian Energy Limited 2019 Interim Results Presentation

5.70 cents per

share ordinary dividend, a 6% increase

18% increase in interim EBITDAF

5% increase

in NZ customer numbers

MARKET UPDATE

3 Meridian Energy Limited 2019 Interim Results Presentation

NEW ZEALAND WHOLESALE PRICES

  Higher wholesale prices since October 2018   That marked national storage dropping below average for the first time since February 2018   And commencement of higher consumption by the Tiwai Point Smelter as new cells were cut in on potline 4  With uncertainty around gas supply as Pohokura offshore capacity was reduced and Maui pipeline issues were discovered   Further 30 days of shutdown on Pohokura offshore wells is expected between February and April 2019   Electricity market is experiencing some periodic thermal plant outages   ASX forward price curve has steadily lifted reflecting the shift in underlying supply demand balance

Higher spot and forward wholesale prices


50

70

90

110

130

150

Q1 2019 Q3 2019 Q1 2020 Q3 2020 Q1 2021 Q3 2021 Q1 2022 Q3 2022

$/MWh OTAHUHU ASX FUTURES SETTLEMENT PRICE

29 June 2018 28 September 2018 31 October 2018

30 November 2018 3 January 2019 31 January 2019

Source: Electricity Authority

0

100

200

300

400

500

600

1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec

$/MWh OTAHUHU DAILY AVERAGE SPOT PRICE

1H FY19 1H FY18

Source: Meridian

NEW ZEALAND DEMAND

  Despite lower irrigation volumes in 2018   2018 was the second equal warmest year on record, average temperatures above 2017   Underlying demand growth of 1% excluding irrigation

Flat demand in 2018

 Medium term economic growth expected   Policy settings should encourage decarbonisation   Assumptions vary on rate of electrification of the wider energy system

Different, positive views on future demand


-2%

-2%

+1%

-2%

0%

0% +2%

+1%

+1%

+2% +1%

-8%

-1%

+1%

-13%

-2%

REGIONAL ELECTRICITY DEMAND 2018 V 2017

0%

Source: Electricity Authority

TIWAI POINT ALUMINIUM SMELTER

  Official opening in early December  New cells have been cut in since October 2018   Tiwai contracts with Meridian now total 622MW   4th potline contract is for 50MW and represents:   a 10% increase in the plant’s production capacity   1% growth in NZ total electricity demand growth

  LME prices have declined 13% since June 2018, however remain above 2017 levels

4th potline restarted


530

540

550

560

570

580

590

600

610

620

1-Jul-18 1-Aug-18 1-Sep-18 1-Oct-18 1-Nov-18 1-Dec-18

MW TIWAI POINT AVERAGE DAILY LOAD

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2,200

2,300

2-Jul-18 2-Aug-18 2-Sep-18 2-Oct-18 2-Nov-18 2-Dec-18

USD/TONNE LME ALUMINIUM PRICES

Source: Meridian

AUSTRALIAN WHOLESALE PRICES

  LGC markets fell during 1H FY19 with:  Developers looking to lock in contracts, putting downward pressure on prices  Retailers under surrendering in front years and meeting carried over obligation by buying back cheaper in 2020

  Recently black forward prices have increased in the lead up to summer with concerns around system reliability   Extreme weather in January 2019 has driven demand, spot and forward prices higher

Lower LGC prices


20

30

40

50

60

70

80

90

100

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

$A/MWH AUSTRALIAN LGC PRICES

Spot CY19 CY20

1H FY19

Source: Meridian

POLICY AND REGULATION UPDATE


NEW ZEALAND POLICY AND REGULATION

  Interim Climate Change Commission established to provide analysis on:   How surrender obligations work if agricultural emissions enter the ETS   Planning for the transition to 100% renewable energy by 2035

  ICCC will be superceded by an Independent Climate Change Commission this year, enabled by the Zero Carbon Bill   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

Climate change policy


30

40

50

60

70

80

90

1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050

TWh DEMAND FORECASTS

NZ Historical Demand

Transpower - NZ Inc

Transpower - Mobilise

MBIE - High

MBIE - Low

Productivity Comm. - High

Productivity Comm. - Low

Source: Meridian



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

Sep 18 Oct 18 Nov 18 Feb 19 Mar 19 Jun 19

First report for discussion

released submissions closed

Analysis of retail billing data

released submissions closed

Preliminary options paper

planned release

workshops followed by submissions

Final report and recommendations

delivered to Minister


  Since June 2018 the EA has been preparing new TPM guidelines, including a new CBA   Update from EA in December 2018:  TPM review is a top priority  Existing interconnection and HVDC charges will be replaced with a benefit-based charge and a residual charge  Benefit-based charge for new investment and selected existing major investments  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

Transmission pricing


0

20

40

60

80

100

120

140

160

180

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025

$M TRANSPOWER HVDC REVENUE

Source: Transpower, Meridian

AUSTRALIAN POLICY AND REGULATION

  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

Thwaites Review (Victoria)


  Default offer proposal still seeking support of all states

ACCC Review (Federal)

 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

Federal Government policy

UK POLICY AND REGULATION

  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)

Price caps


BUSINESS UPDATE


NEW ZEALAND CUSTOMERS

CUSTOMER SALES CUSTOMER NUMBERS

SALES VOLUME

(GWH)

AVERAGE PRICE1

($/MWH)

1H FY19

Residential 198,689 762

Small medium business 38,781 496

Agricultural 37,978 455

Large business 18,658 223

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

  2% growth in customer numbers   Growth in residential (6%) and small medium business sales volumes (4%)   Lower agri sales reflect irrigation demand   First Meridian staff customers migrated onto the Flux platform   Residential discounts now replaced with simple, lower rates

Continued growth

15 1Volume weighted average price in $/MWh


64 57

44

93

124

0

20

40

60

80

100

120

140

2014 2015 2016 2017 2018

$/MWH

Six Months Ended 31 December

AVERAGE GENERATION PRICE

6,163 6,087 6,296 5,289 5,925

739 771 733

648 621

6,902 6,858 7,029

5,937 6,546

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2014 2015 2016 2017 2018

GWH


NEW ZEALAND GENERATION

Hydro Wind Total


  92% of average inflows in the six months to December 2018 with good winter storage   Higher average prices received for generation (33%) and paid to supply contracted sales (37%)  Good storage at end of January 2019:  Waitaki catchment 98% of average  Waiau catchment 92% of average

Average generation levels at higher prices

16

Source: Meridian

Source: Meridian Meridian Energy Limited 2019 Interim Results Presentation

AUSTRALIAN CUSTOMERS AND GENERATION

Customer growth

17

  2% growth in customer numbers   3% reduction in retail sales volume in 1H FY19  Momentum in Victorian gas sales with 12,500 customers and 142TJ of sales volume by the end of 1H FY19   South Australia is under development

Source: Meridian


Lower generation prices   Falling LGC price curve   Drought conditions persist in NSW, leading to lower than expected FY19 and potentially FY20 hydro generation

48,208

77,970 97,547 97,241 99,368

0

20,000

40,000

60,000

80,000

100,000

120,000

Jun-15 Jun-16 Jun-17 Jun-18 Dec-18

CONNECTIONS

AUSTRALIAN ELECTRICITY CUSTOMERS

UNITED KINGDOM

  Proposed merger between npower (our franchisee) and SSE’s domestic retail business was abandoned in December 2018   Key issues appear to be intense retail competition and increased regulation   npower will move into E.ON as part of E.ON’s acquisition of Innogy (npower’s parent) from RWE announced back in March 2018   Following this acquisition (later this year):  RWE focused on generation   E.ON focused on distribution and retail across Europe

  Powershop continues to acquire customers (55,000 by December 2018) and develop white label capability

Merger abandoned


FINANCIAL UPDATE


4.80 5.10 5.33 5.38 5.70

1.40 2.44 2.44 2.44 2.44 6.20

7.54 7.77 7.82 8.14

0

3

6

9

12

2014 2015 2016 2017 2018

CPS


INTERIM DIVIDEND DECLARED

Ordinary dividend Special dividend Total

DIVIDENDS

  Interim ordinary dividend declared of 5.70 cps, 86% imputed   Capital management interim special dividend of 2.44 cps, unimputed   Brings capital management distributions to $500M since the programme began in August 2015

6% growth in interim ordinary dividend

20

INTERIM DIVIDENDS DELCARED CPS IMPUTATION

1H FY2019

Ordinary dividends 5.70 86%

Capital mgt special dividends 2.44 0%

Total 8.14

1H FY2018

Ordinary dividends 5.38 88%

Capital mgt special dividends 2.44 0%

Total 7.82

Source: Meridian


EARNINGS

  Higher residential and business sales volumes at stable average price   Lower corporate sales volumes at higher prices   Lower irrigation sales   Higher wholesale prices and volumes with:   10% increase in physical generation   12% decrease in acquired generation  61% increase in derivative volumes sold

  4th potline volumes and Tiwai price indexation   Some NZ cost expansion, mainly asset refurbishments   Growth in Australia and UK earnings, some cost growth to support this   Higher NZ transmission costs

Record interim EBITDAF, 18% up on 1H FY18


455 474 485 452 510

445 465 455 492

900 939 940 944

0

200

400

600

800

1,000

1,200

2015 2016 2017 2018 2019

$M NZ ENERGY MARGIN

Interim Final half-year Total

324 332 354 329 389

294 318 303 337

618 650 657 666

0

200

400

600

800

2015 2016 2017 2018 2019

$M GROUP EBITDAF


AUSTRALIA

  GSP hydro generation, impacted by drought conditions   Firming retail electricity price   Victorian gas earnings   Sharp reduction in LGC prices   Hedging benefits from these will be felt in 2H FY19   Additional operating costs for GSP assets, gas costs and renewed customer marketing

  Forward sales of LGCs are marked to market through fair value movements   Sales settle each January with fair value gains/losses on settled sales transferring to EBITDAF   1H FY19 includes A$3M of settlement losses which will decrease 2H FY19 EBITDAF   This compares to an equivalent figure in 2H FY18 of A$14M

14% increase in EBITDAF


Accounting treatment of LGCs

30 36

41

6

8 36

44

0

10

20

30

40

50

60

2017 2018 2019

$NZ M AUSTRALIAN EBITDAF


COSTS

  Refurbishment spend on Te Āpiti wind farm and the Ōhau hydro stations  Maintaining a similar level of promotional spend to 1H FY18, supporting NZ customer acquisition   Higher Australian customer service costs from higher average customer numbers   Costs associated with introduction of gas offer in Victoria  Maintenance costs associated with GSP hydro assets   Flux expansion and preparation for Meridian customer migration   Relatively stable stay in business capex   Total capex of $28M in 1H FY19

6% increase in operating costs


44 49

24 18

135

40 48

18 21

127

0

20

40

60

80

100

120

140

160

NZ Wholesale NZ Retail Australia Other Total

$M OPERATING COSTS

1H FY19 1H FY18

23 19 19 17 21

37 31 28 30

60

50 47 47

0

10

20

30

40

50

60

70

80

2015 2016 2017 2018 2019

$M STAY IN BUSINESS CAPEX


BELOW EBITDAF

  $3M (2%) increase in depreciation  No impairments in 1H FY19, compared with 1H FY18 impairments of $2M (Central Wind consent)  No asset sale gains in 1H FY19 compared with 1H FY18 gains of $6M (farm land sales)   $20M increase to NPBT from fair value of electricity hedges from rising forward electricity prices and falling LGC price curve ($2M reduction in 1H FY18)   $15M reduction to NPBT from fair value of treasury instruments from decreases in New Zealand and Australian forward interest rates ($2M reduction in 1H FY18)   $2M (5%) increase in net financing costs   $17M increase in tax expense from higher NPBT   $40M (38%) increase in underlying NPAT from higher EBITDAF, some offset from increases depreciation, interest, tax and swapation premiums

39% increase in NPAT

24

117 104 125 109 152

130

81 75 92

247

185 200 201

0

100

200

300

2015 2016 2017 2018 2019

$M NET PROFIT AFTER TAX


115 122 131 104

144

94 111 90

102

209 233 221

206

0

100

200

300

2015 2016 2017 2018 2019

$M UNDERLYING NPAT



DEBT AND FUNDING

  Total borrowings as at 31 December 2018 of $1,561M   Up $195M from 31 December 2017   Committed bank facilities of $725M of which $300M were undrawn   Expiry of these facilities from FY19 to FY26

Recent USD 300M Private Placement


1.7 1.8 1.9

2.3 2.2

0

1

2

3


TIMES NET DEBT/EBITDAF

340 325

56 135 160

489

50 35

75

100

0

100

200

300

400

500

600

2019 2020 2021 2022 2023 2024+

$M

Financial Year ended 30 June

DEBT MATURITY PROFILE AS AT 31 DEC 2018

Drawn debt maturing (face value) Available facilities maturing

34%

4%

26%

5%

22%

9%

SOURCES OF FUNDING AS AT 31 DEC 2018

NZ$ bank facilities drawn/undrawn

EKF - Danish export credit

Retail Bonds

Floating rate notes

US private placement

Commercial paper

26

C L O S I N G C O M M E N T S

  Good current catchment storage

  Strong January 2019 generation and wholesale prices, with irrigation and air conditioning load driving demand

  NZ electricity price review preliminary options paper is imminent

  Followed by consultation in early 2019, final report to the Minister will follow that

  Transmission pricing proposal for consultation expected in the middle of the year

  NZ’s climate change actions will be shaped by this year’s Zero Carbon Bill, expected to pass into law late 2019

  Default offers in two forms (Victoria, rest of the NEM) appear likely

  Australian federal election sometime in 2019


Q U E S T I O N S


FINANCIAL PERFORMANCE IN DETAIL


OPERATING CASH FLOWS

  Record level of interim operating cash flow   Driven by higher 1H FY19 EBITDAF   Includes reversal of timing differences that weighed on FY18 full year cash flow

$100M (62%) increase


217 206 203 162

262

223 246 267 265

440 452 470 427

0

100

200

300

400

500

2015 2016 2017 2018 2019

$M OPERATING CASHFLOW


$M WHOLESALE RETAIL AUSTRALIA OTHER/UNALLOCATED

INTER-SEGMENT

SIX MONTHS ENDED 31 DECEMBER

1H FY19

1H FY18

1H FY19

1H FY18

1H FY19

1H FY18

1H FY19

1H FY18

1H FY19

1H FY18

Energy margin 430 360 80 92 66 57 - - - -

Other revenue 2 2 6 5 1 - 13 8 (9) (5)

Energy transmission expense (63) (60) - - (2) (3) - - - -

Operating expenses (44) (40) (49) (48) (24) (18) (23) (25) 5 4

EBITDAF 325 262 37 49 41 36 (10) (17) (4) (1)

SEGMENT RESULTS


37 49

-16 +4

+1 -1

0

10

20

30

40

50

60

EBITDAF 31 Dec 2017

Retail contracted

sales

Costs to supply

contracted sales

Other revenue

Operating costs

EBITDAF 31 Dec 2018

$M MOVEMENT IN RETAIL SEGMENT EBITDAF

AUSTRALIAN SEGMENT

  For treatment of financial trading

FY18 energy margin reclassified


ENERGY MARGIN ($M) 1H FY18 REPORTED

CHANGES 1H FY18 RESTATED

FY18 RESTATED

Contracted sales 49 12 61 123

Cost to supply customers (37) (10) (47) (100)

Net cost of acquired generation - (14) (14) (25)

Generation spot revenue 45 12 57 87

Energy Margin 57 - 57 85

NEW ZEALAND RETAIL

  2% increase in customers since June 2018 Customers

32

  5% decrease in overall volumes   6% increase in residential volumes   4% increase in small business volumes   1% decrease in large business volumes   25% decrease in agri volumes, irrigation-driven   1% decrease in average sales price

Residential, Business, Agri segment

  5% decrease in volumes   1% increase in average sales price

Corporate segment


104 102 103 106 109

116 117 115 119 119

56 56 59 66 69

276 275 277 291 297

0

50

100

150

200

250

300

350


ICP (000) NEW ZEALAND CUSTOMER NUMBERS

Meridian North Island Meridian South Island Powershop Total

1,880 2,001 1,886 2,027 1,936

1,113 1,163 911

1,114 1,063

2,993 3,164 2,797

3,141 2,999

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2014 2015 2016 2017 2018

GWH


RETAIL SALES VOLUME

Residential, SMB, Agri Corporate Total

NEW ZEALAND HYDROLOGY

  Inflows for 1H FY19 were 92% of historical average   January 2019 inflows were 99% of average

Inflows

33

 Meridian’s Waitaki catchment storage at 31 December 2018 was 98% of historical average   By 31 January 2019, this position was also 98% of historical average

Storage


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

GWh

Financial year

MERIDIAN'S COMBINED CATCHMENT INFLOWS

December YTD 85 year average

0

500

1,000

1,500

2,000

2,500

1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec

GWh MERIDIAN'S WAITAKI STORAGE

Average 1979- 2013 2014 2015 2016 2017 2018


  1H FY19 generation was 10% higher than 1H FY18   Reflected higher hydro and lower wind generation

Volume

34

  1H FY19 average price Meridian received for its generation was 33% higher than 1H FY18   1H FY19 average price Meridian paid to supply contracted sales was 38% higher than 1H FY18

Price


6,163 6,087 6,296 5,289 5,925

739 771 733

648 621

6,902 6,858 7,029

5,937 6,546

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2014 2015 2016 2017 2018

GWH



Hydro Wind Total

64 57

44

93

124

0

20

40

60

80

100

120

140

2014 2015 2016 2017 2018

$/MWH


AVERAGE GENERATION PRICE

AUSTRALIAN RETAIL

  2% growth in customer numbers since June 2018   12,500 gas customers in Victoria by 31 December 2018

Customers

35

  3% decrease in sales volumes   142TJ of gas sales in Victoria

Sales volume


48,208

77,970 97,547 97,241 99,368

0

20,000

40,000

60,000

80,000

100,000

120,000


CONNECTIONS

AUSTRALIAN ELECTRICITY CUSTOMERS

63

163 241

289 280

0

50

100

150

200

250

300

350

2014 2015 2016 2017 2018

GWH


RETAIL SALES VOLUME

AUSTRALIAN GENERATION

  1H FY19 generation was 37% higher than 1H FY18   1H FY19 includes 123GWh of seasonal generation from the GSP hydro assets   1H FY19 wind generation was 3% lower than 1H FY18

Volume


441 437 309 305 296

123

419

0

100

200

300

400

500

600

2014 2015 2016 2017 2018

GWH


AUSTRALIAN GENERATION

Wind Hydro Total

389

329

-16

+58

-297

+45

+259

+10

-1

+9 +3

-2 -8

0

100

200

300

400

500

EBITDAF 31 Dec 2017

Retail contracted

sales

Wholesale contracted

sales

Costs to supply

customers

Net cost of acquired

generation

Generation spot revenue

Virtual asset swap

margins

Other market costs

Australian energy margin

Other revenue

Transmission expenses

Employee & other

operating expenses

EBITDAF 31 Dec 2018

$M

MOVEMENT IN EBITDAF

1H FY19 EBITDAF

37

New Zealand Energy Margin +$58M (13%)


1H FY19 EBITDAF TO NPAT

XXXX


144 152

389

-137

-7 -43

-58 +5 +7

-4

100

150

200

250

300

350

400

450

EBITDAF Depreciation and

amortisation

Premiums paid on electricity options net of

interest

Net finance costs

Tax Underlying NPAT

Net change in fair value of

hedges/instruments

Premiums paid on electricity options net of

interest

Tax NPAT

$M

1H FY19 EBITDAF TO NPAT RECONCILIATION

NEW ZEALAND ENERGY MARGIN

  A non-GAAP financial measure representing energy sales revenue less energy related expenses and energy distribution expenses   Used to measure the vertically integrated performance of the retail and wholesale businesses   Used in place of statutory reporting which requires gross sales and costs to be reported separately, therefore not accounting for the variability of the wholesale spot market and the broadly offsetting impact of wholesale prices on the cost of retail electricity purchases

ENERGY MARGIN

39

  Revenues received from sales to customers net of distribution costs (fees to distribution network companies that cover the costs of distribution of electricity to customers), sales to large industrial customers and fixed price revenues from derivatives sold (Contract sales revenue)   Purchases required to cover contracted customer sales (Cost to supply customers)   The fixed cost of derivatives acquired to supplement generation and manage spot price risks, net of spot revenue received for generation acquired from those derivatives (Net cost of acquired generation)   Revenue from the volume of electricity that Meridian generates (Generation spot revenue)   The net position of virtual assets swaps with Genesis Energy and Mercury   Other associated market revenues and costs including Electricity Authority levies and ancillary generation revenues (i.e. frequency keeping)



40

1H FY19 1H FY18

VOLUME1 VWAP2 $M VOLUME1 VWAP2 $M

Residential/SMB contracted sales 1,936 $116.4 225 2,027 $117.6 238

Corporate contracted sales 1,063 $81.8 87 1,114 $80.6 90

Retail contracted sales 2,999 $104.1 312 3,141 $104.5 328

NZAS sales 2,608 2,525

Sell side CfDs 1,234 767

Wholesale contracted sales 3,842 $64.7 249 3,292 $58.1 191

Cost to supply retail customers 3,160 3,295

Cost to supply wholesale customers 3,842 3,292

Cost to supply customers 7,002 ($134.5) (942) 6,587 ($97.9) (645)

Acquired generation revenue 1,051 $142.8 150 1,118 $96.6 115

Cost of acquired generation 1,051 ($68.1) (71) 1,118 ($68.7) (82)

Future contract close outs (3) (2)

Net cost of acquired generation 76 31

Generation spot revenue 6,546 $124.2 812 5,937 $93.2 553

Net VAS position 529 6 478 (4)

Other market costs (3) (2)

Energy Margin 510 452

LWAP:GWAP 1H FY19 1.11 1H FY18 1.08

1GWh 2Volume weighted average price in $/MWh


510

812

312

249

-942

150 -71 -3

+6

-3

0

200

400

600

800

1,000

1,200

1,400


Retail contracted sales (net)


sales

Cost to supply customers

Acquired generation

spot revenue

Cost of acquired

generation

Future contract close

outs

Virtual asset swap margins

Other market costs

Energy Margin

$M NEW ZEALAND ENERGY MARGIN


41

Contracted sales revenue $561M

Net cost of acquired generation $76M


510 510 452

+259

-16

+58

-297

+35 +11

-1

+10

-1

0

100

200

300

400

500

600

700

800

Energy Margin 31 Dec 2018


Retail contracted sales (net)


sales

Cost to supply customers

Acquired generation

spot revenue

Cost of acquired

generation

Future contract close outs

Virtual asset swap margins

Other market costs

Energy Margin 30 Jun 18

$M


NEW ZEALAND ENERGY MARGIN MOVEMENT

42

Contracted sales revenue +$42M

Net cost of acquired generation +$45M


OTHER REVENUE

43

SIX MONTHS ENDED 31 DECEMBER $M

2018 2017

Retail service revenue (field services revenue etc) 4 3

Dam Safety Intelligence 1 1

Flux UK 6 4

Other 2 2

Total other revenue 13 10


FAIR VALUE MOVEMENTS

 Meridian uses derivative instruments to manage interest rate, foreign exchange and electricity price risk   As forward prices and rates on these instruments move, non-cash changes to their carrying value are reflected in NPAT   Accounting standards only allow hedge accounting if specific conditions are met, which creates NPAT volatility   $20M positive change in fair value of electricity and other hedges in 1H FY19 from changing forward electricity prices   $15M negative change in fair value of treasury instruments in 1H FY19 from decreasing forward interest rates

On electricity and other hedges and treasury instruments


-33

-83

-21 -26

5

-100

-50

0

50

FY15 FY16 FY17 FY18 1H FY19

$M

NET CHANGE IN FAIR VALUE OF FINANCIAL INSTRUMENTS

INCOME STATEMENT

45


2018 2017

New Zealand energy margin 510 452

Australia energy margin 66 57

Other revenue 13 10

Energy transmission expense (65) (63)

Employee and other operating expenses (135) (127)

EBITDAF 389 329

Depreciation and amortisation (137) (134)

Impairment of assets - (2)

Gain/(loss) on sale of assets - 6

Net change in fair value of electricity and other hedges 20 (2)

Net finance costs (43) (41)

Net change in fair value of treasury instruments (15) (2)

Net profit before tax 214 154

Income tax expense (62) (45)

Net profit after tax 152 109


UNDERLYING NPAT RECONCILIATION

46


2018 2017

Net profit after tax 152 109

Underlying adjustments

Hedging instruments

Net change in fair value of electricity and other hedges (20) 2

Net change in fair value of treasury instruments 15 2

Premiums paid on electricity options net of interest (7) (6)

Assets

(Gain)/loss on sale of assets - (6)

Impairment of assets - 2

Total adjustments before tax (12) (6)

Taxation

Tax effect of above adjustments 4 1

Underlying net profit after tax 144 104


CASH FLOW STATEMENT

47


2018 2017

Receipts from customers 1,695 1,374

Interest and dividends received - -

Payments to suppliers and employees (1,310) (1,101)

Interest and income tax paid (123) (111)

Operating cash flows 262 162

Sale of property, plant and equipment - 12

Sales of subsidiaries and other assets - -

Purchase of property, plant and equipment (23) (18)

Stamp duty/capitalised interest - -

Purchase of intangible assets and investments (12) (10)

Investing cash flows (35) (16)

Term borrowings drawn 89 170

Term borrowings repaid (5) (5)

Shares purchased for long-term incentive - -

Dividends and finance lease paid (292) (286)

Financing cash flows (208) (121)


BALANCE SHEET

48


2018 2017

Cash and cash equivalents 78 108

Trade receivables 259 304

Customer contract assets 20 19

Other current assets 141 122

Total current assets 498 553

Property, plant and equipment 7,809 7,871

Intangible assets 59 58

Other non-curent assets 200 212

Total non-current assets 8,068 8,141

Payables, accruals and employee entitlements 304 328

Customer contract liabilities 15 11

Current portion of term borrowings 512 190

Other current liabilities 83 95

Total current liabilities 914 624

Term borrowings 1,049 1,176

Deferred tax 1,668 1,700

Other non-current liabilities 271 261

Total non-current liabilities 2,988 3,137

Net assets 4,664 4,933 Meridian Energy Limited 2019 Interim Results Presentation

49

G L O S S A R Y Acquired generation volumes buy-side electricity derivatives excluding the buy-side of virtual asset swaps

Average generation price the volume weighted average price received for Meridian’s physical generation

Average retail contracted sales price volume weighted average electricity price received from retail customers, less distribution costs

Average wholesale contracted sales price volume weighted average electricity price received from wholesale customers, including NZAS

Combined catchment inflows combined water inflows into Meridian’s Waitaki and Waiau hydro storage lakes

Cost of acquired generation volume weighted average price Meridian pays for derivatives acquired to supplement generation

Cost to supply contracted sales volume weighted average price Meridian pays to supply contracted customer sales

Contracts for Difference (CFDs) an agreement between parties to pay the difference between the wholesale electricity price and an agreed fixed price for a specified volume of electricity. CFDs do not result in the physical supply of electricity

Customer connections (NZ) number of installation control points, excluding vacants

FRMP financially responsible market participant

GWh gigawatt hour. Enough electricity for 125 average New Zealand households for one year

Historic average inflows the historic average combined water inflows into Meridian’s Waitaki and Waiau hydro storage lakes over the last 85 years

Historic average storage the historic average level of storage in Meridian’s Waitaki catchment since 1979

HVDC high voltage direct current link between the North and South Islands of New Zealand

ICP New Zealand installation control points, excluding vacants

ICP switching the number of installation control points changing retailer supplier in New Zealand, recorded in the month the switch was initiated

MWh megawatt hour. Enough electricity for one average New Zealand household for 46 days

National demand Electricity Authority’s reconciled grid demand www.emi.ea.govt.nz

NZAS New Zealand Aluminium Smelters Limited

Retail sales volumes contract sales volumes to retail customers, including both non half hourly and half hourly metered customers

Sell side derivatives sell-side electricity derivatives excluding the sell-side of virtual asset swaps

Virtual Asset Swaps (VAS) CFDs Meridian has with Genesis Energy and Mercury. They do not result in the physical supply of electricity


50

D I S C L A I M E R THE INFORMATION IN THIS PRESENTATION WAS PREPARED BY MERIDIAN ENERGY WITH DUE CARE AND ATTENTION. HOWEVER, THE INFORMATION IS

SUPPLIED IN SUMMARY FORM AND IS THEREFORE NOT NECESSARILY COMPLETE, AND NO REPRESENTATION IS MADE AS TO THE ACCURACY,

COMPLETENESS OR RELIABILITY OF THE INFORMATION. IN ADDITION, NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS, EMPLOYEES,

SHAREHOLDERS NOR ANY OTHER PERSON SHALL HAVE LIABILITY WHATSOEVER TO ANY PERSON FOR ANY LOSS (INCLUDING, WITHOUT LIMITATION,

ARISING FROM ANY FAULT OR NEGLIGENCE) ARISING FROM THIS PRESENTATION OR ANY INFORMATION SUPPLIED IN CONNECTION WITH IT.

THIS PRESENTATION MAY CONTAIN FORWARD-LOOKING STATEMENTS AND PROJECTIONS. THESE REFLECT MERIDIAN’S CURRENT EXPECTATIONS,

BASED ON WHAT IT THINKS ARE REASONABLE ASSUMPTIONS. MERIDIAN GIVES NO WARRANTY OR REPRESENTATION AS TO ITS FUTURE FINANCIAL

PERFORMANCE OR ANY FUTURE MATTER. EXCEPT AS REQUIRED BY LAW OR NZX OR ASX LISTING RULES, MERIDIAN IS NOT OBLIGED TO UPDATE THIS

PRESENTATION AFTER ITS RELEASE, EVEN IF THINGS CHANGE MATERIALLY.

THIS PRESENTATION DOES NOT CONSTITUTE FINANCIAL ADVICE. FURTHER, THIS PRESENTATION IS NOT AND SHOULD NOT BE CONSTRUED AS AN

OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY MERIDIAN ENERGY SECURITIES AND MAY NOT BE RELIED UPON IN CONNECTION WITH ANY

PURCHASE OF MERIDIAN ENERGY SECURITIES.

THIS PRESENTATION CONTAINS A NUMBER OF NON-GAAP FINANCIAL MEASURES, INCLUDING ENERGY MARGIN, EBITDAF, UNDERLYING NPAT AND

GEARING. BECAUSE THEY ARE NOT DEFINED BY GAAP OR IFRS, MERIDIAN'S CALCULATION OF THESE MEASURES MAY DIFFER FROM SIMILARLY TITLED

MEASURES PRESENTED BY OTHER COMPANIES AND THEY SHOULD NOT BE CONSIDERED IN ISOLATION FROM, OR CONSTRUED AS AN ALTERNATIVE TO,

OTHER FINANCIAL MEASURES DETERMINED IN ACCORDANCE WITH GAAP. ALTHOUGH MERIDIAN BELIEVES THEY PROVIDE USEFUL INFORMATION IN

MEASURING THE FINANCIAL PERFORMANCE AND CONDITION OF MERIDIAN'S BUSINESS, READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE

ON THESE NON-GAAP FINANCIAL MEASURES.

THE INFORMATION CONTAINED IN THIS PRESENTATION SHOULD BE CONSIDERED IN CONJUNCTION WITH THE COMPANY’S CONDENSED FINANCIAL

STATEMENTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2018, AVAILABLE AT:

WWW.MERIDIANENERGY.CO.NZ/INVESTORS/

ALL CURRENCY AMOUNTS ARE IN NEW ZEALAND DOLLARS UNLESS STATED OTHERWISE.


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MERIDIAN ENERGY LIMITED 2019 INTERIM …...Meridian Energy Limited 2019 Interim Results Presentation 10 Electricity price review Second phase of the review is underway Preliminary