Mighty River Power : Quarterly Operational Update three months ended 31 December 2016

Three months ended 31 December 2016

>> QUARTERLY HIGHLIGHTS‌

MOMENTUM LOW

CHURN

4,250GWh

STRONG MOMENTUM CONTINUES FOLLOWING MERCURY RE-BRAND LOWEST CUSTOMER SWITCHING RATE OF THE MAJOR RETAILERS HYDRO GENERATION FORECAST MAINTAINED FOR FY17 >> COMMENTARY

MOMENTUM CONTINUED FOLLOWING RE-BRAND

For the second consecutive quarter, Mercury's continued focus on rewarding customer loyalty resulted in the Company achieving the lowest switch rate (churn) amongst the major retailers. For the quarter ending 31 December 2016, Mercury's annualised churn was 15.9%, 3.3% below the market average of 19.2% based on publicly provided Electricity Authority data. This continued the strong momentum delivered following the Mercury re-brand in July 2016 and contributed to customer numbers increasing by 6,000 over the period.

During the quarter, more than 100,000 customers were rewarded with a Free Power Day and almost 100,000 customers also registered to benefit from the Company's new Airpoints partnership.

The average energy price to customers was down 4.4% to $106.11/MWh relative to the same period last year. This reflects additional commercial and industrial sales contracted throughout the year at lower prices than achieved historically (contributing to a $5.50 reduction in the VWAP of sales to business customers) and the timing of customer loyalty product offerings.

FY17 HYDRO FORECAST MAINTAINED

Total hydro generation increased 205GWh on the same period last year to 1,112GWh. This reflects inflows into the Taupo catchment being 28GWh above average and storage being 134GWh above average at the start of the period.

Based on the hydrological conditions observed throughout the quarter, Mercury continues to forecast midpoint FY2017 hydro generation at 4,250GWh.

LWAP/GWAP remained flat with the prior comparable period last year, at 1.03. This reflects a continuation of lower wholesale price volatility driven by above average national hydro generation. National hydro storage started 246GWh above average and remained above average throughout the quarter.

Reflecting the continued wet conditions, the locational wholesale price difference (basis) between Otahuhu and Benmore nodes was $8.38/MWh (or 21%).

DEMAND IMPACTED BY HIGHER TEMPERATURES AND WET CONDITIONS

After adjusting for temperature, national demand was down 3.2% compared to the same quarter last year. The irrigation, dairy processing and industrial sectors contributed -1.6%, -0.7%, and -0.7% respectively to the decrease in total national demand.

The decrease in the agriculture sectors can be attributed to the wet conditions experienced during the last six months with significantly lower South Island irrigation requirements compared to last year along with reduced national milk collection.

Mercury will release its financial results for the six months ended 31 December 2016 on 21 February 2017.

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE01 >> OPERATING STATISTICS

OPERATING INFORMATION	Three months ended 31 December 2016		Three months ended 31 December 2015		Six months ended 31 December 2016		Six months ended 31 December 2015
ELECTRICITY SALES	VWAP1 ($/MWh)	Volume (GWh)	VWAP1 ($/MWh)	Volume (GWh)	VWAP1 ($/MWh)	Volume (GWh)	VWAP1 ($/MWh)	Volume (GWh)
FPVV sales to customers	106.11	1,088	110.94	1,000	112.30	2,395	115.56	2,253
FPVV sales to residential customers	554		554		1,302		1,340
FPVV sales to business customers	534		446		1,093		913
FPVV purchases from market	1,150		1,056		2,529		2,380
Spot customer purchases	231		233		454		520
Total NZEM Purchases	48.38	1,381	70.23	1,289	54.83	2,983	63.27	2,900
ELECTRICITY CUSTOMERS ('000)	387		380
North Island Customers	346		344
South Island Customers	41		36
Dual Fuel Customers	43		41
CONTRACTS FOR DIFFERENCE	Volume (GWh)		Volume (GWh)		Volume (GWh)		Volume (GWh)
Buy CfD	395		458		904		929
Sell CfD	905		893		1,801		1,919
End User CFD	346		353		673		746
Net Sell CfD2	510		435		897		990
ELECTRICITY GENERATION	VWAP ($/MWh)	Volume (GWh)	VWAP ($/MWh)	Volume (GWh)	VWAP ($/MWh)	Volume (GWh)	VWAP ($/MWh)	Volume (GWh)
Hydro	49.28	1,112	69.36	907	55.14	2,367	61.41	2,215
Gas	-	-	76.74	46	-	-	68.62	146
Geothermal (consolidated)3	42.94	657	65.48	669	48.71	1,290	58.93	1,299
Geothermal (equity accounted)4	44.97	58	66.27	59	49.77	113	59.40	118
Total	46.87	1,827	67.91	1,681	52.78	3,770	60.78	3,778
LWAP/GWAP	1.03		1.03		1.04		1.04
CARBON EMISSIONS ('000 TONNES CO2E)	90		99		186		249
METRIX AMI METERS ('000)	399		389

1 VWAP is volume weighed average energy only price sold to FPVV customers after lines, metering and fees

2 Includes Virtual Asset Swap volumes in both Buy and Sell CfD volumes of 176 GWh for the 3 months ended 31 December 2016 and 176 GWh for the 3 months ended 31 December 2015 and of 352GWh for the 6 months ended 31 December 2016 and 352GWh for the 6 months ended 31 December 2015

3 Includes Mercury's 65% share of Nga Awa Purua generation

4 Tuaropaki Power Company (Mokai) equity share

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE02 >> MARKET DATA > ELECTRICITY GENERATION BY COMPANY FOR THE THREE MONTHS ENDED 31 DECEMBER

MERIDIAN ENERGY CONTACT ENERGY MERCURY GENESIS ENERGY TRUSTPOWER/TILT OTHER

15%

Financial Year Q2 2017

6%

5%

34%

16%

Financial Year Q2 2016

7%

5%

34%

19%

21%

17%

21%

Source: Electricity Authority

> SHARE OF ELECTRICITY SALES (GWh) FOR THE THREE MONTHS ENDED 31 DECEMBER

MERCURY OTHER

Financial Year Q2 2017

Financial Year Q2 2016

14%

13%

86%

87%

Source: Mercury Purchases and Transpower SCADA

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE03 > OTAHUHU WHOLESALE PRICE AND NATIONAL HYDRO STORAGE LEVELS

#REF! #REF! #REF! #REF!

1 80

0.9

0.8

75

0.7

0.6

h

Wh W

G0.5 70/M

$

0.4

0.3

65

0.2

0.1

0 60

0 0 0 0 0 0 0 0 0 0 0 0 0 0

AVERAGE NATIONAL STORAGE FY2016 NATIONAL STORAGE

FY2017 NATIONAL STORAGE ROLLING 12 MONTH AVERAGE OTA PRICE ROLLING 12 MONTH AVERAGE BEN PRICE

4000

$80

3500

$75

3000

$70

2500

$65

GWh

2000

$/MWh

$60

1500

$55

1000

$50

500 $45

0

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

$40

> TAUPO STORAGE

AVERAGE SINCE 1999 FY2016 FY2017

600

500

400

GWh

300

200

100

0

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

MERCURY NZ LIMITED QUARTERLY OPERATIONAL UPDATE04