Mercury Nz Ltd. · NZX:MCY
Mercury Nz — Investor Day (March 2023)
67 slides from Mercury Nz's investor day presentation, Mar 15, 2023
Slide 1: Mercury Investor Day 2023 news release
STOCK EXCHANGE LISTINGS: NEW ZEALAND (MCY) / AUSTRALIA (MCY) For personal use only NEWS RELEASE Mercury Investor Day 2023 15 March 2023 – Mercury is hosting its Investor Day 2023 in Palmerston North today, which includes presentations from the Executive Management Team and other senior managers of t
Slide 2: Mercury Investor Day
For personal use only Mercury Investor Day Palmerston North – 15 March 2023
Slide 3: Retrospective from 2019 Investor Day – The Market
RETROSPECTIVE FROM 2019 MERCURY INVESTOR DAY – THE MARKET For personal use only > Industrial load reductions weighing on New Zealand demand growth; green shoots appearing (new data centres under construction, energy conversion to renewables). > Spot prices volatile reflecting higher thermal fuel cos
Slide 4: Retrospective from 2019 Investor Day – Wind Opportunity?
RETROSPECTIVE FROM 2019 MERCURY INVESTOR DAY – WIND OPPORTUNITY? For personal use only > The 2019 opportunity in wind prophetic? > Tilt Renewables transaction in 2021 culminates in Mercury acquiring Tilt’s New Zealand operations. Tararua 1, 2 and 3, Mahinerangi and Waipipi wind farms bought. > Turit
Slide 5: Retrospective from 2019 Investor Day – Excellence
RETROSPECTIVE FROM 2019 MERCURY INVESTOR DAY – EXCELLENCE For personal use only > A focus on operational excellence evolves into the Thrive programme, delivering $47m in FY22 against an improvement target of $30m. We are working to make ‘thriving’ an ongoing mindset and move towards a more adaptive
Slide 6: Three Key Global Transitions Impacting Mercury
THREE KEY GLOBAL TRANSITIONS IMPACTING MERCURY Emerging from COVID disruptions – ‘the energy crisis’, digitalisation and workforce changes create a dynamic environment £3549 Oct 2022 Annual UK energy bill For personal use only The energy transition for an ‘average’ household > The global energy cris
Slide 7: How the Global Transitions Show Up in New Zealand
HOW THE GLOBAL TRANSITIONS SHOW UP IN NEW ZEALAND The transitions are showing up in regulatory changes, often with interconnections that require careful management Low carbon transition Electricity sector changes Telco sector changes For personal use only Emissions Reduction Plan & Retail Service Qu
Slide 8: FY23 Guidance Bridge
FY23 GUIDANCE BRIDGE > Additional ~400GWh generation volume since October 2022, mostly attributable to hydro generation (circa For personal use only $45m). > Reduction in actual and forward prices impacts on long generation (circa $15m). > Increased hydro generation and lower prices results in a mis
Slide 9: FY23 Hydro Generation Revenue
FY23 HYDRO GENERATION REVENUE > Lower FY23 hydro GWAP forecast (~$28/MWh) driven by combination of: For personal use only • decrease in actual / forecast prices relative to what was forecast in October • additional hydro generation during lower priced periods 300 180 250 150 200 120 150 90 $/MWh GWh
Slide 10: Generation Asset Management
Generation For personal use only Asset Management STEW HAMILTON MATT KEDIAN General Manager Generation Head of Operations - Generation 15 March 2023
Slide 11: Generation – Our Approach
GENERATION – OUR APPROACH For personal use only PROVIDING RESILIENT ENERGY GENERATION & ENERGY CAPACITY BETTER PROTECT & ENHANCE OPTIMISE MANAGE TOGETHER VALUE PERFORMANCE RISK Leveraging location and Investment programme to Incremental improvements & Understand risk and develop diversity to manage
Slide 12: Generation – An Experienced and Capable Team
GENERATION – AN EXPERIENCED AND CAPABLE TEAM PROVIDING RESILIENT ENERGY GENERATION & ENERGY CAPACITY For personal use only GM Generation Stewart Hamilton Strategy and Asset Management, Projects Operations Performance Risk & Engineering Robert Rankin Matt Kedian Emily Collis John Tatkovic 6 40 150 96
Slide 13: Generation – Thriving Today, Shaping Tomorrow: Better Together
GENERATION - THRIVING TODAY, SHAPING TOMORROW For personal use only PROVIDING RESILIENT ENERGY GENERATION & ENERGY CAPACITY BETTER TOGETHER Leveraging location and diversity to manage risk and grow performance
Slide 14: Health, Safety and Wellbeing Culture
BETTER TOGETHER HEALTH, SAFETY AND WELLBEING CULTURE For personal use only Safety Culture > Safety 2.0 - “learning from” incidents – not just preventing. Critical Risk Management > Focus on the risks that can lead to fatality e.g. driving, height, electrical, dropped objects. Process Safety team > W
Slide 15: Protect & Enhance Value
GENERATION - THRIVING TODAY, SHAPING TOMORROW For personal use only PROVIDING RESILIENT ENERGY GENERATION & ENERGY CAPACITY PROTECT & ENHANCE VALUE Investment programme to sustain long term performance
Slide 16: Maintain and Enhance Hydro Station Capacity
PROTECT & ENHANCE VALUE MAINTAIN AND ENHANCE HYDRO STATION CAPACITY For personal use only Station Generation FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36 FY37 FY38 Capacity Scope Cost Age Upgrade 1 Unit sized All Generat
Slide 17: Karāpiro Update
PROTECT & ENHANCE VALUE KARĀPIRO UPDATE For personal use only Karāpiro rehabilitation project is an $80m investment in the power station originally commissioned in 1946. The project includes replacement for all three generating units including generators, turbines and governors. The project protects
Slide 18: Geothermal Fuel Supply Secured for the Long Term
PROTECT & ENHANCE VALUE GEOTHERMAL FUEL SUPPLY SECURED FOR THE LONG TERM For personal use only Commencing eight “make up” wells and one well repair in drilling campaign FY23-FY25. The campaign will see an investment of $128m1 and is due to commence in March 2023 and be completed in late 2024. Field
Slide 19: SIB Capex Reflects Hydro Re-investment and Geothermal Drilling
PROTECT & ENHANCE VALUE SIB CAPEX REFLECTS HYDRO RE-INVESTMENT AND GEOTHERMAL DRILLING ACTIVITIES For personal use only > Varies year-on-year due to geothermal drilling and hydro re-investment activities > Wind SIB CAPEX minimal as almost always OPEX Hydro - Other Hydro - Major Rehabilitations Geo -
Slide 20: Opex Reflects Activities to Improve Asset Resilience
PROTECT & ENHANCE VALUE OPEX REFLECTS ACTIVITIES TO IMPROVE ASSET RESILIENCE For personal use only > Growth reflects foundational work to improve asset resilience plus supporting growth in generating assets across wind and geothermal. Generation Opex by Fuel Type 140 120 100 80 Opex ($M) 60 40 20 -
Slide 21: Ngā Tamariki OEC5 – Increasing Geothermal Capacity
PROTECT & ENHANCE VALUE NGĀ TAMARIKI OEC5 – INCREASING GEOTHERMAL CAPACITY For personal use only > Developing a project to enhance the value of the Ngā Tamariki Power Station by ~37MW (314GWh/year) by adding a fifth generating unit (OEC5), increasing total station capacity to ~123MW (net). > Current
Slide 22: Optimise Performance
GENERATION - THRIVING TODAY, SHAPING TOMORROW For personal use only PROVIDING RESILIENT ENERGY GENERATION & ENERGY CAPACITY OPTIMISE PERFORMANCE Incremental improvements and long term plan
Slide 23: Optimise Hydro Performance
OPTIMISE HYDRO PERFORMANCE PERFORMANCE Hydro Availability For personal use only (3 years) 100 > Hydro Production Volumes have increased in FY23 after stable and relatively 95 Availability (%) low inflows in the previous three years. 90 85 > Optimisation Team formed to support continued works to maxi
Slide 24: Optimise Geothermal Performance
OPTIMISE GEOTHERMAL PERFORMANCE PERFORMANCE Geo Availability (3 years) For personal use only 100 > Geothermal production volumes continue to be stable, FY20 = 3,777GWh, 95 FY21 = 3,757GWh and FY22 3,715GWh. Availability (%) 90 85 > Optimisation Team also maximising value of our geothermal assets. 80
Slide 25: Optimise Wind Performance
OPTIMISE WIND PERFORMANCE PERFORMANCE For personal use only > Wind portfolio FY22 production of 1,330GWh Wind Portfolio Availability • Ex-Tilt assets availability improved to 94.0% (+3.44% on FY21) (3 year) • Turitea North completion first year in operation - achieved availability 98% 96% of 96% (+1
Slide 26: Manage Risk
GENERATION - THRIVING TODAY, SHAPING TOMORROW For personal use only PROVIDING RESILIENT ENERGY GENERATION & ENERGY CAPACITY MANAGE RISK Understand risk and develop resilience of assets
Slide 27: Kawerau Recovery
MANAGE RISK KAWERAU RECOVERY For personal use only Existing 113.7MW Steam Path and Generator were damaged in 2021 and the full refurbishment is set to be completed in FY23. The replacement equipment is supplied by Sumitomo Corporation and manufactured by Fuji Electric in Kawasaki Japan. The equipmen
Slide 28: Asset Management – A Continuous Approach & Core Strength
MANAGE RISK ASSET MANAGEMENT – A CONTINUOUS APPROACH & CORE STRENGTH For personal use only The asset management framework adopted by Mercury is designed to enhance, focus and accelerate delivery of strategic objectives, as follows: 1. Maximising Asset Performance through process optimisation Our ris
Slide 29: Effective Management Systems for Below Ground Assets
MANAGE RISK EFFECTIVE MANAGEMENT SYSTEMS FOR BELOW GROUND ASSETS For personal use only FY22 Generation Availability 94%
Slide 30: Investment in Dam Safety and Risk Management
MANAGE RISK INVESTMENT IN DAM SAFETY and RISK MANAGEMENT For personal use only > Nine dam structures on the Waikato Hydro system aged 60-97 years. > Including Taupō control gates. > Contains and regulates flow from the reservoir on the River. > Dam Safety guidelines (NZSOLD) are becoming regulations
Slide 31: Generation – Our Approach
GENERATION – OUR APPROACH For personal use only PROVIDING RESILIENT ENERGY GENERATION & ENERGY CAPACITY BETTER PROTECT & ENHANCE OPTIMISE MANAGE TOGETHER VALUE PERFORMANCE RISK Leveraging location and Investment programme to Incremental improvements Understand risk and develop diversity to manage ri
Slide 32: Energy Transition and Climate
Energy Transition For personal use only and Climate LUCIE DRUMMOND General Manager Sustainability
Slide 33: Whole of Sector Approach to the Energy Transition
TAKING A WHOLE OF SECTOR APPROACH TO THE ENERGY TRANSITION Working with others to ensure the pace of change supports the transition Sector pipeline of renewables well placed to meet 2030 demand. For personal use only The BCG report ‘The Future is Electric’ sets out how the electricity sector can con
Slide 34: Whole of Sector Approach – Key Transition Challenges
TAKING A WHOLE OF SECTOR APPROACH TO THE ENERGY TRANSITION Key transition challenges need to be navigated to ensure outcomes for end users For personal use only Managing dry year energy supply risk > Preferred pathway in the report has a mix of more renewables (wind and solar already in pipeline), g
Slide 35: Reducing Our Climate Impact and Adapting to Change
REDUCING OUR CLIMATE IMPACT AND ADAPTING TO CHANGE Positioning for opportunities and building knowledge to support preparedness For personal use only Our current climate strategy Positioning ourselves for Promoting the role of Collaborating with Seeking to reduce our own Building knowledge of climat
Slide 36: Playing Our Part – Reducing Our Emissions
PLAYING OUR PART – REDUCING OUR EMISSIONS Continuing to invest in research and development of technology that could support geothermal emissions reduction Inject NCGs here, at For personal use only northern reinjection line > Fugitive geothermal emissions make up ~98% of Mercury’s Scope 1 emissions
Slide 37: Continuous Improvement of Our Climate Disclosures
CONTINUOUS IMPROVEMENT OF OUR CLIMATE DISCLOSURES Leveraging what we have learnt through voluntary disclosure as we move into the New Zealand Climate Standard For personal use only > Starting in 2018 has enabled a staged approach to improving our climate disclosures. > In FY23 we will adopt as much
Slide 38: Taking a Collaborative Approach to Improve Resilience
TAKING A COLLABORATIVE APPROACH TO IMPROVE RESILIENCE Working with others on our social and environmental impact – diverse perspectives, increased capacity, aligned goals For personal use only Meaningful and enduring Working in Evolving how support for effective teams Iwi we restore customers with o
Slide 39: Portfolio, Energy Transition and Generation Development
Portfolio, Energy Transition For personal use only and Generation Development PHIL GIBSON TIM THOMPSON General Manager Portfolio Head of Wholesale Markets
Slide 40: Advantaged Portfolio Well Positioned for the Transition
ADVANTAGED PORTFOLIO WELL POSITIONED FOR THE TRANSITION 100% renewable generation For personal use only > Three low-cost complementary fuel sources in baseload MEAN ANNUAL HYDRO GEOTHERMAL WIND* GENERATION geothermal, intermittent wind with flexible hydro capable of ~8,250GWh ~4,080GWh ~2,600GWh ~1,
Slide 41: Advantaged Portfolio – FY2024 Indicative Net Position
ADVANTAGED PORTFOLIO WELL POSITIONED FOR THE TRANSITION For personal use only FY2024 INDICATIVE NET POSITION BREAKDOWN > Integrated portfolio, usually net long generation with movement 12,000 year-on-year due to hydrology, plant availability and values of sales Call outs: 10,000 > We have options av
Slide 42: Energy Transition – Challenges & Opportunities
ENERGY TRANSITION – OUR VIEW ON CHALLENGES & OPPORTUNITIES For personal use only CORRELATION OF WIND FARM GENERATION (CY2022) Electricity demand must grow to meet our carbon targets Mahinerangi West Wind > Long-term growth is inevitable as electrification is New Zealand’s best Waipipi Turitea Te Uku
Slide 43: Energy Transition – Maintaining Our Competitive Advantage
ENERGY TRANSITION – MAINTAINING OUR COMPETITIVE ADVANTAGE Mercury will maintain our advantage by having the best people and development pipeline to complement our For personal use only existing advantaged portfolio Market capable of navigating the transition > Mercury will advocate for timely and ap
Slide 44: Proven Capability and Experience Positioning Us for Growth
PROVEN CAPABILITY AND EXPERIENCE POSITIONING US WELL FOR GROWTH Demonstrated market understanding and experience For personal use only > We have a proven track record of generation development across fuels GENERATION GROWTH POST 2008 with integration into the wider portfolio Construction – ~2,800GWh
Slide 45: Our Technology Choices – One Size Does Not Fit All
OUR TECHNOLOGY CHOICES – “ONE SIZE DOES NOT FIT ALL” Our development approach is to leverage Mercury’s advantages and partner where there is value and learning For personal use only Build Partner Acquire Strong portfolio of options - strengthened through Tilt Wind Energy acquisition Opportunities
Slide 46: Leading Platform for Growth Projects
WE HAVE A LEADING PLATFORM FOR GROWTH PROJECTS UNDER CONSTRUCTION, CONSENTED OR IN CONSENTING Growing and diversified pipeline of >2,000MW and >8,000GWh For personal use only Equivalent in size to Mercury’s existing generation portfolio Kaiwaikawe ~70% 74MW, 220GWh OF FULL PIPELINE Projects in Proje
Slide 47: Future Ready Retail & Integration
Future Ready Retail & For personal use only Integration CRAIG NEUSTROSKI FIONA SMITH NICK PUDNEY GM Commercial Operations GM Customer Operations Head of Integration 15 March 2023
Slide 48: Our Journey to Future Ready
OUR JOURNEY TO FUTURE READY For personal use only BECOME FUTURE READY… > We purchased Trustpower to accelerate our retail strategy and journey to become a Future Ready organisation… • New Zealand’s largest multi-utility business • Capability to deliver multiple products and services • Provides scale
Slide 49: Mercury Retail
MERCURY RETAIL > Our focus has been on bringing two businesses together while also maintaining momentum. For personal use only Retail integration programme Stable/Modest growth in electricity Completed acquisition of NOW NZ connections > Single Retail Leadership Team > 25K Broadband connections > El
Slide 50: Our Journey to Future Ready – Fit for Now
OUR JOURNEY TO FUTURE READY For personal use only BECOME FUTURE READY… First Stop: ‘FIT FOR NOW’ > We purchased Trustpower to > ‘Fit For Now’ is about creating a accelerate our retail strategy and common operating model… journey to become a Future Ready organisation… That delivers: • One brand • New
Slide 51: Delivery of Synergies on Track
DELIVERY OF SYNERGIES ON TRACK > On track to realise forecast cost For personal use only synergies (Opex and Capex) over 3-year period $35m $10m of synergies to be realised in year 1 through: > Corporate shared services > Technology > Core retail business activity Additional synergies to be realised
Slide 52: Our Journey to Future Ready – Enabling Future Ready
OUR JOURNEY TO FUTURE READY For personal use only BECOME FUTURE Next Stop: READY… ENABLING FUTURE First Stop: READY ‘FIT FOR NOW’ > We purchased Trustpower to > ‘Fit For Now’ is about creating a > Fit For Now is the springboard to accelerate our retail strategy and common operating model… focusing o
Slide 53: Enabling Future Ready
ENABLING FUTURE READY We have a clear focus over the next two years… For personal use only Two-year programme of transformation: > enhance our capability to continuously deliver propositions which are relevant & compelling > improving Customer Experience (CX) through insight & personalisation > leve
Slide 54: Tangible Benefits from Smart Investments
TANGIBLE BENEFITS FROM SMART INVESTMENTS For personal use only Enabling Future Ready means investing in the right places… Technology: > Digital customer: Social connections matter more than ever > Next best action: Insight gathering bots > Open AI language tools: ChatGPT (friend or foe) > Digital in
Slide 55: Turitea Wind Farm
For personal use only Turitea Wind Farm Investor Day Site Visit – Thursday 16 March 2023
Slide 56: Turitea Wind Farm Site Map
t /~6km to i i North Turbines Palmerston North Linton Substation 220kV city centre Revenue Metering Point Gye Maximum Generation 221.4MW ena, JOSS REY Oe es Wiese) WiGles EWTG 29 WO uel \ Wiis so) AWIGi24, WIG aa 2 eh lwisu6 ; wis es e)wiess @¢ wicsp) a 2 wic'32) © GY) Re Oacsy Browns Flat Substatio
Slide 57: Turitea project timeline
For personal use only 2005 2011 2017 Early investigations and Consented, after which Restarted following feasibility the project was paused turbine technology and market developments 2019 Jan 2022 April 2023 Contracts signed and Turitea North (33 WTGs) Turitea South (27 WTGs) construction started fu
Slide 58: Transmission Line
For personal use only TRANSMISSION LINE
Slide 59: Transmission Line
TRANSMISSION LINE For personal use only 12 km, 220kV Grid connection at Double circuit line, 20 poles, 18 towers Transpower’s Linton current configured (8 by helicopter) substation into a single circuit Constructed by 2 Substations – Built to allow Electrix under a Plantation in the expansion for fu
Slide 60: Wind Farm
For personal use only 8 WIND FARM
Slide 61: Wind Farm
WIND FARM For personal use only 1M hours - TRIFR 10.7 Vestas V112. 125m tip North – 119MW, 33x3.6MW ~160 sediment and height, 69m WTG hub South – 103MW, 27x3.8MW erosion control devices height, 55m blades Lizards, bats and birds 842GWh Output 25km of roading 25 year service and North – 470 GWh 42km
Slide 62: Wind Farm Construction – Foundations
WIND FARM CONSTRUCTION - FOUNDATIONS For personal use only
Slide 63: Wind Farm Construction – Foundation and Hardstand
WIND FARM CONSTRUCTION – FOUNDATION AND HARDSTAND For personal use only
Slide 64: Wind Farm Construction – Towers and Turbines
WIND FARM CONSTRUCTION – TOWERS AND TURBINES For personal use only
Slide 65: What We've Learned
For personal use only WHAT WE’VE LEARNED
Slide 66: Wind Farm Tour – Thursday March
WIND FARM TOUR – THURSDAY 16 MARCH For personal use only Please ensure you have: > Covered shoes - safety shoes/boots if you have them. > Wrist to ankle clothing. > Jacket/layers. > Hard hats, safety glasses and vests will be provided. > Completed Turitea Water Catchment Reserve Health Declarations
Slide 67: For personal use only
For personal use only