2025 CRD Report

CLIMATE-RELATED DISCLOSURES 2025 About this report

This report is the Vector Limited group's (Vector or the group) second mandatory climate statement prepared under

New Zealand's climate-related disclosures regime. The Vector group comprises Vector Limited and its subsidiaries. This report relates to the reporting period 1 July 2024 to 30 June 2025 and constitutes Vector's climate statement in respect of that period under the Financial Markets Conduct Act 2013 (FMCA).

Under the FMCA, Vector is required to produce climate statements that comply with the Aotearoa New Zealand Climate Standards (NZCS) 1, 2 and 3 issued by the External Reporting Board (XRB). Accordingly, this document has been prepared in compliance with NZCS 1, 2 and 3, and covers four thematic areas: governance, strategy, risk management, and metrics and targets.

The intended primary users of this report are existing and potential investors, lenders and other creditors.

This report is published as part of a reporting suite, which also includes our FY2025 greenhouse gas emissions inventory report, and annual report. All three reports are available at vector.co.nz/investors/reports.

Given this report relates to the FMCA and NZCS requirements, it necessarily differs from earlier Vector reports prepared voluntarily in response to the recommendations of the Taskforce on

Climate-related Financial Disclosures (TCFD).

Unless the context otherwise requires, all references in this report to we, us, our and Vector should be interpreted to relate to the Vector group.

This report has been subject to limited assurance* by KPMG; see appendix 1, and legal review by Chapman Tripp.

Doug McKay

Chair

22 August 2025

Anne Urlwin

Chair, audit committee 22 August 2025

Adoption provisions

Vector has elected to use the following NZCS2 adoption provision for this FY2025 report. This means the disclosures in this report do not cover these aspects of the NZCS, though some information is provided to maintain consistency with Vector's wider disclosures.

Adoption provision 2: Anticipated financial impacts

* A limited assurance engagement is less in scope than a reasonable assurance engagement, for a detailed explanation - please see page 38.

Disclaimer

This report is not earnings guidance or financial advice for investors. Rather, this report provides a summary of Vector's current understanding of, and response to, climate-related risks and opportunities, and Vector's current climate-related governance, risk management, strategy, metrics and targets. The report reflects Vector's current understanding as of 22 August 2025, in respect of the 12 months ended 30 June 2025.

Climate-related risk management is an emerging area, and often uses data and methodologies that are developing and uncertain. Vector acknowledges that the understanding of climate risk, and the inputs to assist with this understanding are constantly evolving.

Vector (including its directors, officers and employees) does not:

• Represent that the statements, intentions and/or opinions contained in this report will not change, or will remain correct after publishing this report, or

• Promise to revise or update those statements and opinions if events or circumstances change or unanticipated events happen after publishing this report.

Vector is committed to progressing our response to climate-related risks and opportunities over time but is constrained by the novel and developing nature of this subject matter.

In particular, the statements contained in this report involve assumptions, forecasts and projections about Vector's present and future strategies and Vector's future operating environment. Such statements are inherently uncertain and subject to limitations, particularly as inputs, available data and information are likely to change. As such, Vector cautions reliance on climate-related forward-looking statements that are necessarily less reliable than other statements Vector may make in our annual financial reporting.

The risks and opportunities described in this report, and Vector's strategies to achieve our targets, may not eventuate or may

be more or less significant than anticipated. There are many factors that could cause Vector's actual results, performance or achievement of climate-related metrics (including targets) to differ materially from that described, including economic and technological viability, climatic, government, customer, and market factors outside of Vector's control. Vector

gives no representation, warranty or assurance that actual outcomes or performance will not materially differ from the forward-looking statements.

To the maximum extent possible under New Zealand law, Vector (including its directors, officers and employees) does not accept and expressly disclaims any liability whatsoever for any direct, indirect or consequential loss or damage occasioned from any use or inability to use the information contained in this report, whether directly or indirectly resulting from inaccuracies, defects, errors, omissions, out-of-date information or otherwise.

Vector makes no representation as to the accuracy of any information in this report. We recommend you seek independent advice before acting or relying on any information in this

report. Vector reserves the right to revise statements made in, or its strategy or business activities described in, this report, without notice.

This disclaimer should be read along with other methodologies, assumptions and uncertainties and limitations contained in this report, as well as in Vector's greenhouse gas emissions inventory report for FY2025.

Unless the context otherwise requires, all references to amounts in $ in this report are estimates, are in New Zealand dollars and all references to balances or amounts relate to amounts at the end of each financial year, namely 30 June.

This report is not an offer document and does not constitute an offer or invitation or investment recommendation to distribute or purchase securities, shares, or other interests. Nothing in this report should be interpreted as capital growth, earnings or any other legal, financial tax or other advice or guidance. For detailed information on our financial performance, please refer to our annual report, available at vector.co.nz/investors/reports.

Glossary of terms

Table 1: Definition and glossary of terms

About Vector

Vector Limited is NZX listed and 75.1% owned by Entrust, a private community trust which represents 368,000 households and businesses in central, east and south Auckland (as at 2025 roll date).

A breakdown of Vector's businesses and investments as of 30 June 2025 is detailed in the table below.

Changes to Vector's business portfolio

During FY2025 Vector has:

Ceased trading of our Natural Gas Trading business as of 1 July 2024. This business has been on a wind-down since FY2020, whereby contracts for natural gas sales were not renewed. This has led to year-on-year reductions in scope 3 emissions related to use of sold gas product. See our greenhouse gas inventory report [1] for more details. We have also removed references in this climate statement to climate-related risks related to owning a gas trading business.

Sold our Ongas LPG business and Liquigas investment on 31 January 2025. We have recalculated historic greenhouse gas emissions to exclude these businesses in accordance with the Greenhouse Gas Protocol. We have also removed references in this climate statement to climate-related risks with regard to owning LPG businesses.

Sold our 8.1% shareholding in mPrest Systems (2023) Limited on 22 August 2024. The impact of mPrest on Vector's climate-related disclosures was below materiality thresholds for the purposes of climate-reporting and therefore excluded from previous analysis. As a result, sale of this investment has no impact.

‌Governance

Vector's board oversight

Vector Limited's board of directors is the governance body ultimately responsible for overseeing Vector's strategic direction and its climate-related risks and opportunities. Key climate-related risks and opportunities are considered as part of Vector's 16 group-level material risks that are monitored with priority by Vector's board risk and assurance committee. These 16 risks were reviewed four times in FY2025 at the group material risk review. In FY2025 four of these 16 risks relate to climate change. Refer to the governance report within Vector's annual report for a list of these group material risks [1].

The board's role in relation to climate-related issues is supported by two board committees: the audit committee, and the risk and assurance committee. These committees have delegated responsibility for managing Vector's risks, including its climate-related risks and opportunities.

The audit committee is responsible for oversight of climate-related reporting. This committee meets to review key accounting decisions which include those regarding climate-related scenarios, materiality thresholds, consolidated risks and opportunities, as well as greenhouse gas emissions quantification and targets. The audit committee is responsible for reviewing and recommending the climate-related reports, under the Financial Markets Conduct Act (FMCA), for board approval. The audit committee is responsible for ensuring Vector's climate-related disclosures comply with the New Zealand Climate Standards

(NZCS) and is responsible for external reviews and assurance in relation to the climate-related disclosures. KPMG has provided independent limited assurance* over Vector's CRD, as detailed in appendix 1. Vector's greenhouse gas emissions inventory has also been subject to limited assurance by KPMG, as outlined in the greenhouse gas emissions inventory report [1]. Additionally, our CRD has been legally reviewed by Chapman Tripp.

The risk and assurance committee is responsible for the oversight of climate-related risks and opportunities as part of the committee's oversight of Vector's enterprise risk management framework.

These two committees are accountable to the board and each generally meets at least four times per year. Following each meeting the relevant committee updates the board in relation to matters within its scope that significantly affect Vector, as

well as noting decisions of the committee and recommendations to the board. The board notes or approves the findings or recommendations of the committees as appropriate.

All committee papers are available to the full board and all directors have the opportunity to submit questions and/or attend committee meetings.

Members of Vector's management attend the meetings of the committees also, where relevant, to provide a two-way engagement between the board and management. Charters of the board and relevant committees can be found in the governance section of Vector's website [2].

Board

Board of directors

Governance body ultimately responsible for overseeing Vector's strategic direction and Vector's climate-related risks and opportunities. 7 Members

Board audit committee

Responsible for oversight of climate-related reporting and key accounting judgments. 3 Members

Board risk and assurance committee

Responsible for the oversight of climate-related risks and opportunities as part of Vector's wider enterprise risk management framework. 3 Members

Executive

Executive management

Executive leadership and day-to-day management for ensuring delivery and development of the strategic objectives. 7 Members

Group Level

Climate change steering committee

Normally meets monthly with senior management

to provide executive oversight of climate-change-related topics. 5 Members

Group sustainability

Consults business units to explore climate-related opportunities, climate adaptation, and

decarbonisation strategy.

Chief public policy and rgbulatorQ offficgr

Holds executive responsibility for climate-change-related-risks and opportunities.

Group risk

Responsible for Vector's group enterprise

risk management framework used to identify and assess climate-related risks and opportunities.

Group ffinancg

Oversees and analyses financial impacts

of material risks and opportunities, reports on group-level metrics, and manages

carbon accounting.

Group insights

Conducts scenario analysis, and models of key risks and opportunities.

* A limited assurance engagement is less in scope than a reasonable assurance engagement, for a detailed explanation - please see page 38.

Governance (continued)

The board ensures that it has the appropriate skills and competencies by accessing expertise from within the group as well as external advice where needed. For example, the group sustainability team has expertise in physical and transitional climate change trends, while the group insights team has skills to produce and update transitional scenario models for the electricity and gas distribution networks. The board also holds sessions that assist in upskilling the directors on topics relevant to Vector's businesses. For example, in FY2025 the board held a session with the group chief executive and the chief operating officer of electricity, gas and fibre on the status of the gas distribution network about uncertain gas volumes and the incoming regulatory reset. Vector's board charter requires that all directors continuously educate themselves

to ensure that they can perform their duties appropriately

and effectively. A summary of key board and board committee meetings in FY2025 is found in figure 1 below.

Vector's executive management oversight

The group chief executive is responsible for the day-to-day leadership and management of Vector's businesses to ensure the business strategy and objectives are successfully developed and delivered. The climate change steering committee is a subcommittee of the executive, consisting of five members, to provide executive oversight of climate-related topics including climate change risks and opportunities. Meetings are typically held monthly1; however, when the agenda consists only of updates, an email summary may be provided in place of a formal meeting. The climate change steering committee is chaired by the chief public policy and regulatory officer, who holds overall executive responsibility for climate-related risks and opportunities. The climate change steering committee reports to the chief executive periodically via the chief public policy and regulatory officer.

Figure 1: Key board and board committee meetings that occurred during FY2025 related to climate-related risks and opportunities

September 2024

R Reviewed group material risks which includes climate-related risks - this occurs quarterly

November 2024

A Update on scenarios, methods, and judgments influencing Vector's FY2025 climate-related disclosures

R Reviewed group material risks

December 2024

B Update on Vector Technology Solutions - this is related to the energy platforms opportunity

May 2025

B Approved short-term incentive measures for the following financial year

March 2025

R Reviewed group material risks

R Approved climate-related risks and opportunities identified through the business unit risk review

B Approved the electricity asset management plan which contains 10-year investment and maintenance programmes over the period 1 April 2025 to 31 March 2035

B Deep dive on gas distribution

February 2025

B Reviewed Vector's greenhouse gas commitments

June 2025

A Reviewed key judgments made during modelling, carbon emission calculation, and a draft of the climate-related disclosures

B Approved the gas asset management plan which contains 10-year investment and maintenance programmes over the period 1 July 2025 to 30 June 2035

R Reviewed group material risks.

B Update on Vector Technology Solutions

August 2025

A Recommended climate-related disclosures to the board

A Recommended the greenhouse gas emissions inventory report to the board

B Approved climate-related disclosures

B Approved greenhouse gas emissions inventory report

B Update on Vector Technology Solutions

B Approved staff incentive target for

the following financial year

1. Board audit committee

   R Board risk and assurance committee

2. Board

1. In FY2025 there were eight climate change steering committee meetings

   Governance	Strategy	Risks	Opportunities	Risk	Metrics	References
   				management	and targets	and Appendix

   Governance (continued)

   Tracking climate-related metrics and targets

   The climate-related metrics set out in this report are prepared by Vector's management and discussed with the Vector board audit committee. The metrics are monitored by management and integrated into performance dashboards. Any noteworthy changes in Vector's performance against metrics can be reported to the group chief executive via a chief public

   policy and regulatory officer report. Relevant contents from the monthly report are then reported to the board in the group chief executive's report.

   As noted on page 26, Vector's greenhouse gas emissions reduction target was developed by thinkstep-anz, and approved by the board in FY2021. In addition, Vector has targets for customer outages which are set by Vector's economic regulator, the Commerce Commission.

   Progress against Vector's targets is monitored by Vector's management and integrated into performance dashboards. Also, Vector's management is responsible for updating the board on performance against these targets. For example, customer outage performance is presented to the board in an electricity distribution networks operational board paper.

   In FY2025 short-term incentive payments for Vector's executive and their direct reports included a component linked to Vector's performance against its emissions reduction, customer outage targets, and a climate resilience target. These incentive targets are designed and agreed by the executive team and approved by the board at its discretion. Specific details can be found in the metrics and targets section on page 34.

   Vector's group oversight

   The Vector group risk team is responsible for Vector's enterprise risk management framework. Risks, including climate-related risks and opportunities, are identified, assessed and managed across the group in line with the enterprise risk management framework and the group risk assessment criteria. This approach to risk management is designed to ensure that there is appropriate and regular board and management oversight of material risks identified to drive informed decision-making. Vector's group sustainability team consults with Vector's business units to drive Vector's climate change strategy. The group sustainability team reports to the chief public policy and regulatory officer and sets the agenda for the climate change steering committee. Greenhouse gas emissions are accounted for by group finance, with transitional scenario modelling conducted by the group insights team or external consultants, as needed.

   Governance

   Strategy Risks Opportunities

   Risk management

   Metrics and targets

   References and Appendix

   Governance (continued)

   Integrating climate-related disclosures with wider disclosures

   Vector's climate-related disclosures are informed by and informs a suite of inter-related disclosures.

   DISCLOSURE	INTEGRATION
   Electricity asset management plan	The electricity asset management plan, as required by regulation, discloses Vector's electricity asset management policy, objectives, information, 10-year expenditure plans, and the context in which expenditure decisions are made. Expenditure forecasts in the asset management plan are not commitments as they are also scrutinised through appropriate internal governance processes, and are subject to periodic regulatory approval of capital allowances before decisions are made. Integration with climate-related disclosures: Information relevant to the risks - inability to efficiently manage load to avoid network congestion, increase in extreme weather events, and the distributed energy resources opportunity - is discussed in the electricity asset management plan in the context of the electricity network managed by Vector. While scenario analysis informs the asset management plan, the expenditure decisions disclosed do not necessarily relate to a specific scenario. This is explained in further detail in figure 2 on page 14. Climate-related risks are not the sole driver of asset management investment decisions.
   Gas asset management plan	The gas asset management plan, as required by regulation, discloses Vector's gas asset management policy, objectives, 10-year expenditure plans, and the context in which expenditure decisions are made. Expenditure forecasts in the asset management plan are not commitments as they are also scrutinised through appropriate internal governance processes, and are subject to periodic regulatory approval of capital allowances before decisions are made. Integration with climate-related disclosures: Gas transition risk is discussed in the gas asset management plan. While scenario analysis informs the asset management plan, the investment decisions disclosed do not relate to a specific scenario - rather, they are investments tested against those scenarios to deliver a prudent asset management strategy. This is explained in further detail in figure 2 on page 14. Climate-related risks are not the sole driver of asset management investment decisions.
   Greenhouse gas emissions inventory report	Discloses Vector's greenhouse gas emissions, methodology, assumptions, and emissions reduction initiatives. Integration with climate-related disclosures: The greenhouse gas emissions accounting and target are expressed in the greenhouse gas emissions inventory report and feed into the metrics and targets section of the climate-related disclosures.
   Vector annual report, interim report, and operational performance updates	Discloses financial and operational information at a group level. Integration with climate-related disclosures: Operational statistics disclosed in the operational performance update inform the metrics and targets section of the climate-related disclosures. Some information from the climate-related disclosures, and greenhouse gas emissions inventory report is repeated in the annual report so that fair and accurate information is available to readers of the annual report.
   Electricity and gas distribution information disclosures	Annual disclosures of historical financial and non-financial performance, in accordance with regulatory information disclosure requirements. Integration with climate-related disclosures: Metrics disclosed here inform the metrics and targets section of the climate-related disclosures.
   Electricity and gas distribution price quality statements	Annual assessment of performance against price path and quality standards, in accordance with distribution services regulatory price/quality path requirements. Integration with climate-related disclosures: Metrics disclosed here inform the metrics and targets section of the climate-related disclosures.

   Governance	Strategy	Risks	Opportunities	Risk	Metrics	References
   				management	and targets	and Appendix

   ‌Strategy

   Vector's transition plan

   STRATEGIC PRIORITY CURRENT ACTIONS

   LINK TO RISK/ OPPORTUNITY

   Transition planning has been a key aspect of Vector's Symphony strategy. Symphony aims to use digital technologies, and tools such as demand-side orchestration, to more efficiently manage the electrification during the low-carbon transition. Our strategic response to climate-related risks and opportunities has evolved alongside our understanding of those risks and how they are likely to impact Vector. The table below contains a summary of the transition plan aspects of Vector's strategy, describing how we plan to respond to our material climate-related risks and opportunities and position Vector as the economy transitions towards a low-emissions, climate-resilient future state. Further details of Vector's business strategy, including key assumptions and barriers, can be found under each disclosed risk and opportunity.

   Enabling the glgctriffication of Auckland	Orchestrating distributed energy resources such as electric bus charging to R RISK 1: reduce the need for additional infrastructure spending. inability to Developing and deploying digital systems, integration protocols, cyber security, efficiently and data platforms that support the development and operation of demand- manage load to side orchestration. avoid network congestion Enhancing monitoring of the low voltage network to optimise infrastructure utilisation. O OPPORTUNITY 2: Actively engaging to influence regulatory and policy settings and standards such distributed as regulated standards for smart electric vehicle chargers. energy resources Actively engaging with customers to build our understanding of preferences and behaviours, and working with retailers to evolve their offerings that influence how and when customers use the network.
   Mitigating strandinb risk of bas distribution network	Actively engaging with government and regulators for a managed gas transition R RISK 2: to recover potential stranded value. gas transition Reviewing and replacing some capital expenditure (such as pipe replacement at end of life) with operational expenditure (like active pipe monitoring). Understanding customer needs, cost concerns and attitudes related to natural gas.
   Improving climate resilience	Modelling weather impacts on Vector assets from floods, wind, landslip, fire R RISK 3: and cyclones. increase in Analysing weather models over current assets to understand asset-specific risk. extreme weather events Developing projects to mitigate risk with allocated capital expenditure. Establishing a resilience cost curve framework to prioritise resilience projects. Surveying customers to understand their priorities and solutions to strengthen resilience.
   Enabling the dibitalisation of energy	Further developing Diverge, an energy data management software platform O OPPORTUNITY 1: for the collection, processing, storage and delivery of smart meter and related energy platforms energy data insights. Developing strategic partnerships, such as our partnership with Tapestry, the energy moonshot at X (Google's innovation lab) to enable smart electricity networks to benefit customers.
   Decarbonising our operations	Setting a target to reduce Scope 1 and 2 emissions by 53.5% from our FY2020 Not linked to a material base year (excluding electricity distribution losses). risk or opportunity, but is Developing a marginal carbon cost abatement curve to prioritise consistent with Vector's decarbonisation projects. Symphony strategy to help navigate and shape the energy transition2

   UNDERPINNED BY VECTOR'S GROUP-LEVEL SYMPHONY STRATEGY

   Information regarding the extent to which transition plan aspects of Vector's strategy are aligned with internal capital deployment and funding decision-making processes can be found in each risk/opportunity section later in this document. With respect to 'decarbonising our operations', please refer to the marginal carbon cost abatement curve on page 29.

2. Decarbonising our operations is strategically important as it aligns with global efforts to limit warming to 1.5C. However there is no risk or opportunity linked to this priority as it does not meet our materiality thresholds.

   Governance

   Strategy

   Risks

   Opportunities

   Risk

   Metrics

   References

   management

   and targets

   and Appendix

   Strategy (continued)

   Orderly decarbonisation

   • Limits global average temperature to 1.5ºC warmer by 2100 (RCP 1.9)

   • Net zero by 2050 in New Zealand and globally

   • Transition includes uptake of digital platforms for demand-side management

   • Rapid electrification managed through demand response

   • Regulations aligned with decarbonisation, and pricing models that manage whole-of-system costs

   • Ongoing efforts with energy efficiency to reduce demand

   • Managed transition away from fossil fuel gas

   • SSP 1-1.9

   Our approach to asset management

   ORDERLY DECARBONISATION

   As a regulated entity, Vector publishes detailed 10-year electricity and gas asset management plans, available here [3,4]. These plans detail our prudent asset management strategy, and are informed by asset management specific scenario modelling - see figure 2 on page 14. While climate-related risks are an input into asset management planning, these are collectively one of the many risks that are considered.

   Our approach to using climate scenarios

   Vector developed three group climate scenarios, as outlined in the adjacent table, which adapt data from the Intergovernmental Panel on Climate Change (IPCC) Assessment Report Six [5] for physical analysis, and the Network for Greening the Financial System (NGFS) [6] (an international network of central banks

   and supervisory authorities including the Reserve Bank of

   New Zealand) for transitional analysis. We consider that the IPCC scenarios [5] are best suited for New Zealand physical risk impact analysis because of their data availability. Likewise, we consider that the NGFS scenarios are relevant to Vector's assessments as they capture the customer burden on an unmanaged transition.

   Disorderly decarbonisation

   • Global average temperature 2.7ºC warmer by 2100 (RCP 4.5)

   • New Zealand still achieves net zero by 2050 but via a disorderly transition

   • World maintains current emissions until 2050 and net zero by 2100

   • Transition focuses on large-scale renewable supply with no demand side or digitalisation

   • Rapid unmanaged electrification

   • Regulations lag decarbonisation efforts and create barriers to efficient decarbonisation

   • Customers bear the cost of an expensive unmanaged transition

   • Unmanaged transition from fossil fuel gas

   • SSP 2-4.5

   These group scenarios were initially developed by Vector's management, informed by existing scenario modelling for asset management, globally recognised scenarios, and engagement with the wider electricity distribution and transmission sector

   in New Zealand. The scenarios were revisited in FY2025 and

   were considered to remain plausible and appropriate future pathways that are fit for purpose. However, we note that, from a global context, both the SSP5-8.5 'hothouse scenario' and

   DISORDERLY DECARBONISATION

   SSP1-1.9 'orderly 1.5°C scenario' are being re-examined and these may be updated in future disclosures with oversight from our climate change steering committee and board audit committee.

   Because these updates are related to physical impacts, they will affect physical climate change modelling, but they are not expected to have impact on the underlying process to identify material climate-related risks and opportunities. Vector does not include carbon removals/sequestration in its underlying scenario assumptions.

   Vector worked with the wider New Zealand energy sector to align on scenarios. This work was finalised in June 2024 and we may consider this in our scenarios and scenario modelling in the future. This may result in changes to our strategy, and risk and opportunity assessments. We have not yet integrated the wider energy sector scenarios as it will take some time to update our numerous models.

   Hothouse

   • Global average temperature 4.4ºC warmer by 2100 (RCP 8.5)

   • Emissions triple by 2075

   • Policies revert New Zealand to the fossil fuel era

   • Customers bear the cost of expensive fossil fuel energy

   • Regulations block decarbonisation spending

   • SSP 5-8.5

   Select assumptions of the group scenario narratives are used in scenario modelling as relevant to the appropriate Vector business unit. For example, when modelling future electricity load we consider inputs such as electric vehicle uptake, demand-side control, energy efficiency, and gas to electricity switching, but

   do not include others, like temperature forecasts. Similarly when modelling the future gas network we include assumptions

   such as the regulatory settings around gas networks, but do

   HOTHOUSE

   not include physical climate change impacts or the transitional impacts of the electricity network. The relationship between scenarios and modelling is detailed in figure 2. There is no model that combines all assumptions presented in the scenarios narratives.

   Governance

   Strategy

   Risks

   Opportunities

   Risk

   Metrics

   References

   management

   and targets

   and Appendix

   Strategy (continued)

   Under the orderly decarbonisation scenario, the world shifts gradually but pervasively towards decarbonisation. This scenario describes a future where global net-zero emissions are reached by 2050, and global temperatures peak around 1.6ºC by 2050 and then decline to 1.4ºC by 2100. This prevents the most extreme predicted impacts of climate change (which are described in

   the hothouse scenario below). However, this scenario will still result in an increase in extreme weather impacts including flooding, increased heavy wind events, land erosion and increased sustained hot and dry weather.

   For New Zealand, the orderly decarbonisation scenario describes a future where domestic actions and policies are consistently aimed at achieving net-zero domestic emissions by 2050. This scenario sees actions and policies providing for clear and early decarbonisation actions that integrate a whole-of-system approach, including both the supply side and demand side of the energy system.

   In relation to the electricity sector, the orderly decarbonisation scenario's future provides for the New Zealand electricity grid supplying near to 100% renewable electricity by 2050. It also assumes regulatory settings that incentivise and prioritise demand-side energy management solutions, distributed

   generation, and energy-efficiency measures, which allow the energy sector to manage electrification and renewable generation while avoiding substantial increases in network congestion. In particular, this demand-side participation by energy customers optimises the use of the existing physical electricity distribution network to reduce inefficient capital expenditure and assumes regulatory settings that optimise the wholesale market to leverage the low cost of renewable power. The combined effect keeps electricity prices low, and therefore enables an easier transition from fossil fuels to electricity.

   ORDERLY DECARBONISATION

   Globally the need for higher-quality energy data, digital platforms, and energy analytics increases as more electric vehicles and distributed renewable generation enter the electricity system.

   With respect to the natural gas sector, the orderly decarbonisation scenario describes a future where gas supply networks undergo

   a managed transition from fossil gas in response to reduced gas usage. This means that capital asset costs associated with existing gas transmission and distribution assets are recovered through early regulatory and policy changes, thereby minimising future customer impacts as costs are recovered over a larger current customer base.

   Under the disorderly decarbonisation scenario, the world follows a decarbonisation pathway whereby emission trends do not shift markedly from historical patterns, with some countries making relatively good progress while others fall short. CO2emissions are expected to remain at current levels until approximately 2050 and then fall by 2100 causing global temperatures to reach 2.0ºC by 2050, and 2.7ºC by 2100.

   Consequently, with respect to physical risks of climate change, the increased temperatures that are assumed to occur under the disorderly decarbonisation scenario (when compared to the orderly decarbonisation scenario) would cause more significant

   weather impacts to be felt in New Zealand. These weather impacts include physical risks to Vector's physical assets, including our electricity assets in particular.

   In regards to transition risks, under the disorderly decarbonisation scenario New Zealand achieves its net-zero emissions target

   by 2050. However, policy measures in the lead up to 2030 lack cohesion and the failure to coordinate policy stringency across sectors results in inefficient capital investments.

   In the electricity sector, this delay and incoherent policy approach results in a high cost burden on energy customers (because of inefficient investment in physical electricity assets to respond to higher peak energy demands), and creates energy reliability issues.

   Under the disorderly decarbonisation scenario, decarbonisation policies focus on supply-side policies which enable new large-scale renewable electricity generation and support the rapid electrification of transportation. The absence of demand-side management of electric vehicle charging and industry electricity demands results in high network congestion, needing large infrastructural upgrades with costs largely passed on to customers. This could result in intervention by regulators and/ or government

   DISORDERLY DECARBONISATION

   - therefore impacting the approval of capital allowances.

   The absence of demand-side management also limits customers' abilities to leverage technology to reduce consumption at peak periods, increasing the strain on the wholesale market and dependence on large-scale backup generation. This failure to realise opportunities to reduce overall energy costs through system efficiencies results in high electricity prices. Such high electricity prices not only intensify energy affordability issues

   but also create dependency on government subsidies and high carbon prices to achieve the 2050 targets.

   In relation to the natural gas sector, the disorderly decarbonisation scenario presumes that gas customers take and act on the view that the long term (between 2040 - 2050) operation of piped

   gas is not viable. This leads to a wind-down without regulatory or policy intervention to preserve cost recovery leading to an increase in cost recovery risks. In addition, gas customers face their own stranded asset risk.

   The hothouse scenario describes a future where minimal and fragmented efforts towards climate change mitigation have resulted in severely increased physical impacts.

   Under this scenario, the rest of the world prioritises economic and social development over decarbonisation efforts leading to the exploitation of fossil fuel resources. As a result, under the hothouse scenario GHG emissions triple by 2075 and global temperatures reach 2.4ºC by 2050 and 4.4ºC by 2100.

   With respect to physical risks, there would be a significant increase in extreme weather events leading to expensive climate change adaptation measures and low grid reliability.

   Regarding transition risks, this scenario represents a future where there is no or minimal action towards domestic

   HOTHOUSE

   and global emissions targets. Regulations form barriers to decarbonisation spending, and policy incentives to facilitate faster carbon reductions are ineffective or absent. Customers continue to bear the cost of fossil fuel energy and ongoing climate change adaptation.

   In relation to the natural gas sector, the hothouse scenario assumes a continuation of fossil fuels such as natural gas and LPG beyond 2050. Likewise, the electricity network only sees a low and manageable uptake of electric vehicles through to 2080.

   Governance	Strategy	Risks	Opportunities	Risk	Metrics	References
   				management	and targets	and Appendix

   Strategy (continued)

   Scenarios represent plausible descriptions of how the future may develop based on a set of assumptions, including both physical and transitional climate-related risks in an integrated manner.

   Scenarios are used to prepare for uncertain future impacts of climate change and test the resilience of Vector's business

   model and the Symphony strategy. Scenarios are not intended to be probabilistic or determinative of climate change. Future group scenarios may also change in time, given the significant interconnection with government and regulatory decisions.

   Vector's scenario analysis covers the group and all subsidiaries. The chosen scenarios are appropriate to Vector as they allow us to assess the resilience of our business strategy against different potential futures that could emerge as part of the energy transition.

   As explained above, Vector's scenario modelling informs our strategy including our gas and electricity asset management.

   Figure 2: Interconnection of Vector's modelling with overarching climate scenarios

   Transitional Modelling Group Scenarios Physical Modelling

   INDUSTRY WORKING GROUP - GAS TRANSITION MODELLING

   Assumptions include:

   • Gas wind-down by 2050

   • No government or regulatory support/ transition plan

   CUSTOMER SCENARIO MODEL

   Load forecast of electricity distribution network.

   Assumptions include:

   • Customer growth

   • Energy efficiency

   • Solar/battery

   • Electric vehicles

   • Hot water control

   • Gas to electricity substitution

   • Demand-side control

     Electricity asset management plan

     GAS CUSTOMER SCENARIO MODELLING

     Load forecast of the gas distribution network to 2031.

     Assumptions include:

   • Reduction in gas volumes

     Vector engagement with government and regulators

• No government or regulatory support/ transition plan

  ORDERLY DECARBONISATION

  Electricity network:

• Net-zero emissions by 2050 in NZ

• Includes uptake of digital platforms and demand-side management

• Rapid electrification managed

  through demand response

  Gas network:

• Managed transition from fossil gas

  Physical:

• 1.5°C global warming by 2100

  - SSP 1-1.9

  DISORDERLY DECARBONISATION

  Electricity Network:

• Net-zero emissions by 2050 in NZ

• No demand side or digitalisation

• Rapid unmanaged electrification

  Gas Network:

• Unmanaged transition from fossil gas

  Physical:

• 2.7°C global warming by 2100

  - SSP 2-4.5

  HOTHOUSE

• Minimal and fragmented efforts towards climate change mitigation

  Physical:

  Gas asset management plan

• 4.4°C global warming by 2100

  - SSP 5-8.5

  SCENARIO-LINKED PHYSICAL MODELS

  • Flooding

  • Wind

  • Coastal inundation

- Fire risk (based on short-term forecasts)

Strategy (continued)

Physical impacts modelling

Drawing on our group scenarios, Vector conducts detailed physical modelling of both acute and chronic impacts.

Physical climate modelling highlights that electrical assets in the Auckland region are exposed to the various physical

impacts of climate change. Assessment and management of physical risks on Vector's electricity distribution network have therefore been a focus.

In FY2022 Vector began assessing specific physical risks on our electrical infrastructure assets. We did so by prioritising those risks with the highest expected impact, being: risks associated with higher wind-speed, flooding, landslip, fire, and ground temperature increases. In FY2022 Vector commissioned ClimSystems to conduct extreme wind analysis, and analyse coastal inundation.

In FY2023 freshwater flood analysis was conducted, and in FY2024 the flood models were improved to include flood depth. The flood modelling results were mapped against our electricity zone substations. In FY2025 the models were

updated to include even more infrequent, high-impact events such as 1-500 year and 1-1000 year probabilities.

In FY2024 the University of Auckland's Department of Civil and Environmental Engineering conducted a land instability assessment in relation to our overhead electricity assets.

Geospatial landslip risk maps were then mapped against Vector's overhead asset base to understand asset susceptibility to landslips.

We worked closely with Earth Sciences NZ (formerly NIWA) and Fire and Emergency New Zealand to conduct a dry year and associated fire zone analysis for the electricity distribution network for the subsequent summer.

Vector engaged with international electricity distribution companies, including Florida Power & Light Company and San Diego Gas & Electric, to help us understand and prepare for the impacts of extreme weather events. In the case of Florida Power & Light, this was in response to the growing frequency and severity of cyclones, to learn more about how they were managing their adaptation, while the work with San Diego Gas & Electric was around how they managed their wildfire risk.

In FY2025 Vector commissioned Earth Sciences NZ (formerly NIWA) to explore plausible outcomes for the Auckland region if Ex-Tropical Cyclone Gabrielle had taken a different track and directly impacted Auckland as opposed to Hawke's Bay. Initial analysis highlights that the heaviest rainfall that occurred with the actual Gabrielle event in Hawke's Bay was now happening over the Coromandel and Kaimai Ranges, in effect placing Auckland in a rain-shadow region, therefore lessening the impact. Most parts of Auckland still received around 100mm of rainfall, and work is underway to process this data for analysis against our assets.

Physical climate-change impact modelling is part of our scenario analysis and informs Vector's climate change strategy via the asset management process and informs the engineering and design process for works on existing assets. For example, we have developed an approach to

flood abatement over zone substations within flood-risk zones and integrated those expenditures within our electricity asset management plan. These include activities such as the raising of assets above flood plain levels, or relocating the assets altogether.

There is usually a time-lag between Vector's climate modelling/ analysis, and asset management processes. For example, once an asset is identified as having a potential vulnerability, detailed modelling and engineering studies are often required before appropriate action can be put forward. Note that the proposed mitigation actions in the asset management plan are not a commitment to spend, and also require periodic regulatory funding decisions from Vector's economic regulator, the Commerce Commission.

Transitional impacts modelling

The Climate Change Commission has highlighted that electrification will be key to the decarbonisation of New Zealand's economy [7]. Transitional aspects of Vector's group climate scenarios have been selected to identify the boundary conditions for infrastructural demand. The scenarios help us to focus on the strategies that can better utilise existing infrastructure - such as regulated standards for smart electric vehicle charging, which informs our position on wider policy and regulations concerning the electrification transition.

Through our scenario modelling, we consider elements of both an orderly and disorderly transition to help us understand future demand. For example, modelling of peak load under the disorderly decarbonisation scenario assumes misaligned management of customer assets and appliances, resulting in the greatest peak demand. The converse is true of the orderly

decarbonisation scenario, where peak load is minimised - such as for example through the integration of smart digital platforms, network visibility, the alignment of customer incentives, and demand side orchestration of customer assets.

An example of this would be electric vehicle uptake. In a disorderly scenario, we model a greater proportion of

unmanaged electric vehicles charging during peak periods, which ultimately increases the capacity requirements on the network. In an orderly scenario, demand-side orchestration results in fewer electric vehicles being charged at peak times.

This scenario modelling has been considered within Vector's strategy processes including the electricity asset management plan, which presents a detailed discussion on network growth and security in chapter 10 [3].

Transition risks to Vector's gas network were modelled in FY2023 as part of the wider Gas Industry Futures Working Group - a collaboration of gas distribution and transmission companies in New Zealand. We model the disorderly transition scenario as it relates to gas, which presumes a 2050 network wind-down with no regulatory or policy intervention. This is appropriate to analyse given the significant potential asset cost recovery risks. In FY2025 Vector divided the disorderly scenario of gas into three further sub-scenarios to test different plausible customer trends of the disorderly scenario.

Strategy (continued)

Limitations of scenario modelling

As noted on page 3, climate-related risk management, and scenario modelling in particular, is an emerging area, and often relies on data and methodologies that are developing and uncertain.

By way of example, our flood modelling is largely dependent on precipitation forecasts, pre-storm water levels, elevation topology based on light detection and ranging (LiDAR) scans,

ground surface roughness and infiltration. The elevation topology represents a 'bare earth' model and therefore does not take into account buildings or subsurface stormwater reticulation.

Our wind modelling does not have spatial resolution, and therefore is not geospatially integrated into our asset analysis. This limits our ability to incorporate wind models into targeted asset planning.

In addition, our landslip modelling does not take into account the impacts of future precipitation.

Vector's transitional scenario modelling on the electricity network is also limited. For example, it only includes transitional customer impacts, such as electric vehicle uptake, industrial decarbonisation, new point loads, population growth, demand response, solar/battery uptake, and energy efficiency. It does not consider how the physical impacts of climate change (such as temperature change) may impact customer energy demand in the future.

We exclude the hothouse scenario in our transitional scenario modelling as this assumes there is no transition and therefore is an immaterial transitional impact. Hothouse is still modelled in our physical scenario analysis.

In addition, gas network scenario models are highly sensitive to the current and future policy and regulatory framework, future gas prices, availability, and customer sentiment towards fossil fuels. These regulatory settings, market conditions, and policy settings are not yet clear and therefore our assumptions may prove incorrect.

Value chain

In considering Vector's exposure to climate-related risks and opportunities, we have also taken into account the exposure of our value chain. As part of that assessment, we have defined our value chain as encompassing Vector's 50% share in Bluecurrent (formerly known as Vector Metering). It provides smart electricity and gas meters, and related data services. Bluecurrent operates in Australia and New Zealand.

We have also assessed upstream risks by including consideration of climate-related risk exposure of some of our tier 1 suppliers but have excluded tier 2 and 3 suppliers (for example, copper mining suppliers) because of the current difficulty in analysing such a large and complex supply chain.

Impacts on downstream customers, such as the cost of gas appliance conversions and gas costs, are considered. They are relevant to our assessment of climate-related risks and opportunities.

We have also begun exploring the intersectionality between critical infrastructure providers as part of our value chain analysis. In FY2025 we initiated a collaboration with Auckland Transport to analyse Vector's ability to access critical electrical infrastructure in a flood event.

Current transitional impacts

Vector is already observing growth in electric vehicles and industrial decarbonisation in the Auckland region, which impacts the load on Vector's electricity distribution network. We are also observing indirect transitional impacts, such as the anticipated rapid growth of data centres in the Auckland region. While not directly attributed to climate change, many data companies

are drawn to New Zealand because of its high renewable electricity supply and competitive energy costs compared to other OECD countries.

Although electricity system growth is reflected in our electricity asset management plan - [3], it is not possible to attribute these financial variances specifically to climate change. For example, while growth is driven in part by electrification, it is also driven by housing development, and changes in industrial behaviour.

It is important to note that the current increases in Vector's electricity distribution network pricing are largely influenced by an increase in the weighted average cost of capital, rather than an increase in infrastructure expenditure.

Vector has also developed Diverge, an energy data management software platform for the collection, processing, storage and delivery of smart meter data and its related insights. Our electricity distribution network uses Diverge for ingesting and storing smart meter and related energy data which can be

used to increase visibility of customer demand on Vector's low-voltage network.

The Ministry of Business, Innovation, and Employment (MBIE) have indicated that gas supply is reducing faster and sooner than previously forecast based on their most recent petroleum reserves data (January 2025) [8]. The ministry's expected proven and probable future natural gas production from 1 January 2025 onwards dropped from 1,166PJ in 2024 to 960PJ in 2025, an 18%

reduction. Natural gas distributed volumes on the Vector network have declined from 14.4PJ in FY2019 to 11.9PJ in FY2025.

In 2022 the Commerce Commission implemented accelerated depreciation from the start of the third default price/quality path commencing on 1 October 2022. Shortening asset life can reduce the risk of economic network stranding. Vector is currently engaging with the Commerce Commission on the next price path reset, and highlights that more focus is required to manage stranding risk to preserve incentives to invest and ensure remaining customers are not burdened with material price rises in later years. For more information, see risk 2: gas transition.

In FY2025 Vector recognised an impairment loss of $37 million in regard to goodwill allocated to the gas distribution business. The impairment was recognised following due consideration of updated forecasts in our gas asset management plan. These forecasts show a decline in net connections to the gas network from FY2026, and the overall gas volume continuing to decline, but at a faster rate than in prior years. This follows a FY2024 goodwill impairment of $60 million. Following the impairment, the carrying value of the gas distribution business is consistent with the estimated value of the regulated asset base.

Strategy (continued)

Current physical impacts

In recent years, including FY2025, Vector's electricity network has been impacted by extreme weather events. These include:

High wind-speeds, storms and cyclonic events: Responsible for power outages, largely through vegetation falling on Vector's electricity distribution network, and related repair costs.

Flooding: Resulting in flood damage, asset relocation costs, operational costs to disconnect and reconnect power for the safety of our customers, and geo-technical instability leading to landslips and increased vegetation fall.

In FY2025 Cyclone Tam followed by a thunderstorm caused about 1,600 low-voltage faults, and 231 high-voltage faults resulting in over 79,000 customers losing power. The latest estimate is that the associated costs to Vector for electricity maintenance as a result of Cyclone Tam resulted in a cost of approximately $1.7 million.

For interest, the FY2023 Auckland Anniversary floods and Cyclone Gabrielle resulted in a cost of $17.1 million.

Figure 3: Mapping of scenarios to Vector's risks and opportunities

O

Orderly decarbonisation

Disorderly decarbonisation

1. InabilitQ to gffficigntlQ manabg load to avoid network congestion

Hothouse

R

OPPORTUNITIES

RISKS

Hot and dry weather: Reducing current capacity in electricity assets and increasing the risk of electrical equipment failing or causing wildfires.

Vector's material risks and opportunities

From our scenario analysis, we have identified three risks and two opportunities. Their mapping against our scenarios are highlighted in figure 3, and expanded on the subsequent pages.

‌RISK 1:

InabilitQ to gffficigntlQ manabg load to avoid network congestion

R

Risk description

Key scenario: disorderly decarbonisation Type: transitional - policy risk

Sector: electricity distribution network Geography: Auckland

In a disorderly decarbonisation scenario, an absence of timely policy, regulatory and market changes results in customer peak demand increasing faster than

average annual usage. Subject to network response and planning, two different future scenarios may emerge:

1. a highly congested network with network connection queues and reliability challenges; or

2. a strong increase in physical network investment leading to affordability challenges for customers.

Time period

Long term: 10 - 30 years

Anticipated impacts

Scenario modelling highlights that under a disorderly decarbonisation scenario the growth over the next 30 years would result in a substantially stronger increase in peak demand compared to an annual increase in consumption on Vector's network. Under this disorderly scenario, the absence of demand-side orchestration leads to two fundamental issues as described in the risk section above:

If network investment is lagging demand because of unanticipated rapid peak demand growth, the network will be increasingly congested and new connections queues will become increasingly long. If prolonged and at scale, this could

lead to customer outages, slow down economic growth and limit decarbonisation efforts.

Conversely, if traditional network investment is significantly ahead of demand growth or caters to an increasingly high peak demand, it may lead to a strong build-out of physical network infrastructure that locks in cost and lacks flexibility.

Both issues may pose risks such as higher customer costs and economic slowdown. This could result in intervention by regulators and/or government, impacting the return on the deployed assets and reputational loss.

Vector's risk management strategy

Vector's strategy to manage this risk over the medium-term period to 2035 involves the effective demand-side orchestration of distributed energy resources (such as electric vehicles and hot water), and the deployment of non-wires alternatives to smooth load profiles. This includes increasing our ability and capability to manage these distributed energy resources (either ourselves, or through third parties), and the alignment of market, regulatory and policy settings to support and enable this. Also included

is the management of loads during critical events, such as a network or grid emergency, to ensure electricity system stability.

To defer investment in traditional infrastructure and manage the network securely, Vector needs certainty that customers' demand will be shifted outside peak periods. At a high level, delivery of our Symphony strategy to address this risk involves:

• Direct integration of distributed energy resources, and their management systems, with our network management systems. An example of this could be a dynamic operating envelope which could provide network limits to retailers' systems in real-time in response to electricity constraints on the network

• Enabling digital systems, integration protocols, cyber security, and data platforms

• Visibility of the low-voltage network, including distribution transformer and distributed energy resource visibility for more efficient planning

• Active engagement for regulatory and policy settings and standards such as regulated standards for smart electric vehicle chargers

• Network modernisation to support whole-of-system planning, distributed energy resource integration and detection

• Active customer engagement to build our understanding of preferences and behaviours, and working with retailers to

  evolve their offering that influence how and when customers use the network.

  These initiatives are incorporated into Vector's internal capital deployment and funding decision-making processes through our electricity asset management plan [3].

  Examples of actions to date that support Vector's risk management strategy include:

• Using data and insights from our gas network to inform electricity demand forecast from gas to electricity switching

• Building capability to on-board large customers onto Vector's distributed energy resource management system for demand response which can minimise the capital cost for those customers

• Further developing Diverge, an energy data management software platform for the collection, processing, storage and delivery of smart meter data and related insights

• Increasing low-voltage network visibility via the aggregation of existing smart meter data to understand remaining low-voltage headroom

• Developing a load management protocol with retailers operating customer devices, and introducing a commercial distributed energy resource tariff to enable more efficient use of existing network capacity by commercial customers with flexible loads

• Building solutions using bespoke services, co-developed between Vector Technology Solutions and AWS

• Working with Tapestry, the energy moonshot at X (Google's innovation lab) as one of a select group of global partners, collaborating on the next generation of platforms for network management. For more details, see opportunity 1: energy platforms on page 21.

Changes to this strategy may emerge in response to regulatory, technology and market changes, scientific developments, and customer preferences.

Governance Strategy Risks Opportunities

Risk management

Metrics and targets

References and Appendix

RISK 2:

Gas transition

R

Risk description

Key scenario: disorderly decarbonisation Type: transitional - policy risk, market risk Sector: gas

Geography: Auckland

An absence of timely policy and regulatory decisions on the gas transition, combined with upstream gas supply shortages gives rise to a disorderly decarbonisation scenario, where gas infrastructure companies and their connected customers are potentially exposed to material transition costs, disruption and gas-asset stranding risk.

Time period

Short term: 0 - 5 years

Medium term: 5 - 10 years

Long term: 10 - 30 years

Anticipated impact

There is uncertainty over the future asset life utilisation (capacity and longevity) of gas networks. This is driven by New Zealand's targets for net-zero carbon emissions by 2050, combined with a shortage of upstream gas supply, declining gas consumption, and

inconsistent government policy direction to adequately manage the transition. Under the disorderly decarbonisation scenario, there is a risk that the government or regulator doesn't honour the principle of regulated investment cost recovery. This introduces a stranded asset risk whereby investment recovery is not achieved over the long term. This may also lead to further impairments of the value of the gas business.

Vector has already experienced a 17% decline in gas volumes since 2019, and our medium-term scenario modelling under the disorderly transition highlights that this trend will continue. This is driven by a combination of numerous factors which include decarbonisation, gas scarcity, and business closure or relocation from Auckland.

Vector's risk management strategy

Vector's short-term cash-flow risk is because of the Commerce Commission's approach to using a weighted average price cap, which incentivises gas distribution companies like Vector to grow gas demand - and therefore financially penalises gas distributors if gas volumes are lower than the Commerce Commission's forecasts. We have proposed that New Zealand follows the approach of the UK, which uses a revenue cap whereby our revenue is determined regardless of how much gas is conveyed. Vector has also been moving our pricing to fixed charges, which mitigates some short-term volume decline.

Mitigating long-term capital recovery risk requires action by regulators to make timely changes that accelerate the recovery of capital from current customers before an increased rate of disconnections puts that capital recovery at risk.

Vector's approach to mitigating gas stranding risk focuses on:

• Advocating for regulatory intervention to accelerate depreciation of gas assets

• Seeking regulatory allowances for end-of-life treatment of the gas network, such as decommissioning

• Reducing capital expenditure where safely possible to minimise added stranded value. This includes substituting some capital projects with operational projects.

• Requiring 100% customer contributions for new gas connections and associated network growth costs.

  In FY2025 Vector began engagement with the Commerce Commission in relation to the upcoming price path reset. This

  is a regulatory framework that determines the maximum revenues of gas distribution networks over the next period from 1 October 2026. Vector has proposed that the Commission:

• Moves the form of control from a weighted average price cap to a revenue cap

• Agrees that the regulated asset base should not be indexed to inflation to avoid increasing stranding risk

• Implements a more aggressive approach to mitigating stranding risk to ensure more asset value is recovered over the current larger customer base

• Updates the assumptions in its asset stranding model to further accelerate depreciation

• Creates a step up in operational expenditure allowances to support the transition of some capital expenditure to operational expenditure

• Clarifies its view on how decommissioning costs should be treated under the regulatory framework.

  Examples of actions taken by Vector as part of this strategy to reduce capital recovery risk to date include:

• Informing both government and regulators as to the criticality of preserving the principle of regulated investment cost recovery. An example of this is Vector's paper to government on 'Managing the gas transition - options preserving solutions to manage customer risks from gas asset stranding' in FY2024 [9]

• Proposing that the Commerce Commission implements accelerated depreciation from the start of the third default price/ quality path commencing 1 October 2022

• Requiring 100% customer contributions for new gas connections and associated network growth costs as of 1 October 2022

• Not proceeding with some previously forecast capital projects, such as future-proofing ducting

• Reducing system growth to zero in the RY2025 gas asset management plan

• Forming the Gas Infrastructure Future Working Group alongside Clarus and Powerco, after engagement with the Ministry of Business Innovation and Employment. The purpose was to explore scenarios for the end-state and transition options for gas infrastructure [10].

This risk serves as an input into Vector's financial planning process via our gas network asset management plan [4]. It is important to note that it is not possible to deploy additional capital to manage this risk. Rather, the risk is being managed by reducing capital

expenditure where safely possible to reduce exposure to further asset stranding risk. For example, in FY2021 the gas asset management plan had a 10-year forecast of net capital expenditure of $86 million (inflated to forecast 2026 dollars). In Vector's most recent gas asset management plan the 10-year forecast of net capital expenditure has dropped to $43 million (inflated to forecast 2026 dollars) - which has been partially offset through higher operational maintenance costs. Note that the gas asset management plan discloses gross capex which includes customer connections and asset relocations which do not contribute to stranding risk as they are largely funded by the

customer. We chose, therefore, to disclose net capex here as this is the portion attributed to stranding risk.

Because of the significant impact of evolving markets and government policy, updates to this risk, relevant scenarios, and strategy may need to be considered in future years' climate-related disclosures and asset management plans.

RISK 3:

Increase in extreme weather events

R

Risk description

Key scenarios: orderly and disorderly decarbonisation, hothouse

Type: physical - acute

Sector: electricity distribution network Geography: Auckland

All scenarios identify an increase in extreme weather events which is expected to cause disruption to the Vector network in the Auckland region. These include increasing wind-speeds, freshwater flooding, coastal flooding, cyclonic activity, land erosion, and an increase in sustained hot and dry weather leading to elevated wildfire risk. These weather impacts are physical risks to our assets, in particular our electricity distribution infrastructure assets.

Time period

Short term: 0 - 5 years

Medium term: 5 - 10 years

Long term: 10 - 30 years

Anticipated impact

All scenarios highlight an increase in extreme weather events because of climate change compared with historical trends, with the most severe impacts in the hothouse scenario. Key impacts are customer outages, reputational risks and regulatory risks/ fines from those outages, public safety risks, and asset costs

(via either repair or reinforcing) to Vector's network.

Our flood modelling scenario analysis conducted in FY2024 considered 113 zone substations out to the year 2100. It highlighted 13 zone substations that are identified to be at potential risk of flooding. Only certain assets (such as the control gear) within these 13 zone substations are modelled as being

as vulnerable. A total of 15 projects have been identified to mitigate these risks. Examples include the raising of assets above flood levels. These projects need to be assessed through the appropriate internal governance process for approval of capital allowances before they can be actioned. In FY2025 we completed one of our flood mitigation projects, reducing the number of flood exposed zone substations to 12.

Regarding coastal inundation, only one zone substation was identified as being at risk and is currently being decommissioned.

Wind-speed models to the year 2100 highlight that the hours of heavy wind-speeds per year are forecast to increase across all scenarios. As heavy wind-speeds resulting in vegetation fall are responsible for significant damage on the Vector network, an increase in heavy wind-speed frequency would increase unplanned outages resulting in additional expenditure for

network repair, and heighten the risk that Vector does not meet our regulatory quality standards. In addition, the cascading effects of floods with high wind-speeds can weaken the

geo-technical stability of the ground, leading to increased tree fall, landslips and delayed network repair until the water has subsided. Landslip susceptibility analysis from FY2025

highlighted 351 power poles in potentially very high landslip risk.

Climate modelling across all scenarios shows that the length and severity of sustained hot and dry weather will increase too. This, in combination with high wind-speeds, raises the risk of fire start from Vector's electricity distribution network under normal operating conditions. Furthermore, warmer weather decreases electrical asset capacity ratings.

Vector's risk management strategy

Vector developed a risk scoring system which uses results from climate change models, along with internal engineering expertise. Each climate-related risk to specific assets is given a risk score based on a set of specific criteria. Summing all our

analysed risks comes to a total risk score of 431 risk points. This is not an exhaustive list, and more risks will be added as Vector's climate-change modelling continues to mature.

This risk serves as an input into Vector's financial planning process via our electricity asset management plan. We have put forward approximately $300 million worth of projects for inclusion in Vector's FY2025 electricity asset management plan [3]. These projects undergo further refinement beyond the description included in the electricity asset management plan. It is important to note that the electricity asset management plan is not a commitment to spend, and projects will be refined continually, for example with final tree regulations being implemented.

Examples of projects in progress include:

• Continuous asset monitoring and modernisation of our planned maintenance programmes to identify potential weaknesses early. This includes the use of aerial inspection and development of artificial intelligence (AI) based condition assessment in partnership with Tapestry, the energy moonshot at X (Google's innovation lab)

• Infrastructure upgrading to improve flood resilience at key zone substations

• Transferring load from our highest flood-risk zone substation so that it can be decommissioned (Ngātaringa Bay

  zone substation)

• Reconfiguring parts of the electricity network to create multiple pathways for power to flow (known as meshing), and adding network automation to quickly re-route power. In some cases, meshing can be substituted with standby distributed generation

• Upgrading overhead lines with more resilient technologies

• Reducing the risk of the network starting a wildfire during normal operations. Examples of risk reduction include the implementation of seasonal ratings, use of safer fuses and the potential to switch off reclosers on extreme-heat days

• The Government has announced a decision on the long-awaited reform of the tree trimming regulations. These changes will help us to better protect our lines from trees, and so protect our customers' electricity supply, however the cost recovery challenges of tree trimming remain unaddressed in these changes

• Ongoing engagement with Earth Sciences NZ (formerly NIWA) and Fire and Emergency New Zealand for the FY2025 summer.

  Governance	Strategy	Risks	Opportunities	Risk	Metrics	References
  				management	and targets	and Appendix

  ‌OPPORTUNITY 1:

  Energy platforms

  O

  Opportunity description

  Key scenario: orderly decarbonisation

  Type: transitional - market, products and services

  Sector: electricity Geography: global

  In the orderly decarbonisation scenario, better access to data and the use of intelligent digital platforms to move loads to off-peak times would improve network utilisation and efficiency. Advanced meters, the data they provide and the accessibility of that data can be used to increase network visibility, enable demand-side management, and improve network operations, customer service, and the innovation of new products and services.

  The need for Vector to build capability to process large, varied datasets has driven our investment in digital platforms. We have developed Diverge, an energy data management software platform for the collection, processing, storage and delivery of smart meter and related energy data. Diverge is being used by Bluecurrent (a provider of smart metering services and solutions that is 50% owned by Vector) to provide

  energy data to electricity distribution network operators in Australia and New Zealand, to improve the visibility

  of the impacts of distributed renewable generation and electrification on their networks.

  Vector's electricity distribution network also uses Diverge for ingesting and storing smart meter and related energy data to provide various analytical functions and insights.

  Time period

  Short term: 0 - 5 years

  Medium term: 5 - 10 years

  Vector's opportunity management strategy

  We are building solutions using bespoke services co-developed between Vector's wholly owned subsidiary Vector Technology Solutions (VTS) and AWS. This has seen VTS establish the Diverge solution for Bluecurrent and Vector as well as launch a go-to-market initiative for international markets.

  Beyond the arrangements with Bluecurrent, Vector's electricity distribution network also uses Diverge for ingesting and storing smart meter and related energy data for various analytical functions.

  We are also continuing our partnership with X (Google's innovation lab), contributing to their Tapestry project, as one of a select group of global partners collaborating on next-generation platforms for network management. These tools include Tapestry's 'GridAware', which uses new technology including drones and applies machine learning and modern

  artificial intelligence processes to survey and guide maintenance of the network. This enhances the job of traditional network inspection, which is much more labour intensive, through greater efficiency and new inspection techniques. Another tool, Tapestry's 'Grid Planning Tool for Distribution', creates robust network simulations that incorporate optimised solutions for new technology such as solar photovoltaic installations and the growth of customer-owned devices like batteries and electric vehicle chargers, to ensure an efficient network.

  These two partnerships support key components of our Symphony strategy, using digital solutions and innovation to enable more efficient use of the network, and improve our planning capabilities. This opportunity is funded from the Vector group's annual budget, along with out-of-cycle requests from the board when specific opportunities arise. We note the Commerce Commission's innovation and non-traditional solutions allowance (INTSA) which could provide up to $28.4 million in research and development during the current five-year regulatory period.

  The specific internal capital deployment and funding decisions related to this opportunity are not disclosed here because of commercial sensitivity.

  Anticipated impact

  The need for more, higher-quality, and near-real-time energy data can be expected to increase as more distributed energy resources such as electric vehicles and intermittent renewable generation capacity enter the electricity system. Developing energy platforms like Diverge would allow Vector to improve management of our electricity distribution network and offer this capability as a service to other networks, both locally and globally. This would therefore enable us to better serve our customers and monetise this technology in the future.

  Governance	Strategy	Risks	Opportunities	Risk	Metrics	References
  				management	and targets	and Appendix

  OPPORTUNITY 2:

  Distributed energy resources

  O

  Opportunity description

  Key scenario: orderly decarbonisation Type: transitional - resource efficiency Sector: electricity

  Geography: Auckland

  In the orderly decarbonisation scenario, distributed solar, batteries (including vehicle-to-grid (V2G)) and micro-grids (including utility-scale batteries) - combined with smart, remotely manageable energy systems (such

  as hot water load control and smart electric vehicle chargers) - act as demand-side energy resources that complement centralised large-scale electricity generation. Efficient and effective demand-side management of these distributed energy resources presents an opportunity for Vector's role to evolve to

  include more advanced distribution system operation (DSO), involving advanced integrated network planning, evolved commercial arrangements with third parties, and more active network management. This has the added benefit of contributing to the mitigation of risk

  1: inability to efficiently manage load to avoid network congestion.

  Time period

  Short term: 0 - 5 years

  Medium term: 5 - 10 years

  Long term: 10 - 30 years

  Anticipated impact

  Efficient demand-side management and orchestration of distributed energy resources connected to the network has the potential to reduce peak congestion on the network and manage network security during emergency events (such as

  storms). This may support Vector's electricity distribution network to reduce unnecessary capital deployment and avoid increased customer costs.

  Orchestration of distributed energy resources is also crucial after network outages. If appropriately managed, the distributed energy resources could support and stabilise a network restart.

  However, if they are not controlled, and all demand turns

  on as power is restored, it could cause a large instantaneous spike in demand which could overload transformers and distribution lines - and trip protection devices, therefore delaying network restoration.

  Future industry architecture, and the scope of advanced distribution system operation (including new functions and capability required) are currently the subject of much discussion among the electricity industries in New Zealand and globally.

  The Electricity Authority has expressed a preference to ensure risks of potential conflicts of interest across these functions are mitigated, which could include ring-fencing of certain DSO functions from network ownership and operation. While not strictly a threat to the achievement of the objectives of Vector's strategy, this could reduce the scope and scale of

  the opportunities available to the Vector group in executing the strategy.

  Vector's opportunity management strategy

  Vector's future network road map, detailed in section 2 of the 20243 electricity asset management plan, consists of four priority areas:

• Achieving supportive commercial, regulatory and policy settings. During the short term, we will continue working with market participants, regulators, policy-makers and appliance/ network standard agencies to work towards settings that enable the demand-side orchestration of distributed energy resources. We expect a more rapid addition of distributed energy resources in the medium term

• Understanding customer needs and preferences in relation to the management of distributed energy resources. Vector

  continues to invest in analytics to understand customer needs and behaviours, and increase communication with electricity retailers to gather insights

• Increasing our access to distributed energy resource capacity - through improved visibility of distributed energy resources, demand-side management, evolved pricing and commercial mechanisms, continued coordination with third parties such as electricity retailers, and direct integration of distributed energy resources with our network management systems

• Building capability, by continuing to make no-regrets investments in new enabling technologies, developing new commercial arrangements and operating protocols with third parties, and increasing our understanding of customer response to load management practices and incentives.

This opportunity serves as an input into Vector's financial planning process via our electricity asset management plan. Vector's FY2025 electricity asset management plan includes approximately $50 million of capital deployment towards distributed energy resource management over the next 10 year period. This forms part of the non-network digital capex forecasts in our electricity asset management plan. This opportunity is further supported by the platforms highlighted in opportunity 1: energy platforms.

1. A detailed asset management plan which includes narratives such as the future network roadmap is only published every second year. The last detailed asset management plan for electricity was in 2024. The 2025 plan was a shorter update.

   Governance

   Strategy

   Risks

   Opportunities

   Risk

   Metrics

   References

   management

   and targets

   and Appendix

   ‌Risk management

   Vector's approach to risk management

   Vector's group enterprise risk management framework is consistent with the risk management standard ISO 31000.

   The framework is embedded in our business through our risk governance, policies, guidelines and risk partnership model that the group risk team maintains with the different business units to support Vector's risk management.

   Risk assessment

   Treat risk

   Establish the context

   Evaluate risk

   Analyse risk

   Identify risk

   
   
   

   Monitoring and review

   Communication and consultation

   Figure 4: Vector's enterprise risk management framework

   We use a risk assessment criterion within our group enterprise risk management framework to support a consistent approach to risk management across the Vector group. Our board risk and assurance committee has responsibility for overseeing and reviewing our group enterprise risk management framework, and the related policies, and Vector's group material risks.

   Our process for identifying and prioritising material climate-related risks and opportunities

   Risks or opportunities are assessed as material if their residual risk is assessed as high to very high based on the group risk assessment criteria - which takes into consideration severity and likelihood. In addition to this, Vector also employs the following two criteria specifically for the climate-related disclosure process:

   • A risk or opportunity has a potential financial impact greater than 5% of Vector's market capitalisation

   • A risk or opportunity contributes to or forms a barrier to emission reductions outside of Vector's organisational boundary which constitutes more than 1% of

   national emissions.

   If the risk or opportunity meets any of the above criteria, it is considered material and prioritised, with oversight from the climate change steering committee. A summary of climate-related risks and opportunities is reviewed by the board risk and assurance committee.

   As part of our bottom-up approach, the group risk team work to identify new climate-related risks with all business units.

   While we only directly engage our internal business units in our risk review, we consider our value chain when analysing and managing climate-related risks and opportunities. This includes our upstream supply chain, downstream customer impacts, and Vector's subsidiaries and investments (excluding investments that fall below 20% ownership4). Our approach to defining our value chain boundary and exclusions is discussed in the value chain subsection of the strategy section on page 16.

2. At the date of this report, Vector has no investments below 20% ownership.

   Governance	Strategy	Risks	Opportunities	Risk	Metrics	References
   				management	and targets	and Appendix

   Risk management (continued)

   Figure 5: Vector's climate-related risk and opportunity management process flow. This process occurs annually.

   Group sustainability and group risk and

   resilien

   ce teams engage with key stakeholders

   Oct

   across the Vector group.

   Review and update existing climate-change risks and opportunities. Identify changes in risks and opportunities, trends and ratings.

   Discuss and update mitigations and

   their effectiveness.

   Prioritise high-level climate-change-related risks and opportunities.

   Refine inputs, assumptions and methodologies

   for modelling.

   Nov

   Changes to scenarios and methodology for risk quantification presented to board audit committee.

   High-level climate change risks and opportunities presented to the climate change steering committee.

   Working with operational business units to collect data and metrics for recognised targets.

   Involvement of group finance to assess risks

   and opportunities.

   March

   List of prioritised climate-change-related risks and opportunities approved by board risk and assurance committee.

   Engagement with external advisors to identify

   gaps and improve reporting.

   June

   First draft of climate-related disclosures presented to board audit committee.

   
   
   

   Governance	Strategy	Risks	Opportunities	Risk	Metrics	References
   				management	and targets	and Appendix

   Risk management (continued)

   Our process for understanding the impacts of risks and opportunities

   Vector also conducts more detailed physical and transitional risk modelling to understand the business impacts and opportunities. These are described on page 15, and summarised here for completeness.

   Physical risks

   Vector quantitatively and qualitatively studies physical risk, working with the University of Auckland's Department of Civil and Environmental Engineering, Earth Sciences NZ (formerly NIWA) and ClimSystems.

   To date, Vector has investigated the following climate-related physical risks:

   • Fluvial and pluvial flood exposure across all electrical assets

   • Flood-depth exposure at zone substations

   • Extreme high water level from coastal inundation across zone substations

   • Projected increase in frequency and duration of high wind-speeds generally (not against any specific asset type)

   • Flood and wind impacts from cyclones

   • Landslip risk to overhead electricity assets

   • Fire risk after extended periods of hot and dry weather, which could be triggered by Vector's overhead assets under normal operating conditions.

   Transition risks

   To evaluate transition risks and opportunities, the Vector group insights team uses a customer scenario model to estimate the impact of energy transitions, such as the uptake of electric vehicles, on the electricity distribution network. The model supports Vector to assess potential future load growth requirements, plan for network flexibility requirements, and understand the impact this may have on our customers.

   Further details of this scenario model, including high-level model assumptions, can be found in the strategy section and are explained in section 10 of Vector's electricity asset management plan [3].

   The Vector insights team also uses a scenario model to evaluate different elements of the disorderly transition on the gas network.

   Time frames

   We use the time horizons below in our scenario analysis and physical and transitional risks and opportunities assessment.

   As explained below, each time horizon has been selected because of its link to our asset planning horizons and capital deployment plans:

   • Short term (0-5 years), to reflect typical business planning and regulated price path cycles which sets Vector's regulated revenue streams

   • Medium term (5-10 years), to allow for our asset management plans for gas and electricity networks that detail capital and operational expenditure forecasts over a 10-year period

   • Long term (10-30 years), to account for longer impacts over existing and future planned assets and business activities.

   Governance	Strategy	Risks	Opportunities	Risk	Metrics	References
   				management	and targets	and Appendix

   ‌Metrics and targets

   Vector uses metrics and targets to measure and manage our climate-related risks and opportunities disclosed in the strategy section. Within this disclosure we also include our scope 1, 2 and 3 greenhouse gas emissions, and our target to reduce select emissions.

   Greenhouse gas emissions

   We have published our greenhouse gas emissions in our FY2025 greenhouse gas emission inventory (GHG inventory) report, available here [1].

   Vector measures and reports our greenhouse gas emissions in accordance with:

   • The greenhouse gas protocol - a corporate accounting and reporting standard

   • The greenhouse gas protocol - scope 2 guidance

   • The greenhouse gas protocol's corporate value chain (scope 3) accounting and reporting standard

   • Other related technical guidance issued under the greenhouse gas protocol standard.

   Together we refer to these as the greenhouse gas protocol. This splits greenhouse gas emissions into three categories:

   Scope 1 - Direct emissions from sources Vector directly owns or controls such as emissions from our vehicle fleet's fuel

   combustion, our diesel backup generators, methane leaks from our natural gas distribution network, and SF6leaks from our electricity distribution network.

   Scope 2 - Indirect emissions from Vector's consumption of purchased electricity, and electricity distribution losses along the network.

   Scope 3 - All other indirect value chain emissions, including customer energy consumption, and supply chain emissions.

   The greenhouse gas protocol splits scope 3 emissions into 15 categories. A breakdown of Vector's emissions by scope

   and category can be found in table 3 with bespoke emissions intensity metrics in table 2.

   All calculations are expressed in total tonnes of carbon dioxide equivalent (tCO₂e).

   Vector uses the operational control approach, as defined by

   the greenhouse gas protocol, to measure and report emissions. This allows emissions reduction efforts to focus on emissions over which Vector has the greatest control, and thereby can influence most.

   Our base year for emissions reporting is FY2020 (1 July 2019 to 30 June 2020). Vector recalculates emissions of historic years if the inventory is affected by changes that in aggregate total 5% of our carbon footprint. These changes can be structural (for example acquisitions or divestments), changes in the way the

   inventory is calculated, or discovery of omissions or errors. Vector might decide to update historic years for changes below the threshold for other reasons, such as consistency or clarity.

   Additional information on Vector's organisational boundaries for the purpose of emissions calculation, including the treatment of investments, operational boundaries, emission factors, exclusions, summary of changes to previous years, methodologies, and results, can be found in Vector's greenhouse gas emissions inventory report [1].

   Independent limited assurance over Vector's greenhouse gas emissions inventory was provided by KPMG (see Vector's greenhouse gas emissions inventory report [1]).

   Emissions reduction target

   In FY2021 Vector set an absolute emissions reduction target.

   That target is for Vector to reduce our scope 1 and 2 emissions (excluding electricity distribution losses) by 53.5% by FY2030 from a FY2020 baseline. The target was developed by thinkstep-anz in 2021, based on a methodology published by the Science Based Target Initiative (SBTi) and the SBTi's then applicable guidance on reductions required to be consistent with keeping global warming to 1.5°C.

   Our target has not been validated by SBTi because SBTi's methodology provided for the inclusion of emissions related to electricity distribution losses, which we have excluded. Further detail regarding this exclusion is set out on page 27.

   The emissions reduction target does not rely on any offsets5. Vector does not have any interim targets. However, we have internal emissions reduction targets that are weighted to staff remuneration, which are explained in more detail on page 34.

   In FY2025 we achieved our emission reduction target, five years ahead of the original FY2030 target date, with a reduction in our scope 1 and 2 emissions (excluding distribution losses) of 55% compared to the FY2020 base year. This was largely because

   of a reduction in natural gas fugitive emissions, along with a reduction in diesel-generation-related emissions.

   Meeting the target in FY2025 does not guarantee that the emissions reductions can be maintained in subsequent years. There are key risks highlighted in table 4 that could result in Vector missing our target in any given year.

   Our total emissions across all three scopes (including electricity distribution losses) have decreased by 54% since FY2020. This is mainly owing to a reduction in natural gas consumption in the Auckland region, combined with a wind-down of Vector's Natural Gas Trading contracts.

   Vector's emissions intensity, in table 2, has also decreased across four out of five categories, which are linked to our emissions reductions across our gas and electricity businesses. The final metric, 'kgCO2e per MWh delivered - including electricity distribution losses' fluctuates largely owing to New Zealand's national electricity emission factor, however this can also change because of characteristics on our distribution network, which can be a result of several factors including load profiles, and distance to load.

   A breakdown of emissions by scope and a comparison of emissions per scope since Vector's base year in FY2020 can be found in table 3. These summaries of emissions have been

   extracted from our greenhouse gas emissions inventory report [1].

3. Vector made a public commitment to net-zero emissions by 2030 in 2017, which contemplated the use of offsets. This commitment has since been updated in FY2021 with an additional absolute emissions-reduction target to reduce our absolute scope 1 and 2 emissions by 53.5% by FY2030, which does not anticipate use of offsets. In FY2025 Vector has used the 53.5% target to manage our climate-related risks and opportunities and it is against this target that we track our performance.

Metrics and targets (continued)

Electricity distribution losses

Electricity distribution losses are not like a water or gas leak; they are an inherent characteristic of electricity distribution networks. Although we can measure these losses, and report their associated emissions based on New Zealand's published electricity generation emission factor, we can never fully remove them. As distribution losses are largely an inevitable by-product of electrical conduction, Vector has elected to exclude emissions associated with such losses from our emissions reduction target. This allows our target to focus on emissions that we can more readily manage.

Figure 6: (left) Emissions included in Vector's emissions reduction target - scope 1 and 2 excluding distribution losses and their comparison to the FY2020 base year. (right) Vector's yearly scope 1 and 2 emissions excluding distribution losses since FY2020. Emissions are in tCO₂e.

25,000

25,000

20,000

FY2030 emissions reduction target

20,000

Emissions (tCO,e)

15,000

Emissions (tCO₂e)

15,000

10,000

10,000

5,000

5,000

0

Natural gas distribution fugitive emissions

FY2020

SF6 Other

leakage fugitive emissions

FY2025

Stationary combustion including biogenic carbon

Vehicle fleet

Electricity consumption (market-based)

0

FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30

Group emissions FY2030 target

Table 2: GHG emissions intensity of select scope 1 and 2 emissions

length in m

** Main gas lines refer to the shared pipeline infrastructure, while service lines connect the customer to the main line.

*** Electricity distribution losses are excluded from our emissions reduction target (see explanation above).

Metrics and targets (continued)

Table 3: GHG inventory by scope and category in tCO2e. FY2025 emissions highlighted in green indicate a reduction since the base year or year in which emissions were first reported, whereas emissions in red show increases.

‡ Recalculated FY2020 to FY2024 to remove emissions relating to the sale of the Ongas LPG business. For details, see sections 1 and 4 of the greenhouse gas emissions inventory report [1].

* Market-based method for electricity consumption. While location-based electricity emissions are also included in our inventory, the amounts summed in table 3 include only market-based emissions, as these form part of our emissions reduction target.

§ Recalculated FY2022 to FY2024 to remove emissions relating to the sold Natural Gas Trading contracts. As a result of the closure of the business from 1 July 2024, there are no FY2025 emissions relating to purchased, sold or shipped natural gas. For details, see sections 1 and 4 of the greenhouse gas emissions inventory report [1].

| | Recalculated FY2020 to FY2024 to remove emissions relating to the sale of the Ongas LPG business. For details, see sections 1 and 4 of the greenhouse gas emissions inventory report [1]. Post the Ongas sale, emissions from third-party transportation for upstream-purchased materials and products are immaterial and are therefore excluded from reporting.

Metrics and targets (continued)

Marginal carbon abatement cost curve

In FY2022 Vector developed a carbon abatement cost curve to help measure and understand our emissions reduction target (scope 1 and 2 excluding electricity distribution losses) and actions available to us to contribute to reaching this target.

This work identifies the financial impact of potential carbon reduction activity across scope 1 and 2 emissions, using an internal carbon cost of $140 per tCO2e. This amount was chosen as it aligned with the Climate Change Commission's 2021 recommendations to government to meet its 2050 targets [11], and is consistent with our internal carbon cost since FY2022.

We consider this internal carbon cost to still be appropriate.

Through this work, we identified emissions that could be reduced while achieving cost savings for the group (those with negative abatement cost) and others that were close to cost neutral (those with bars close to $0/tCO2e/year), with the balance assessed as being more complex to abate given the availability of current alternatives. While the data in the cost curve is updated based

on the latest information, it presents forward-looking estimates of emissions reduction potential, as opposed to actual emissions results. The estimates are also conservative, which explains

how we have already met our emissions reduction target, even though we have not yet completed all the actions on the curve.

The cost curve was updated in FY2025 to include the sale of the Ongas business - this removed any emissions reduction activities associated with Ongas, along with a removal of corresponding historic emissions.

Changes in technology, project prices, emissions cost modelling, new business innovation and a range of other factors may

alter the marginal carbon abatement cost curve in our future disclosures.

Figure 7: Vector's marginal carbon cost abatement curve. The horizontal axis corresponds to Vector's total FY2020 scope 1 and 2 emissions excluding electricity distribution losses. Each bar relates to a potential emissions reduction initiative where the thickness of the bar details the amount of emission reductions estimated to be possible as a result of the initiatives. The vertical axis represents the estimated cost, with negative values indicating estimated cost savings. Initiatives are ordered left to right, from

the most cost saving to the most expensive.

Abatement cost

$/tCO₂e/year

3-month gas pipeline surveying (2027) 6-month gas pipeline surveying (2024)

3-month high-pressure gas pipeline surveying (2025)

$140/ tCO₂e

Annual gas pipeline surveying (2022)

SF6

monitoring

Abatement potential tCO₂e

Renewable-only electricity (2023)

Transition vans and utes to electric (when available)

Vector headquarters to '6 Green Star'

building (2023)

Transition remaining light

vehicle fleet to EV (2020 - 2027)

Hybrid generator (in trial)

Uncosted emissions

Third-party gas pipeline damage

Other fugitive methane

Other diesel generation

Public engagement on dial before you dig (2023)

Using mobile transformers as opposed to diesel generators for multi-day upgrades (2024)

Completed In progress

Planned

Reducing unnecessary diesel generation through process optimisation (2021)

53.5%

Emissions reduction target

$1,000

$0

-$1,000

-$2,000

Metrics and targets (continued)

Table 4: Key risks that may form a barrier to Vector achieving our emissions reduction target

Assets vulnerable to transition risks

Vector's assets that are vulnerable to transition risks are our gas-related businesses and investments. This table highlights our key gas businesses that are potentially vulnerable to transition risks and their associated carrying value. We are currently disclosing 100% of the total carrying value as this represents a conservative estimate of potential impacts. This does not include the electricity distribution network.

The sale of the Ongas business and the investment in Liquigas, along with the wind-down and subsequent closure of Vector's Natural Gas Trading business has reduced some of our exposure to transition risks. The main drivers behind reduction in the carrying value of the gas network were the goodwill impairments in both FY2025 and FY2024.