THE LONG RUN MERIDIAN ENERGY LIMITED 2018 ANNUAL RESULTS PRESENTATION
INTRODUCTION Meridian Energy Limited 2018 Annual Results Presentation 2
A SNAPSHOT OF OUR PERFORMANCE Meridian Energy Limited 2018 Annual Results Presentation 3
OUR PEOPLE EMPLOYEE MEASURES Engaged and committed people % FY18 Target � 78% of our people are highly engaged Global top 10% benchmark 120% � 50% of our people are shareholders. 100% 98% 100% 84% Directors and officers hold 1.9m shares 78% 80% � No serious injuries during the year 60% 42% 40% � Physical and mental health is top of mind 33% 40% � Targeting 40% of women in people 20% leadership and senior specialist positions 0% Women in the Women in senior Engagement Gender pay parity � Currently 98% gender pay parity business roles Source: Meridian � Voluntary increase in parental leave to 22 TOTAL SHAREHOLDER RETURN weeks % Meridian Peer group median � Rainbow Tick accreditation supports our 33% 35% diversity and inclusion 31% 30% � Conventional remuneration framework: 25% 19% � Fixed: base salary and KiwiSaver 17% 20% 14% � STI: cash, profit-based 15% 10% � LTI: equity, relative TSR-based 5% � Enduring partnerships with KidsCan and 0% 2014 2015 2016 2017 2018 Kākāpō Recovery Financial Year ended 30 June Source: Meridian Meridian Energy Limited 2018 Annual Results Presentation 4
OUR SUSTAINABILITY LEADERSHIP Climate change � Meridian now net zero carbon across Group operations � Pursuing greater decarbonisation of NZ’s energy system 1 (41% of carbon emissions) � Potential to add 75% to electricity demand � Pathway to higher renewable participation has to address potential dry period energy deficit � Meridian Australia’s green credentials are well ahead of the wider market Affordable and clean energy � Hardship programme to support vulnerable customers � Advocate for distribution pricing reform � Supporter of some industry change and broader social policy reform � Converting ourselves to electric vehicles Meridian Energy Limited 2018 Annual Results Presentation 1 Largely non-renewable fuelled road transport, manufacturing, construction and domestic heating 5
OUR MARKETS Meridian Energy Limited 2018 Annual Results Presentation 6
NEW ZEALAND DEMAND ANNUAL DEMAND CHANGE SINCE 2010 0.8% growth in FY18 % � Continued economic and population +2.6% 3% growth during FY18 2% � Generally above average temperatures +1.1% +0.8% during the financial year 1% +0.3% � Periods of cold conditions during the 0% current winter -0.6% -0.1% -1% -0.9% � Growth in most regions and irrigation -1.7% -2% 2011 2012 2013 2014 2015 2016 2017 2018 Financial Year ended 30 June Different, positive views on future demand Source: Electricity Authority � Medium term economic growth expected DEMAND FORECASTS TWh NZ Historical Demand � Policy settings should encourage 90 Transpower decarbonisation 80 MBIE - High � Assumptions vary on rate of electrification MBIE - Low 70 Productivity Comm. - High of the wider energy system Productivity Comm. - Low � Electrification of the whole light vehicle 60 Meridian - High fleet represents 19% demand growth Meridian - Low 50 � Smelter’s 50MW contract represents 1% 40 demand growth 30 Source: Meridian 1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050 Meridian Energy Limited 2018 Annual Results Presentation 7
NEW ZEALAND SUPPLY NEW ZEALAND LAKE STORAGE High FY18 North Island inflows GWh Actual Average � North Island storage was above average for 4,000 all but 33 days of FY18 3,500 � Varying South Island storage; two 3,000 successive dry periods in 1H FY18, storage South 2,500 Island above average through all of Q4 FY18 2,000 � ASX futures prices finished FY18 lower than 1,500 1,000 June 2017 North 500 � 82% renewable generation in FY18 Island 0 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Source: NZX New generation needs NZ CONSENT MATURITY � 0.5%-1% demand growth in the short term GWh Geothermal Gas Wind Tidal Hydro is possible 15,000 � Medium term growth could be higher with 12,000 greater electrification and plant retirement � Depending on views, equivalent of two or 9,000 more mid-sized wind farms needed 6,000 annually over the longer term � Consent maturity is near dated 3,000 0 2018 2020 2022 2024 2026 2028 2030 2032 2034 Source: Meridian Meridian Energy Limited 2018 Annual Results Presentation 8
NEW ZEALAND POLICY AND REGULATION Zero Carbon New Zealand by 2050 NZ 2016 SECTOR EMISSIONS � Agriculture means NZ has one of the 3% 5% 6% highest per capita rates of emissions Electricity 17% � 32 million tonnes of carbon emissions from Road transport the wider (non-agricultural) sectors could Stationary energy* be removed through electrification Agricultural � Converting all fossil fuel based energy use Industrial processes 20% to renewables could add 75% to electricity Waste 49% demand *manufacturing (including milk processing), construction and commercial sectors and domestic heating Renewable electricity grid Source: Ministry for the Environment HYDRO INFLOW DEFICIT CHALLENGE � Potential hydro inflow deficit is currently Swing energy sources managed through thermal capacity and fuel storage Potential 5,000 energy GWh � Industry shift needed to manage risk as deficit inflow storage deficit ex-coal renewable levels increase and coal exits and 1-3,000 additional the system extreme GWh 1,000 supplies dry GWh � Current battery technology is not suited to storage winter potential and 1,500 long-term energy storage needs import GWh potential Worst case dry Coal storage Gas storage Demand deficit response Source: Meridian Meridian Energy Limited 2018 Annual Results Presentation 9
NEW ZEALAND POLICY AND REGULATION AVERAGE RESIDENTIAL ELECTRICITY COST Electricity price review % change � Review will examine whether prices are Energy & other component Lines component Total 10% +3.2% +3.5% efficient, fair and equitable +2.8% 8% � Review will be forward looking and +2.4% 6% +4.3% consider the entire electricity market +7.0% 4% +0.8% +6.6% +3.6% � Issues paper to be published in September 2% +2.9% +2.9% -1.7% +1.4% � Followed by consultation in early 2019 on 0% +0.2% +0.9% -0.7% -2.6% options to address any problems -2% -0.5% � Findings and recommendations are due to -4% Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Ministers by May 2019 Source: Ministry of Business, Innovation and Employment TRANSPOWER HVDC REVENUE Transmission pricing $M � Beneficiaries pay approach to be central to 180 EA’s new TPM proposal – for all future and 160 140 at least some recent major investment 120 � Now preparing their policy proposal 100 including new cost benefit analysis 80 � Update from EA in December 2018 60 40 � Status quo cost reduction signalled by 20 Transpower 0 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Source: Transpower, Meridian Meridian Energy Limited 2018 Annual Results Presentation 10
AUSTRALIAN MARKET RESIDENTIAL PRICE AUSTRALIA NEW Struggling with policy to coordinate energy COMPARISON ZEALAND affordability, reliability and decarbonisation Average 2018 prices, 40.76 29.03 � Liberal National coalition in power, Nominal, NZD c/kWh NZD c/kWh election between late 2018 and mid 2019 Including GST � More interventionist approach to energy 2008-2018 5.1% per 1.4% per � NEG is the Federal Government’s attempt Average annual increase, annum annum Real, to coordinate energy and climate policy, Including GST Federal and State negotiations continue � Dealing with Liberal Party right wing that is Source: ACCC, Ministry of Business, Innovation and Employment, Meridian pro-coal and anti-renewables � Different degrees of support for renewables at State Government level � Upcoming elections in Victoria (November 2018) and NSW (March 2019) � Regulatory reviews on affordability and transparency: � ACCC (Federal) � Thwaites (Victoria) � Greater transparency is good for consumers Meridian Energy Limited 2018 Annual Results Presentation 11
THE UNITED KINGDOM MARKET RESIDENTIAL PRICE UNITED NEW Legislated price controls are imminent COMPARISON KINGDOM ZEALAND � The Competition and Markets Authority Average 2017 prices, 30.37 28.79 (CMA) report has made recommendations Nominal, NZD c/kWh NZD c/kWh to improve customer engagement and Including GST/VAT responsiveness to price 2004-2014 6.8% per 3.0% per � The CMA recommended a temporary price Average annual increase, annum annum cap for prepayment meter customers only Real, � Stated that broader price controls would Including GST/VAT undermine competition and product Source: Competition and Markets Authority, Ministry of Business, Innovation and innovation Employment, Meridian � Electricity prices became an election issue in 2017 and the new government put pressure on the regulator to impose price control � The regulator refused, so a Bill was prepared forcing the regulator to implement price controls � Implementation is expected in late 2018 Meridian Energy Limited 2018 Annual Results Presentation 12
OUR CAPITAL MANAGEMENT Meridian Energy Limited 2018 Annual Results Presentation 13
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