Mercury Operating Statistics & Guidance Update

FY2018 EBITDAF guidance lifted to $530 million (attached)

Mercury announced today that it has lifted its FY2018 EBITDAF guidance from $515 million to $530 million.

This is due to an expected 150 GWh increase in full year forecast hydro generation due to continued wet weather in the Taupo area. Annual hydro generation is now forecast to be 4,550 GWh for the financial year, or 550 GWh above average.

Guidance may change and remains subject to any material events, significant one-off expenses or other unforeseeable circumstances including changes in hydrological conditions.

Mercury Quarterly Operational Update (attached)

Three months ended 31 December 2017

> RECORD - Q2 Generation of 1,848 GWh including 1,172 GWh from hydro
> WHOLESALE PRICES RISING - Highest Q2 wholesale price since FY2006
> 4,550 GWh - Full year hydro generation forecast up 150 GWh

ELEVATED WHOLESALE PRICES; RECORD GENERATION; HYDRO GENERATION FORECAST UP

Wholesale prices for the quarter ending 31 December 2017, of $93/MWh at Otahuhu and $90/MWh at Benmore, almost reached the record highs set in FY2006. These prices were up significantly on the prior comparable period by $45/MWh and $50/MWh respectively.

South Island inflows were 68% of average (or almost 1,800 GWh below average) contributing to wholesale prices increasing from $59/MWh at Otahuhu and $53/MWh at Benmore in October to be $121/MWh and $122/MWh respectively in December. Low inflows into the South Island hydro catchments resulted in total South Island hydro storage falling from 120% of average at the start of the quarter to end at 77%1 (or almost 600 GWh below average).

In contrast to the South Island, hydro inflows into the Waikato Hydro Catchment were near normal contributing to the second consecutive quarter of record output from our renewable generation fleet of 1,848 GWh. Mercury utilised storage within Lake Taupo to generate 1,172 GWh from the Waikato Hydro Scheme, optimising generation with rising wholesale prices. Lake Taupo storage fell from 130% of average to 85% at the end of the quarter1 (or 70 GWh below average). Geothermal generation was down 39 GWh to 676 GWh as scheduled maintenance outages were completed at the Nga Awa Purua and Mokai power stations.

The quarter illustrated the value to Mercury of the low level of correlation between wholesale prices and inflows into the Waikato Hydro Catchment. Mercury was able to benefit from the coincidence of high hydro generation and high wholesale prices (unlike what is typical for South Island hydro operators).

With higher than average inflows into the Waikato Hydro Catchment since 31 December 2017, Mercury has updated its FY2018 midpoint hydro generation forecast to 4,550GWh (up 150GWh on the forecast provided with the previous Quarterly Operational Update).

CONTINUED BELOW MARKET CHURN; MODERATE END-USER PRICE GROWTH

Mercury's rate of customer churn was again below market average as the company continues to focus on rewarding, inspiring and making it easy for our customers. For the quarter, Mercury's annualised churn for all brands of 19.4% was 1.2% below the market average of 20.6%. Trader churn for all Mercury brands for the quarter increased to market levels.

The company's churn advantage over the twelve months to 31 December 2017 contributed in customer numbers increasing by 6,000 to 393,000 as fewer customers switched from Mercury. The company experienced customer growth in both the North (+4,000) and South Islands (+2,000) and for dual fuel customers (+4,000).

The average energy price to customers was up (to $108.20/MWh) compared to the same period last year ($106.11/MWh). This increase partially reflects loyalty offerings redeemed in the prior period associated with the Mercury brand launch.

UNDERLYING DEMAND GROWTH

After adjusting for temperature, national demand was up 3.7% compared to the same quarter last year (or up 3.0% on an unadjusted basis). This increase in demand was impacted by a normalisation of irrigation and dairy load due to wet conditions in the prior period (1.8%). Positive signs of underlying demand growth were again observed with continued growth in the urban (0.8%) and rural (0.7%) sectors.

1 Average since 1999

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