ENERGY FREEDOM FOR A CHANGING WORLD.
2020 ANNUAL REPORT // MERCURY NZ LIMITED 49 46 45 43 09 06 05 04 1. ENERGY FREEDOM TODAY. MENU. 4. ENERGY FREEDOM INNUMBERS. CUSTOMER FINANCIAL STATEMENTS INDEPENDENT AUDITOR’SREPORT RECORDFINANCIAL TRACK FINANCIAL COMMENTARY UPDATE CHAIR &CHIEFEXECUTIVE OUR BUSINESS MODEL OUR DIRECTION ARE WHO WE 24
PARTNERSHIPS 27 3. LIVINGENERGY FREEDOM.
PREPARING FOR CLIMATE CHANGE OUR PILLAR STORIES OUR PILLAR KAITIAKITANGA 30 33 SECURITY HOLDER HOLDER SECURITY 87 85 DISCLOSURES 79 72 71 5. THE BEHINDENERGYTEAM FREEDOM. INFORMATION REMUNERATION REPORT GOVERNANCE ATMERCURY EXECUTIVE TEAM YOUR DIRECTORS & YOUR 2. OUR WORLD OFENERGY FREEDOM. 22 21 20 18 14
CREATING VALUE INFY20 ALL TOGETHERIT PULLING THE RISKS WE FACE ENGAGING WITH OURSTAKEHOLDERS US THE WORLDAROUND
PEOPLE 36
97 DIRECTORY 96 GLOSSARY NOMTO FOR INFORMATION 95 UTIAIIY INDICES SUSTAINABILITY 92 SHAREHOLDERS - TCFD INDEX - TCFD - GRIINDEX COMMERCIAL COMMERCIAL
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PRUE FLACKS // FLACKS CHAIR PRUE by: Board the of behalf on signed is 2020 and 18 August dated is Report Annual This Mercury. of operations the affect significantly or may affected significantly have that year the of end the since circumstances any of aware not are directors The behalf. his on audit the &Young undertake to Ernst of Bunyan Lloyd appointed has and auditor, Mercury’s be to required is Auditor-General 2020. The June 30 ended year the for Statements Financial and Report Annual integrated NZ Limited’s Mercury present to pleased are directors The STATEMENT DIRECTORS THE FROM we could do better, please email [email protected] things including report, this about comments any have you If we take. approach integrated the shows that away in performance our on honestly and openly report to seek we this, all Across why. and do we what are, we who of part all are they that note but interest, particular of areas find you help to sections five into reporting our We grouped have (TCFD). Disclosures Financial related our and index (GRI) Standards Initiative Reporting Global specific a include We also creation. value of view along-term taking pillars, five across approach strategic our of outcomes the and outputs inputs, including Model, Business Our We describe framework
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2 MERCURY ANNUAL REPORT 2020 ABOUT THIS REPORT MENU MENU
ENERGY FREEDOM TODAY. oday E nergy F reedom T
We are focussed on being here for the long term. There are interdependencies between a range of factors that affect our ability to create value over time. In this section we introduce you to Mercury; provide an overview of how we operate (Our Business Model); outline our past and current performance and outcomes; and share our goals for the future. Our Chair, Prue Flacks, and Chief Executive, Vince Hawksworth, then jointly summarise our 2020 financial year. MERCURY ANNUAL REPORT 2020 ANNUAL MERCURY 3 WHO WE ARE. MENU
KARĀPIRO
KAWERAU ARAPUNI AUCKLAND OUR MISSION: WAIPĀPA
MARAETAI I ĀTIAMURI ENERGY FREEDOM. AND II oday WHAKAMARU ŌHAKURI
MŌKAI+ NGĀTAMARIKI
ARATIATIA ROTOKAWA
NGĀ AWA E nergy F reedom T We are primarily a generator and retailer of PŪRUA+ LAKE TAUPŌ electricity, focussed on meeting the energy TURITEA needs of New Zealanders.
Our mission, which guides us in what we generate electricity from 100% renewable We manage a small number of subsidiary do and why, is Energy Freedom for all New sources: hydro, geothermal and soon, wind. enterprises, such as Mercury Solar (solar Zealanders. This is about Aotearoa New We also have just under 20% ownership of installations) and Mercury Drive (an exploratory Zealand being stronger economically and Tilt Renewables (NZX:TLT) which has wind electric vehicle by subscription service). We more sustainable through better use of and solar generation developments in New also have a solar and battery research and homegrown, renewable energy. Zealand and Australia. development (R&D) facility. HYDRO STATIONS Our purpose is to inspire New Zealanders to Our current electricity generation sites are We have a corporate office in Auckland, enjoy energy in more wonderful ways. We do situated in the central North Island of New other offices in Hamilton, Rotorua, Taupō, GEOTHERMAL STATIONS this by championing e.transport, providing Zealand, along the Waikato River (hydro) and Palmerston North and Wellington, as well as
offers to our loyal customers and innovating nearby steamfields of the northern part of operational sites at our power stations and at REPORT 2020 ANNUAL MERCURY SOLAR with digital solutions to make interactions the Central Plateau (geothermal). Our Turitea our R&D centre in Penrose, Auckland. with us easy and rewarding. wind farm is being developed in an area Thinking in an integrated way about how renowned for wind generation – part of the WIND FARM we create long-term value is part of who Tararua Range in the Manawatū region. (under construction) we are. Since 2015, we’ve been building the Our retail operations serve residential, understanding across Mercury of how we commercial (small and medium sized R&D CENTRE collectively contribute to the delivery of our businesses), industrial and spot market strategy by following Our Business Model and customers. Sub-brands include GLOBUG,
focussing on things that matter most. We our pre-pay electricity product. (+ not 100% owned by Mercury) 4 OUR DIRECTION. MENU
OUR PURPOSE OUR MISSION TO INSPIRE ENERGY NEW FREEDOM. oday ZEALANDERS TO ENJOY
• E nergy F reedom T ENERGY IN CT COM NE M N IT COMMERCIAL O & CUSTOMER C MORE ACHIEVING OUR COMMERCIAL GOALS O INSPIRING, REWARDING AND MAKING & W
THROUGH SUSTAINABLE GROWTH. E IT EASIER FOR OUR CUSTOMERS.
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WONDERFUL T
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WAYS. • C L U A RI IN OUS & ORIG MERCURY ANNUAL REPORT 2020 ANNUAL MERCURY PEOPLE PARTNERSHIPS ENABLING OUR PEOPLE TO PROVIDING GREATER OPPORTUNITIES PERFORM TOGETHER IN A FOR NEW ZEALAND, OUR INDUSTRY, OUR CHANGING ENVIRONMENT PARTNERS AND OUR BUSINESS THROUGH AND KEEP EACH OTHER SAFE. LONG-TERM COLLABORATION.
KAITIAKITANGA LONG-TERM SUSTAINABILITY OF NATURAL RESOURCES AND ASSETS. 5 OUR BUSINESS MODEL. MENU
INPUTS OUR BUSINESS ACTIVITIES OUTPUTS
314k residential 348K 32k commercial 3,712 4,361 oday CUSTOMERS 2k industrial GWh HYDRO GWh PHYSICAL 300 spot GENERATION SALES
2 geothermal joint ventures 2,615 GWh GEO E nergy F reedom T 4 formal iwi partnerships • 24 CT COM GENERATION PARTNERSHIPS 18 community and NE M commercial partnerships N IT COMMERCIAL O & CUSTOMER C ACHIEVING OUR COMMERCIAL GOALS O INSPIRING, REWARDING AND MAKING & W
THROUGH SUSTAINABLE GROWTH. E IT EASIER FOR OUR CUSTOMERS.
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T % %
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15 13
9 hydro S
GENERATION CONSUMPTION
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5 geothermal •
14 • MARKET SHARE MARKET SHARE POWER C L U A STATIONS R IN IOU IG S & OR OUR BUSINESS
309 women 28 in Taupō MODEL EXPLAINED. 477 men 61 in Rotorua 786 Our Business Model shows our key inputs PERMANENT 496 in Auckland 101 in rest of NZ EMPLOYEES 100 in Hamilton interacting with our business activities (which has Our Direction at its core) to create outputs of sustainable, commercial value. MERCURY ANNUAL REPORT 2020 ANNUAL MERCURY PEOPLE PARTNERSHIPS The outcomes of our activity are measured ENABLING OUR PEOPLE TO PROVIDING GREATER OPPORTUNITIES and take us towards mid-term and long-term 78K 2K PERFORM TOGETHER IN A FOR NEW ZEALAND, OUR INDUSTRY, OUR goals that reflect our enduring mission. SHAREHOLDERS BONDHOLDERS CHANGING ENVIRONMENT PARTNERS AND OUR BUSINESS THROUGH AND KEEP EACH OTHER SAFE. LONG-TERM COLLABORATION. OUR BUSINESS MODEL IS CONTINUED OVER KAITIAKITANGA LONG-TERM SUSTAINABILITY OF THE NEXT PAGES NATURAL RESOURCES AND ASSETS. 6 OUR OUR For a definition of these measures please see our Glossary. our see please measures these of For adefinition PILLARS
KAITIAKITANGA PARTNERSHIPS CUSTOMER OUTCOMES FY20 OUR BUSINESSOUR MODEL. TRADER CHURN MERCURY BRAND 5.9 LWAP/GWAP PORTFOLIO 1.02 BEING ACTIONED RECOMMENDATIONS PRICE REVIEW ELECTRICITY EPR
% RELATIONSHIPS COMMUNITY 16 SCORE (NPS) NET PROMOTER 13.7 APPROVED KARĀPIRO COMPLETE; REFURBISHMENT WHAKAMARU HYDRO 60 BRAND STRENGTH CO 36 IMPACTS MITIGATE LOCKDOWN SUPPLIERS TO WORKED WITH COVID-19 EMISSIONS INTENSITY GROSS GENERATION 2 E/MWh % KG MID-TERM MID-TERM we rely on. rely we that assets and resources natural of the sustainability long-term the managing are and We understand strategy. and purpose our with consistent created, are relationships and new and strengthened, relationships are maintained Existing industry. electricity contributions from renewable the positive for support community and national,There is bipartisan regional segments. target our in customers for easy it making and rewarding We inspiring, are STRATEGIC GOALS
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approach. in place facilitating our long-term are Plans Management Integrated effect. in are and place in Key relationship stakeholder plans are economy. carbon toalow transition of the enabler as an is viewed Electricity • • • MEASURE THIS MEASURE HOW WE WE HOW Net Promoter Score Promoter Net Churn Brand strength
New Zealand’s leading energy brand. energy Zealand’s leading New physical and natural assets. of both management long-term ultra- the in as aleader Recognised enhanced. and enduring fuel to access Mercury’s with Zealand, and toNew contributor as apositive recognised industry our with industry, our within as aleader Recognised STRATEGIC GOALS LONG-TERM
7 MERCURY ANNUAL REPORT 2020 Energy Freedom Today MENU OUR OUR For a definition of these measures please see our Glossary. our see please measures these of For adefinition PILLARS
COMMERCIAL PEOPLE OUTCOMES FY20 OUR BUSINESSOUR MODEL. RETURN SHAREHOLDER ANNUAL TOTAL 4.5 INCIDENT HEALTH &SAFETY HIGH SEVERITY ONE
% CAPEX STAY-IN-BUSINESS $114 ENGAGEMENT EMPLOYEE 67 % M 85 WIND FARM FULL TURITEA TO COMMITMENT WIND LOCKDOWN REMOTELY DURING WHILE WORKING THE SAMEORBETTER WASPRODUCTIVITY OF EMPLOYEES FELT %
MID-TERM MID-TERM risk parameters. risk agreed within operating while investment, CAPEX stay-in-business maintain an appropriate average for and growth EBITDAF We deliver business. to our important are who people the all of wellbeing mental and physical the on tofocus continues that We organisation aZero are Harm towork. place attractive as an viewed are and and performance productivity of levels highest the to deliver changing nature of work in order tothe respond and understand to people We our have enabled STRATEGIC GOALS
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growth. enabled by sustainable earnings dividends ordinary Progressive • • MEASURE THIS MEASURE HOW WE WE HOW No serious injuries serious No Employee engagement
least our cost of capital. cost our least shareholder returns, earning at financialand performance of terms in sector our Leading productivity. and of performance levels highest the todeliver of work nature changing tothe toadapt people our enabled has that organisation A Zero Harm STRATEGIC GOALS LONG-TERM
8 MERCURY ANNUAL REPORT 2020 Energy Freedom Today MENU EXECUTIVE UPDATE. CHIEF & CHAIR – a strong result given FY20 was the first full full first the was FY20 given result – astrong Taupō’s levels, storage and prudent hedging, 300GWh down against our long-term through year. the long-term its below 100GWh almost year the (4,006GWh FY19) was approximately (4,006GWh approximately was FY19) year without earnings from the Metrix smart smart Metrix the from earnings without year VINCE HAWKSWORTH // CHIEFEXECUTIVE PRUE FLACKS // CHAIR scheduled maintenance activity completed scheduled maintenance completed activity average. Careful management of Lake of Lake management Careful average. hydrological low of record a sequence COVID-19 the by caused disruption the and Geothermal production of 2,615GWh was production Geothermal Hydro generation for the year of 3,712GWh of 3,712GWh year the for generation Hydro continued finalquarter in the Minimal rainfall Mercury’s overall performance was strong strong was performance overall Mercury’s Operating earnings, (EBITDAF) of $494 (EBITDAF) earnings, Operating metering business, which was sold in FY2019. in sold was which business, metering million were down $12 million on the prior year year prior the on million $12 down were million lessenhelped financial the impact the of of June. end at the mean pandemic. generation (2,697GWh generation despite FY19), record year’s last on down modestly only conditions. Lake Taupō hydro ended storage September, from hydro generation impacted by 2020 year affected financial atesting in extremely low inflows. drought across Waikato the catchment, which 33 northern turbines is expected in the final final the in is expected turbines northern 33 We completed multi-year refurbishments at at refurbishments multi-year We completed We also advanced construction of the Turitea of the construction We advanced also total to the end of June. Contractor delivery delivery Contractor of June. end tothe total (ICT) investment – all part of ensuring our our of ensuring part –all investment (ICT) level ahigh represented ($115 FY19) million steamfields. as well as a three-well geothermal drilling drilling geothermal as athree-well as well as some impacts from the COVID-19 the from related impacts as some and further COVID-19 restrictions. further and wind farm, having committed $184 million in in million $184 committed having farm, wind New Zealand.New Capital expenditure (CAPEX) of $279 million of million $279 (CAPEX) expenditure Capital Our investment in Tilt Renewables has Tilt in has investment Renewables Our Kawerau and Rotokawa and at Kawerau programme platforms for sustaining are output strong. lockdown from late March, have set back the the have back late set March, from lockdown our information communication technology across our assets generation of and activity in Australia as well as Tilt’s growth in in as Tilt’s as well growth Australia in opportunities renewable energy growth performance tocontractor subject remain times Project of FY22. quarter second the in timetable. Completion of the construction quarter of FY21, and the 27 southern turbines turbines southern 27 the and of FY21, quarter delays across design as well and construction, enabled us, as intended, to participate in in toparticipate as intended, us, enabled Whakamaru and Aratiatia hydro stations stations hydro
9 MERCURY ANNUAL REPORT 2020 Energy Freedom Today MENU wider stakeholders. and owners our of benefit the for strategy our on to deliver continue and customers, our safe, support people our tokeep team executive his and Vince supports Board the is ensuring focus My term. longer the over partners and suppliers communities, customers, our on impacts potential the and environment current of the conscious We very all are period. this through leadership strong and transition asmooth ensured have industry the in experience deep and Vince’s skills role, into the step to time achallenging was this Although of March. end at the lockdown COVID-19 of the midst the us in joined Vince Executive. Chief new our as Hawksworth Vince toappoint pleased extremely was Board The 2020year. of the financial part including period, along over toMercury Fraser and Whineray Withers Joan of contributions significant the like toacknowledge I would sector. another in role a for quarter third the in left who Fraser to replace Whineray Executive Chief of anew appointment the tomanage was tasks of my early One (ASM). Meeting Shareholders’ Annual September our at retired who Withers Joan succeeding as Chair after my first 2020 Report, Annual Mercury’s toyou topresent is apleasure It OBSERVATIONS. PRUE’S KEY Total shareholder returns (TSR) through 3.0x debt/EBITDAF tolook We ratio. continue We $600 million undertook of refinancing the year were 4.5%, reflecting underlying underlying 4.5%, were year reflecting the of Metrix. sale the through the year, split evenly between new new between year, evenly the split through from the previous year’s record ($357 million ($357 record year’s million previous the from from a liquidity and capital perspective. capital and aliquidity from for opportunities to further strengthen our our strengthen to further for opportunities strength and solid execution in a challenging achallenging in execution solid and strength strong end of our target range of 2.0x to of 2.0x to range target of our end strong approach to core its activities. was $6.4 billion at financial year end end year $6.4 at financial was ($6.3 billion CAPITAL MANAGEMENT FY19), which benefitted by $177 million from from million $177 by benefitted which FY19), tax of down $207 was million after profit Net Mercury continues to be well positioned positioned well tobe continues Mercury Financial our in read be can details Further Mercury’s investment-grade credit rating rating credit investment-grade Mercury’s Commentary basis, anormalised on costs, Operating Our gearing ratio is 2.0, in line with the the is 2.0, with ratio line in gearing Our Our capital management initiatives support support initiatives management capital Our billion FY19). billion row, our reflecting disciplined and focussed a in year seventh flat a for broadly remained bank and bond. a facilities capital capital position. capital environment. Mercury’s market capitalisation capitalisation market environment. Mercury’s Financial Statements Financial and
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This brings the full-year ordinary dividend to to dividend ordinary full-year the brings This 15.8 CPS, up 2% (15.5 CPS FY19), marking marking FY19), CPS 2% (15.5 up 15.8 CPS, & Poor’s (S&P) Global Ratings in December December in (S&P) Ratings & Poor’s Global We are pleased to declare a fully imputed imputed afully todeclare We pleased are Joan Withers’ retirement in September 2019. S&P, by conducted Areview following the announced decision by Rio Tinto Rio by decision to announced the that we anticipate is likely tocontinue. is likely anticipate we that of retail have register we that alarge (BBB+), which was reaffirmed by Standard by (BBB+),Standard reaffirmed was which shut Tiwaishut smelter, no saw Point aluminium sustain this in a low interest rate environment environment rate interest alow in this sustain shareholders to who appreciate our efforts of dividend share final per 9.4(CPS).cents with the appointment of Hannah Hamling. Hamling. of Hannah appointment the with Guiding our approach to maintaining YOUR BOARD YOUR Meeting along with those directors retiring retiring directors those with along Meeting Hannah has a broad of range applicable change in this rating. in this change by rotation. by year financial the in later tofill pleased incremental dividend increases, we recognise of ordinary year consecutive 12th our ongoing value to Mercury. She will seek seek will She toMercury. value ongoing of be will which management water in expertise specific and skills governance very were we that vacancy aBoard created dividend growth. dividend election at our 2020 Annual Shareholders’ 2020 at our Shareholders’ Annual election The COVID-19 pandemic tested our incident incident our COVID-19 tested The pandemic Zealand’s largest wind farm. Electrons will will Electrons farm. wind Zealand’s largest We continue to support the Future the to support We Directors continue We appreciated the contribution of Anna of Anna contribution the We appreciated to us in the year ahead. We are pleased to to We ahead. pleased year are the to us in other, customers, each our to support for our people and our resilience as an as an resilience our and people our for suppliers and communities through such announce our commitment to complete the an unprecedented and sustained disruption disruption sustained and unprecedented an appointment. 60 turbines at a total cost budgeted at $464 at $464 budgeted cost at atotal turbines 60 wind farm to the full extent of the consented consented of the extent full tothe farm wind to able were we November in farm, wind was a major highlight that is outlined in in is outlined that highlight amajor was In our 2019 Annual Report, we signalled a a signalled we 2019 our In Report, Annual HIGHLIGHTS COVID-19 PANDEMIC Director during the year, have the we and during Director as term her Future finished who Lissaman, million. This will ultimately make Turitea ultimately will This New million. into governance. coming of talent pipeline programme number of activities that would be important important be would that of activities number structures support response processes, more detail in World The detail more construction of one of stage Turitea the construction that,advanced we have only not confirm organisation. How responded people commenced process the of making another which aims to improve the the toimprove aims which Around Us Around .
10 MERCURY ANNUAL REPORT 2020 Energy Freedom Today MENU The electricity sector has again performed has performed again sector electricity The Whakamaru refurbishment, an additional hydro stations, Aratiatia and Whakamaru at refurbishments We completed We continued our focus on customer value value customer on focus our We continued 20% capacity has been achieved, equivalent equivalent achieved, has been 20% capacity to adding an extra turbine. We advanced We advanced turbine. extra an to adding in positions our manage to successfully vehicles. 375,000 than electric more to power testing ways to build a workforce that is agile is agile that aworkforce tobuild ways testing August FY22, as a result of delays related to to related of delays as aresult FY22, August year. year. stations to ensure efficient performance performance efficient toensure stations start to flow in 2021, and on completion it will will it completion on and in 2021, toflow start and digitally enabled. and digitally enabled. at aimed year the through completed a pilot well into the future. In the case of the of the case the In future. into the well the through afeature tobe continued which well in managing, for New Zealanders, the the Zealanders, New for managing, in well SECTOR DYNAMICS SECTOR Detailed workforce planning continues, with with continues, planning workforce Detailed COVID-19. part of a multi-year programme across our our across programme of amulti-year part however replacement of the first main main first of the replacement however planning for our Karāpiro rehabilitation, annually provide enough renewable electricity generating unit is now scheduled for elevated and volatile wholesale markets, energy systems. of sustainability environmental and equity, energy ‘trilemma’ of energy security, energy There has been material progress made made progress material has been There We supported the intent of the Government’s intent of the the We supported towards efficient use of electricity, which which electricity, of use efficient towards Around Us. Us. Around Supply was secure and stable despite an an despite stable and secure was Supply (EA) move to implement a data sharing sharing adata (EA) toimplement move support greater innovation and reliability reliability and innovation greater support will FY21, in advanced be will which sharing, situation (UTS) is outlined in The World World The in is outlined (UTS) situation agreement, which we fully support. The data data The support. fully we which agreement, a claim of creating an undesirable trading trading undesirable an of creating a claim on Energy Meridian against ruling draft as its unprecedented dry weather sequence in the the in sequence weather dry unprecedented May that the average annual power bill has has bill power annual average May the that (ERANZ) Association Retailers Electricity the time At same Island. the North Mercury fully supports. fully Mercury Electricity Price Review (EPR) Price Electricity Our assessment of the EA’s transmission EA’s of the assessment transmission Our planning with distributors. This has been has been This distributors. with planning increased and also measures competition, encouraged that period this over measures of range of a is areflection This real terms. in low 11-year anew reaching tofall, continued pricing methodology (TPM) guidelines,pricing (TPM) methodology as well put in place changes based on EPR’s the outcomes for consumers. network better toenable data of customer sharing secure safe and the advancing on outcomes. enabled by the Electricity Authority’s Authority’s Electricity the by enabled , and actively actively , and reported in in reported There was some great work undertaken to to undertaken great work some was There 3.7% to around 314,000. After two years years 3.7% two 314,000. toaround After We launched a new brand campaign, ‘Kiss Oil Oil ‘Kiss campaign, brand anew We launched World Around Us Around World towards commercial and industrial customers, customers, industrial and commercial towards support demand forsupport renewable energy by saw residential customer numbers down down numbers customer residential saw away from fossil fuels. fuels. fossil from away Understanding the impacts of impacts the COVID-19 the Understanding when the pandemic hit. It was restarted hit. restarted was It pandemic the when we communicated retail price changes in in changes price retail communicated we whose incomes were disrupted. Specific Specific disrupted. were incomes whose Goodbye’ in February, aimed at more boldly boldly at more aimed February, in Goodbye’ CUSTOMERS February. February. Our focus on yield, rebalancing our portfolio with continued loyalty on focus Our reinvigorating the movement for a transition atransition for movement the reinvigorating to July. isin important it that We believe campaign the topause decision the made customers with activity-based incentives incentives activity-based with customers engaging App Mercury as our such initiatives The section the in outlined are initiatives put in place new payment solutions for those responding and customers, our on pandemic of no mass market headline price changes, driving a transition to e.transport, but quickly quickly but toe.transport, atransition driving during COVID-19 the lockdown. environment, was not challenges. its without afast-changing in empathetically and quickly . achieve outstanding results.achieve outstanding to of change period this in team Mercury the toleading forward I look of COVID-19. impacts social and economic the Tiwai and of the closure smelter Point aluminium navigates the as Mercury of uncertainty level increased of an face the in even performance for platform astrong provides that mission clear and people passionate of great assets, combination However, is the it day. every actions their in Freedom” is demonstrated “Energy for passion The toface. face people many of our tomeet and assets our toknow get and tovisit delighted Ihave been Subsequently, customers. our support and electricity togenerate business the operate safely could employees our toensure transitioned capably and thatsmoothly had organisation wasan of impression first My exciting. and challenging both 4COVID-19 was Level lockdown country’s the of week first the in of Mercury Executive as Chief my role Starting OBSERVATIONS. VINCE’S KEY
11 MERCURY ANNUAL REPORT 2020 Energy Freedom Today MENU The wellbeing, health and safety of our people people of our safety and health wellbeing, The We surveyed our people about their their about people our We surveyed All senior leaders undertook a mental amental undertook leaders senior All Support was offered, to our people impacted impacted people toour offered, was Support face-to-face but adapted for online learning learning online for adapted but face-to-face of work. places physical to, our back and from, serious harm incident during the year (zero year the in during incident harm serious as most of our people worked from their their from worked people of our as most toadapt ready are we so arrangements attention. who suffered a broken leg while working at at working while leg abroken suffered who wellbeing awareness course, initially delivered delivered initially course, awareness wellbeing away transition the support helped working and circumstances, work tochanged well It was disappointing to us that there was one one was there tous that disappointing was It … THEIR WELLBEING, HEALTH & SAFETY HEALTH &SAFETY WELLBEING, … THEIR PEOPLE FY19). Our thoughts were with the individual, individual, the with were thoughts Our FY19). Our showed people tremendous resilience reducing likelihood the of serious harm or on afocus with controls, safety hard on towork We continue towork. areturn made particular COVID-19 with the by lockdown, lockdown. homes through of period the COVID-19 the required. other significant events. events. significant other has subsequently He hydro sites. of our one compromised. 70 over immuno- or toemployees given care adapted teams and Individuals response. Zealand’s pandemic of New face the in continues to be a fundamental focus of of focus afundamental tobe continues our previous investments in digital ways of of ways digital in investments previous our quickly again to changing circumstances if working flexible effective on lessons embed to at ways looking are and experiences We will be investing carefully in our people, people, our in carefully We investing be will environment uncertain an in We operate things we can control. We have instigated a a We control. have can instigated we things have and also market will Government, the smelter, and decisions around timing of the of the timing around decisions smelter, and and there is no room for complacency. The Underpinning these activities, we are weUnderpinning are these activities, wholesale electricity markets. Transmissionwholesale electricity In this environment we must look at the at the look must we environment this In • • ACTIVITIES FY21 LOOKING FORWARD platform, powered by committed people, to to people, committed by powered platform, operational own our toenhance programme others. us and for implications investment by signalled storage pumped in investments pricing implications, and consideration of opportunities in accordance ouropportunities with strategy. and growth incremental todeliver continue resilient and strong thatwe have a confident customers. our for solutions digital in and assets, our in things right the doing places, right the in in volatility toincreased lead will closure, Tiwai of the closure Point aluminium the COVID-19 on of the pandemic impacts effectively and efficiently.effectively people right have we the ensuring excellence, economy will continue. announced The biometrics. voice by assisted experience customers’ our toimprove ways investigating including customers, for choices digital our Advance refurbishment. station preparation work for Karāpirofurther hydro and of Turitea farm, wind Completion Together Mercury, are we VINCE HAWKSWORTH // CHIEFEXECUTIVE the loyalty of our customers and the support support the and customers of our loyalty the fully imputed, representing a7.6% representing imputed, fully increase set at $515 million, subject to any material material toany subject at $515set million, acknowledge contribution the of our people, unforeseeable circumstances including including unforeseeable circumstances FY21 ordinary dividend guidance is 17.0 guidance dividend CPS, ordinary FY21 GUIDANCE • • Ngā mihi nui ki a koutou katoa. kiakoutou nui mihi Ngā Wonderful. made Energy TeamManagement gratefully we (EMT) PRUE FLACKS // FLACKS CHAIR PRUE Mercury’s FY21 EBITDAF guidance has been has been guidance EBITDAF FY21 Mercury’s On behalf of your Board and Executive Executive and Board of your behalf On hydrological conditions. Guidance at time the guidance is $80 million. stay-in-business CAPEX generation. FY21 3,900GWh assumes of hydro report of this ordinary dividendordinary increases. of year 13th consecutive the and FY20 on of our partners and owners to our business. toour owners and partners of our events, significant one-off expenses or other or other expenses one-off significant events, Operational excellence initiatives. environment. changing quickly a for fit aworkforce tobuild out rolled Programmes
12 MERCURY ANNUAL REPORT 2020 Energy Freedom Today MENU focus on how we create value. most. Wematters outline how this all shapes our how we through balance lens the of what trade-offs risks the we face; andinterests and opportunities; needs, identified ourstakeholders’ consider we how respond to key changes in our environment; external weIn cover this section how we take into account and FREEDOM. ENERGY OF WORLD OUR
13 MERCURY ANNUAL REPORT 2020 Our world of Energy Freedom MENU AROUND US. AROUND WORLD THE wellbeing while maintaining business maintaining business while wellbeing and safety people’s on We focus our put People areas. key across responses are here Outlined supplierscustomers, and stakeholders. coordination of our response across people, 2020 effective toensure January 31 on activated was Plan Management Incident Our on our business. pandemic of the impact the tolimiting year financial of the half second the in attention our toturn had we targets, scorecard our of delivery and strategy of our execution today-to-day addition In pandemic. COVID-19 the us has been toimpact factor external unanticipated disruptive most The COVID-19 PANDEMIC decisions. our guide to understanding this use and business our to material most factors external into understanding effort put we so opportunities and challenges risks, present can These us. impact business of our outside environment), the and factors partners customers, we do has (for on impacts other parties example, operates withinMercury awider world. While what ensure safety and wellbeing needs were met. were needs wellbeing and safety ensure immunocompromised were contacted to or 70 old over years workers Essential maintenance). generator Ngātamariki and (e.g. refurbishment Aratiatia our for services providingor contractors essential maintenance staff and payroll operators, station dispatchers, workers included spot traders/electricity processes in place for essential workers. These have and toidentify completed Work was travel. essential for homes their leave only and home from towork people most require would which 4, Level toAlert amove for toprepare hours 48 3for Level toAlert amove announced Government the March, 23 On home. from inpeople non-essential roles could work all toensure systems technology tested successfully we 19 On March, continuity. to work. to work. return aphased initiated 2we Level at Alert 18 May On April. 27 3on Level 4toAlert Level Alert from moved response national The help. and needed struggling were who individuals with contact direct some in resulted this and levels comfort and impact of lockdown on wellbeing, productivity the tounderstand undertaken were Surveys COVID-19. of contracting risk at higher members family or employees any identify could we so and toqueries answers direct toget able were people our so inbox email adedicated up We set connected. people tokeep helping and focussed on providing reassurance and frequent were people toour Communications
14 MERCURY ANNUAL REPORT 2020 Our world of Energy Freedom MENU • • • • • • included: and significant was time this during of work programme most. The it needed who customers tothose help and support providing on was focus primary Our Customers lockdown. during same the stayed or improved either factors these found Most connected. staying and decisionquestions about productivity, making answering responded, 54% of employees experiences of working during lockdown. their on employees surveyed we June, In office. tothe return afull made we 8June, On virtually. conducted tobe it for training of all aredesign and completed, was sites on reconfiguring workspacesthe wayand activity equipment, with associated logistics Transitioning levels across included alert the processes for GLOBUG for customers processes with resuming energy management risks tomitigate aprogramme initiating alternatives tooffer payers over-the-counter contacting toll-free making GLOBUG calls from mobiles disconnections pausing debt processes collection and number establishing a dedicated COVID-19 phone COVID-19 of result as a support and reassurance for looking customers for page web anew creating
and transparent approach. aroundstakeholders our proactive, pragmatic, from feedback positive Wepaused. received when energy management processes were debt in growth facing GLOBUG customers to given was focus Particular customers. tosupport implemented we measures and government on the stakeholders regulatory with engagement We undertook recipients. the by welcomed were These regulators. and officials Government Ministers, keywith Wellington including stakeholders communicated (NEMA) proactively and National Emergency Management Agency tothe reports situation weekly We provided Stakeholders • • • • • • to help small businesses with cashflow with businesses small to help initiative SOS Business of the sponsorship businesses small for support payment differentiated segmentation approach that allowed for developing a small commercial customers with to engage rolling out a campaign ‘boredom buster’ at home active being to challenges App Mercury the aligning lockdown in while customers to offer hour power afree launching customers remindercollection processes for GLOBUG designing and implementing phone-based
• • • through a of range initiatives including: support toprovide We able were levels. income tomaintain staff for and possible, where staff tomaintain contractors enable conversations to focussed on opportunities for changesthe lockdown, necessary our effecting After of key suppliers. a range We engaged early during lockdown with Suppliers our COVID-19 preparedness and response. Treasury and around (MBIE) Employment and Innovation of Business, Ministry Transpower, from requests of information anumber We answered approaching. winter essential works continued, conscious of deferred, was maintenance some While ofgenerators supply. around security with coordinated Transpower effectively drilling when that was allowed was that when drilling well tocomplete toreturn able were they so crew together through lockdown the period drilling its tokeep Century MB with closely Venture Joint Rotokawa working team the in employment workers those tokeep tohelp concessions of We anumber made workers. vulnerable of low-paid anumber employ who suppliers with closely working team procurement our undertaking were they work on-site limited the tocomplement home thatcontractors could they complete from providing work to core generation
15 MERCURY ANNUAL REPORT 2020 Our world of Energy Freedom MENU • • Key lessons include: Plans and Incident Management Processes. Continuity Business their toupdate units business by used be will sessions these in incident management teams. Items identified mode, we held formal debrief sessions for our torecovery response and management Through our transition from incident Key lessons • • • included: support remotely. Our working while people of their needs tothe responded as they them tosupport partners iwi our with We worked team management team into lead practices these toincorporate how considering are units –business data by informed decisions fast and collaborative incident management teams enabled work practices virtual enhance TeamsMicrosoft further will to Skype from –transitioning home from working toenable well worked technology COVID-19 by affected most people its tosupport reserves fund increasing of distribution partnership Tūwharetoa with toconsider working kaumātua its for heaters distribute and Waikato-Tainui’ssupporting to buy initiative remotely cases and manage support community home from toworking transition its tocoordinate management Raukawa assist to expertise ICT and centre call our sharing Transpower, national maintains the which country. the across spread evenly to being according togained, benefits as opposed allocated be will grid electricity national the of upgrading maintaining and shared costs June 2020. principle The applied is that the new transmissionits pricing approach in (EA) announced Authority Electricity The TRANSMISSION PRICING METHODOLOGY Fixed Tariff Charge Regulations. Low of the phase-out the and making market areason outstanding of EPR reform, including regulators and Government the with engage to We continue customers. of our interests best the considering intent while policy the with consistent of changes implementation toensure allocated were Resources backs. win- and saves and discounts; payment dependent consumer guidelines; prompt- medically and consumer vulnerable to the reforms were: attention Areas priority for (EPR) Review Price Electricity Government’s the from findings the We welcomed PRICE REVIEW ELECTRICITY • • for us for like look could flexibility what increased on TeamManagement discussions (EMT) Executive advanced –we home from working enjoyed people of our most accelerated has been processes todigital –transition processes paper-based remaining for of working ways new required home from working
. Energy for electricity supply in August 2021 2021 August in supply electricity for Energy Meridian with contract its end would smelter Tiwai the that smelter Point aluminium announcementThe by of owners the the SMELTER ALUMINIUM TIWAI POINT pillar story Partnership as our features strategy Catchment a Waikato World’s Best for planning Our management. and quality freshwater toimprove initiatives government local and central in toparticipate continue will and reform freshwater in interest an with We of many one are years. six toseven next the over out carried reviews plan regional through be will proposals Government’s the of flexibility).Implementation and (operation generation risks to electricity helped lessen regulatory environmental through consultation the process has May in 2020. plan management Engagement freshwater its released Government The WATER aluminium smelter. Tiwai of the closure of the Point impacts EA’s of the the and review process a judicial or potential changes in approach including toimplementation delays further in result may that of factors anumber have been review.its Following announcement the there Transpower until completes known be not will to us impact 2023. final April by The place in tobe pricing new 2021 with 30by June EA’s the guidelines with new line in structure apricing with up tocome is expected grid, .
16 MERCURY ANNUAL REPORT 2020 Our world of Energy Freedom MENU * Electricity demandandgeneration scenarios (EDGS),July2019 * Electricity Turitea. like infrastructure critical for designation services essential on Government the from clarity greater tobe needs there addition, In efficiency. on tofocus need clear tothe point pandemic, including pricing pressures, which COVID-19 of the impact economic to the due risks financial heightened are There to 2050. period the in as double much may as electricity renewable for demand that theme. MBIE scenario modelling* suggests enduring an tobe continues economy the of as decarbonisation growth electricity for renewable There remains opportunity the again. yet have torebalance will demand and market, as supply the in of volatility risk increased is an smelter, there aluminium Tiwai of the closure Point pending the on e.transport. Following announcement the by our ongoingsupported leadership in a clear pathway for development, generation allowing balance, achieved as having demand and supply market viewed We previously had LOOKING FORWARD areas. demand tohigh close sources generation Island North our with positioned, well relatively are we that remains view Our closure. smelter’s the following immediately demand softer offset will that consumers for prices on impacts have also upward will upgrades of transmission cost The Island. South and North the between separation price spot significant expect we completion, Until upgrades. transmission for plan its with Transpower that note is progressing year. financial of our end the We after came disrupting the trilemma. heat, not while process and of transport Zealand’s economy, such as electrification the New for future toalow-emissions transition to opportunities material most the on focus should Policy systems. of energy sustainability security, energy equity, and environmental of the energy trilemma, being energy terms in balanced and functioning well as being sector Zealand’s electricity of New recognition for toadvocate We continue will failure. of systemic indication an as seen be not should participant market one by behaviour of poor Anincident provisions. trading of market areview be could Energy. Aconsequence Meridian against complaint situation trading undesirable an of consideration its on ruling afinal making be will EA The and/or initiatives. energy new incentives energy of renewable form the in come could These cycle. election of the as part suggested tobe sector tothe related interventions various for is potential There customers. our and people our tosupport digitisation accelerate to opportunity as the as well home, from towork of people many of our ability proven the to due arrangements work of flexibility greater for opportunities also are There
17 MERCURY ANNUAL REPORT 2020 Our world of Energy Freedom MENU ENGAGING WITH OUR STAKEHOLDERS. described here. described are to them what’s important how we engage and them with role, specific their Stakeholders, time isthe right. we had planned, later in 2020, when engagement, stakeholder detailed the We undertake groups. will on behalfsurvey of their stakeholder appropriate the completed they if consensusthe was would it more be and owners, relationship internal our ourstakeholders, to closest those went into lockdown. We consulted were all set to country go when the groups and our nine stakeholder This year, we wanted to engage with them. to asimportant stakeholders most andneeds wants identified these by relevant the to given consideration business plans with are developed and strategy Our success. our across our business is crucial to stakeholders with relationships maintaining and Building
PARTNERSHIPS business. other’s each into understanding effort and time dedicating by and partnerships, reward customer ventures, joint commercial through are partners our with engage we ways the of Some operate. we which in communities relationshipslongstanding the with beneficial, mutually We positive, build • • • goal. and vision purpose, mission, our with aligned ventures beneficial mutually through which we canopportunities develop deliver and seek we partnerships, Via our Loyalty Brand resources Natural SHAREHOLDERS &INVESTORS • • • hold institutional investorhold institutional meetings. and briefings (ASM), analyst meeting provide and Board also deliver an annual shareholder continuous disclosure. Our management adhering to principles the of reports, announcements operating and quarterly dividends and earnings reports, year half and annual updates, market material through backbone of our business. We engage the are investors and shareholders Our tocreate value. continue and grow to business our for capital financial shareholders and provide stability the and Approximately 80,000 investors Safety &wellbeing Safety developmentGeneration excellenceOperational WHAT IS IMPORTANT TO THEM ABOUT MERCURY THIS YEAR? THIS WHAT ABOUT MERCURY TO IMPORTANT IS THEM HOW DO WE ENGAGE WITH THEM? WITH ENGAGE WE DO HOW
IWI • • • conferences and supplier briefings. industry work, live completing and work discussions, engagement on proposed new This contract meetings, includes partnership iwi. with occurs engagement proactive areas, these sustain and protect value, respect, we that ensure to order In iwi. for significance historical and of are cultural located are wind) and (hydro, geothermal facilities generation our areas where ofMany the and plans. long-term, mutually beneficial partnerships toestablish which through platform the with us provide iwi with relationships close Our Climate change developmentGeneration resources Natural GOVERNMENT & REGULATORS • • • contribute to. contribute or commission we that reports of external visits and engage through development the We site host forums. regulatory/political and events industry energy in participation and briefings, ministerial submissions, to responses meetings, scheduled Engagement takes place through formal and overcome challenges. opportunities, identify solutions, todevelop entities governing other with and of government levels at different We collaboratively work business. our develop can we which within construct environmentoperating and provide the our determine that frameworks regulatory the set regulators and Government Customer experience Climate change &wellbeing Safety
18 MERCURY ANNUAL REPORT 2020 Our world of Energy Freedom MENU ENGAGING WITH OUR STAKEHOLDERS. issues we face in our communities. our in face we issues social the and environmental understand tobetter context the and tooperate support us with provide relationships community Our COMMUNITY • • • customers. of vulnerable needs the support better and tounderstand agencies government upon. We budgeting work with groups and environments which business the depends social and natural tothe improvements on engage we TrustEnhancement (WCEET), Waikato Ecological the in Catchment role our Through requests. level lakeand flow river tocommunity respond and operate we which in communities the in events sponsor We also forums. of community a variety in participate actively Key members team Safety &wellbeing Safety developmentGeneration resources Natural operations. and business our us toenhance allow that services and products deliver suppliers Our SUPPLIERS • • • standards with suppliers. new develop insight into, gain and with, collaboratively towork conferences industry briefings and proactive engagement with negotiations, contract meetings, supplier review We business use also commitments. on-going customer and other business completing various or projects fulfilling Suppliers are continuously engaged in Safety &wellbeing Safety excellenceOperational growth Sustainable WHAT IS IMPORTANT TO THEM ABOUT MERCURY THIS YEAR? THIS WHAT ABOUT MERCURY TO IMPORTANT IS THEM industry to its highest potential. highest toits industry the grow and to share, exchange knowledge provide participants an opportunity Industry PARTICIPANTSINDUSTRY • • • progress and innovation. tofuture tocontribute and solutions, with assist issues, industry across tostay order in We this do participants. sector by organised events as stakeholder as well conferences, and events toindustry contribute and attend Zealand. We New regularly also Business Council, Sustainable Business Council and Energy as ERANZ, Business such groups industry in participation active and meetings through participants one-on-one industry various We with work challenges. overcome as to as well growth for opportunities new support and toprovide industry energy the with We collaboratively work Climate change &wellbeing Safety resources Natural HOW DO WE ENGAGE WITH THEM? WITH ENGAGE WE DO HOW product development. future and growth continued for foundation Customers sustain our business, provide the CUSTOMERS • • • sponsorships and events. and sponsorships and through partnerships, our community research; market and surveys customer media; social via portal; Account My and mail); website our direct letters, email, calls, (via Centre Engagement Customer our through several avenues including: through input and feedback seeking proactively engagement, customer responsive and effective for We strive longstanding. often and valued, are relationships customer Our business. their earn that services and products the us tohave place in helps about care what they and expectations we do. their needs, Understanding of everything core at are the customers Our Safety &wellbeing Safety loyalty Customer Customer experience (CONTINUED)
and efforts we thrive and prosper. and thrive we efforts and diversity knowledge, skills, their Through business. our drive 786Our employees EMPLOYEES • • • development and onboarding programmes. our through important towhat’s connected stay also employees Our supporters. change communication channels of and our network digital internal as our as well surveys, pulse We do this through engagement and success. toour is crucial heard are viewpoints and perspectives different Ensuring High Teams Performance &wellbeing Safety & development Capability
19 MERCURY ANNUAL REPORT 2020 Our world of Energy Freedom MENU WE FACE. WE RISKSTHE value over time. over value create we how for focus our and most to shape matters account in our view of what risk areas. We take these into have seen this year in our key summary of trends the we In we this provide section a operations. environment internal our and changes in external the yearevery to take into account review and update these risks We report. alongside this Statement Governance in Corporate the we manage is them included Mercury’s key risks and how of summary comprehensive A that is published published is that PILLARS OUR AREA RISK KEY TRENDS CURRENT IMPACTING FACTORS
SAFETY shuts. shuts. maintenance geothermal and refurbishments campaign,hydro drilling a farm, Turitea wind our year, including the of course the over projects of large number significant the to due risk safety in increase any managing of mindful were we year This • • such as: aspects key on progress make to We continue the public. customers, and contractors, employees, of wellbeing the affect could that risks major the of one be to continues and us for objective essential an is Safety areas for improvement regarding made be to more informed decisions or near misses, allowing incidents of reporting in continued improvements cases ofacceptance our safety WorkSafe’s conditional with programme, Safety Process our COMPLIANCE COVID-19. from broader impacts of resulting area this in risks increased of aware were we processes, review regulatory key fewer been have there year, while this During us. to impact their in neutral or largelysupportive either all were EPR and Committee Change Climate Working Group, Interim Tax the of outcomes The concluded. were us to impact significant for potential the had that processes regulatory several FY19, In Mercury. to risks significant presents which area, this in change regulatory consider We also fraud. deter and risks assess to tool important an is policies Compliance internal with Code. Participation Industry and within the Electricity consents resource as such through key elements capacity desired our to operate to ability our for Compliance is important
REPUTATION stakeholder management. our and strengthen enhancement programme security our build to year, continued we This increase globally. continuesattacks to cyber- of sophistication and activity of level The to increase. continues also on rely and hold we that data of amount The and owners. partners communities, customers, –our groups stakeholder key our of each across grow to continued has input and stakeholder relationships of importance The OPERATIONAL • • • on: focussed were we FY20, in risks these managing In pandemics). global or disasters natural as such (events interruption business and exposure; market availability; fuel availability; asset management and operational risks include: key The revenue. create and electricity generate to ability our on impact significant potentially a have risks Operational the impacts of COVID-19 of impacts the Tiwai to relation in situation ongoing the shuts maintenance geothermal and refurbishments hydro of drilling, programme the impacts of COVID-19. of impacts resulting from broader risks financial in shifts any managing of mindful been We also have farm. wind Turitea the of construction the managing on focussed have we year This continuous improvement. and review regular to subject are that controls process key have activities related and Finance FINANCIAL monitoring and response. enabling risk, people of increase the transparency to information people key of atarange We look to lift. continuing engagementstaff levels to contributed have Teams,Performance High on afocus and management programmes, and leadership in investment Ongoing PEOPLE
20 MERCURY ANNUAL REPORT 2020 Our world of Energy Freedom MENU PULLING IT ALL TOGETHER. ALL IT PULLING OUR PILLARS strategy our reviewing by us is informed of for what is material view our year Each (see below).
WHAT’S IMPORTANT TO OUR STAKEHOLDERS what matters combining by aspects these tovisualise helps page, this on plotted one like the assessment, amateriality Undertaking tocreate value. continue we toensure toevolve needs approach our how areas toconsider these in changes with We toexplore. todate up keep opportunities and tomanage risks stakeholders, to our important what’s environment, external the pages: preceding the in covered items against a broad context, including the we have covered them in this Annual Report and used them to define the reporting boundaries. reporting the define to them used and Report Annual this in them covered have we topics material most the As highest. the rank that those are corner right-hand top the in areas focus The RESEARCH INDUSTRY & PERFORMANCE FY20 MATERIALITYFY20 ASSESSMENT TEAMS DEVELOPMENT HIGH DEVELOPMENT CAPABILITY & GENERATION CUSTOMER LOYALTY WHAT’S IMPORTANT TO US BRAND CHANGE CLIMATE GROWTH SUSTAINABLE IWI to what matters most. to what matters aligned remain priorities our toensure check as across- serves other. assessment The by, each supported are relate to,also and they pillars, five of our toone linked each are assessment and, are although they important materiality areasthe in focus ofAll the pillars. five toour related areas, focus year, fifteen our this used we assessment For tous. materiality most our what matters and stakeholders toour most RESOURCES NATURAL ASSETS EXPERIENCE CUSTOMER WELLBEING & SAFETY REGULATORS GOVERNMENT & EXCELLENCE OPERATIONAL
21 MERCURY ANNUAL REPORT 2020 Our world of Energy Freedom MENU FY20. IN VALUE CREATING integrated approach.integrated of our development continued and adoption the through achieved been acrossFY20, our five pillars,that has Here we define our value creation in
economic performance ofeconomic company. the performance direct the past extends creation value ensure and tolife purpose our us tobring toallow help These communities. local to support commitments Zealand. We tohaveNew long-standing proud are in uptake vehicle as electric such opportunities growth green on have focussed partnerships commercial Our resources. to natural existing geothermal operations that rely on ongoing the access and developments wind tonew essential have been landowners other and Māori with partnerships long-standing Our partners. iwi and community commercial, our have we with relationships the and operations our in is embedded protection) and (guardianship our business and broader economic outcomes. Kaitiakitanga for foundation avital are partnerships enduring and Deep PARTNERSHIPS component measure of executive remuneration. remuneration. of measure executive component is a it focus, customer delivering for is accountable at Mercury everyone that toensure and business our for benchmark a core is satisfaction Customer loyalty. their rewarding and supply their of security tomaintain helping and connected them keeping agreat experience, them –giving tothem most us matters tell what they on focus we response in us and choosing for customers toour We grateful are people. for easy and seamless service our makes and technology, customer-led leverages loyalty, rewards ways. Wewonderful are doing this through an approach that more in energy toenjoy Zealanders New is toinspire purpose Our CUSTOMERS societal and environmental benefits. communitieswith we also provide broader economic development, working and partnerships our Through time. over value in grow and owners our to dividends that support flows cash sustainable and stable We todeliver aim performance. economic leading our in We pride take growth. future pursuing and business our operating apply financial strong disciplines and riskrobust management in We owners. toour value delivering on centred strategy, business ultra-long-term our focussed of product are a reflect, they trends the and Report, Annualthis in reflected results financial Our COMMERCIAL KAITIAKITANGA PEOPLE rewarded for excellence. and recognised are staff ensures which culture, performance ahigh- and management great people development, employee on focus We have acomplementary remuneration. of executive measure is acomponent with work we everyone and people of our wellbeing and safety The business. our in succeed and contribute can they feel people where of inclusion have aculture and thinking, toinnovative contributing in particularly diversity, value We potential. full their out tolive motivated and engaged feel employees where towork, safe agreat place and to make Mercury Teams We side. our aim on Performance have we High ensuring is by customers, toour possible experience best the deliver and business, our in tocreate value way best the that We believe catchment. Waikato its and of the River wellbeing and health the including outcomes, of environmental enhancement and protection availability, resource natural ongoing toensure operate we which in communities local and government with collaboration on priority We is akey ahigh focus. place compliance consent resource customers, toour energy todeliver rely we which on environment natural the toprotect order In goals. Zealand’s climate change New tomeeting contributes and tocustomers value delivers that advantage energy Zealand’s renewable New towards contributes future generations of New Zealanders. Our renewable generation including stakeholders, of other interests the recognises that focus We resources. have along-term natural from energy We harness
22 MERCURY ANNUAL REPORT 2020 Our world of Energy Freedom MENU LIVING ENERGY FREEDOM. ENERGY LIVING sustainable future. sustainable about our contribution in this area towards amore for climate change so you more can understand pillar, preparing Kaitiakitanga to approach our go as planned. We also feature, of our as part didn’t that things from lessons also and progress challenges share and our opportunities, successes, through year. the We on our responses reflect to undertaken is an example of material activity and what they mean that to us, through astory we toIn seek bring this to section life our pillars,
23 MERCURY ANNUAL REPORT 2020 Living Energy Freedom MENU CUSTOMERS. VULNERABLE HELP CLOSE CONNECTIONS reason enough to move the customer to to customer the tomove enough reason not was electricity having not Unfortunately, requirements. to parole due address toaspecific remanded and prison from released being after faced acustomer reality the was That pandemic. COVID-19 tothe response nationwide of the as aresult into alockdown went country the week the evening, Wellington awindy on in moving imagine Then history. credit toyour due connected electricity to get able being not and electricity Imagine moving into a home without experiences that some of our more vulnerable have customers us. with To bring this to of life, Tua’s Helen here we tell story the contribution to the Experience. and Loyalty Brand, are areas pillar focus Customer Mercury’s FOCUS OUR 1. CUSTOMER. customer was supposed to be starting out out starting tobe supposed was customer this terrible, was it Ithought desperate. Tua Helen pretty called at“I Mercury, that,”change Liz said. to do Icould nothing was there and address at that tostay had customer The options. any were there think didn’t Ireally and aFriday on 6pm, released around was He power. without weekend the facing was and level) response lockdown highest country’s 4(the Level during prison from released been just had who customer this had “I CEO Liz said. Kelly different accommodation, Porirua Whānau budgeting services and other community and other community budgeting services provider.prepay electricity Social agencies, residential Zealand’s largest GLOBUG is New GLOBUG. product prepay Mercury’s through hour the within running and up house to the power had team, customer of the members of efforts collective through and Mercury, at others with toconnect able was She years. Manager, has ten for she had arole Liaison Tua Community Helen is Mercury’s Liz added. world,” tothe back welcome alonely That’s lockdown. during house into adark move to had but chance, asecond having fresh,
24 MERCURY ANNUAL REPORT 2020 Living Energy Freedom MENU SUMMARY. PILLAR • • RISKS KEY brand. energy Zealand’s leading New STRATEGIC GOALS: LONG-TERM segments. target our in customers for easy it making and rewarding We inspiring, are STRATEGIC MID-TERM GOALS: • • FOCUS AREAS OTHER • STORYPILLAR FOCUS AREA on our ability to operate core systems. core tooperate ability our on impacting failure asystems or Loss of data service. customer on impacting or customer general communications, billing connections, customer in Errors Loyalty Brand Experience
budgeting and government agencies relationshipsstrong groups, community with tobuilding herself has dedicated Helen things“getting done”. for is well-known as Helen surprised wasn’t quickly, so but connected electricity got Helen grateful and delighted, was she Liz said budgeting more difficult. make can which month, of the end at the abill sent being than rather budgets, their with coordinated be it, can that away in of using ahead pay electricity for Customers consumption. building up debt through unmanaged energy it can households help struggling avoid GLOBUG because on rely groups support in difficult circumstances, get a fair deal. deal. fair a get circumstances, difficult in individuals or families, income low ensure and better them support can we customers, our understand we when that says Helen customers. our and understanding supplying electricity just between gap the bridge helps customers of vulnerable behalf hard on working leaders and socialcommunity agencies the relationshipsMaintaining with Freedom. of Energy mission our and work this between connection astrong sees She helping all financially challenged households. to as astep toelectricity access affordable and fair long-term in belief Mercury’s with aligns drive Her Whānau. as Porirua such difficult to get a post-pay account. post-payaccount. a get to difficult make it can records credit poor Having record.” acriminal having by stigmatised backgrounds and they’re then further come generally from vulnerable “They’ve said. lives,” Helen their torebuild time prison served who have people for difficult very “It’s of that. example an was prison from released just person of the situation The government authorities. and of businesses intentions the distrust can and society by marginalised are customers It requires ongoing work because some ENERGY CONSUMPTION. UP DEBT THROUGH UNMANAGED HOUSEHOLDS AVOID BUILDING BECAUSE IT CAN HELP STRUGGLING RELY GROUPS SUPPORT ONGLOBUG SERVICES AND OTHER COMMUNITY SOCIAL AGENCIES, BUDGETING
25 MERCURY ANNUAL REPORT 2020 Living Energy Freedom MENU CREATING VALUE THROUGH OUR GLOBUG OFFERS THEM, AND MANY MENU CUSTOMERS. OTHERS, A VIABLE OPTION THAT ENABLES THEM TO WORK WITHIN THEIR MEANS AND GIVES THEM FAIR ACCESS TO ELECTRICITY.
COMMERCIAL CUSTOMER
“GLOBUG offers them, and many others, a In early April, escalating debt was at risk of viable option that enables them to work within getting out of hand.
their means and gives them fair access to Through Helen’s established contacts, F reedom L iving E nergy electricity.” PEOPLE PARTNERSHIPS we sought guidance and feedback on its For many of GLOBUG’s 22,000 customers, approach, and that helped develop a new keeping up with bills is a daily struggle. We energy management solution that was KAITIAKITANGA work closely with those social and community sustainable commercially for us and worked agencies actively helping struggling for our vulnerable customers by supporting households to ensure GLOBUG customers are their budgeting needs. Helen’s contribution to the support we offer to treated with empathy and dignity, Helen said. Options for payment deferrals were LOOKING FORWARD vulnerable customers integrates thinking and The economic impact of the COVID-19 established, repayment rates were reviewed, delivers shared value across other Mercury pandemic created additional challenges for training focussed on empathy and Mercury expects the impacts of COVID-19 on the pillars. For example: many customers. There were answers we communications were enhanced with an economy to impact a growing number of our • PARTNERSHIPS – working with budgeting needed from community organisations and emphasis on care and clarity. customers through FY21 and possibly beyond. The agencies and other groups in communities social services on how we could best support Committed work from all those involved cost of electricity will be top of mind and therefore helps our knowledge of customer needs these customers. with GLOBUG enabled changes to be made the efforts to support customers will continue to be while building trust in our brand and “The biggest challenge within the GLOBUG quickly, and embedded for some longer term important and also expected of us by stakeholders. for our sector (Industry & research and world was: how do we support access to the positive outcomes. We expect vigorous competition to continue to be Government). REPORT 2020 ANNUAL MERCURY essential service of electricity, but not grow This approach was subsequently mirrored a feature of the market, with activity ramping up the debt of customers who are largely with • COMMERCIAL – Insights from Helen’s work across post-pay customer relationships as as competitors reposition portfolios ahead of the contributed to improvements in the way this product because it helps them avoid well as partner and supplier engagements. we managed the risk of growing debt levels debt?” impacts of a South Island demand drop that will (Sustainable growth). result from the signalled closure of the Tiwai Point aluminium smelter. We intend to fight to earn our customers’ business, using data to target digital offers that inspire, reward and make things easy. 26 BEST CATCHMENT.BEST WORLD’S THE goal of making Waikato the World’s the Catchment. Best here of our evolving aspirational the with work to strategy develop apartnership Government (central and local) relationships. To bring this to life, we tell story the and Iwi Research, and Industry are areas pillar focus Partnerships Mercury’s six inches in front of my face.” front in six inches see river. Icouldn’t Now of the bottom to the clearly see Icould Karāpiro Lake in swimming aschoolboy Iwas “When different: were things when ago years 40 remembers He mission. For is apersonal this Gavin Manager. Sustainability Catchment Mercury’s Williamson, Gavin Catchment,” Waikato World’s Best says the make the can we together, work and now decisions right make we the if But resources. for its growing competition is there and is declining Water quality pressure. Waikato is under River mighty “The FOCUS OUR 2. PARTNERSHIPS. everyone to be on board.” on tobe everyone needs imagining are we outcome positive our knowledge and but huge expertise, the in confident are we and Karāpiro to below Taupō from landscape long the see “We when,” explains. Gavin catchment, and the in is it where is, there water much how knowing in caretaker. Weterm experienced well are is a long- river, Mercury the on stations power nearly 100 years’“With experience operating river. the of perspective unique our and catchment the in history long our from comes that idea bold is a aspiration catchment’ ‘best Mercury’s of industry, tourism, recreational activity and and activity recreational tourism, of industry, lifeblood the also are awa of the waters The Waikato the catchment. from water drinking on rely river the along communities other Taupō Hamilton, and Watercare. addition, In Waikato by the River from is piped water into Taupō) Lake and where toAuckland, mountains the around diversions water the upperthe reaches of Whanganui the (via from further, even extends catchment The to Te oWaikato Puaha mouth). (the river Waikato from (river)The awa flows Taupō with. share it we those river, and the with relationship of our evolution is an vision Our OUR CHANGING APPROACH
27 MERCURY ANNUAL REPORT 2020 Living Energy Freedom MENU SUMMARY. PILLAR • • RISKS KEY enhanced. and enduring tofuel access Mercury’s with Zealand, and toNew contributor as apositive recognised industry our with industry, our within as aleader Recognised STRATEGIC GOALS: LONG-TERM strategy. and purpose our with consistent created, and new relationshipsstrengthened, are relationships and are maintained Existing industry. from renewable the electricity for positive support contributions community national,There is bipartisan regional and STRATEGIC MID-TERM GOALS: • • FOCUS AREAS OTHER • STORYPILLAR FOCUS AREA we manage our integrated business model. business integrated our manage we Regulatory changes that how could affect electricity market. and demand impacting on wholesale the and long-termShort changes in supply Industry Government Iwi
been formed and tested, and trust and and trust and tested, and formed been Tasman have relationships Strong sea. Waikato tothe the and through diversions Whanganui the from stretch (territories) rohe whose iwi, river by endorsement and involve possible strongest the participation has to managed are resources water region’s the which in way the that believe We longest. the here have been and place this love also who others from We’ve learned pathways. similar on all were we that saw We diverse. more also and focussed more both became catchment the in conversations our organisation as an matured we As river. the for respect and care appropriate with as ahydro generator responsibilities our out carry might we how about them with totalk opportunity the took tosay and had towhat people carefully listened we ago, ourDuring consenting process 20 years better. catchment tomake the how insight into tooffer able be will all and needs, have All horticulture. and dairy for irrigation WELLBEING. TO NURTURE HEALTH ITS AND LIVING TAONGA. WE HAVE ADUTY AWA IS ASACRED TUPUNA AND WE HAVE LEARNT THAT THE government. and local and regional councils and central organisations, Watercare, other Fonterra and Energy, NIWA, Genesis Mercury, headwaters, awa Whanganui the from Rangi Ngāti and Waikato the River along from iwi sea: to the brought together from people mountains the (representing ‘going together’) forward and allocation. tour, The called Tukitahi quality water around issues systemic with is dealing that system management water challenged severely and acomplex with acatchment Australia, in Basin Darling 2017,In Murray- (tour) the ahaerenga visited like. looks what ‘bad’ seen also like, we’ve look might catchment ‘best’ what the imagine we While FORWARD TOGETHER GOING wellbeing. and health its to nurture (treasure). taonga living and We have aduty (ancestor) tūpuna is asacred awa the that We have grown. have learnt understanding
28 MERCURY ANNUAL REPORT 2020 Living Energy Freedom MENU CREATING VALUE THROUGH OUR MENU PARTNERSHIPS.
“We saw that the Waikato River catchment “Amidst the increasing urgency of the isn’t that broken. We started to imagine national conversation around water, what could be done together to start to freshwater reforms, regional policy processes repair years of human impact and improve and pressure on the catchment from the catchment in terms of allocation and Auckland’s 2019/20 drought, we somehow COMMERCIAL CUSTOMER use, creating headroom for positive land use have to find time to see the catchment change and improved storage opportunities,” through each other’s eyes and work together says Gavin. for sustainably better outcomes. This thinking led to the idea of the World’s “Success will look different for everyone F reedom L iving E nergy
PEOPLE PARTNERSHIPS Best Catchment vision. To put this vision but for true success everyone needs to find into action, Mercury’s leadership endorsed a alignment. The bottom line is that the river new role, Catchment Sustainability Manager, comes first, with water quality and water KAITIAKITANGA and Gavin was appointed. “This is a truly allocation including iwi allocation front and long-term, future-focussed role working with centre.” iwi, regulators, scientists, the region’s hugely important farming communities and others,” FROM IDEA TO REALITY Our vision for Waikato to be the World’s Best says Gavin. The waters of the awa keep flowing, and as it LOOKING FORWARD Catchment involves integrated thinking and “Our first step will be to take our World’s Best passes downstream, Mercury uses its gravity We are aiming to reconnect in FY21 with those delivers shared value across other Mercury to generate renewable electricity. pillars. For example: Catchment vision to our key partners in the who were part of the Tukitahi tour to reconsider community and get their views on whether “It’s our privilege to be here,” says Gavin. the insights we all had. The Government has • COMMERCIAL – the collaborative approach this fits with what they are thinking. “We’ve been here for a long time, we’re going to catchment management supports our released its Three Waters reform programme “We plan to work closely with the Waikato to be here for a long time too. The values we necessary hydro refurbishment programme hold run deep in the organisation. and it will be important to listen and learn about that secures Sustainable growth. Regional Council, aligning with its freshwater strategy. Also with river iwi, to understand and “Our plan is to work with our partners to the implications of that on each other, and to • KAITIAKITANGA – our partnerships take plan for appropriate actions that benefit the
align with their strategic plans and aspirations explore their connections to the river and REPORT 2020 ANNUAL MERCURY us towards being recognised as a leader in for water. We will talk to our corporate learn what could make this the world’s best collective needs of those who are part of the the ultra-long-term management of both partners in the catchment to see how we can catchment from their point of view. physical and natural Assets. Waikato catchment. We will be considering new pool our resources and work collaboratively on “This is a huge ambition, bigger than me and partnerships that can support our business • PEOPLE – Capability & development projects that benefit the catchment.” of our people is enhanced through work bigger than Mercury. We need everyone to be strategy, and reviewing established partnerships involving complex interconnections as well Getting started has already been challenging. on board to make this the best it can be, and so that areas of shared value are understood. as cultural and historical considerations. It’s not just the catchment that’s under that means the best in the world.” pressure – people and organisations are stretched and working hard on immediate
priorities. 29 THE FUTURE. THE FOR WHAKAMARU POWERING UP recognition of their place in wider the environment. how we balancereflects our care thefor legacy of our with assets refurbishment The hydro station. Whakamaru our of refurbishment Change To and Assets. bring this to of life, the here we tell story the KaitiakitangaMercury’s pillar focus areas are Natural Resources, Climate OUR FOCUS OUR generations of New Zealanders. earlier by built were that stations power the and resources natural both with work we which in ways the guides It organisation. an as purpose long-term our influences protection) and (guardianship kaitiakitanga of concept Māori teao tothe A commitment responsibility. ahuge –and art an also it’s runningis machinery efficiently a science, but and of water system interconnected Waikato of the River.water this Keeping powerful the from gravity by turned turbines nine power housing stations 39 huge comprises Waikato System Hydro Mercury’s 3. KAITIAKITANGA. sustainable improvements to efficiency, risk risk to efficiency, improvements sustainable better: but same, of the more for not look teams infrastructure our means Applying concept the of kaitiakitanga pastthe decade. gone back into machines these mighty over has dollars of abillion aquarter around far So item. investment Waikato is asignificant River the on hydro stations nine the for programme reinvestment our that then is surprising not It grid. national tothe energy renewable of input 60% of Mercury’s contributes it and Zealand’s 10% electricity, of New around generates WaikatoOur System Hydro teams and it’s a job he is passionate about. about. is passionate he ajob it’s and teams Manager, these leads Asset Infrastructure Hill, Graeme teams. Management Asset our by is planned commitment business This thatwater. from efficiently, most electricity, most the togenerate able being from supply) and (the fuel towater access long-term securing from derive assets the of custodianship to approach our of benefits environmental outcomes. commercial The management, resource management and
30 MERCURY ANNUAL REPORT 2020 Living Energy Freedom MENU SUMMARY. PILLAR • • RISKS KEY natural assets. and physical of both management term ultra-long- the in as aleader Recognised STRATEGIC GOALS: LONG-TERM on. rely we that assets and resources natural of the sustainability term long- the managing are and We understand STRATEGIC MID-TERM GOALS: • • FOCUS AREAS OTHER • STORYPILLAR FOCUS AREA generation. and geothermal fluid for geothermal hydro generation for of water Availability stations. of ourpower or operability efficiency viability, the on impacts that An event Climate change resources Natural Assets
* resource our electricity, togenerate ability system’s the on impact has minimal them torefurbish required outage of the timing the that so hydro system inter-connected the in sit risk? they do Where corresponding and now?like condition right What is their replaced. What is performance their actual or refurbished last was equipment the when and stations of the age at the look “We generating plant. a 50-year horizon (operational life) for the at looking are we teams, maintenance and machines, working closely operation with of these refurbishment* plan we “When century. a (river) almost dates awa back already to the when you considerthat fitting, our connection – view term ultra-long an taking means That says. he to,” subscribes really my team that something is generations tofuture over it passing then assets hydro station the after we’re looking whole concept of “The doing while our part move closerto their endof life, full rehabilitation/replacement isneeded. overThis hasbeena majorundertaking at Mercury thelast decade. The term “refurbishment” isused where equipment has beenoverhauled closeto originalcondition but not actually replaced. As the machines additional 12,700 electric vehicles annually. annually. vehicles 12,700additional electric an topower 124MW)to around –enough 20% of over increase (from 100MW overall an of 5-6MW, meaning units four of the each on capacity unit in increase an was outcome The Renewable Energy. GE and Hydro Andritz manufacturers, components and working closely the with through careful consideration of turbine the water the of use the in efficiency greater toachieve opportunities saw teams The complete. to of work years four than more and planning of years several required It Graeme. says units,” main generating of the part major every total, in replaced, or overhauled either we where station first is the Whakamaru complexity and of scale terms “In of Taupō. 1956. in north commissioned was It 40km is located hydro station Whakamaru market?”Zealand’s electricity toNew obligations our and consents, analysed. Pleasingly, reflecting the attention attention the Pleasingly, reflecting analysed. and reported were misses near and incidents embedded, and regularly reviewed. Minor were procedures and plans safety and health robust people, our on focus our with Aligned region. local the from crews work and specialists, international with week, six a days site, on people to40 up were there unit of each six-month installation the During offshore.” designers andcontractors, manufacturers site, on everyone for concentration sustained of level year. ahuge each unit It’s per including around six months time outage of work years four –that’s units of four rehabilitation the involved project “The outcome. important was another through efficiently station the flow water topass ability the increasing so flexibility, lacked station as the neck’ ‘bottle could flow meant inter-linked hydro system the within position and design station’s The MAIN GENERATING UNITS. TOTAL, MAJOR EVERY PART OFTHE OVERHAULED ORREPLACED, IN STATIONFIRST WHERE WE EITHER THE IS WHAKAMARU COMPLEXITY IN TERMS OFSCALE AND
31 MERCURY ANNUAL REPORT 2020 Living Energy Freedom MENU CREATING VALUE THROUGH 20% $67M MENU OVERALL WHAKAMARU KAITIAKITANGA. INCREASE IN REHABILITATION CAPACITY PROGRAMME
given to health and safety across complex partners MB Century, Andritz Hydro, and
tasks involving huge machinery, the project GE Renewable Energy who contributed to y F ree d om COMMERCIAL CUSTOMER was injury-free. the Whakamaru rehabilitation. Speeches Unit outages were scheduled over summer were made, and when Graeme stood up to months to lessen the impact on the market of address the assembled group, in front of him were around 40 people, some of whom reduced generation at the station. L i v ing E nerg PEOPLE PARTNERSHIPS had been part of the project since early With major parts being manufactured and thinking started over 14 years ago. Graeme is transported from around the world, the passionate about the legacy of the assets, but first time they are assembled is on site, and KAITIAKITANGA it’s the people who work on them, and in the LOOKING FORWARD that has informed the approach for future background to support them, that make him projects. proud. Enabling works and equipment manufacture will “You can’t underestimate the importance continue for the significant rehabilitation work Our Whakamaru hydro station refurbishment “Completion of this project is a massive of technical quality assurance because milestone in Mercury’s multi-million dollar, planned for Karāpiro power station. Other works integrates thinking and delivers shared value we’re getting equipment manufactured across other Mercury pillars. For example: multi-decade journey of reinvestment on the planned include completion of the Rotokawa in many countries. This requires the main Waikato River. We could not have done this geothermal plant upgrade and making progress • PEOPLE – this large project embedded manufacturer to apply rigorous attention to without the support, dedication, know-how high standards of Safety & wellbeing, and detail, and that they closely manage their on our multi-year transformer replacement and commitment to a quality result from programme on our hydro power stations. benefitted from Capability & development subcontractors.” everyone involved.” embraced by team members. Time needs to be allowed for quality The Whakamaru programme came in on Ongoing work associated with our Dam Safety • PARTNERSHIPS – design, manufacture assurance to avoid problems later that can budget at $67 million. Extensive works at our programme recognises the role we play in and equipment installation works with cause delays and performance problems.
power stations at Ōhakuri, Arapuni, Aratiatia protecting our communities. REPORT 2020 ANNUAL MERCURY Industry partners for the benefit of New Often we may need a Mercury team member and now Whakamaru are part of significant Zealand’s electricity market. We will continue to review our environmental or independent specialist to be present at the re-investment – a total of a quarter of a billion • COMMERCIAL – delivering output gains factory to inspect manufacturing processes dollars so far – to secure the operational monitoring programmes to ensure we are investing through Operational excellence contributes and witness testing. efficiency and effectiveness of the hydro in good science that not only helps us understand to Sustainable growth. Fast forward and the project is complete. system for future generations. the impacts of our operations, but also contributes A sunny March afternoon, a gathering to a wider community understanding of changes in Taupō for many of the Mercury team occurring in our areas of operation. and representatives from our supporting We will undertake climate change scenario CLICK HERE to watch eight months work in modelling and consider the appropriateness of 32 30 seconds of the Whakamaru station upgrade. emissions targets. CLIMATE CHANGE. FOR PREPARING climate change disclosures (our current completenessthe and transparency of our developing so, gradually todo continue will we and periods reporting annual two past the over TCFDWe framework the have used providing information to their shareholders. in companies by use for framework disclosure aconsistent TCFD 2015 in the todevelop (FSB) Board created Financial Stability The TCFD. the by produced has been framework and a recognised reporting opportunities manage risks and capitalise on emerging toeffectively expected are entities Corporate climate change. with associated risks There is growing awareness of financial the impacts. climate change own our for responsibility gas (GHG) totake and greenhouse emissions its Zealand reduce New helping to play in guardianship, role or have akaitiakitanga, Kaitiakitanga pillar, and we we acknowledge our area under is afocus It stakeholders. many our and Mercury for issue material a as identified has been Climate change (TCFD) Disclosures Financial Climate-related Task the against Force on Reporting targets. and metrics management, risk strategy, of governance, TCFD elements recommended the using section this We have structured below). table the in is represented compliance Strategy TCFD ELEMENT targets and indicators Performance Governance Management Risk
requirements TCFD with Aligned
. FY20 In progress FY21 targets in FY21 in targets the appropriateness of to investigate Mercury FY21 in undertaken to be modelling scenario 2.0˚C and 1.5˚ FY22 FY23 disclosure of climate-related risks more more risks climate-related of disclosure made and framework management risk its specifically include climate change, reviewed to matrix skills Board our updated we FY20, In opportunities. and risks climate related management and policy processes including risk our on Board the advising and reviewing overseeing, for has responsibility RAAC The Board. (RAAC) of the Committee Audit and Risk Assurance the through level, at agovernance managed, currently are opportunities and risks Climate Change • • • include: toclimate change relation in and Charter, Board the in out set are Responsibilities strategic direction and operation. Mercury’s for has responsibility Board Our in place and monitored monitored and place in are systems compliance and management risk audit, effective that ensuring reporting of integrity the and performance financial monitoring implementation, strategy resources appropriate business supporting plans and with goals strategic clear establishing FOR CLIMATE CHANGE. RISK MANAGEMENT GOVERNANCE &
includes a three-year plan. action and responsibilities and roles response, management opportunities, and risks related climate strategy, our documents CCMP Our Customer. and Geothermal Wholesale, Hydro Finance/Risk Sustainability, and Assurance across Corporate Affairs/Communications, occurs opportunities and risks related change of climate day-to-day management The OPERATIONAL MANAGEMENT (CCMP). Plan Management Change aClimate approving and opportunities and risks climate change our reviewing discussions and workshops several in involved was EMT the FY20 In climate change. including initiatives associated and strategies our on Board tothe recommendations making and Team is developing (EMT) Management Executive and Executive Chief of the responsibilities of the One ROLE MANAGEMENT’S management processes. risk of internal as part is included risks of climate related explicit. review Annual
33 MERCURY ANNUAL REPORT 2020 Living Energy Freedom MENU EMT workshops undertaken in FY20, on climate-related risks and opportunities, produced a STRATEGY. list of 13 covering all the TCFD risk types. A summary of the top five, their potential impacts, timelines, risk rating and how we intend to manage them is provided in the table below. MENU Again, we have aligned these to the relevant TCFD categories for consistent reporting.
H TRANSITIONAL: POLICY & H TRANSITIONAL: MARKET M TRANSITIONAL: MARKET & M TRANSITIONAL: MARKET RISK M PHYSICAL RISK LEGAL RISK & TECHNOLOGY RISK TECHNOLOGY OPPORTUNITY & OPPORTUNITY
S M L S M L M L S M L L
Any increase in regulation and/or actions that do A decrease in demand due to de-industrialisation, An increase in electricity demand from significant The physical impacts of climate change will have Physical climate impacts will arise over the long not consider management of New Zealand’s energy increased use of batteries and an increase in de- electrification of transport (light vehicles, trucking a direct impact on electricity demand. Warmer term due to extreme or acute weather events e.g. trilemma as a whole, (energy security, energy equity, centralised energy generation will impact on the and air), industrial process heat conversions to winters may reduce demand for heating, whilst storms, droughts, increasing frequency of days with F reedom L iving E nergy and environmental sustainability of energy systems) electricity market and Mercury. Technologies already electricity, data centres, export hydrogen production hotter summers may well increase demand for high temperatures. Longer-term or more chronic could lead to negative impacts for New Zealand, our exist in many of these areas and additional new and New Zealand population growth provides cooling in the warmer months. risks include increasing temperatures with impacts sector and our customers. technologies will be developed to aid the transition the potential for increased revenues. Mercury has Drier summers with extended periods of drought on inflows into the hydro catchment. There are Regulatory constraints may be placed on carbon to a low carbon future. It is important that we closely positioned itself to grow market share of generation could increase demand for water e.g. for irrigation. financial risks and opportunities associated with or electricity pricing, impacting on both markets monitor future technology developments, their in New Zealand through the development of the This has the potential to impact water availability these changes which may be both direct (on our and posing both reputational and financial risks costs and returns, as they are crucial considerations Turitea wind farm and has additional prospects in in the catchment and our ability to generate. assets and operations) and indirect (on markets and for Mercury. To manage this, we remain engaged should we consider investing in them. We have both wind and geothermal. We actively promote Scenario analysis will enable us to to understand supply chains). with the regulatory processes around the emissions experience in grid-scale and domestic batteries the electrification of transport, and will continue to these potential impacts on both energy and Increasing extremes of catchment inflows and high trading scheme and forestry rules. and associated solar technologies. As we develop work with industry to explore fossil fuel substitution, water requirements. There are both risks and temperature days presents the risk of damage to large-scale wind generation we will broaden our business models for green hydrogen and renewable opportunities around continued access to fuel our generation assets or impacts on our ability to We will continue to maintain engagement with knowledge and understanding of this technology electricity supply to data centres. generate. government, regulators and media commentators (water) through increasing demand for water use which may have applications at a smaller scale in Our assets are capable of managing high inflow and will maintain/lead the narrative on the positive and/or storage decreasing. Changes in demand the future. events and high temperature days. However, there contribution renewable energy makes to New due to physical changes will inevitably influence remains a risk that some damage or interruption to Zealand’s climate change ambitions. electricity market prices. We will closely monitor policy controls, statutory change and legal operation may occur if extreme events increase in We will continue to make submissions on legislation, precedents that could impact our access to water. frequency. regulation and planning instruments relevant to We will continue to engage in the relevant Resource This would have a negative impact on revenues climate change, renewable energy, carbon forestry Management Act (RMA) processes, monitor and/or increase operating costs. Scenario modelling REPORT 2020 ANNUAL MERCURY and the energy trilemma to ensure the best policy statements and continue to develop our to be undertaken in FY21 will form the basis for the outcomes for New Zealand’s low carbon future. water strategy, working with the many catchment management of climate-related risks and inform stakeholders. generation operating plans, potential changes required to resource consent conditions and high flow management plans. 34
TIMELINE: S Short M Medium L Long term RISK RATING: H High M Medium geothermal facilities. fugitive emissions from Direct emissions – predominantly 1 Scope TO FY20 FY15 BY SCOPE EMISSIONS GHG emissions. gas greenhouse indirect and direct all covering report, inventory annual emissions comprehensive a approach. publicly Mercury discloses standard a using footprints emission gas greenhouse of corporate TCFDThe promotes disclosure the
Tonnes CO2e 400,000 600,000 500,000 300,000 200,000 100,000 & TARGETS. METRICS 0 FY15
FY16 sites and in offices. in and sites used at electricity generation emissionsIndirect - from 2 Scope Scope 1 FY17 Scope 2 FY18 dual fuel customers. to sales gas from downstream –83% emissions indirect Other Scope 3 Scope Scope 3 FY19 FY20 EMISSIONS INTENSITY OF GENERATION FY15 TO FY20 GENERATION FY15 OF INTENSITY EMISSIONS
Emissions intensity kg CO2e/MWh 4 6 8 5 3 2 7 1 0 0 0 0 0 0 0 0 0 FY1 5 FY1 Generation GWh 6 FY1 7 E reduction target(s).reduction when considering appropriateness the of any and emissions future type step important is an modelling, of scenario outcomes with together Developing of our understanding our broader emissions footprint, tolandfill. waste accommodation, and travel staff maintenance, general services, e.g. IT of supplier categories various and customers) fuel dual our value chain, which includes emissions from: (gas sold products to with associated emissions the detail, more in explored, we FY20 In m i s s FY1 i o n 8 s
I n t e n s i t y kgC FY1 9 O 2 e /MWh FY20 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Generation (GWh) NET CARBON POSITION FY15 TO FY20 FY15 POSITION CARBON NET
Tonnes CO2e 1,000,000 1,200,000 800,000 400,000 600,000 200,000 0 FY15 Emissions fromgeneration andgassales FY16 of just over one million tonnes. million one over of just complianceETS obligations, we had a surplus our meeting after of FY20, At end the ETS. the under obligations our us tomeet enable and projects forestry Zealand New different support that place in We have contracts ten 2010. since forests carbon in has invested Mercury (ETS) TradingEmissions Scheme Zealand’s New in participant active an As OUR CARBON NET POSITION FY17 FY18 Net carbonposition(tonnes) FY19 FY20
35 MERCURY ANNUAL REPORT 2020 Living Energy Freedom MENU geothermal well drilling programme. programme. drilling well geothermal our to while contributing his and growth of Andrew Marsh story the to life, as an example that touches on all focus areas, here we tell To this Development. and bring Capability and Wellbeing, and Safety Teams, Performance High are areas pillar focus People Mercury’s FOCUS OUR exciting time to start my Mercury career.” my Mercury tostart time exciting an and space, energy renewable the in teeth my tocut time ideal an was It development. under was Ngātamariki and completed been recently had stations geothermal Pūrua Awa Ngā and Andrew. “Kawerau says time for of geothermal growth generation,” exciting an 2010, in during engineer as an Power River Mighty then what was joined “I his career. builds as he goals people Mercury’s breathes and lives Marsh Andrew Manager Well Services outcomes: business important deliver tosafely his team leading Taking and ownership, developing capability JOURNEY.LEADERSHIP LIVING THE 4. PEOPLE. Manager, Wu “Andrew’s says: Khoo, Manager. Technical Geothermal Resources Well Services appointed 2018In was Andrew direction.” and purpose of asense providing and needs people’s of understanding importance tothe in keyed Ialso of my career stretch this “During Andrew. says successful,” tobe order in leader its from what needs ateam me taught particular in and at Mercury path leadership my on me started it because chance, the at jumped “I team. Engineering a Process tolead engineers two 2012, in role recruiting management formal his first on took Andrew a team.” as quickly, and both decisions to make crucial able are you that imperative “It’s says. Andrew of $200,000-$300,000 rate at the aday,” spending be can you because compressed, in geothermal the sphere is complex and making Andrew. “Decision with resonated development meetings and feedback the at regular areas identified growth were These making.” decision risk-taking and commercial knowledge and his approach to his develop us tohelp by move a deliberate was Manager toWell Services appointment
36 MERCURY ANNUAL REPORT 2020 Living Energy Freedom MENU SUMMARY. PILLAR • • RISKS KEY and productivity. performance of levels highest the todeliver of work nature changing tothe toadapt people our has that enabled organisation A Zero Harm STRATEGIC GOALS: LONG-TERM business. toour important are who people the of all wellbeing mental and physical the on tofocus continues that We organisation aZero are Harm towork. place attractive as an viewed are and performance and of productivity levels highest the todeliver order in work of nature changing tothe respond and tounderstand people We our have enabled STRATEGIC MID-TERM GOALS: • • • STORYPILLAR FOCUS AREAS talent. growing our retain Failing and todevelop customer or public. the a acontractor, staff, toour injury serious or afatality causes that occurring An incident High Teams Performance &wellbeing Safety & development Capability
framework helps to build more effective effective more to build helps framework 2018, HPT in the toMercury Introduced Teams’Performance framework. (HPT) ‘High our on to draw able was Andrew,for he teamcontracting on field. the Fortunately a with along business, areas of the other in with towork of ateam specialists had he tohim, directly reporting as ateam well As toeight.” two from up team the establishment of bench-strengths by building the toaccelerate Ihad responsibility, more as having as well because me, for growth of period intense an tobe out turned “This project,” says. Andrew adrilling leading with assigned was “I tested. areas were Manager role long before his development Well Services the in been hadn’t Andrew thought and experience in the wider team.” wider the in experience and thought of diversity the on as drawing as well experts of geology, and reservoir drilling engineering input the utilising multi-disciplinary, more tobe to adjust needed we that clear was a drilling project“With on horizon, the it Andrew. says strengths,” its showed really framework HPT the where was timeframes while managing large and budgets short todeliver project the on pressure “The purpose. and mission our and goals team on to deliver together better towork teams support tools HPT priorities, and purpose their on aligned be and conflict embrace trust, tobuild teams dynamics and environment. By helping composition, team addressing by teams 87 91 team stayed on track. on stayed team the toensure rules ground meeting basic set and better other each to know get members team let second The table. tothe bring could member team into what each delved and session styles exploredfirst communication “The Katy. says rules,” ground basic set and qualities and strengths team existing out todraw sessions HPT three on settled “We results. better toachieve framework HPT the use teams tohelp as away and involved for those as both a development opportunity internally trained are coaches Scoullar. HPT coaches,HPT Communications Manager Katy of our of one guidance the on drew Andrew EACH OTHER. EACH FROM LEARN AND IT NEED THEY WHEN HELP FOR ASK THEY TEAM, SAY THEIR THAT PEOPLE OF WITHIN ASPIRATIONS. CAREER THEIR IN INTEREST AGENUINE SHOWN MANAGEMENT, IN SOMEONE OR HAS SAY MANAGER, THAT PEOPLE OF THEIR PEOPLE. ITS OF & SAFETY HEALTH TO THE COMMITTED IS THAT AGREE MERCURY PEOPLE OF 70 % % %
37 MERCURY ANNUAL REPORT 2020 Living Energy Freedom MENU OUR SKILLS PLEDGE In 2019, the Prime Minister’s Business Advisory Council set CREATING VALUE a challenge to organisations to sign up for the Aotearoa THROUGH OUR New Zealand Skills Pledge. We have committed to the pledge MENU and we aim to offer our people the opportunity to be trained PEOPLE. and to learn new skills needed to make their contribution to the future of work. We pledge to: • publicly disclose our investment in on-the-job training “At the third, Andrew presented to the team, Importantly, there was clarity around roles: the and reskilling hours annually outlining his expectations and preparing contractor focussed on how to run the site, them for potential high-pressure situations Mercury looked after the safety framework, • double the number of on-the-job training and reskilling
COMMERCIAL CUSTOMER involving sometimes multi-million-dollar compliance and safety-in-design. hours we provide by 2025 y F ree d om decisions. We workshopped scenarios which The drilling project saw the completion of two Our focus during FY20 has been on increasing training hours served to clarify expectations of the team and wells at Kawerau and a third well at Rotokawa. in development programmes and e.learning, particularly their various roles.” targeting capabilities required to build a future-ready Even with all the planning, there were sustainable workforce. L i v ing E nerg “Adopting HPT principles led us to discover challenges. Andrew and his team had to PEOPLE PARTNERSHIPS that while individually we might not have had respond to a nearly two-week delay at TRAINING AREA TRAINING HOURS TRAINING HOURS the ability to fulfil a drilling project, collectively Kawerau when a failed drill string became IN FY19 IN FY20 we did,” says Andrew. KAITIAKITANGA stuck two kilometres down the well. Capability development 4,205 4,318 “HPT allows everyone to state their Operations ultimately had to cease short sometimes divergent positions, free of of the final depth target. Health & safety 5,920 6,919 constraint or of fear of others’ opinions, Business compliance 861 1,196 Andrew’s professional journey with Mercury Overall the drilling project had highly leading to open and frank discussions and a successful outcomes, with the completion of integrates thinking and delivers shared value united commitment to the best outcome. across other Mercury pillars. For example: the wells exceeding capacity expectations. “This was hugely beneficial for both internal And while one well went over budget due to • PARTNERSHIPS – working closely and external relationships, the strength of the drill string issue, it helped delineate the and collaboratively with contractors which tends to play out in key areas like health, southern area of the Kawerau steamfield, LOOKING FORWARD and Iwi partners supports our growing safety and wellbeing, which is an ongoing area providing critical information for future We recognise that we are in an environment of understanding of managing geothermal of focus for Mercury,” says Andrew. planning. resources (Industry & research). change and uncertainty that will affect many of “Early on in the project, we experienced “I feel fortunate to be having my leadership • KAITIAKITANGA – being aware of our our people directly or indirectly. Lessons from the
a small number of safety issues in quick journey at Mercury, supported by those REPORT 2020 ANNUAL MERCURY responsibilities to the environment and COVID-19 lockdown will guide the evolution of our succession – an ankle roll, then a finger break. around me and by frameworks like HPT. I to others helps secure the long-term It was evident we had to tackle these incidents don’t feel I would have had such useful tools approach to flexible working arrangements and sustainability (Natural resources) and proactively and the excellent relationship with at my disposal or had my development areas accelerate our digital capability. Wellbeing and viability of our geothermal assets (Assets). our contractor, supported by HPT principles, identified and addressed so head-on by any safety is an area we will continue to focus on, with • COMMERCIAL – success through the meant we could work more effectively to find other employer,” Andrew says. face-to-face and online training for all our people project team’s operational excellence focus a solution and turn this safety blip around,” offered on an ongoing basis. We will continue to contributes to our overall geothermal Andrew said. generation of 2,600GWh per annum leverage our High Performance Teams framework (Generation development). and Our Attitudes (Share & connect, Commit CLICK HERE to find out how & own it, Curious & original), to further improve 38 geothermal energy is made. cross-functional collaboration and continue to lift engagement. of to work build the underway Zealand’s New largest wind farm, Turitea. Development and To Sustainable Growth. bring this here to life, we tell story the Generation Excellence, Operational are areas Pillar focus Commercial Mercury’s FOCUS OUR across Mercury. across and team the within strengths shown and project construction this has tested pandemic of this impact tothe Responding pandemic. COVID-19 to the related impacts unforeseen and unprecedented saw year financial the of half second the tosay that fair it’s but case, business into is the baked change for possibility the For investment, along-term wind farm. Zealand’s largest New be to create what will build 60-turbine full tothe turbines 33 initial the toextend decision of the announcement November’s and October, in construction of start and ground-breaking the included celebrated year. we this Highlights milestones at Turitea key farm some wind passed Our WINDS. SHIFTING DEALING WITH 5. COMMERCIAL. growth expectations had tapered off,” tapered had expectations growth demand. market “All flattened had Crisis Financial Global the granted, were farm wind Turitea the for consents the time the by But there. farm wind a build would we resolved, was this that, once anticipated was it and process, consenting of Inquiry Board protracted and a complex at Turitea site the undergoing time was that company. At the for of layer growth next the toadvance was his remit and stations company was building geothermal power 2009, in the Mercury joined Dennis When ambiguity. with towork is well-equipped development, Turitea of the Director Project and Manager Dennis Radich, Generation Development
full circle back to Turitea as my number one to Turitea back one circle full as my number come had my role level Atpath. apersonal growth toMercury’s difference a meaningful to make opportunity a real identified had “We me. for and company the for outlook the in difference “made ahuge Dennis, says project, the toapprove decision Board’s The 2018. November in Board toour case a business taking before process atender ran and farm awind building around analysis the revisited improving economics in wind generation, Years identified mid-2017 team In the passed. toimprove. economics on building new and generation waited for the pause hit company The Dennis. remembers
39 MERCURY ANNUAL REPORT 2020 Living Energy Freedom MENU PILLAR SUMMARY. MENU priority, although my original remit, which “Renewable energy projects are about the focussed on the commercial side, had now very long term, and we believe the business expanded significantly to include leading the case is sound for the completion of the physical infrastructure build.” Turitea wind farm to support New Zealand PILLAR STORY FOCUS AREA The first 33 turbines were announced in demand well into the future.” • Generation development March 2019, followed quickly with a further As construction takes place, some flexibility is announcement of the remaining 27 turbines necessary. in November that year. “Being prepared to change plans is a key OTHER FOCUS AREAS “First-mover advantage is important, and we part of managing real life in a large, complex • Operational excellence ensured we were in a position to move quickly project. Limitations on port capacity at Napier • Sustainable growth enough to announce that we were going at the time, and a couple of pinch points
ahead with the full 60 turbines. on the transport route for the 55m turbine F reedom L iving E nergy “The outlook for the wholesale market had blades, meant we went to the other side of STRATEGIC GOALS: MID-TERM lifted dramatically and that supported more the North Island to Port Taranaki for blade We deliver EBITDAF growth and maintain investment.” import.” an appropriate average for stay-in-business The decision to proceed with the full This required a new route up the range at CAPEX investment, while operating within 60-turbine wind farm was based on Turitea that wasn’t previously contemplated. agreed risk parameters. comprehensive analysis of the market, the What nobody could anticipate was COVID-19 STRATEGIC GOALS: LONG-TERM cost to build, and other variables. and its profound impact on individuals, Leading our sector in terms of “The most measurable part is cost – being communities and businesses. Major financial performance and shareholder able to model capital cost and operating construction projects like the Turitea wind returns, earning at least our cost of capital. cost of the wind farm,” Dennis explains. farm did not escape its impact. “For a renewable asset, with very close to “From January to February there was an free fuel, the lion’s share of the outgoing is evolving situation internationally,” says Dennis. KEY RISKS in the capital cost at the start. You need to “We were aware that the coronavirus might • An incident occurring that causes a be confident that your 25-year forecasts 60 at least disrupt the supply chain with key fatality or serious injury to our staff, a are appropriate to justify that upfront
components coming from China, Italy and REPORT 2020 ANNUAL MERCURY contractor, a customer or the public. TURBINE WIND FARM commitment." Indonesia. Then we saw the global spread • Supply chain disruptions that delay Unknown risks, such as market demand of the threat, something that none of us deliveries and impact construction and future electricity prices, were modelled. had seen before or could reasonably have timelines. Uncertainty around the future of the expected.” * aluminium smelter at Tiwai Point, that uses During the Alert Level 4 lockdown, Mercury $465M around 13% of all electricity produced in this and its contractors suspended construction country, was also considered as part of the work as required by the Government’s INFRASTRUCTURE business case but ultimately, “in the context COVID-19 directions. When the country of a 25-year investment decision, Tiwai is a PROJECT
returned to Alert Level 3, the site reopened. 40 relatively short-term factor,” says Dennis. * excludes capitalised interest CREATING VALUE THROUGH WHEN THE WINDS OF MENU COMMERCIAL. CHANGE BLOW, SOME PEOPLE BUILD WALLS, OTHERS BUILD WIND COMMERCIAL CUSTOMER MILLS. F reedom L iving E nergy
PEOPLE PARTNERSHIPS
KAITIAKITANGA
Our Turitea wind farm project integrates “Getting the opportunity to remobilise was “We never intended to stop with just the LOOKING FORWARD thinking and delivers shared value across extremely welcome but demobilisation and Turitea wind farm,” says Dennis. “This wind other Mercury pillars. For example: remobilisation is not costless and in a very farm is the first important step in building Operational efficiency and effectiveness will be a key focus, recognising a challenging economic • PEOPLE – this large project embedded simple sense it extends the timeline of the Mercury’s wind generation portfolio. The high standards of Safety & wellbeing, and project. infrastructure that we’re putting in place environment, likely volatility in wholesale markets benefitted from Capability & development “This is a strong reminder that despite the around transmission and grid connection for and competitor repositioning ahead of the embraced by team members. best laid plans, there are plenty of things this wind farm is sized to also facilitate the signalled closure of the Tiwai Point aluminium Puketoi wind farm, further to the east. • PARTNERSHIPS – relationships with outside your control. smelter. An internal team has been established to Vestas, the world’s largest supplier of wind “COVID-19 remains an ongoing situation we’re “We have laid the groundwork to build consider efficiency initiatives. turbines, to deliver and maintain the wind adapting to, but what we do know is that another wind farm at Puketoi at the REPORT 2020 ANNUAL MERCURY farm; and Palmerston North City Council to Turitea will be built. It will be a great asset for appropriate commercially motivated time and Growth will be delivered by bringing generation to ensure the safe delivery of the project within Mercury and for New Zealand’s renewable it has an even better quality wind resource the grid from our Turitea wind farm. Completion the council-owned Turitea Reserve. generation,” says Dennis. than Turitea.” of the 33 northern turbines is expected in the final • KAITIAKITANGA – close engagement with And the team have their sights set beyond There is an ancient Chinese proverb: “When quarter of FY21, and the 27 southern turbines in tangata whenua to ensure the development the Turitea wind farm. the winds of change blow, some people build the second quarter of FY22. activities are undertaken in accordance with walls, others build wind mills”. local tikanga. Our capital management approach ensures we retain the flexibility to be able to take advantage of CLICK HERE to watch how we plan to build opportunities that may present themselves. 41 the largest wind farm in New Zealand. from our retail energy sales operations. dynamics of our generation operations as distinct so that you can more clearly financial the see This year, we have amended our segment reporting our auditor’s and our financial report statements. June 2020 compared prior with years, as well as financial the for yearperformance theend to of results. Here we provide on our commentary our decisions and our play actions in out financial thinking, integrated our how explains section This IN NUMBERS. IN FREEDOM ENERGY
42 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU the southern section following suit in spring FY22. spring in suit following section southern the with FY21, autumn in completed be to expected is farm wind the of section northern The million. $465 to project the for spend committed total taking farm, Turitea wind our of section southern the building to committed We also signalled. as levels normalised FY19 with line in were at$190m FY20 in costs Operating costs. to approach focussed and disciplined our We continued have year. $7/MWh by the increase 8.8% or during yields average saw segment industrial and commercial the of Repricing segments. all across challenged remained which margins, pressured FY20 during prices spot elevated However, period. prior the over 3.2% $4/MWh or increased yields market mass Average fall. losses and acquisitions customer both saw numbers, customer to opposed as loyalty, and value customer on focus Our year. the during completed also was campaign drilling Athree-well Pūrua. Awa Ngā and Kawerau atboth outages maintenance two-yearly of back the year, off the at2,615GWh for down slightly was generation Geothermal year. of time the for average long-term its below 100GWh almost year Taupō the Lake saw close and summer/autumn months drier normally the of ahead summer of start atthe full nearly to rise Taupō Lake saw levels period against our long-term management average. Prudent portfolio during the 300GWh approximately down generation hydro with September, from dry acutely was catchment Waikato the across year, weather prior the to Similar May. early by resumed had this however halted, temporarily was farm Turitea wind our at Construction staff. and customers to impact minimal with undertaken be could this meant platform digital its in investment company’s the lockdown, during home from work to required were staff office-based While April. and March through lockdown nationwide the during continuing activity generation all with service essential an as operating continued we as businesses, many to compared modest were far so Mercury on COVID-19 of impacts The 2019, favourable. million $8 is February it in business metering company’s the of sale the for normalised when million, $12 down is FY20 for COVID-19. to EBITDAF due While lockdown anational and conditions drought prolonged of face the in FY20 in performance asolid produced Mercury COMMENTARY. FINANCIAL
$M 6 6 6 660 6 7 7 7 15.8 12 DIVIDEND ORDINARY FULL YEAR DIVIDEND GROWTH OFORDINARY YEAR CONSECUTIVE industrial sales, up 3.2% and 8.8% respectively. 8.8% respectively. and 3.2% up sales, industrial and commercial and market mass both across acquisitions. Average energy yields increased Farmsource and targeted customer contract the renewing not contracting, industrial and to increasethe customer portfolio commercial in decisions Taupō Lake of levels, management good of aconsequence was performance portfolio key. Astrong been has management portfolio and lake good that meant catchment the Waikato into inflows Lower resulting in 300GWh less hydro production. drought, the by affected year previous the from $15m down was million $652 of Margin Energy MARGIN ENERGY 0 0 4 8 4 2 2 0 0 0 0 0 0 0 FY16 TH FY17 E CPS n e r g y
M FY18 a r g i n FY19 FY20
$M 200 205 210 195 215 1 185 9 more material through time. through material more become to forecast is associates from earnings because included been have These FY19. over an increase of million in$18 million FY20, $17 Tuaropaki Power Company), which contributed via Mokai, and (Tilt Renewables associates in investments group’s the from income accounted equity includes now income Other FY19. in million $15 2019, contributed which February in sold was that business metering its Metrix, without year full first its had group the as year previous the on million $6 down was million $32 of year the for income net Other OTHER INCOME and focussed approach to its core activities. disciplined Group’s the evidence to continues This Metrix. of sale the and changes (IFRS) Standards Reporting Financial International for normalising arow, after in year aseventh for flat broadly costs operating its held Group The OPERATING COSTS 0 FY16 FY17 O p e r a t i n g
FY18 C os t s FY19 FY20
$M 4 5 440 5 4 5 5 5 (EBITDAF) EARNINGS OPERATING $494 and the sale of Metrix in February 2019. February in Metrix of sale the and hydrology lower of 300GWh approximately of back the year, off previous the from million $12 fell $494 of million EBITDAF company’s The Metrix. of sale the and conditions hydro drier given solid were earnings operating FY20 (EBITDAF) OPERATING EARNINGS 8 0 8 6 4 6 2 0 0 0 0 0 0 0 FY16 O p e FY17 r a t i n g
E M a r FY18 n i n g s
( E B I FY19 T
D A F ) FY20
43 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU Cents per share BUSINESS CAPEX OF STAY-IN- AFTER TAX EARNINGS UNDERLYING PROFIT $114 $164 $207 2 lower interest and tax charges more than offsetting the impacts of lower hydrology. lower of impacts the offsetting than more charges tax and interest lower to due primarily million, up $27 was tax after profit net group’s the sale, on gain this for Normalising Metrix. business, smart-metering company’s the of sale the from million $177 by benefitted which million, $357 of record year’s previous the than lower was of $207 million year the for profit Mercury's PROFIT FOR YEAR THE 2 1 1 0 0 0 5 5 5 FY16 Interim FY17
M Distributions M Final M FY18 Special FY19 Buyback FY20
$M 200 300 250 150 50 100 consecutive year of ordinary dividend growth. dividend ordinary of year consecutive 12th 2019, in our 2%, or marking CPS, 15.5 from up CPS, 15.8 to dividend ordinary full-year the brings This declared. been has dividend final (CPS) 9.4 of share per cents dividend ordinary imputed afully time, over average on Flow 70% of 85% to ratio Free of Cash pay-out a targeting policy, dividend our with line In opportunities. potential other and farm Turitea wind the of development the to relation in growth and liquidity for flexibility sheet balance provides This million. $79 of equivalents cash and cash and $525 of million headroom debt available has and stock treasury as shares 39 million holds Mercury BBB+. of rating credit Global S&P our support to 3.0x 2.0x of to debt/EBITDAF range credit target Mercury’s of end strong atthe remains however ratio gearing The date. to advanced million $184 with farm, Turitea wind the of construction to relation in expenditure capital the to due year previous the on marginally up is EBITDAF debt/ 2.0 of times level gearing Mercury's AND DIVIDENDS CAPITAL STRUCTURE 0 FY16 FY17 Stay-in-business Capital Ex FY18 p e n Growth d i t u
r e FY19 FY20
$M 2 1 approach to cost. management, customer value and a disciplined company’s continued focus on careful portfolio the year, reflecting the for million $3 by earningsUnderlying tax after increased financial instruments. derivative of value fair the in changes any and tax), impairments before profit of million $10 and/or infrequently occurring events (exceeding one-off removing after earnings of comparison and assessment an make to stakeholders our enable to provided is earnings Underlying UNDERLYING EARNINGS 1 0 0 5 5 0 0 0 0 0 FY16 Underlying EarningsAfterTax FY17 FY18 FY19 FY20 B taxes. and interest of costs cash the and sale its with associated costs the with along gas, and electricity of sale the from flows cash represents activities operating by provided cash Net FLOWSCASH FROM OPERATING ACTIVITIES drilling campaigndrilling this year. athree-well completed also company The continued. station Karāpiro our at works refurbishment preliminary 2020 and July in Aratiatia 2020 and March in atWhakamaru completed were refurbishments hydro major The Turitea. to relation in was which of majority the CAPEX, growth of million $165 and (SIB) CAPEX stay-in-business $114m year, comprising the during (CAPEX) expenditure capital in million $279 invested company The year. last to compared higher million $53 was which debt, net in increase an to contributed also Turitea construction farm. Turitea wind company’s the in date to invested million $184 and falling, capital of cost assessed the to due assets, generation Mercury’s of revaluation upward $296 million a to due primarily million, $401 by increased company the of Total assets ALANCE SHEET ALANCE
44 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU Net profit for the year the for profit Net EBITDAF Total shareholders’ equity Total shareholders’ sheet Balance For the year ended 30 June 30 ended year For the TRENDS PERFORMANCE FINANCIAL RECORD.FINANCIAL TRACK Energy margin Energy Income statement Total assets Total assets Total liabilities Operating cash flow cash Operating flow Cash Ordinary dividends per share (cents) share per dividends Ordinary dividends declared special and Ordinary Free Flow Cash Special dividends per share (cents) share per dividends Special tax after earnings Underlying financialOther measures Stay-in-business expenditure capital expenditure capital Growth Total expenditure capital expenditure Capital Investing cash flow cash Investing Net debt (cents) share per earnings diluted and Basic Financing cash flow Gearing (net debt/net debt + equity, %) (net debt/net +equity, Gearing debt Debt/EBITDAF (x) 2 1 ($ million) 6,885 2020 3,739 3,146 15.21 1,149 23.5 (198) 15.8 494 356 652 (173) 207 242 279 164 215 165 2.0 114 – 6,484 26.23 3,537 2,947 1,096 2019 (335) 23.7 506 15.5 357 667 272 361 211 115 161 89 63 26 1.9 – 3,305 2,801 6,106 1,264 17.00 2018 (254) 566 234 258 730 370 207 27.7 (141) 198 15.1 118 112 1.9 6 – 3,308 2,689 5,997 1,038 13.37 2017 (298) 23.9 380 698 523 14.6 266 270 184 (98) 5.0 176 114 116 1.8 2 6,085 2,770 1,068 3,315 2016 (228) 24.4 660 283 14.3 493 252 224 160 (40) 11.6 152 4.0 2.0 59 72 13 Electricity generation (GWh) generation Electricity customers (‘000)Electricity GWh) (FPVV, customers to Sales 3. 2. 1. June 30 ended year For the Total recordable injury frequency rate (TRIFR) rate frequency injury Total recordable measures Operational Per 200,000 hours;includeson-site employees andcontractors. Adjusted for S&Ptreatment of subordinated debt issuedinFY2015. Financial results for theperiodsended30June2017 andearlierhave not beenrestated for newIFRSstandards. 1 ($ million) 3 6,327 2020 4,361 348 1.26 4,500 6,703 2019 0.72 373 4,477 2018 0.87 7,511 388 4,606 7,310 2017 1.05 392 6,462 4,397 2016 0.74 376
45 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU for the Audit of the Financial Statements Financial the of Audit the for standards are further described in the the in described further are standards those under responsibilities Our Board. Standards Assurance and Auditing Zealand New the by issued Zealand) (New Auditing on Standards International the and Standards Ethical and Professional the incorporate which Standards, Auditing General’s Auditor- the with accordance in audit our out We carried BASIS FOR OPINION International Financial Standards. Reporting and Standards Reporting Financial International to Equivalents Zealand New with accordance in ended then year the for consolidatedits and financial cash fl performance fi consolidated the respects, material all in fairly, present Group fi consolidated the opinion, our In information. explanatory other fi consolidated the to notes and date, that on ended then year fl cash consolidated the and equity in comprehensive income, consolidated statement of changes of statement consolidated statement, income consolidated 2020, the June at30 as sheet balance consolidated the comprise that Report, 49 Annual 69 to pages the of on Group fi consolidated the We audited have OPINION fi consolidated the of audit the out carry to &Young, Ernst of resources and staff the using Bunyan, Lloyd me, appointed has Auditor-General The Group’). ‘the as to referred (collectively entities controlled other and subsidiaries its and entity’) (‘the NZ Limited Mercury of auditor the is Auditor-General The FOR ENDED YEAR 30 2020 THE JUNE AUDIT THE ON REPORT FINANCIAL THE OF STATEMENTS TO SHAREHOLDERS THE MERCURY OF NZ LIMITED INDEPENDENT AUDITOR’SREPORT. nancial position of the Group as at 30 June 2020, and 2020, and June at30 as Group the of position nancial and policies accounting include that statements nancial nancial statements of the the of statements nancial nancial statements of the the of statements nancial Auditor’s Responsibilities Responsibilities Auditor’s ow statement for the the for statement ow section of our report. report. our of section nancial statements of the Group on his behalf. behalf. his on Group the of statements nancial ows ows Professional and Ethical Standard 1 Standard Ethical and Professional Auditor-General’s Auditing Standards, which incorporate the with accordance in Group the of We independent are opinion. our for a basis provide to appropriate and We believe that the audit evidence we have obtained is suf is obtained have we evidence audit the that We believe ful Zealand Auditing and Assurance Standards Board, and we have Independence Standards) (New Zealand) (New Standards) Independence Ethics for Assurance Practitioners (including International International (including Practitioners Assurance for Ethics including a review of the Group’s consolidated fi consolidated Group’s the of areview including assignments out carried have we audit, the to addition In requirements. interests in, the Group. Group. the in, interests or with, relationship no have we above, described assignments other the and audit the than Other Group. the of business the of activities trading of course ordinary the within terms normal fi our of employees and Partners Group. the of auditor as independence our impaired not have services These requirements. independence with compatible are which of all America, of States United the in services related tax and data survey market remuneration of provision engagement, agreed upon procedure engagements, a limited assurance 2019, December 31 ended six months the for statements fi lled our other ethical responsibilities in accordance with these these with accordance in responsibilities ethical other our lled
rm may deal with the Group on on Group the with deal may rm International Code of of Code International issued by the New New the by issued nancial nancial fi cient cient fi the of audit the for responsibilities We ful have matters. these on opinion aseparate provide not do we and thereon, opinion our fi consolidated the of audit our of context the in addressed were matters fi consolidated signi most of were judgement, professional our in that, matters those are matters audit Key AUDITKEY MATTERS consolidated financial statements. accompanying the on opinion audit our for basis the provide below, matters the address to performed procedures the including procedures, audit our of results The statements. fi consolidated the of misstatement material of risks the of assessment our to respond to designed procedures of performance the included audit our Accordingly, matters. these to relation in including report, audit the of section fi lled the responsibilities described in the the in described responsibilities the lled nancial statements as a whole, and in forming forming in and awhole, as statements nancial These period. current the of statements nancial fi cance in our audit of the the of audit our in cance nancial statements nancial nancial nancial Auditor’s Auditor’s
46 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU VALUATION OF GENERATION ASSETS Why significant the generation assets calculated as at 30 June 2020. June at30 as calculated assets generation the of value fair the to adjustment any make not did and event date balance apost as announcement this treated Group 19 the note in described As 2021. August in completed be to expected is Tiwai which close to intention its announced Tiwai of owners 2020 the 2020. 9July On June at 30 expectation the was which (“Tiwai”), smelter aluminium Tiwai Point Limited Smelters Aluminium Zealand New of operation ongoing the assuming calculated been has assets generation of value fair the that 7states note addition, In assumptions. rate discount and path price electricity the to related it as particularly valuation, their within COVID-19 of impacts the considered specialist valuation Group’s The be. otherwise might it than higher is subjectivity of degree the uncertainty economic of times in and subjective inherently are assets generation of valuation the in used assumptions Significant Group. the on pandemic 19 COVID the of impact the 1explains Note pandemic. COVID-19 the from resulting uncertainty economic and restrictions the by impacted significantly be, to continue to likely is and been, has awhole as economy Zealand New The statements. financial consolidated the 7of note in described as rate discount the and volumes, generation path, price electricity wholesale the include assets generation the of value fair signi most The model. fl cash adiscounted using assets generation of value fair the estimate to party external an engages Group The assets. total Group’s 81% the of approximately represent assets generation fi consolidated the 7of note in out 2020 set as June 30 at million $5,575 to revalued were assets Generation nancial These statements. are significant because the fi cant inputs used to calculate the the calculate to used inputs cant ow ow
• • • • • • • we: evidence audit appropriate sufficient obtaining In How our audit addressed the key audit matter audit key the addressed audit our How statement disclosures in notes 7 and 19. 7and notes in disclosures statement fi related the of adequacy the assessed accordance Group’s the with accounting and policy; in made were adjustments valuation the assessed specialist; valuation external Group’s the of assessed the professional competence and objectivity event; date balance post anon-adjusting as Tiwai closure announced the of treatment management’s assessed to: specialists valuation own our involved generation volumes. compared forecast generation volumes to historical assets. generation the of value fair the estimate to used model the to inputs significant the assessed and adopted methods valuation the understand to specialist valuation external Group’s the with met • • • electricity price path and discount rate applied. rate discount and path price electricity the including assumptions key on COVID-19 of impact the of assessment specialist’s valuation external Group’s the consider and rate; discount the of appropriateness the assess specialist; valuation external Group’s the by path price electricity wholesale the of determination to used process the consider nancial nancial VALUATION NON-STANDARD OF PRICE DERIVATIVE ELECTRICITY FINANCIAL INSTRUMENTS Why significant anticipated electricity price path. price electricity anticipated the to relating including be, otherwise might it than higher is subjectivity of degree the uncertainty economic of times in and subjective inherently are Derivatives Standard Non- of valuation the in used assumptions Significant statements. financial consolidated the of 14 note in disclosed amounts the within included are which Derivatives Non-Standard as derivatives these to We refer forecast. path price electricity wholesale internal Group’s the including assumptions valuation complex more of use the require and markets secondary or primary active in observable readily not are inputs valuation the which for derivatives price electricity certain include balances These fi consolidated the of 14 note in out set as million $254 total liabilities derivative and million $222 total assets derivative of value fair 2020, the June fi derivative using managed are which risks certain to it expose activities Group’s The nancial instruments. At 30 At 30 instruments. nancial nancial statements. nancial • • • • we: evidence audit appropriate sufficient obtaining In How our audit addressed the key audit matter audit key the addressed audit our How statement disclosures as described in note 14. note in described as disclosures statement fi related the of adequacy the assessed basis. sample a on terms contract the to data underlying agreed applied. path price electricity the on pandemic COVID-19 the of impact the assessing included This inputs. and assumptions key challenged specialists, valuation internal our with together specialists: valuation Our derivatives. Non-Standard the of value fair the estimate to used models the assess to specialists valuation our involved • • Generation Asset procedures detailed above. detailed procedures Asset Generation the performing in obtained estimates path price other to path price electricity compared the Group’s anticipated wholesale methodologies; and valuation the of appropriateness the evaluated nancial nancial
47 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU do so. do to but alternative realistic no have or operations, cease to or Group the liquidate to intend either Directors the unless accounting of basis concern going the using and concern going to related matters applicable, as disclosing, concern, agoing as continue to ability Group’s the assessing for entity, the of behalf on responsible, are directors the fi consolidated the preparing In form. electronic or printed in whether fi consolidated the of publication the for and error or fraud to due whether misstatement, material fi consolidated of preparation the enable to necessary is determine they as control internal such for responsible also are directors The 2013. Act Conduct Markets Financial the from arise responsibilities directors’ The Standards and International Financial Standards. Reporting Reporting Financial International to Equivalents Zealand fi consolidated the of presentation fair and preparation the for entity the of behalf on responsible are directors The STATEMENTS FINANCIAL THE DIRECTORS’ FOR RESPONSIBILITIES regard. this in report to We nothing have fact. that report to required are we information, other this of misstatement amaterial is there that conclude we performed, have we work the on If, based misstated. materially be to appears otherwise or audit the in obtained knowledge our or statements fi consolidated the with inconsistent materially is information other the whether consider so, doing in and, information other the read to is responsibility our statements, fi consolidated the of audit our with connection In assurance conclusion thereon. of form any express not do we and information other the cover fi consolidated the on opinion Our fi consolidated the than other information includes which Report, Annual the for entity the of behalf on responsible is Directors of Board The REPORT FINANCIAL STATEMENTS AND AUDITOR’S INFORMATION OTHER THAN INTHE nancial statements for the Group that comply with New New with comply that Group the for statements nancial nancial statements and auditor’s report. auditor’s and statements nancial nancial statements that are free from from free are that statements nancial nancial statements, statements, nancial nancial statements does not not does statements nancial nancial statements, statements, nancial nancial nancial nancial nancial
• • • • also: We audit. the throughout scepticism professional maintain and judgement professional exercise we Standards, Auditing Auditor-General’s the with accordance in audit an of part As fi consolidated these of in to expected be reasonably could they aggregate, the in or if, individually material considered are and error or fraud from arise can Misstatements exists. it when misstatement material a detect always will Standards Auditing Auditor-General’s the with accordance in conducted audit an that a guarantee not is but assurance, of level ahigh is assurance Reasonable 2001. Act Audit Public the from arise responsibilities Our opinion. our includes that report auditor’s an issue to and error, or fraud to due whether misstatement, material from free are fi consolidated the whether about assurance reasonable obtain to are objectives Our AUDIT FINANCIAL THE OF STATEMENTS FORAUDITOR’S RESPONSIBILITIES THE fl exists, we are required to draw attention in our auditor’s auditor’s our in attention draw to required are we exists, uncertainty a material that conclude we If concern. a going cast signi cast may that conditions or events to related exists uncertainty amaterial whether obtained, evidence audit the on based and, directors the by accounting of basis concern going the of use the of appropriateness the on Conclude management. by made disclosures related and estimates accounting of reasonableness the and used policies accounting of appropriateness the Evaluate control. internal Group’s the of effectiveness the on opinion an expressing of purpose the for not but circumstances, the in appropriate are that procedures audit design to order in audit the to relevant control internal of understanding an Obtain control. internal of override the or misrepresentations, omissions, intentional forgery, collusion, involve may fraud as error, from resulting one for than higher is fraud from resulting misstatement amaterial detecting not of risk The opinion. is suf is that evidence audit obtain and risks, those to responsive procedures audit perform and design error, or fraud to fi consolidated the of misstatement material of risks the assess and Identify uence the economic decisions of users taken on the basis basis the on taken users of decisions economic the uence fi cient and appropriate to provide a basis for our our for abasis provide to appropriate and cient fi cant doubt on the Group’s ability to continue as as continue to ability Group’s the on doubt cant nancial statements. nancial nancial statements, whether due due whether statements, nancial nancial statements as a whole awhole as statements nancial communication. bene interest public the outweigh to expected be reasonably would so doing of consequences adverse the because report our in communicated be not should matter a that determine we circumstances, rare extremely in when, or matter the about disclosure public precludes regulation or law unless report auditor’s our in matters these describe We matters. audit key the therefore are and period current fi consolidated the of audit the determine those matters that were of most signi most of were that matters those determine we directors, the with communicated matters From the applied. safeguards or threats eliminate to taken actions applicable, where and independence, our on bear to thought be reasonably may that matters other and relationships all them with communicate to and independence, regarding requirements ethical relevant with complied have we that astatement with directors the provide We also audit. our during identify we that control internal in signi and audit the of timing and scope planned the matters, other among regarding, directors the with We communicate • • • financial statements. consolidated the of publication electronic the over controls and security the evaluate not did we Also, statements. guarantee of complete accuracy consolidated the financial we do nor transaction, every examine We not did opinion. audit our for responsible solely remain We audit. Group the of performance and supervision direction, the for responsible are We statements. financial consolidated the on opinion an express to Group the within fi suf Obtain presentation. fair achieves that amanner in events and transactions underlying the represent statements disclosures, consolidated the and whether financial fi consolidated the of content and structure presentation, overall the Evaluate concern. agoing as continue to cease to Group the cause may conditions or events future However, report. auditor’s our of date the to up obtained evidence audit the on based are conclusions Our opinion. our modify to fi consolidated the in disclosures related the to report nancial information of the entities or business activities activities business or entities the of information nancial inadequate, are disclosures or, such if statements nancial fi cant fi audit fi cient appropriate audit evidence regarding the the regarding evidence audit appropriate cient ndings, including any including signi ndings, nancial statements, including the the including statements, nancial nancial statements of the the of statements nancial fi cant de fi ts of such such of ts fi cance in in cance fi ciencies ciencies 18 AUGUST 2020 18 AUGUST ZEALAND AUCKLAND, NEW AUDITOR-GENERAL THE OF BEHALF ON LLOYD BUNYAN // &YOUNG ERNST
48 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU EBITDAF Change in the fair value of financial instruments financial of value fair the in Change Gain on sale/impairments Total expenses Total expenses 1. 2020 June 30 ended year For the CONSOLIDATED INCOME STATEMENT. FINANCIAL STATEMENTS. Depreciation and amortisation Basic and diluted earnings per share (cents) share per earnings diluted and Basic parent the of owners to attributable year the for Profit expense Tax tax before Profit Net interest expense Total revenue The accompanying notes form an integral part of these financial statements. financial these of part integral an form notes accompanying The gain onsaleandimpairments. EBITDAF: Earnings before netinterest expense,tax expense,depreciation andamortisation, changeinthefair value of financialinstruments, 1 Note 7, 8 7, 14 5 2 2 2 2020 $M (1,274) 1,768 1,768 15.21 (214) 248 248 494 494 207 (54) (41) 22 22 – 2019 $M (1,495) 26.23 2,001 2,001 (204) 506 506 430 430 357 357 177 177 (75) (73) 26 26 For the year ended 30 June 2020 June 30 ended year For the CONSOLIDATED STATEMENT OFCOMPREHENSIVE INCOME. Movement in other reserves other in Movement reserve revaluation asset in Movement loss or profit to subsequently reclassified be not will that Items comprehensive income Other year the for Profit Tax effect Tax Movement in cash flow hedge reserve hedge flow cash in Movement loss or profit to subsequently reclassified be may that Items effect Tax reserves ventures’ joint and associates’ in movements of Share sheet balance to transferred reserve hedge flow cash in Movement Other comprehensive income for the year, net of taxation of year, net the for income comprehensive Other Total comprehensive income for the year attributable to owners of the parent the of owners to attributable year the for income Total comprehensive Note 14 14 9 2020 $M 285 285 209 209 207 416 (91) 6 8 – – 1
2019 $M 244 244 440 (118) (66) 357 32 83 (9) (1) (1) 1
49 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU Derivative financial instruments financial Derivative Receivables Total assets Total assets non-current Advances to joint operations joint to Advances Investment in and advances to associates to advances and in Investment Derivative financial instruments financial Derivative Inventories assets Contract Receivables Total assets current equivalents cash and Cash assets Current ASSETS Investments Total equity shareholders’ Reserves As at 30 June 2020 June 30 at As CONSOLIDATED SHEET. BALANCE Intangible assets Intangible Property, plant and equipment and plant Property, Non-current assets Treasury shares Issued capital EQUITY SHAREHOLDERS’ The accompanying notes form an integral part of these financial statements. financial these of part integral an form notes accompanying The Note 10 10 10 14 14 8 4 9 9 9 6 7 2020 $M 6,885 5,898 3,462 3,739 6,412 244 244 328 328 378 378 473 473 (101) 126 22 22 78 78 79 79 96 6 2 6 – 2019 $M 6,484 6,484 6,058 6,058 3,260 5,528 3,537 3,537 234 234 256 256 426 426 378 378 (101) 129 129 50 50 85 85 94 94 23 23 76 3 6 – Payables and accruals liabilities Current LIABILITIES Provisions Payables and accruals liabilities Non-current Total liabilities current Borrowings Derivative financial instruments financial Derivative 18 August 2020 August 18 // FLACKS CHAIR PRUE Borrowings instruments financial Derivative Taxation payable For and on behalf of the Board of Directors, who authorised the issue of the Financial Statements on 18 August 2020. 18 August on Statements Financial the of issue the authorised who Directors, of Board the of behalf For on and Net assets Total liabilities Total liabilities non-current Deferred tax 18 August 2020 August 18 // SMITH DIRECTORKEITH Note 10 10 14 14 12 12 11 5 5 2020 $M 3,739 1,202 3,146 2,271 446 446 845 845 875 875 280 138 138 116 116 33 33 74 74 12 12 2019 $M 2,947 3,537 2,126 2,126 1,158 1,158 208 208 692 692 821 821 541 541 216 216 45 45 59 59 19 19 9
50 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU Balance as at 30 June 2020 June 30 at as Balance Total comprehensive income for the year the for income Total comprehensive Dividend Other comprehensive incomeOther Net profit for the year the for profit Net ventures’ reserves joint and associates’ in movements of Share taxation of net reserve, hedge flow cash in Movement taxation of net reserve, revaluation asset in Movement AT AS 1JULY 2019 BALANCE 2019 June 30 at as Balance Total comprehensive income for the year the for income Total comprehensive Dividend year the for profit Net Other comprehensive incomeOther ventures’ reserves joint and associates’ in movements of Share Recycling of fair value losses in available available in losses value fair of Recycling for sale reserves sale for Movements in other reserves other in Movements For the year ended 30 June 2020 June 30 ended year For the CONSOLIDATED STATEMENT OFCHANGES INEQUITY. net of taxation of net reserve, hedge flow cash in Movement BALANCE AS AT AS 1JULY 2018 BALANCE net of taxation of net reserve, revaluation asset in Movement The accompanying notes form an integral part of these financial statements. financial these of part integral an form notes accompanying The
capital Issued Issued 378 378 378 378 378 378 378 378 $M – – – – – – – – – – – – – – – –
Retained Retained earnings 300 300 (208) (214) 300 300 344 344 206 206 292 207 207 357 357 164 164 (15) (13) $M 2 (1) (1) – – – – –
revaluation revaluation reserve 3,077 3,077 Asset Asset 3,077 3,077 3,281 2,901 204 204 204 204 205 205 176 176 $M 176 176 (1) – – – – – – – – –
Cash flow flow Cash reserve hedge hedge (118) (122) (85) (94) (118) (94) $M (24) (4) (4) (4) (9) – – – – – – – – –
reserves Other Other (100) (100) (114) (90) $M 15 15 10 10 10 10 14 14 (1) – – – – – – – – –
3,305 3,305 equity 3,537 3,537 3,739 Total Total (208) 440 209 (214) 205 (85) 207 207 357 357 176 176 416 $M 83 (4) (9) 8 1 –
Acquisition of investment of Acquisition Proceeds from the sale of metering business metering of sale the from Proceeds ventures joint and associates to repaid advances and from received Distributions Cash balance at the end of the year the of end the at balance Cash comprises: balance Cash 2020 June 30 ended year For the CONSOLIDATED CASHFLOW STATEMENT. Interest received Interest employees and suppliers to Payments Receipts from customers CASH FLOWS FROM OPERATING ACTIVITIES Acquisition of intangibles of Acquisition activities operating by provided cash Net Interest paid Net cash used in financing activities financing in used cash Net Dividends paid (Payment)/receipt of lease (liabilities)/incentives loans of Repayment loans from Proceeds CASH FLOWS FROM FINANCING ACTIVITIES Taxes paid Net cash (used)/received in investing activities Return/(lodgements) of prudential deposits Acquisition of property, plant and equipment and plant property, of Acquisition CASH FLOWS FROM INVESTING ACTIVITIES Cash and cash equivalents at the end of the year the of end the at equivalents cash and Cash year the of beginning atthe equivalents cash and Cash held equivalents cash (decrease)/increase and cash Net in 2020 $M (1,205) (330) (330) 1,697 (195) (214) 356 356 (173) (198) (60) (28) (77) 375 (15) 94 79 79 79 21 4 (4) 1 – –
2019 $M (1,478) (208) (335) 1,987 (166) 361 361 (70) (55) 270 (29) (93) (79) 30 30 89 89 (35) 63 63 94 94 94 5 1 9 5
51 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU receivables and payables that include GST invoiced. GST include that payables and receivables of exception the GST, of exclusive with stated are components all that so prepared been have statements financial Group The value. atfair measured are which assets generation and Placement USPrivate the instruments, financial of exception the with cost, historical of basis the on prepared are statements financial Group The International Financial Standards (“IFRS”). Reporting with comply also statements financial These entities. Standards (“NZ IFRS”) as appropriate for profit-oriented Reporting Financial International to equivalents Zealand New with comply They GAAP”). (“NZ Practice Accounting and in accordance New Zealand with Accepted Generally 2013 Act Conduct Markets Financial the with accordance in prepared been have statements financial Group The (2) BASIS PREPARATION OF shareholder. other any by or Government the by way any in guaranteed not are Group the of liabilities The Group. the over influence potential significant with it providing Government”), (“the Zealand New of Right in Queen the Majesty Her is NZ Limited Mercury of shareholder majority The interests in joint arrangements. and associates in investments its including subsidiaries, its and Company the comprise statements financial Group The Group”). (“the Group NZ Limited Mercury for are statements”) consolidatedThe financialstatements (“Group financial ASX. the on status listed exempt foreign with and Board Main NZX the on listed is and 2013, Act Conduct Markets Financial the under entity reporting 1993, FMC an Act Companies the under registered Zealand, New in incorporated is Company”) (“the NZ Limited Mercury (1) ENTITY REPORTING NOTE 1. ACCOUNTING POLICIES 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. • • • • • follows: as are judgements and estimates significant of areas The estimates. these from differ may results Actual expenses. and income liabilities, and assets of amounts reported the and policies of application the impact that estimates and judgements requires statements financial of preparation The andEstimates judgements reserve. translation currency foreign the to taken are differences Exchange rate. that approximating arate or date transaction atthe rate spot atthe translated are items expense and Revenue date. atbalance ruling rates exchange atthe translated are Dollar, Zealand New the not is currency functional whose entities of liabilities and assets The ($M). dollars million nearest the to rounded been has information financial stated, otherwise dollar. Unless States United the is currency functional their as subsidiaries direct its and Limited Power Geothermal Mighty and dollar Australian the is currency functional its as Limited Tilt in share Renewables accounted equity Mercury’s from apart currency, functional Group’s ($) the is which Dollars Zealand New in presented are statements financial These currency Functional and presentation lease liabilities (refer note 7) (refer note liabilities lease establishing of purpose the for rates borrowing Incremental 14) note and 13 note (refer instruments financial of Valuation 11) (refer note costs rehabilitation environmental and restoration for Provision 10) (refer note accruals revenue Retail 7) (refer note equipment and plant generation of Fair value been restated to reflect this change. this reflect to restated been have periods Prior forward. going significant more become to these anticipates it as revenue total within ventures joint and associates of earnings recognise to decided has Group The presentation. and classifications year current to conform to needed where restated been have comparatives Certain presented. years all to applied consistently been have policies and year the during made been have polices accounting to changes No and standards policies Accounting
52 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU effective as at 18th August 2020 and has made use of all available information at that time. atthat information available all of use made has 2020 and August at18th as effective is assessment This below. out set is sheet 2020 balance June 30 Mercury's on COVID-19 of impact the of assessment An future. the in Mercury and economy New Zealand the impact will COVID-19 how in uncertainty significant is there that acknowledged is It Mercury. on period reporting the during COVID-19 of impact the limited has this aresult, As levels. alert all throughout trading continue to able was Mercury Therefore service. essential an deemed was electricity of retailing and generation The border controls. for except lifted were restrictions remaining all and achieved 1was 2020, level 8June On level. ateach removed restrictions specific 2020, 13 May 2 on with level then 2020 and April 27 3on level to down back moved was level alert The period. four-week initial an for lockdown) 4(full to level alert its raised Government Zealand New 2020 the 25 March Wednesday on this, Following COVID-19. of spread and outbreak the of aresult as pandemic aglobal declared Organisation Health World 2020 the March 11 On COVID-19 Pandemic NOTE 1. ACCOUNTING (CONTINUED) POLICIES 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Income Tax Borrowings Provisions associates Investments and Right-of-use assets Equipment and Plant Property, Instruments Financial Derivative Assets Contract Receivables Cash Item Sheet Balance had a material impact on Mercury’s tax balances. tax Mercury’s on impact amaterial had measures relief tax No other tax expense. and balance tax deferred the in reflected been has legislation this of impact $8million The buildings. non-residential on depreciation tax reintroduced Act Measures) Urgent Assistance Social (Taxation and COVID-19Response The value. carrying USPP the in reflected is rate NZD exchange vUSD the on COVID-19 of impact Any date. atbalance rate exchange the NZD to using exchanged is USPP Group’s the and cost atamortised held are Borrowings provision. this affect not does COVID-19 wells. geothermal of restoration subsequent and abandonment the for is provision material Group’s The exist. impairment of indicators no levels, alert all throughout trading continue to able were and industry same the in are investments all 28.IAS Since NZ under method equity the via recognised are associates and investments Mercury’s of All recognised. previously been have leases these how impacted not has and immaterial is relief The properties. three on landlords from relief rent received Mercury COVID-19. from arising impacts incorporated has 2020 and June at30 out carried was assets generation of assessment value fair The PricewaterhouseCoopers. by valuation independent an following 2020 June at30 as revalued been have They value. atfair held are assets Generation COVID-19impacts. incorporate 3derivatives 2and Level for used techniques Valuation value. atfair recorded are Derivatives prices. electricity forward and rates exchange foreign rates, interest affected has COVID-19 assets. contract on COVID-19 from impact no was There relationship. customer the of life expected the over amortised are costs acquisition customer Capitalised receipts from customers less reliable. of trend historical the rendered which conditions macroeconomic the on COVID-19 of effect the for account to million $1 by loss impairment for allowance its increased has Mercury hand. on cash of value carrying the to impact No COVID-19 Assessment Note 5 Note 12 Note 11 Note 9 Note 7 Note 7 Note 13 Note 10 Note 10 Note N/A Note
53 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU Transactions between segments represent transfer charges by generation/wholesale to retail for the purchase of electricity. of purchase the for retail to generation/wholesale by charges transfer represent segments between Transactions Inter-segment segments. retail or generation/wholesale the to attributable directly not are which services support corporate Represents Segments Other only. purposes comparative 2019 –for March in sold was –which Metrix of services metering the Represents Metrix Zealand. New in customers market mass to equipment, solar including products, and services related energy, of sale with associated activity encompasses segment market retail The Retail segment. retail the and customers &industrial commercial both to electricity of sale the from revenue includes also It earnings. associates of share Group's the and activities development generation The generation/wholesale trading, electricity production, market associated segment encompasses the with electricity activity Generation/Wholesale AND SERVICES PRODUCTS OF TYPES accordingly. restated been has information comparative All purposes. comparative for separated been 2019 also –has March in sold was –which Metrix business metering owned previously company’s the methodology, reported newly this Under segments. (iii) and Other (ii) Retail (i) are Generation/Wholesale, segments reported newly the Accordingly, made. are decisions operating and is managed business the how reflect better to changed were segments operating company’s year, the the During characteristics. economic similar share they if only segments reportable into aggregated are segments Operating costs. and revenue operating central of allocation an of inclusive segment each by impairments and sale on gain instruments, financial of value fair the in change amortisation, and depreciation expense, tax expense, interest net before earnings represents EBITDAF Segment EBITDAF. of ameasure on segments operating the of performance the assesses who basis, amonthly atleast on decision-maker, operating chief the being Executive, Chief the to reported is segments operating these of each about information financial Discrete provided. services and products the of nature the on based by management identified are segments operating The IDENTIFICATION OF REPORTABLE SEGMENTS NOTE SEGMENT 2. REPORTING 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Net interest expense work in progress Interest to capitalised capital Interest income Interest expense interest Lease Interest expense Interest Segment EBITDAF Segment Total expenses Allocation or corporate overheads corporate or Allocation Employee compensation and benefits Other expensesOther Direct costs of other revenue other of costs Direct metering party third excluding sales, of cost direct Other Maintenance expenses Maintenance metering party Third Line charges Energy costs Energy Total revenue Other revenueOther Earnings of associates of Earnings Sales to customers and derivatives and customers to Sales Sales – electricity generation –electricity Sales YEAR ENDED 30 JUNE 2020 JUNE 30 ENDED YEAR SEGMENT RESULTS
Generation/ Wholesale (604) (832) 1,318 584 584 706 706 486 (34) (35) (36) (32) (77) $M (11) 10 10 (8) (4) (3) 18 18 4 – – –
Retail (308) (308) (744) 752 752 746 746 (25) (43) (32) $M (11) (2) (9) (6) 6 8 – – – – – – –
Metrix $M – – – – – – – – – – – – – – – – – – – – –
Segments Other Other (15) (50) (48) (7) 22 22 $M (3) 1 – – – – – – – – – – – – – –
segment Inter– (302) (302) 302 302 302 302 $M – – – – – – – – – – – – – – – – –
(1,274) 1,028 1,028 (385) Total 1,768 (610) 706 706 (40) 494 (54) (68) (82) (46) (56) (41) $M 16 16 (3) (2) 18 4 1 –
54 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU Prior year comparative figures have been amended to reflect the share of earnings of associates now recognised in total revenue. total in recognised now associates of earnings of share the reflect to amended been have figures comparative year Prior Net interest expense work in progress Interest to capitalised capital Interest income Interest expense interest Lease Third party metering party Third Segment EBITDAF Segment Total expenses Interest expense Interest Employee compensation and benefits revenue other of costs Direct Allocation or corporate overheads corporate or Allocation Other direct cost of sales, excluding excluding sales, of cost direct Other Other expensesOther expenses Maintenance metering party third Energy costs Energy Total revenue revenueOther Line charges Earnings of associates of Earnings Sales to customers and derivatives and customers to Sales Sales – electricity generation –electricity Sales the amount of $192,000 (2019: $192,000 of $264,000). amount the in services compliance UStax provided (2019: (US) also $33,000). $13,000 EY were data survey market remuneration of provision to relation in services (2019: $605,000). $606,000 Non-audit were engagements procedure upon agreed and assurance other and statements financial the of review and audit the for Auditor-General, the by appointed are EY, to who Fees payable Audit fees YEAR ENDED 30 JUNE 2019 JUNE 30 ENDED YEAR SEGMENT RESULTS (CONTINUED) 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS.
Generation/ Wholesale (1,014) 1,458 1,458 (795) 444 944 944 497 497 (34) (34) (35) (25) (77) $M (11) 16 16 (3) (3) (3) 1 – – – –
Retail (345) (298) (775) 807 807 817 817 (46) (32) (27) $M (11) 10 10 42 (8) (5) (3) – – – – – – –
Metrix (13) 33 33 33 $M 20 (5) (3) (2) (3) – – – – – – – – – – – – –
Segments Other Other (72) (14) (71) $M 22 22 (8) (2) 1 – – – – – – – – – – – – – –
segment Inter– (307) (291) 307 307 291 291 (16) $M 16 16 – – – – – – – – – – – – – – –
(1,495) 2,001 2,001 (802) 1,013 1,013 (422) Total 944 944 506 (86) (33) (33) (42) (75) (74) (71) 43 43 $M (2) (6) 1 1 – –
accordingly. This change had no impact on the prior period comparatives for underlying earnings. underlying for comparatives period prior the on impact no had change This accordingly. calculation its amended has and earnings underlying within this include to relevant is it that feels longer no Group The entities. associate of instruments financial of value fair in change the of share accounted equity its out backed previously has Group The 9. Note see details For further period. the during reversed was Tilt. in expense tax This investment Group's the of movements value fair unrealised to relation in periods prior in recognised was expense tax deferred million $10 a accounting, equity to moving to Prior transition. on gain purchase abargain as recognised being million $18 of difference the with assets, identifiable of share it’s of value fair the and investment Group’s the of cost the between acomparison required This associate. an in investment an as ("Tilt") Limited Tilt in Renewables investment its for accounting began Group the year the During at28%. adjustments taxable all on Tax applied been has Adjustments tax after expense Underlying tax earnings after Adjustments before tax expense tax before Adjustments Tax (credit)/expense Tax mature with the underlying hedged items. hedged underlying the with mature they when impact their align to order in earnings underlying from are excluded instruments financial of value fair the in Changes tax expense. of net all sale, on gain and instruments financial derivative of value fair the in change any items), impairments, material represents which tax, before profit of million $10 (exceeding events occurring and/or infrequently one-off removing after earnings of comparison and assessment an make to stakeholders enable to presented is tax after earnings Underlying NOTE 3. NON-STATUTORY –UNDERLYING MEASURE EARNINGS Impairments/Gain business in on sale metering instruments financial of value fair the in Change YEAR THE FOR PROFIT Tilt bargain purchase gain Tilt purchase bargain 2020 $M 207 164 (40) (43) (22) (18) (3) – 2019 $M (203) (177) (196) 357 (26) 161 161 7 –
55 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU (2019: deficit of $25 million). The imputation credit account is required to have a surplus balance at 31 March each year. each March 31 at balance surplus a to have required is account credit imputation million).The of $25 (2019: deficit million $30 of adeficit has account credit 2020 imputation (2019: June the at30 as $nil) available are credits imputation No Interim dividend for 2020 for dividend Interim 2019 for Final dividend 2019 for dividend Interim 2018 for Final dividend paid and declared Dividends Acquisition of treasury shares treasury of Acquisition Balance at the end of the year the of end the at Balance Balance at the beginning of the year the of beginning the at Balance Treasury shares winding up. winding on surplus any and dividends in equally share and rights voting equal have value, apar have not do shares 1,360,894,041). These (2019: 1,361,032,535 was basis, diluted and abasic year, both on the during issue on shares of number average weighted The paid. fully and issued (2019: shares 1,400,012,517) ordinary 1,400,012,517 by represented is Company the of capital share The NOTE 4. SHARE CAPITAL AND DISTRIBUTION 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. 2020 Number 2020 Number of shares (M) shares of 39 39 39 –
Cents per share per Cents 2020 $M 6.2 6.2 6.4 6.4 9.3 9.3 101 101 9.1 9.1 –
2019 Number 2019 Number of shares (M) shares of 2020 $M 214 39 39 127 39 87 – – –
2019 $M 2019 $M 208 124 101 101 84 – – – NOTE 5. TAXATION 5. NOTE on these revaluations is unlikely to crystallise in the foreseeable future under existing income tax legislation. tax income existing under future foreseeable the in crystallise to unlikely is revaluations these on liability tax deferred The tax. deferred in recognised is that created is difference temporary ataxable base, tax the to adjustment similar no with revalued, are assets Where purposes. tax income for account capital on held is equipment and plant Property, utilise the difference. temporary to profit taxable future be will there that extent the to recognised only is asset tax Adeferred liabilities. and assets Group’s the of bases accounting and tax the between arising differences temporary on method, liability the using full, in provided is tax Deferred Deferred Tax gains. value fair unrealised to 2019 relation in June at30 recognised liability tax deferred $10m its reversed therefore has and future foreseeable the in that dividends pay will Tilt unlikely it considers Group the appointee, director a having from gained influence additional the to due and development capital into earnings reinvest to looking be Tilt will it from that announcement an Following • • of: effect tax income the and provision year’s current the both includes statement income the to charged expense tax The expense tax Current Represented by: activities ordinary from profit to attributable Tax expense • • • • • Increase/(decrease) to: due expense tax in tax before profit at28% the on expense tax facie Prima tax before Profit Tax(i) expense Income Tax Deferred tax recognised in the income statement income the in recognised tax Deferred deductible temporary differences to the extent that it is probable that they will be utilised. be will they that probable is it that extent the to differences temporary deductible and goodwill; of recognition initial from arising those except differences, temporary taxable other differences buildings commercial of treatment tax in change gaincapital Tilt in Renewables investment on recognised tax deferred of reversal earnings paid tax ventures’ joint and associates’ of share 2020 $M 248 248 (90) (69) (41) 49 10 8 5 5 – 2019 $M (120) 430 (73) (81) (4) 51 – 8 – –
56 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU had a material impact on Mercury’s tax balances. tax Mercury’s on impact amaterial had measures relief tax No other balance. tax deferred the in reflected been has legislation this of impact million $8 The buildings. non-residential on depreciation tax reintroduced Act Measures) Urgent Assistance Social (Taxation and COVID-19Response The Balance as at 30 June 2020 June 30 at as Balance movementsOther comprehensive income other Charged/(credited) to Charged/(credited) to the income statement income the Charged/(credited) to Balance as at 1 July 2018 1July at as Balance (ii) Movement in deferred tax Balance as Charged/(credited) to the income statement income the Charged/(credited) to income comprehensive other Charged/(credited) to Balance as at 30 June 2019 June 30 at as Balance Other NOTE 5. TAXATION (CONTINUED) 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Employee benefits and provisions and benefits Employee Financial instruments Financial Property, plant and equipment and plant Property, liabilities and assets tax deferred (i) Recognised
at 1 July 2019 1July at
2020 $M equipment plant and plant and Assets Property, Property, (1,263) (1,214) (1,214) (1,155) 27 31 61 (85) 3 – (83) 34 34 $M 26 26
–
2019 $M instruments Assets Financial Financial 23 23 30 55 2 –
(14) 23 23 23 23 $M 32 32 27 (11) 15 Liabilities 5 2020 $M –
(1,263) (1,263) entitlements Employee Employee – – –
Liabilities 2019 $M $M 2 2 2 3 – – – – 1 (1,213) (1,213)
– – –
2020 $M Other (1,202) (1,263) $M (5) (2) 17 17 (1) 31 31 31 19 3 Net
27 31 3
2019 $M 2019 $M (1,202) (1,213) (1,158) (1,158) (1,158) (1,131) Total Net (91) (34) $M 23 23 30 49 (2) 2 7
Net book value book Net Accumulated depreciation Accumulated Disposals Cost or valuation or Cost 2020 June 30 at Balance value book net Closing year the for Depreciation charge movement revaluation Net Net revaluation movement revaluation Net Additions Transfers Additions value book net Opening 2020 JUNE 30 ENDED YEAR value book Net NOTE 7. PROPERTY, AND EQUIPMENT PLANT plant. operating repair and service to held are million) (2019: $23 million of $22 stores Consumable location. and condition final their to them bringing and inventories acquiring in incurred expenditure includes and basis average aweighted on determined is Cost NOTE 6. INVENTORIES Accumulated depreciation Accumulated year the for Depreciation charge Disposals Transfers value book net Opening 2019 JUNE 30 ENDED YEAR Cost or valuation or Cost 2019 June 30 at Balance value book net Closing
Generation assets assets Generation at fair value $M value fair at 5,347 5,347 5,347 5,347 5,347 5,347 5,575 5,575 5,215 5,575 5,575 (163) 250 250 (170) 296 296 101 101 30 30 16 16 (1) 1 – – – Meters at Meters at cost $M cost (45) (23) 48 48 23 23 (6) 3 – – – – – – – – – – – – – –
Other assets assets Other at cost $M cost at 125 125 (73) (67) 115 115 48 48 48 48 52 52 52 25 25 37 37 (11) (8) 52 (2) 7 – – – – – use assets Right-of- (10) 44 44 44 44 (12) 56 56 42 42 49 49 49 59 59 12 12 49 (5) (4) (1) – – – – – – progress at cost progress at cost Capital work in in work Capital (108) 259 259 (30) 231 231 231 231 231 231 80 80 80 80 80 58 58 53 53 $M 80 (1) – – – – – – – Total $M Total 5,634 5,634 5,528 5,528 5,528 5,528 5,370 5,370 5,898 5,898 5,977 (106) (186) 250 250 260 260 296 296 (181) (50) 139 139 (79) – – –
57 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU consequence of the revaluation, accumulated depreciation on these hydro and geothermal assets has been reset to nil. to reset been has assets geothermal and hydro these on depreciation accumulated revaluation, the of consequence 2019. in a assets As generation geothermal and hydro Group’s the across recognised increase revaluation $250m the to addition in is year. This current the in respectively $43m and $253m of assets generation geothermal and hydro Group’s the of value carrying the to increase an in 2020. resulted This June at30 as valuer, independent an PricewaterhouseCoopers, by methodology value present anet using revalued were consents) Act Management (except Resource atvaluation shown assets generation All CARRIED ATASSETS FAIR VALUE year. next of half second the in commence to anticipated is commissioning phased Its farm. wind Turitea its of construction ongoing Group’s the to due elevated is balance progress in work capital 2020, the June at30 As 12 respectively. note 2and note in disclosed is liability lease and interest 5.36% was (2019:5.26%). position lease Group’s financial of The statement the in recognised liabilities lease to applied rate borrowing incremental average weighted The exercised. be to certain reasonably are that options renewal lease all and terms lease existing for payments lease future of value present atthe liabilities lease and assets lease recognised has Group The term. lease current the over basis line astraight on depreciated are assets Lease expense. interest and obligation lease the of arepayment as recorded are payments Lease sheet. balance the on recognised are leases all 16, IFRS with line In agreements. lease under lessee a as assets underlying those use to right Group’s the represents and vehicles motor and property constitute assets Right-of-use impairments. and depreciation less atcost recorded are equipment and plant property, of items other All atcost. recorded are valuation recent most the to subsequent atvaluation stated equipment and plant property, to Additions asset. the of amount revalued the to restated is amount net the and asset the of amount carrying gross the against eliminated is revaluation the of date atthe depreciation accumulated Any reserve. revaluation asset the to transferred previously surplus any exceeds it where arises it period the in statement income the in recognised is equipment and plant property, of item individual an of revaluation on A deficit statement. income the in recognised is it case which in statement, income the in recognised value in decrease aprevious offsets it unless reserve revaluation asset the to directly transferred is equipment and plant property, of item individual an of revaluation on surplus Any depreciation. accumulated less value atfair measured is equipment and plant Generation basis. straight-line on a consent the of life the over depreciated are costs These benefits. economic future to rise give will they probable is it where asset anon-current as recognised and capitalised are consents resource obtaining in incurred Costs use. productive for ready is asset an as soon as capitalised be to cease Costs capitalised. also are generation, power from proceeds net the deducting after properly, functioning are assets the whether testing of Costs limits. materiality monetary and time certain meet these where rate, interest finance project specific Group’s atthe capitalised are aproject to attributable costs Financing overheads. fixed and variable of proportion appropriate an and labour direct associated construction, in used materials all of cost the includes progress, in work capital including Group, the by constructed equipment and plant property, of cost The use. intended their for necessary condition and location the to assets the bringing in incurred costs attributable directly other plus assets the acquire to given consideration the comprises purchased equipment and plant property, of cost The VALUES CARRYING ASSETS NOTE 7. PROPERTY, AND EQUIPMENT PLANT (CONTINUED) 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS.
Right of use assets use of Right Vehicles Other plant and equipment and plant Other hardwareComputer and software tangible • • assets: Generation Office fixture and fittings, including fit-out including fittings, and fixture Office Future wholesale electricity price path price electricity wholesale Future valuation is most sensitive to. sensitive most is valuation the that constant, inputs valuation other all keeping assumptions, to changes of impact valuation the outlines table following The values. asset comparative derive approach assumes 100% control and consequently a control premium should be applied if using valuation an equity technique to valuation flow cash discounted The conditions. consent generation to changes material no and horizon modelled the over sustained being supply fuel geothermal and hydro regime, regulatory market wholesale the to changes material events), no 19 –subsequent atTiwai (see note Point Limited Smelters Aluminium Zealand New of operation on-going 7.6%).to the assumed also valuation The 6.9% 6.5% and (2019: 7.2% between of 6,708 of rate (2019: p.a. GWh 6,703 volumes discount p.a.) apost-tax GWh and production p.a.), average net (2019: million p.a. $158 $161 of million expenditure (2019:MWh operational $75/MWh $106/MWh), and average $75/MWh $93/ and between of prices electricity wholesale including inputs unobservable of use make they as required judgement of element an is there cases all In rate. discount and assumptions life and capacity expenditure, capital and operational projected volumes, path, price electricity wholesale future the of forecast the include valuation the in used are that assumptions key The Operational expenditure rate Discount The annual depreciation rates are as follows: as are rates depreciation annual The lives. useful expected their over value residual estimated their to assets the down write to as so assets, evaluation and exploration and progress in work capital land, freehold than other equipment and plant property, all on basis astraight-line on provided is Depreciation Depreciation (2019: $1,937 million). $1,959 been have million would atcost, recognised been they had assets, generation revalued of amount carrying The Other generationOther Hydro and thermal generation thermal and Hydro Sensitivity +/- 0.5% +/- +/- 10% +/- +/- 10% +/- ($604) /$747 ($267) / $267 / ($267) $891 / ($898) / $891 2020 $M Valuation impact 5-50% 4-33% 2-50% 2-50% 5-33% 2-33% 1-33% 2020 ($235) $235 / $833 /($837) $833 ($531) /$641
2019 $M 5-50% 4-33% 2-50% 2-50% 5-33% 2-33% 1-33% 2019
58 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU Opening net book value book net Opening 2019 JUNE 30 ENDED YEAR NOTE 8. INTANGIBLE ASSETS 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Amortisation for the year the for Amortisation Disposals Transfers Additions Closing net book amount Cost AT 2019 JUNE 30 BALANCE are stated at cost less accumulated amortisation and any accumulated impairment losses. Rights, which have a finite life, are are life, afinite have which Rights, losses. impairment accumulated any and amortisation accumulated less atcost stated are programme development generation Group’s the further to acquired significant, most the are rights access land which of Rights, Rights impaired. be may asset intangible the that indication an is there when performed be only will testing impairment life, afinite have to deemed are assets 15 years). 2to these As (2019: between 15 years 2to between of lives useful estimated their over amortised are costs These use. to bring and acquire to incurred costs the of basis the on capitalised are licenses software computer Acquired Software value book Net Net book value book Net amortisation Accumulated Opening net book value book net Opening 2020 JUNE 30 ENDED YEAR Accumulated amortisation Accumulated Additions Transfers Surrendered Units Surrendered Cost AT 2020 JUNE 30 BALANCE C year the for Amortisation l osing net book amount book net osing Intangible Intangible software (106) (113) 138 138 149 149 (20) (22) (26) 55 55 36 36 36 36 36 36 $M 32 32 22 22 32 32 10 10 13 13 – –
Rights (14) 20 20 20 20 (16) 20 20 20 20 34 34 34 34 $M 18 18 18 18 (2) (1) 1 – – – – –
Emissions Emissions units 23 23 23 23 $M 23 23 23 23 23 23 16 16 23 23 (7) – 7 7 – – – – – –
progress Work in in Work (22) (10) $M 10 10 21 21 (2) 8 6 6 6 6 5 – 5 5 – – – –
Total 200 200 (122) (127) 212 212 (28) (23) (22) 101 101 85 85 85 85 85 85 28 28 29 29 $M 78 78 78 78 (7) – –
Hudson Ranch I Holdings LLC EnergySource Minerals LLC EnergySource LLC Pūrua Awa Ngā Rotokawa Tilt Renewables Limited Limited Holdings TPC Name of entity of Name The Group financialstatements includethe following: (JOINT AND OPERATIONS) VENTURES JOINT NOTE 9. AND ADVANCES INVESTMENT TO ASSOCIATES AND ARRANGEMENTS JOINT Share of earnings of Share Additions during the year the during Additions year the of beginning the at Balance are recognised when the contracts are settled. are contracts the when recognised are units emissions of purchase the for contracts Forward liability. the settle to intended units those of value carrying atthe recorded is liability the held, units of level the to Up incurred. is obligation the as liability acurrent as recognised are obligations Emissions surrendered. units the of cost average weighted the on based sheet, balance the in assets intangible to areduction and statement income the in expense an as recognised are obligations emissions their for compensation in creditors to surrendered are that units Emissions recognition. initial to subsequent revalued not are units Emissions assets. intangible as recorded are purchased, or allocated whether units, price). Emissions (purchase atcost recorded are units emissions (nil value). Purchased value nominal at recorded are scheme Emissions Reduce to Projects the under Government the by allocated been have that units Emissions Emissions and units emissions obligations impaired. be may asset the that indication an is there when arise only will (2019: 25 years).impairment 3to for years Testing 60 3to from range which rights, the of life the over amortised Balance at the end of the year the of end the at Balance Distributions received during the year reserves and income comprehensive other in movement of Share Electricity generation Electricity Mineral extraction Investment holding generation Electricity Steamfield operation and development generation Electricity Investment holding Principal activity Principal Joint venture Joint venture Joint venture Joint operation Joint operation Joint Associate Associate Type 2020 $M 230 230 328 328 Associates 76 76 (4) 18 8 64.80% 65.00% 25.00% 20.84% 75.00% 20.86% 19.96% 2019 $M 2020 Interest held 88 88 76 76 (9) (4) – 1 64.80% 65.00% 25.00% 20.84% 75.00% 20.86% 19.97% 2020 $M 2019 Joint ventures – – – – – – United States United United States United United States United New Zealand New New Zealand New Zealand New New Zealand New
2019 $M Country – – – – – –
59 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU NOTE 10. RECEIVABLES, PAYABLES AND ACCRUALS gains. value fair unrealised to 2019 relation in June at30 recognised liability tax deferred $10m its reversed therefore has and future foreseeable the in that dividends pay will Tilt unlikely it considers Group the appointee, director a having from gained influence additional the to due and development capital into earnings reinvest to looking be Tilt will it from that announcement an following Additionally, $18m. of gain purchase abargain recognise 2019 and 19 July of as value market its with line in assets net Tilt’s identifiable bring largely to is adjustment this of 2019. effect The December in 2subsidiary Tilt’s Snowtown of sale the from arising information the account into taken has Group the so, doing In reserves. and earnings of share its accounting equity when creates this differences resulting any for of account and assets Tilt, net identifiable of share its of value 2019, 19 fair July on the to investment its of cost the compare to required is Group NZ 28, IAS the applying In 2019. 19 July on value market its to investment the bringing period, the for recognised being $4m of loss value fair unrealised an in resulted has This date. that from associate an in investment an as investment its for accounted has and ventures joint and associated in ofIASInvestments NZ 28– context the in influence significant gained it that considers Group the Consequently, Tilt. of board the to director anon-independent as appointed was Executive Chief Group’s 2019 the 19 July On statement. income the through value atfair investment an as for accounted was investment this and directors of board its on representation have not did Group the 2018. time At in that (“Tilt”) 19.99% Limited initial Tilt an in Renewables stake purchased Group The million. US$3 to LLC amounting EnergySource to relating losses of share its recognise to yet has Group the Ventures, Joint and Associates in NZ 28 IAS –Investments under method equity the with compliance In venture. joint the in interest its LLC exceeds Source Energy in losses of share Mercury’s 16. note to refer receivables party related these of conditions (2019: and million). For $4 terms million $4 of Limited Holdings TPC associate its (2019: and million) $6 million $6 of amount the in partner venture joint Rotokawa its to advances outstanding had Group the year the of end At the (JOINT AND OPERATIONS) VENTURES JOINT (CONTINUED) NOTE 9. AND ADVANCES INVESTMENT TO ASSOCIATES AND ARRANGEMENTS JOINT 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Trade and receivables accruals RECEIVABLES Allowance for impairment loss Prepayments accruals and receivables trade Net past consumption history. Generation revenue is derived mostly from generation sales to the New Zealand wholesale market at at market wholesale Zealand New the to sales generation from mostly derived is revenue Generation history. consumption past customer’s the on based meter, unread each for consumption of estimate an involves date atbalance meters electricity and gas unread for accruals Revenue contracts. of aportfolio as treated therefore are and characteristics similar have that terms contract on are derivatives) (i.e. financial and physical both customers, to energy of year. Sales the over and month each cycle arolling on occurs customers market mass to sales of billing while basis, month acalendar on billed is customers industrial and commercial large with derivatives and to sales from Revenue basis. amonthly on invoiced typically are derivatives and customers to Sales 2020 $M 250 239 241 (2) 11
2019 $M
248 256 247 (1) 9 Expected loss rate loss Expected Amounts written off written Amounts year the for Charge year the of beginning atthe Balance follows: as were loss impairment for allowance the in Movements Loss allowance receivable –trade amount carrying Gross Balance at the end of the year the of end atthe Balance 2020: June at30 allowance loss the details table following the basis that On receivable. not are that amounts known significant any for adjusted period, the during losses credit historical corresponding the 2020and June 30 before period month a 12 over sales of profiles payment the on based are rates loss expected The due. past days on based grouped been have receivables trade losses, credit expected To the measure allowance for receivables. all trade loss expected lifetime a uses which losses credit expected measuring to approach 9simplified NZ IFRS the applies Company The Loss Credit Expected off. written were uncollectable deemed (2019: were million) $3 $2 million of year. Receivables the during recognised was (2019: $2 million) million $3 of charge allowance An receivable. the of terms original the to according due amounts collect to able be not will Group the that evidence objective is there when loss impairment for allowance an recognises Group The 16. note to refer receivables party related of conditions and For terms terms. day 30 on generally are and bearing non-interest are Trade receivables stations. the at generation metered actual reflecting basis month acalendar on Manager Clearing Market Wholesale the by invoiced is Revenue point. injection grid atthe price spot prevailing the Trade payables are non-interest bearing and are normally settled on 30 to 60 day terms. day 60 to 30 on settled normally are and bearing non-interest are Trade payables creditors Sundry Employee entitlements accruals and Trade payables and accruals Payables $M $M % 30 days past past days 30 More than than More due 4% 5 – 60 days past past days 60 More than than More 27% due – 1 90 days past past days 90 More than than More 2020 $M 2020 $M 59% 292 due 249 36 (2) 2 3 2 7 1 1
2019 $M 2019 $M Total
225 187 31 (3) 8 2 2 7 1 1
60 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU Discounting movement Discounting Current year the of end the at Balance year the during used Provisions effect) is recognised as an interest expense. interest an as recognised is effect) discount (the time of passage the from resulting provision in increase The reserves. revaluation in areduction and provisions in increase an as reported are year the during made estimates these in Changes settlement. of timing likely the and required, expenditure the of estimate best management's of value present the on based calculated is provision The utilised. been have resources geothermal which from areas of restoration subsequent and abandonment the for recognised been have Provisions Non-current NOTE 11. PROVISIONS expenses operating to Amortised Additions BalanceOpening assets Contract CONTRACT ASSETS incurred. when revenue against directly recognised are customers to given credits of treatment The years. two be to assumed customer, the astraight on amortised are and assets, contract customer as sheet balance the on recognised are customers, retaining or acquiring of commissions) (like costs Incremental Customer NOTE 10. RECEIVABLES, PAYABLES AND ACCRUALS (CONTINUED) contract 2020 June 30 ended year For the assets NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Balance at the beginning of the year the of beginning the at Balance Provisions made during the year the during made Provisions remainder between one and three years of the reporting period end. period reporting the of years three and one between remainder the and period reporting the of year one within amortised be to expected is million $1 balance, assets contract total the Of Closing balance ‑ line basis over the period which is consistent with the transfer of the benefit to to benefit the of transfer the with consistent is which period the over basis line 2020 $M 2020 $M 74 74 14 14 59 74 74 (1) (2) – 2 3 2 1
2019 $M 2019 $M 59 59 59 51 (3) 3 – – 6 3 3 2
Capital bonds Capital USPP –US$125m USPP Wholesale bonds Capital bonds Capital –US$45m USPP Wholesale bonds –US$30m USPP Wholesale/credit wrapper Deferred financing costs Lease liabilities Commercial paper programme Carrying value of loans of value Carrying adjustments Fair value Bank facilities Current NOTE BORROWINGS 12. Non-current 3.6% through to the first reset date of 11 July 2024.July 11 of date reset first the to 3.6% through of rate interest afixed have and earlier redeemed 2049 unless July in mature to due are (MCY020). bonds MCY020 bonds The subordinated unsecured, new of $300m issued and bonds MCY010 $300m existing the redeemed 2019 Mercury July 11 On &Poor’s. Standard by A2 rated is programme The investors. professional at targeted and unsubordinated and unsecured instruments, market money short-term are programme the under issued Notes facilities. bank undrawn and committed by backed fully is which programme Paper Commercial million a$200 has Group The 2021. December in matures currently million $250 of facilities bank 2024 March rolling in and matures 2022, $50m October in matures 2022, $100m August in matures million $100 2021, September in matures million $200 2021, June in matures million $100 facilities, loan million $800 the Of period. reporting the during facilities new of $300m executed Company The million). 2019: 2020 $500 (30 June June at30 as facilities loan bank unsecured and committed of million $800 has Group The NZD USD NZD NZD USD NZD USD NZD NZD denomination Borrowing currency NZD Jul–2019 Dec–2020 Feb–2020 Jul–2049 Dec–2025 Mar–2023 Dec–2022 Sep–2021 < 3months Maturity Maturity Various 6.90% 4.25% 8.21% 3.60% 4.60% 5.79% 4.35% Floating Floating Coupon Coupon Floating 2020 $M 1,291 1,291 300 300 200 200 446 446 845 845 302 302 163 163 68 68 63 63 39 39 59 59 26 26 75 75 (4) - - 2019 $M 1,233 1,233 300 300 305 305 692 541 541 199 199 163 163 43 39 39 69 69 59 59 26 31 – (1) –
61 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU contract amounts of foreign currency forward exchange contracts were $146 million (2019: million). $102 million $146 were contracts exchange forward currency foreign of amounts contract or principal the date At balance programme. expenditure committed its hedge to contracts exchange forward into enter to policy Group’s the is It operations. foreign in investments net and borrowings) (including liabilities and assets recognised services), maintenance and equipment capital of purchase the (including transactions commercial future from arises risk exchange Foreign Dollar. Yen, Euro, Yuan Australian Japanese and USDollar, primarily are risk this to rise giving currencies The currency. functional Group’s the than other acurrency in denominated transactions of aresult as risk exchange foreign to exposed is Group The Foreign exchange risk million). (2019: (2019: $1,495 $1,506 12 years), years million were 11 to up of terms remaining with contracts, sell and buy both including contracts, energy of value principal the date, At balance parties. the between settled price market spot the and price contract the between difference any with settled periodically are contracts energy The sold. and purchased are electricity of quantities specified future which at price afixed establish that contracts energy into enters Group The contracts –energy risk Price RISK (A) MARKET financial instruments. derivative and borrowings accruals, and payables advances, (not prepayments), accruals and receivables trade equivalents, cash and cash comprise instruments financial principal Group’s The business. Group’s the of course normal the in arise risks rate interest and liquidity exchange, foreign credit, price, to Exposure wealth. shareholder protecting of aim the with risks these manage proactively to seeks and markets financial of unpredictability the on focuses programme management risk overall Group’s The MANAGEMENT RISK FINANCIAL 13. NOTE equipment. transmission of alessee be to deemed also is and equipment office and vehicles motor &buildings, land use to right the for contracts lease various into entered has Group The Placement. Private US the of conditions and terms the or deed this of terms the of breach no been has There conditions. and terms Placement Private US the to apply also covenants and undertakings These Group. the to relation in ratios financial certain maintain to and indebtedness, its secure to assets its affecting or over interest asecurity exist to permit or create to not exceptions, certain to subject agreed, has Group the which in financiers bank its of favour in deed pledge anegative into entered has Group The deeds. these of terms the of breach no been has There covenants. financial certain maintain to and indebtedness, secure to assets its affecting or over interest asecurity exist to permit or create to not exceptions, certain to subject agreed, has Group The holders. the for trustee as acting Limited, Trust Group Guardian Zealand New the with Bonds Rate Floating Fixed and Senior NZD denominated its all for Trust Deeds Supplementary and Trust Deed aMaster into entered has Group The NOTE BORROWINGS 12. (CONTINUED) 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Sensitivity analysis is based on an assessment of the reasonably possible movements in forward price. forward in movements possible reasonably the of assessment an on based is analysis Sensitivity Price risk material. be could which time, over response market dynamic account into take not does analysis The equity. of components on other and profit tax post on Group the of exposures risk market relevant the in decreases or increases of impact potential the summarises following The analysis Sensitivity (2019: $2,095 million). million $1,440 was starts) forward (including outstanding swaps rate interest of amount principal contract the date, At balance exposure. this manage to options rate interest and swaps rate interest uses Group The rates. interest floating at terms fixed for borrows it that extent the to risk rate interest to exposure has Group The Interest rate risk Currency strengthens by 10% –Euro Dollar Zealand New 10% by increased price forward Electricity Group Currency weakens by 10% 10% by weakens Currency 10% by decreased price forward Electricity Currency strengthens by 10% –USD Dollar Zealand New rates over a one year period based on the average actual movements experienced over the prior 10 years. 10 prior the over experienced movements actual average the on based period year aone over rates exchange foreign in movements possible reasonably for allowing exposure, exchange foreign has Group the which for currencies significant most the against strengthening or weakening Dollar Zealand New the of impact the on based is analysis Sensitivity Foreign exchange risk Currency weakens by 10% by weakens Currency Currency weakens by 10% by weakens Currency Currency strengthens by 10% –Yuan Dollar Zealand New Currency strengthens by 10% -AUD Dollar Zealand New Currency weakens by 10% by weakens Currency Impact on post tax profit tax post on Impact profit tax post on Impact 2020 $M 2020 $M – – – – – – – – (1) 1 2019 $M 2019 $M (12) 12 12 – – – – – – – – 2020 $M 2020 $M Impact on equity Impact on equity Impact (20) (34) 33 33 (3) (2) (3) 17 4 4 3 2019 $M 2019 $M (33) 33 33 (3) (2) (2) 3 – – 2 2
62 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU derivative financial liabilities. The timing of cash flows for non-derivative financial liabilities is based on the contractual terms of terms contractual the on based is liabilities financial non-derivative for flows cash of timing The liabilities. financial derivative non- recognised from interest and repayments payoffs, fixed contractually all reflect disclosures risk liquidity following The liabilities financial Non-derivative sources. funding various of use the through flexibility and funding of continuity between abalance maintain to is objective Group’s The period. forward-looking 12 month immediate the over mature facilities of amount alimited that and needs unanticipated cover to facilities committed and undrawn in available is headroom prescribed that require Policies Directors. of Board the by approved policies under risk liquidity to exposure its manages Group The (C) RISK LIQUIDITY bonds. customer of way by held collateral any of account taking without date reporting atthe risk credit to exposure maximum Group’s the represent best sheet balance the in recognised assets financial of amounts carrying The occurs. this that event the in impacted be will consequently Group The participants. market class generator all by assumed be will shortfall the of share aproportionate security, prudential its of exhaustion the following House, Clearing Energy the to obligations its settle to aretailer by afailure of event the In maturity. until price contracted to relative price market current the on dependent counterparty the to exposure risk credit potential has Group the contracts, energy to respect With higher. A- of or rating credit equivalent) (or Moody’s &Poor’s Standard long-term aminimum have which and with, agreement ISDA an master signed has it that banks with transactions derivative into enter only to policy Group’s the is It account. bank aseparate in held are bonds Customer history. credit suitable a establish to yet have who customers commercial from abond requires normally and customers electricity all on assessments credit performs Group The Directors. of Board the by approved policies under risk credit to exposure its manages Group The (B) CREDIT RISK accounting. hedge for qualified have that options and swaps rate interest in changes value fair from result equity of components other in 9. NZ movements IFRS The under accounting hedge for qualify not do which but hedges economic valid are that options and swaps rate interest in changes value fair of result the with combined balances cash and debt rate variable from costs interest higher/lower to due are profits tax post in movement The years. 10 last the over movements actual on based period year aone over rate swap year 10 the in movement possible reasonably the of assessment an on based is analysis Sensitivity Interest rate risk NOTE 13. FINANCIAL MANAGEMENT RISK (CONTINUED) 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Interest rates higher by 100 bps bps 100 by higher rates Interest Interest rates lower by 100 bps 100 by lower rates Interest Impact on post tax profit tax post on Impact 2020 $M (13) 13 13 2019 $M (4) 4 2020 $M Impact on equity Impact (22) 20 20 2019 $M (16) 13 Net inflow/(outflow) Net inflow/(outflow) Loans Receivables Cash and cash equivalents cash and Cash Liquid financial assets 2020 JUNE Lease liabilities Lease liabilities Payables and accruals liabilities Financial equivalents cash and Cash Liquid financial assets 2019 JUNE Receivables Loans Payables and accruals liabilities Financial operating cash flows or committed and undrawn debt facilities that will provide additional liquidity support. support. liquidity additional provide will that facilities debt undrawn and committed or flows cash operating future expected account into take not does analysis the shortfall, aliquidity of impression the give below tables the While sheet. balance the in recognised amounts the with reconcile not will totals the consequently flows, cash undiscounted contractual are presented amounts the that noted be should It contract. underlying the Less than 6 6 than Less 6 months Less than than Less months (280) (439) (452) (736) 350 350 (219) (216) 244 244 (413) 256 256 323 323 (89) 94 94 $M $M 79 79 (4) (4)
months months 6 to 12 12 6 to 6 to 12 12 6 to (50) (50) (46) (15) (15) $M $M (11) (4) (4) – – – – – – – –
1 to 5years 1 to 1 to 5 5 1 to (464) years (425) (470) (601) (641) (641) (33) (12) (31) $M $M (9) – – – – 6 6
Later than than Later Later than than Later 5 years 5 years (640) (690) (690) (795) (795) (743) (50) (52) $M $M – – – – – – – –
(1,609) (1,582) (1,528) (1,575) (1,925) (1,911) (225) (292) Total Total 350 350 250 250 256 256 329 (91) (91) 94 94 $M $M 79 79
63 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU Net maturity Net • Net maturity Net Derivative liabilities – net settled –net liabilities Derivative 2020 JUNE • settled –gross liabilities Derivative Derivative liabilities – net settled –net liabilities Derivative 2019 JUNE • • settled –gross liabilities Derivative relation to derivative assets should also be considered when assessing the ability of the Group to meet its obligations. its meet to Group the of ability the assessing when considered be also should assets derivative to relation in receipts cash of expectation The settlements. asset derivative to relating funds receive to expects also Group The liabilities. derivative to relation in made be to expected are that payments the summarise also table The periods. time different over occur to forecast is expenditure underlying the short-term are derivatives these of maturity the While occurs. transaction underlying the until basis instalment an on rolled be may derivatives exchange Foreign commitments. purchase future hedge to used are that derivatives exchange foreign to relate derivatives settled Gross derivatives. price electricity and derivatives rate interest include derivatives settled Net date. atbalance Group the by held liabilities derivative from arising risk liquidity the details below table The liabilities financial Derivative NOTE 13. FINANCIAL MANAGEMENT RISK (CONTINUED) 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Outflows Inflows Outflows Inflows 6 months 6 months Less than than Less Less than than Less (102) (146) 104 104 (58) (64) (62) (73) 131 131 $M $M
months months 6 to 12 12 6 to 6 to 12 12 6 to (30) (30) (51) (51) $M $M – – – –
1 to 5years 1 to 1 to 5years 1 to (119) (119) (98) (98) $M $M – – – –
Later than than Later Later than than Later 5 years 5 years (16) (16) $M $M (11) (11) – – – –
(250) (248) Total Total (102) (146) (198) (213) 104 104 131 131 $M $M
Maximum use is made of observable market data when selecting inputs and developing assumptions for the valuation technique. valuation the for assumptions developing and inputs selecting when data market observable of made is use Maximum derivatives. these of values fair the estimating in used be could that inputs these of respect in assumptions possible reasonably of range is a there therefore and judgement, significant requires inputs of selection The input. key another is price forward the of volatility the then option, an is derivative the Where rate. discount the and curve price forward the used: being inputs key two are there instrument the of flows cash future estimated the of value present the as calculated is aderivative of value fair the Where capacity. generation committed future and conditions supply and demand anticipated costs, fuel thermal of assessment an inflows, future conditions, hydrological current of account takes which model fundamental based supply ademand by determined is and terms) (in real question in period the $114/MWh) of $69/MWh of over price price amaximum (2019: and MWh minimum $115/ of $70/MWh of price amaximum price and aminimum incorporates prices forward of view internal Management’s term. contract’s the of remainder the for prices forward of view internal Management’s with combined years, three first the for prices market ASX of combination a using methodology flow cash adiscounted using valued are which contracts electricity traded non-exchange include data observable non-market includes which technique avaluation use that instruments Financial exchange.recognised a on traded not derivatives exchange foreign and derivatives rate interest include valuation, overall the to significant not are that inputs unobservable or inputs, market observable only with technique avaluation using measured are that instruments Financial 3(2019: million). $138 level as categorised were million $99 and million) $17 1(2019: level as categorised were million $12 of liabilities derivative price 3(2019: million). $79 Electricity level as categorised were $70 million and million) 1(2019: $44 level as categorised were million $54 of assets derivative price Electricity derivatives. price electricity for 2, except level as categorised were value fair at carried instruments financial Group’s the of 2020 all June at30 As • • • comprise: methods The instrument. afinancial of value fair the estimating in methods various uses Group The Valuation techniques issue. bond each for inputs and prices market quoted on based (2019: are million). $305 Fair million values at$314 calculated been has which for value fair the Bonds, Capital (ii) and the respectively; (2019: million) $312 $326 (2019: million and (2019: $296 million) million), $298 $60 million at $28 million calculated been have which for values fair the Placement, USPrivate the and Bonds Rate Floating the for: (i) Fixed Bonds, Rate the except values fair their approximates statements financial the in recorded liabilities and assets financial of amount carrying The Fair values (D) FAIR VALUE ESTIMATION Level 3 – the fair value is estimated using inputs that are not based on observable market data. market observable on based not are that inputs using estimated is value fair 3–the Level and prices); from (derived (as indirectly or prices) directly either liability, or asset the for observable are 1that Level in included prices quoted than other inputs using estimated is value fair 2–the Level markets; active in prices quoted using calculated is value fair 1–the Level
64 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU Sensitivity analysis is based on an assessment of the reasonably possible movements in forward price. forward in movements possible reasonably the of assessment an on based is analysis Sensitivity profit. tax post on Group the of exposures risk price in decreases or increases of impact potential the summarises following The analysis Level 3 sensitivity NOTE 13. FINANCIAL MANAGEMENT RISK (CONTINUED) 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Electricity forward price decreased by 10% by decreased price forward Electricity 10% by increased price forward Electricity Group liabilities as at 30 June. at30 as liabilities and assets financial derivative of value fair the in gains/(losses) value included inception in movements the details below table The zero. to value fair initial the return to amount aconstant by derivatives the of value fair the determine to used path price future the adjusting by contract the of life the over amortised is adjustment inception This atinception. zero to contract the of value fair initial the bring to made is adjustment inception an circumstances these In reasons. of avariety for curve price market derived prevailing the from differ may which for pricing the basis, abilateral on agreed are contracts derivative electricity traded exchange non of price contract The zero. be would atinception value fair basis, length arm’s an on into entered are contracts derivative when that a presumption is There gains/(losses) ‘inception’ Deferred of financial instruments’. value fair the in ‘change within recognised are Group the of statement income the within recognised movements value 3fair Level Closing balance • • losses and Gains New contracts balanceOpening movements value 3 fair of level Reconciliation Matured contracts Matured Through other comprehensive income statement income the Through Impact on post tax profit tax post on Impact 2020 $M 2020 $M (29) (59) 24 12 (6) 6 6 – 2019 $M 2019 $M (28) (78) (59) 54 (8) (6) 6 1 Closing balance year the during realised losses inception Deferred hedges new on (losses) gains inception Deferred and cash equivalents. Total capital is calculated as shareholders’ equity plus net debt. The gearing ratio is calculated below: calculated is ratio gearing The debt. net plus equity shareholders’ as calculated is Total capital equivalents. cash and cash less non-current) and current (both borrowings total as calculated is debt Net capital. total by divided debt net as calculated is ratio This ratio. gearing its of basis the on capital monitors Group the industry, the in companies other with Consistent borrowings. reduce to sold assets or injected or returned be can capital shareholders, to dividends as paid amount the to made be can changes structure, capital the adjust or maintain to order In companies. sector private comparable to similar atarate value shareholder increase to opportunities growth other and projects development generation new finance to as well as reinvestment asset required undertake to funds sufficient provide to is managed Capital performance. financial estimated with along conditions hydrological and market economic, medium-term and short predicted from risks the to regard having Group the for structure financial asustainable maintain to seeks Management CAPITAL(E) MANAGEMENT RISK Net debt equivalents cash and cash Less Placement USPrivate adjustments Fair value value atcarrying Borrowings gains/(losses) inception deferred Opening price derivatives Electricity Gearing ratio Gearing Total capital Total equity equivalents. For the year ended 30 June 2020, the Group had a debt to EBITDAF ratio of 2.0 times (2019: 1.9 2.0 of times times). ratio EBITDAF to a debt had Group 2020, the June 30 ended year For the equivalents. cash and cash less debt 50% subordinated of and debt senior all be to deemed is debt of calculation the treatment, agency rating the with consistent and ratio this calculating of purpose the basis. For on-going an on rating credit its support to sufficient metrics credit maintain to time, through average on 3.0 times, than less of ratio EBITDAF to adebt maintain to seeks Group The threshold. equity shareholder aminimum and ratios cover interest minimum exceed ratio, gearing maximum its not exceeding to addition in must, Group the financiers bank its of favour in deed pledge negative the Under 2020 $M 2020 $M 23.5% 4,888 3,739 1,291 1,149 1,149 (12) (63) (79) (7) 10 (5) 2019 $M 2019 $M 23.7% 4,633 4,633 3,537 3,537 1,096 1,233 (15) (12) (94) (43) 3 –
65 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU below, based on maturity date: maturity on based below, summarised are relationship hedging their of designation the with together instruments financial derivative of values fair The NOTE 14. DERIVATIVE FINANCIAL INSTRUMENTS 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Electricity price derivative derivative rate Interest CURRENT ASSETS Electricity price derivative Cross currency interest rate derivative derivative rate interest currency Cross Electricity price derivative derivative rate interest currency Cross Foreign exchange derivative derivative rate Interest LIABILITIES CURRENT derivative rate interest currency Cross Foreign exchange derivative Interest rate derivative derivative rate Interest NON-CURRENT ASSETS hedge. flow acash as designated is margin issuance the of hedge the and hedge value afair as designated is rate interest benchmark the of hedge The designation. hedge of purpose the for components two into split been have currency, foreign in issued borrowings on risk currency foreign and interest combined the manage to used are which swaps, rate interest currency Cross IFRS NZ 9. under hedges flow cash as designated are below) described (except those derivatives prices electricity and derivatives rate interest derivatives), starting forward (predominantly derivatives rate interest other All loss. and profit through value atfair as treated are 9but NZ IFRS under hedges as designated not are hedges, economic while contracts, energy traded exchange value low short-term and derivatives, exchange foreign value low short-term of majority The –margin derivative rate interest currency Cross Electricity price derivative derivative rate Interest NON-CURRENT LIABILITIES 2020 $M 138 126 101 116 15 15 28 36 96 23 26 57 75 37 67 11 – – – 2019 $M 208 129 40 40 115 115 50 50 82 82 45 45 45 45 91 91 41 41 4 6 2 2 1 1 – 2 gain of $51m). of gain 2019 value (2019: July fair 19th on investment its for accounting equity to moving to prior million $4 of Limited Tiltin Renewables investment its on loss value fair a recognised also Group the instruments, financial derivative on loss value fair the to addition In instruments financial derivative of value fair in Total change Foreign exchange rate derivatives rate exchange Foreign Electricity price derivatives Cross currency interest rate derivatives –margin derivatives rate interest currency Cross derivatives rate Interest Borrowings – fair value change value –fair Borrowings Cross currency interest rate derivatives rate interest currency Cross Amortisation of fair values fair of Amortisation reserve the in recognised hedges flow cash of portion effective The balanceOpening Closing balance movements of Tax effect Equity-accounted share of associates’ movement in other comprehensive income comprehensive other in movement associates’ of share Equity-accounted sheet balance to transferred amount The 1. MOVEMENT FLOW INCASH HEDGE RESERVE income are summarised below: comprehensive other and statement income the in recognised instruments financial derivative of values fair in changes The years. of 5 life remaining a has which Energy Meridian with contract is a significant most The swaps. basis called generically Island South and North between risk price electricity wholesale hedge to contracts of anumber into entered has Group The swaps: Basis prices. electricity wholesale than rather index hedge amoving against settles contract The Company. Tuaropaki Power the with contract hedge electricity an has Group The not designated as contracts for hedges accounting purposes Electricity Amounts reclassified to theincomestatement recognised inamortisation. 1 2020 $M Income statement (19) 26 10 18 13 (1) (1) 5 2019 $M (25) (26) (11) 10 (1) (1) 3 – Other comprehensive comprehensive Other 2020 $M 2020 (122) (118) (16) (17) $M income (11) 31 – – – 6 – – – 2 1 2019 $M 2019 (118) (118) (30) (24) (118) (92) $M 33 33 (9) (1) (1) 3 – – –
1 1
66 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU • Net cash inflow from operating activities operating from inflow cash Net • • • • year: the during liabilities and assets in Change liabilities and assets in change before activities operating by provided cash Net companies venture joint and associate of earnings of Share Other non-cashOther items Movement in effect of discounting on long-term provisions long-term on discounting of effect in Movement Gain on sale of assets of sale on Gain instruments financial of value fair the in Change Net (gain)/loss on sale of property, plant and equipment and plant (gain)/loss property, of Net sale on Depreciation and amortisation for: Adjustments • activities financing or investing as classified Items year the for Profit Dividend income received from the investment in Tilt in Renewables investment the from received income Dividend FROM OPERATING ACTIVITIES NOTE 15. RECONCILIATION PROFIT OF FLOWS FOR CASH TO YEAR THE NET 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Carbon costs Carbon Increase/(decrease) in payables trade and accruals Decrease in deferred tax deferred in Decrease Increase/(decrease) in provision for tax inventories consumable in Decrease Increase in trade receivables and prepayments and receivables trade in Increase Net interest accrual interest Net 2020 $M
214 214 356 (22) 387 207 (18) (15) (49) 18 14 (4) 1 – – – 2 7 1 2019 $M 204 204 (177) 326 326 367 367 357 357 (26) (26) (8) (2) (9) (1) (1) 4 1 4 1 5 – below: reported been have Group the to external owners some have which entities between transactions those only Consequently, eliminated. been have Group the within parties related between transactions statements, financial consolidated are these As parties. related considered are which of all arrangements, joint and associates subsidiaries, in investments has NZ Limited Mercury parties related Transactions with tax. and travel postal, energy, trading including services of avariety cover Transactions terms. commercial normal on are Crown the by owned partly or wholly entities other and Crown the with transactions All Group. the over influence potential significant with it providing Crown, the is NZ Limited Mercury of shareholder majority The shareholder Majority NOTE 16. RELATED PARTY TRANSACTIONS booked. charge impairment any or forgiven, off, written been have debts party related No balances. outstanding any of receipt on terminate will agreement the date, repayment fixed no is There agreement. supply energy geothermal the under receipts of level the to linked are advance the under Repayments rate. interest afloating carries partner Venture Joint Rotokawa our to advance long-term The conditions being met. certain to subject demand on repayable and free interest is (2019: million) $4 million $4 of Limited Holdings TPC to advance An terms. commercial normal on made are services other and management contracts, Energy • • • Joint operations • • Associates Interest income Interest Energy contract received/(paid) settlements Management fees and agreements service received Energy contract received/(paid) settlements Management fees and agreements service received 2020 $M Transaction value 16 16 12 6 – 2019 $M 12 12 32 14 16 1
67 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU • comprised: payable) and (paid compensation personnel management Key NOTE 16. RELATED PARTY TRANSACTIONS (CONTINUED) 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. provide to the Group. the to provide they services the to relation in personnel management key of benefit the for insurance officers and directors purchases Group The period. reporting the in terms commercial normal on Group the with transacted entities these of anumber Again, remuneration. additional any receiving without employment their of part as entities party third other and subsidiaries direct to services directorship provide personnel management key of A number the reporting period. during terms commercial normal on Group the with transacted entities these of Anumber entities. party third other to services directorship provide also Directors of Anumber activities. trading of course ordinary the within employees, for discounts staff with conditions, and terms normal on consumers electricity as NZ Limited Mercury with deal Group the of employees and Directors Management. Senior and Directors the be to considered are Group the for personnel management Key Group. the of activities the controlling and directing planning, for authority and responsibility with people those are personnel management Key personnel management key with transactions Other • Directors’ fees Benefits for the Chief Executive and Senior Management: Senior and Executive Chief the for Benefits Salary and other short-term benefits benefits short-term other and Salary Termination benefits Termination Share-based payments Share-based Transaction value 7,086 7,086 8,735 8,735 $000 2020 948 948 324 324 377
$000 6,519 6,519 8,041 2019 990 990 532 532 –
liabilities. or assets contingent material other no has Group The consequence. a as required be will guarantees or credit of letters these to relating resource of outflow any that expectation no is there However, business. of course normal the in suppliers various to guarantees and credit of letters issue will Group the time to From time time. atthis unknown is operations Group’s the on claim this of impact The addressed. be best may interests and rights such any how determine to Government the for be will it and resources geothermal and water fresh in rights proprietary undefined) yet as (but residual have Māori that Tribunal concluded Tribunal. The Waitangi the 2012 with in lodged was resources geothermal and water fresh to relating Council Māori Zealand New the by claim A separate assets. hydro its operate to ability Group’s the impair to unlikely is matter the on Tribunal’s decision the that advice received has Group The atMaraetai. land Group’s the including atPouākani, land of resumption the for recommendations binding seeking application an to relates hearing remedies 1975. The Act Treaty Waitangi of the to Tribunal pursuant Waitangi the in Government the against brought hearing aremedies to subject is Waikato, that atMaraetai, land holds Group The dams. Waipāpa and II Iand Maraetai Whakamaru, the beneath riverbed Waikato the of parts those in title customary to aclaim with succeed to unlikely are applicants the that advice received has and that land to title beneficial or simple fee the holds Mercury dams. Waipāpa and II Iand Maraetai Whakamaru, the beneath riverbed the including land, customary Māori are riverbed Waikato the of parts certain that declaration a seeking Court Land Māori the in claim a filed recently have kaumatua of agroup 2and Trust No Claims Pouākani The against brought been have that claims to subject are that resources geothermal and water fresh in interests has and land holds Group The Contingencies the terminate. also will period, reporting the of end the from period year eight the cover which agreements, purchase forward existing the terminated is ETS NZ the event the In units. (NZ ETS) scheme trading emissions Zealand New purchase to contracts are commitments Government. Intangible atKarapiro. assets generation hydro of refurbishment atTuritea and assets generation wind of construction for contracts include Capital commitments include purchases of plant both property, and equipment (PP&E) and intangibles. PP&E commitments years five than Later NOTE 17. COMMITMENTS &CONTINGENCIES One to five years years five to One Commitments Within one year year one Within
2020 $M 264 391 110 Capital Capital 17 2019 $M 341 341 198 198 129 129 14 14
68 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU Movements in the number of share options are as follows: as are options share of number the in Movements (2019: $531,516). transactions payment based share equity-settled to $376,849 relation in expensed Group the year the During executives. to options nil-price in-substance of grant the represents and discretion of alevel with board the LTI provides Each plan 2022. July in vest to due is plan The hurdles. capital on return internal Group’s the against (ii) performance NZSX; and out the on listed are who generators of: electricity i) other acombination against measured is Performance period. performance the over employment continued of irrespective met, are targets return shareholder total certain if cost atnil shares the granted are executives plan the Under NZ Limited. Mercury in rights share awarded were executives where introduced was plan performance year, anew the During period. vesting the of start atthe as both companies, NZX50 (ii) NZSX; and all the on listed are who generators of: electricity i) other acombination against measured is Performance used. is measure return shareholder total arelative plan, the Under individual. the to trustee the by released are shares corresponding the and balance loan their of repayment towards applied be must amount cash That vested. have which shares the for balance loan initial the to equal is tax, for deduction after which, amount acash to entitled are executives vest, shares the If return. shareholder total relative Group’s the and period vesting the through employment continued on dependent is shares of Vesting period. vesting the of end the LTI until the of Trustee plan the by trust on held shares the with Group, the from loan free interest an by funded value atmarket shares purchase executives senior the 2021 July 2020 and July in vest to due plans the Under Group. the of performance the influence to able most executives those and shareholders between alignment the enhance to designed are plans The executives. (LTI) senior for plans incentive long-term based share equity-settled operates Group The Long-term incentive plan NOTE 18. SHARE-BASED PAYMENTS 2020 June 30 ended year For the NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS. Balance at the beginning of the year the of beginning the at Balance Balance at the end of the year the of end the at Balance weighted average life of 1.8 years (2019: years). 1.5 years 1.8 of life average weighted a having plan the under options (2019: remaining year 286,118) the the of with end atthe exercisable were 236,911 options Options granted Options expired Options Options exercised Options
(338,075) 320,897 320,897 823,237 823,237 (174,625) 631,434 631,434 2020 (199,735) 277,001 823,237 823,237 745,971 745,971
2019 – statements. financial these of presentation fair the affect would that date balance to subsequent events material other no are There material. be to expected not are lockdown nationwide previous the from experiences on based Group the on COVID-19, to impacts the relation in uncertain remains future the Whilst 2. Level Alert to moving country the of rest the with 3, Level Alert COVID-19 re-entered region Auckland 2020 the 12 August On COVID-19 a19.96% own to continues Tilt. in Group The stake amount. a commensurate by reduced Tilt in been has investment its of value the and increased reserves cash Group’s the aresult As July. 10 on $55 million receiving Group the in resulted This at $2.91share. per cancelled being held shares five every of out share one with cancellation, and buy-back ashare undertake to intention its (Tilt) announced Limited Tilt of board Renewables 2020 the 7 April On distribution capital Tilt • • been: have would accounts Group’s the on impact resultant the then occurred 2020 also had July at31 prices wholesale/futures future on impacts observed currently the 2020 and June 30 to prior announced been had intention NZAS the Assuming generation. coal and gas in and/or closures reductions likely and planned upgrades transmission significant with likely is response market electricity adynamic uncertain, remains closure smelter’s the of impact future the While 2020. July 31 of as respectively Benmore and atAuckland MWh $81/MWh $55/ to and reduced had and $80/MWh and at$96/MWh atBenmore Auckland in trading 2022 were June ending year the for prices futures electricity For example, prices. electricity wholesale and balance demand/supply electricity country’s the on impact amaterial have to likely is closure Its consumption. electricity Zealand’s 13% New of around for accounts smelter The 2021. August in complete to expects it which atTiwai Point, operations its down wind to intention its announced (NZAS) Smelters Aluminium Zealand 2020 New 9July On PointTiwai aluminium smelter 2020. September 30 on paid be to share of per 9.4cents dividend final imputed afully approved has directors of board The NOTE 19. SUBSEQUENT EVENTS eventually crystallise based on actual electricity spot prices in the future as the underlying contracts settle. contracts underlying the as future the in prices spot electricity actual on based crystallise eventually will difference $89m. of This abalance $76m, by with higher be would derivatives electricity Group’s the of valuation fair The depreciation. routine through than other FY2021, in reverse to expected not is difference this Tiwai valuations post possible of arange within fall values asset generation current the As recognised. $296m the to compared as revaluation, positive a$42m with smaller, been have would value atfair assets generation Group’s the of revaluation The
69 MERCURY ANNUAL REPORT 2020 ENERGY FREEDOM IN NUMBERS MENU ENERGY FREEDOM. ENERGY BEHIND TEAM THE stay in touchstay us. with and financial to help youterms, to and a directory of industry your understanding help to glossary a indices, sustainability shareholders, for information policy and report. We also share other disclosures, remuneration and report governance our present you to our and directors executive team. We and our Here we customers. introduce partners around 80,000 people; 800 about our owners; There’s abig team that contributes to our mission:
70 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU YOUR DIRECTORS. PATRICK STRANGE // SCOTT ST JOHN // JOHN DIRECTOR ST SCOTT PRUE FLACKS // FLACKS PRUE CHAIR
DIRECTOR HANNAH HAMLING //HANNAH HAMLING MIKE TAITOKO //MIKE KEITH SMITH // SMITH DIRECTORKEITH DIRECTOR
DIRECTOR JAMES MILLER // ANDY LARK // LARK DIRECTORANDY
DIRECTOR YOUR EXECUTIVE TEAM. YOUR CHIEF MARKETING OFFICER MARKETING CHIEF CHIEF FINANCIAL OFFICER FINANCIAL CHIEF VINCE HAWKSWORTH // WILLIAM MEEK // MEEK WILLIAM CHIEF EXECUTIVE JULIA JACK // JACK JULIA
GENERAL MANAGERGENERAL RETAIL & DIGITAL MANAGER HYDRO &MANAGER WHOLESALE HYDRO MANAGER CORPORATE AFFAIRS PHIL GIBSON // GENERAL GIBSON PHIL TONY NAGEL // NAGEL TONY KEVIN ANGLAND // ANGLAND KEVIN GENERAL GENERAL
NICK CLARKE // MANAGER GENERAL CLARKE NICK MANAGER PEOPLE & PERFORMANCE MARLENE STRAWSON // STRAWSON MARLENE RISK ASSURANCE OFFICER GEOTHERMAL & SAFETY LUCIE DRUMMOND GENERAL GENERAL
// //
71 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU GOVERNANCE ATMERCURY. and Australia. and corporate governance trends in Zealand New company) as well contemporary as reflecting is(Mercury an ASX Foreign Exempt Listed NZXcompliance standards ASX and with ensure to practices and policies governance corporate our reviews regularly Board The and our to create ability long-term value. sustainabilityterm of our business and assets, long- the ourstakeholders, relationships with strong of maintenance our underpins This pillars. foundational our to fundamental are processes and policies frameworks, governance. Robust of corporate standards At Mercury, highest to the we are committed with our Board virtually through an online platform. online an through virtually Board our with person meeting, but enable our shareholders to engage in- an hold not do 2020 we ASM our for that prudent is it believe we pandemic, COVID-19 the from resulting gatherings on restrictions and guidance health public Given Meeting. Shareholders’ Annual virtual first our hold to us for underway well are preparations report, this of date atthe As 2020 ASM: technology. other and platforms digital using Meetings, Committee Board and Meetings Board seamlessly, including continued and following lockdown, the governance of the business During management. with and aBoard as both working, of ways digital to transition the accelerated have pandemic COVID-19 the by created events unprecedented The COVID-19 governance: renewable energy portfolio. our to generation wind add we as energy, renewable in investment of phase next its in Mercury lead to well him positions Australia and Zealand New in sector energy the in experience Vince’s Hawksworth. Vince Executive, Chief new our of appointment 2019 the December in announced Board the process search robust and extensive an Following Executive: Chief balanced. well remains Board our ensure to consideration careful of result the was and experience.skills, Hannah’s diversity appointment collective Board’s the complements and to adds issues management water in experience and skills governance background, science environmental 2019. strong Hannah’s September in Withers Joan Chair former of retirement the by created vacancy the following Board the to Hamling Hannah director new 2020, welcomed we February In composition: Board activities: following the on focussed we Framework, Governance Corporate usual our to addition in period, reporting the Over FORHIGHLIGHTS FY20 GOVERNANCE CORPORATE
to privacy and our approach to inclusion and diversity. and inclusion to approach our and privacy to commitment to ethically acting and responsibly, our approach our risks, manage we how experience, and composition Board our of overview an give we section, following the In disclosure. change climate of respect in particularly disclosures, issue social and environmental our of transparency and completeness the develop to continuing Engagement Principles published in 2020, although we are and Governance Corporate BlackRock the with aligns generally at Mercury Governance that consider We also guidelines. these we consider and procedures our substantially practices reflect OECD, and the and Forum Governance Corporate (IFC) Global Corporation Finance International the Principles, Governance Global (ICGN) Network Governance Corporate International the from principles and guidelines the reviewed We also have Governance Statement Corporate full our in explained are exceptions These • • to: relate exceptions only The Code. Governance Corporate NZX the with compliance substantial in are and edition) (fourth Recommendations and Principles Governance Corporate ASX the with comply practices governance corporate Our 2020. year calendar in Policy aTakeovers Response adopted Mercury Code, Governance Corporate NZX the with comply to However, shares. Mercury’s of 1989Act ownership on Finance Public the under restrictions on based decision a was which Protocol), 3.6 (Takeover Recommendation and remuneration; director for Committee Nominations the and remuneration, general and executive for Committee Performance and People the between split is atMercury remuneration of governance the where Committee), (Remuneration 3.3 Recommendation . Risk Assurance & & Assurance Risk Audit Committee Audit Committee Executive Management Team MERCURY PEOPLE MERCURY MERCURY BOARD MERCURY Chief Executive Executive Chief People & Performance &Performance People Shareholders Committee Nominations Committee Committee
72 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU of our website. our of Team section Executive the in available is Charter Board The Charter. Board Mercury’s in out set are responsibilities Board’s The responsibilities. and purpose its fulfil to perspective and diversity knowledge, experience, skills, the has it group acollective as that ensure to structured is Board The director. future next our determining of process the in 2019. currently is Board The December 31 on tenure 18-month her concluded Lissaman, Anna director, future third Our decision-making. in participate not do although meetings, Committee and meetings Board Mercury attend to invited are directors Future Zealand. New in directors new ready board- of pool the increase to aims It mentorship. valuable and action in governance real-life to exposure with directors table for 12 or more months. This programme provides future board atthe sitting experience valuable appointees three offered has and Programme Directors Future Directors’ of Institute the of supporter along-standing been has Board The website. our of section Directors of Board the in available are directors our of Details independent. and non-executive is directors the of Taitoko. Mike and Each Strange Patrick St John, Scott Smith, Keith Miller, James Lark, Andy (Chair), Hamling, Hannah Flacks Prue directors: eight comprises currently Board The characteristics and Composition BOARD MERCURY’S GOVERNANCE ATMERCURY. (CONTINUED)
members of the Committees were as follows: as were Committees the of members the period, reporting the During directors. the of respect in Committee Nominations the Team and (EMT), Management Executive the and Executive Chief the of respect in PPC the between shared are committee that to allocated be ordinarily would which functions the Instead, committee. remuneration aseparate have not does Board the Code, Governance Corporate NZX the of 3.3 Recommendation to exception an As Mercury. of oversight Board’s the strengthen they Together governance. of areas specific on focuses Committee Each Committee. Nominations the and (PPC) Committee &Performance People (RAAC), the Committee & Audit Assurance Risk the committees: standing three has Board The Committees page. following the on diagram the in out set are characteristics Board Our Mercury. of adirector not is Executive Chief The securities. voting Mercury’s of 5% more or controls, which entity an of representative other or executive an is or controls director No Mercury. of scheme share employee an in, participates or from, remuneration performance-based receives director No Mercury. of adirector as than other member group another or Mercury with relationship contractual material other any has or Mercury to supplier amaterial years, three last the within been, has director No subsidiaries. its of any or Mercury to services professional material provided that afirm of shareholder material or executive senior director, apartner, was director no 12 months, last the Within Mercury. to services professional material provide to years, three last the within retained, or employed been has director No interfere with, the independent exercise of their judgement. materially to seen be reasonably could or with, interfere materially would that relationship other or business interest, any of free are who and shareholders substantial not are who directors non-executive are they that in directors 'independent' be to Board the by considered are directors Mercury All conflicts and Independence Committee Nominations Committee Performance People & Audit Committee & Assurance Risk Committee
and Patrick Strange Patrick and (Chair), Miller James Flacks Prue Chair Board as position her of virtue by amember also was Flacks Taitoko. Mike and Prue (Chair), Lark, St John Andy Scott Chair Board as position her of virtue by amember also was Flacks Prue Strange. Patrick and (Chair), Miller James Smith Keith Members proposal relating to director remuneration to be put to shareholders. to put be to remuneration director to relating proposal any on Board the to recommendations makes also Committee Nominations The directors. the of knowledge and experience, skills, the of assessment an maintains and develops and committees its and Board the of process evaluation annual an Board the to recommends Committee the Further, Board. the on vacancy casual a fill to or Meeting Shareholders’ Annual next atthe election for nominated be to directors potential as selection for perspectives and diversity experience, expertise, necessary the with people Identifying • • • to: relating responsibilities Performance and People its fulfil to Board the Assisting • • • • Mercury’s: on Board the advising and reviewing Overseeing, Roles and responsibilities and Roles People and Performance policies and practices and policies Performance and People Team (EMT) Management Executive and Executive Chief the of performance and remuneration the plan and strategy Performance and People Mercury’s publication for by management prepared information financial compliance policies and processes functions audit external and internal and mechanisms control internal opportunities) and risks climate-related and assurance safety and health of risk management policies and processes (which includes oversight
73 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU BOARD CHARACTERISTICS BOARD GOVERNANCE ATMERCURY.
LS SKIL A TANG
AKI I relationships/connectivity Iwi IT Electricity industry experience
KA PA
relationships RT Shareholder/investment community community Shareholder/investment N Natural resource management E (including climate change) R SH IP
S Human resources, health and relationships Government safety experience
E L
P O experience and knowledge Regulatory E Large company leadership experience P (CONTINUED)
C
U
S
T
O Retail, marketing and brand experience brand and marketing Retail,
Digitisation/technology M
E
R 0%
25% 50% 75% 100% 75% 50% 25% 100% Governance experience Governance Female Male
Australian energy market experience market energy Australian 0-3 years Finance/accounting/audit committee/ Finance/accounting/audit
Innovation and growth, entrepreneurship growth, and Innovation Commodity or financial markets trading risk management experience management risk
Business strategy experience strategy Business 3-6 years
T
E
N
U
R
6+ years E
L
A
I
C
R
E
M
D
M
I
O
V C
E
R
S
G
I T
E Y
N
D E R broadly. contribute to expected is director each where discussion open and collaborative of aculture fosters Board The values. Mercury’s reflects culture its that and directors individual of experiences and background skills, of diversity the from, benefits and of, advantage takes it that ensuring on focussed is Board The directors. new of recruitment the for input akey is This requirements. future and current Mercury’s against directors the of experience and skills collective the evaluate to used is matrix The Board. the of role the to relevant skills the out setting amatrix developed has Committee Nominations The forcommittees discrete projects. temporary two established Board 2020, the June 30 ended year the During required. are committees hoc ad or standing additional whether basis aregular on assesses Mercury website. our Corporate the in Governance available are Charters Committee The Board. the by approved Charter written a with accordance in operates committee standing Each section of of section the skills of the Board during the reporting period. reporting the during Board the of skills the 2020. Board The also completed a comprehensive analysis of year calendar of end the before completed be will Chair the by led review performance Board that a intended is It identified. were business the of areas some in insights strengthening engagement outside of boardroom for duties. Opportunities genuine demonstrating business, the of levels multiple through constructively engage directors that noted It another. one off build and test to used were views different which in thought of diversity strong with tier, top the in be to Board Mercury’s found 2019. review The September in completed was facilitator, external an of assistance the with review, Board full last The discussion. Board and questionnaires consultants, external including techniques of avariety using undertaken is This committees. and processes Board of effectiveness the and collectively), and (individually directors the of performance the review to conducted regularly are Evaluations members. its of contributions individual the exceeds group acollective as Board the that ensures This
74 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU GOVERNANCE ATMERCURY. commitments to our foundational pillars and strategy for creating long-term value for our shareholders. our for value long-term creating for strategy and pillars foundational our to commitments Mercury’s with aligns This governance. for required are considers Board the that skills those highlights below table The developing relationships. constructive concerns and and investment community of, shareholder understanding and in, Experience relationships Shareholder/investment community regulators. and government with interactions and relationships constructive maintaining government and experience developing and of functioning the of understanding An relationships Government customers. our to benefit providing and assets our of custodianship sustainable ensuring in plays that role the and operate we which in environment regulatory evolving the of understanding An knowledgeRegulatory and experience Partnerships SKILL ATTRIBUTE our offering. differentiate positively to seek we as development brand and marketing retail, in experience Senior experience brand and marketing Retail, Customer (CONTINUED) Hamling Hannah Hannah Andy Andy Lark
James James Miller Taitoko Mike Mike Strange Patrick Patrick Flacks Prue Prue
Smith Keith Keith
St John St Scott Scott
our value of kaitiakitanga. living and change climate including resources natural with associated issues with Familiarity change) climate (including management resource Natural excellence. operational of understanding adeep with together industry, electricity the within experience governance or executive Senior experience industry Electricity Kaitiakitanga SKILL ATTRIBUTE connection with iwi concerns and aspirations. and concerns iwi with connection adeep and iwi with relationships trusting deep foster and build to ability the culture, Māori of appreciation and understanding An relationships/connectivity Iwi Primary skills Primary Secondary skills Secondary
Hamling Hannah Hannah Andy Andy Lark
James James Miller Taitoko Mike Mike Strange Patrick Patrick Flacks Prue Prue
Smith Keith Keith
St John St Scott Scott
75 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU GOVERNANCE ATMERCURY. business in that market. that in business doing of challenges and opportunities the and market energy Australian the with Familiarity Australian energy market experience ofeffectiveness senior management. the assess to ability an and governance of standards highest the to Commitment Governance experience Commercial freedom. and choice with customers our provide to impact potential their and technologies disruptive and ICT of understanding A detailed Digitisation/technology level. executive atasenior business in success Sustainable Large company leadership experience SKILL ATTRIBUTE health and and wellness safety concerns. of understanding appropriate an and growth provide an environment for personal and business to issues performance and people with Familiarity experience andHuman safety health resources, People (CONTINUED) Hamling Hannah Hannah Andy Andy Lark
James James Miller Taitoko Mike Mike Strange Patrick Patrick Flacks Prue Prue
Smith Keith Keith
St John St Scott Scott
and financial markets. of commodity and understanding Experience trading markets financial or Commodity achieving organisational growth. of record aclear and innovation to commitment and/or demonstratedand understanding A record track of demonstrated entrepreneurship entrepreneurship and growth, Innovation strategy. sustainable and a successful A record track of developing and implementing experience strategy Business SKILL ATTRIBUTE an appropriate risk and framework culture. internal controls, and developing and overseeing finance corporate and accounting and reporting, financial in experience board or executive Senior management experience Finance/accounting/audit committee/risk Primary skills Primary Secondary skills Secondary
Hamling Hannah Hannah Andy Andy Lark
James James Miller Taitoko Mike Mike Strange Patrick Patrick Flacks Prue Prue
Smith Keith Keith
St John St Scott Scott
76 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU the achievement of our plans. The Policy sets out the risk risk the out sets Policy The plans. our of achievement the to and business Mercury’s to risks potential and existing assessing,identifying, controlling, monitoring and reporting management which provides a consistent method of risk in capability Group-wide holistic, a comprehensive, embed to is Policy Management Risk the of purpose The framework. management risk our form together which business our for appropriate policies management risk of asuite by supported website) our of section Governance Corporate the in (available Policy Management Risk overarching an place in has Mercury business. Mercury’s of part integral an is management Risk MANAGING &ASSURANCE RISK website. our of section Governance Corporate the sustainability. and information personal of protection reputation, our and people fairly, promoting wellbeing, protecting our business treating to commitments our include principles These return. in suppliers our from expect we what and suppliers our with work we way the out set Principles Guiding Supplier Our thing. right the doing and ethically acting to commitment our share who suppliers with work we that ensure to want We also website. our of section Corporate the in Governance available is Code Mercury The investors. our and communities, and people our customers, our to commitment our define and other each to promises our support They standards. behavioural and ethical our underpin framework policy associated and Code Mercury The times. all at fairness and integrity with and honestly act to employees, and directors including people, Mercury all requires Code Mercury The ways. wonderful more in energy enjoy to Zealanders New inspiring of purpose our achieve and strategy our deliver successfully to culture our sustain and embed to require we behaviours the documents Code Mercury The is. do’ to thing ‘right the what know people our that ensures Code Mercury Our right. what’s do to strive people our all At Mercury, ACTING ETHICALLY &RESPONSIBLY GOVERNANCE ATMERCURY. Our Supplier Guiding Principles Guiding Supplier Our are available in in available are (CONTINUED)
management of material business risks. In addition, the RAAC RAAC the addition, In risks. business material of management Mercury’s of effectiveness the on RAAC the to regularly reports Officer Assurance Risk The processes. and policies management risk Mercury’s on Board the to advice providing and reviewing overseeing, for responsible is RAAC The website. our of section Governance Corporate the in available Statement, Governance Corporate Mercury’s in detail more in out set are and Board the by reviewed regularly and set are which Statements Appetite Risk Mercury’s in embodied are These value. shareholder deliver to and objectives strategic our achieve to risks some accept must Mercury year. each times four least at meets Committee The change. objectives operational and strategic our and circumstances as activities risk review and appropriate risk management to all employees, and to monitor and awareness risk promote to is mandate Its Executive. Chief the by chaired and EMT the from representatives of comprised Committee, Management aRisk operates Mercury and audit providers. assurance risk management, between interaction and debate robust and healthy is there ensure to Officer Assurance Risk the tasks RAAC Chair. The RAAC the and Officer Financial Chief the to line reporting dual a has Officer Assurance Risk The audit. internal and assurance management, risk of effectiveness the determine to independence the has who Officer Assurance aRisk has Mercury This approach is consistent with principle. the precautionary tolerances. risk with line in impacts reduce to action mitigating take and hazards potential contain risk, of likelihood the reduce to measures taking and risk managing and identifying actively involves framework The risks. climate-related managing and assessing includes This risks. governance and social reputational, regulatory, operational, environmental, strategic, financial, encompassing risk, to approach The risk management a comprehensive supports framework Board. the by approved and RAAC the by annually reviewed is Policy The operate. to expected is management which within Mercury of requirements and objectives management least every two years. years. two every least at and required as reviewed is Policy Privacy Our future. the in occurring breaches similar prevent to plans of development the require and procedures assessment and escalation made, our processes for dealing breaches with privacy include sometimes are mistakes that Recognising unit. business their within privacy champion who Leads Privacy Business have information personal process that units Business annually. training that update to and Mercury joining of period a certain within training Act Privacy complete to required are Employees framework. privacy our of part important an be to privacy of aculture of maintenance and establishment the We consider basis. aquarterly on Committee Management Risk Management issues Privacy Committee. are to the reported Risk the to notification with Executive, Chief our to required as matters escalating and basis, aday-to-day on matters Policy, promoting awareness of monitoring matters, privacy Privacy our implementing for responsible is and Officer Privacy Mercury’s also is Counsel General Our framework. management risk our within managed is risk Privacy respectfully. and carefully managed is care our in information personal that ensure to is objective Our framework. privacy robust and Policy Privacy acomprehensive has Mercury PRIVACY answer questions relevant to the audit. the to relevant questions answer to shareholders our to available is and Meeting Shareholders’ Annual the attends Policy, Engagement Stakeholder the with consistent and, meetings RAAC all attends auditor external The website. our on available is which Policy, Independence Audit our by guided is services audit external of provision The years. five every atleast partner audit key the of rotation require Rules Listing NZX The behalf. his on audit FY20 the out &Young carry to Ernst of Bunyan Lloyd appointed has Auditor-General The 2001. Act Audit Public the under ‘Group’), the (together, subsidiaries its of each and Mercury of auditor independent external the is Auditor-General The FY20. in place took framework management risk the of review last The framework. management risk the reviews annually towards diversity in that area is progressing. is area that in diversity towards work our how of view our inform help will points data identified those against comparison where benchmarks use we areas, In other measure. aspecific towards working us by aided is area that in diversity achieving that believe we where exist targets Generally, benchmarks. and targets of amixture of up made are objectives These Board. the by set objectives against measured is goals diversity and inclusion against progress Our • • • • • principles: following the to aligned is Activity flexibility. and inclusion orientation, sexual ethnicity, age, gender, on focuses diversity and inclusion to approach Mercury’s website. our of section Governance Corporate the in available is policy framework and Policy Diversity and Inclusion our with starts diversity and inclusion to commitment Our performance. business better to leading thrive, and grow people our where workplace inclusive an create helps capability and experience views, backgrounds, different celebrates that ateam of part Being teams. their of potential full the also and potential, full their to up live to motivated and engaged feel employees our where work, to place safe and agreat Mercury We make to aim connect. and share to people our encourage we that is Attitude Mercury the of element key A forms. its all in diversity celebrates and embraces Mercury INCLUSION &DIVERSITY candidates. all to attractive is that strategy arecruitment maintaining and pool candidate the of diversity the increasing through workforce atalented retaining and attracting and diversity; and inclusion of value the in belief our reflect that behaviours leadership promoting differences; individual on capitalising and thought of diversity harnessing outcomes; business enhances and difference values that environment work inclusive and aflexible creating levels; atsenior workforce our of diversity the increasing . 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77 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU including the Chair (as at 30 June 2019 this was 25%, or two out of eight). of out 25%, two was or (as 2019 this Chair June at30 the including eight, of out 25%, two was or date at balance Board the on women of nine). of proportion out The two or 22% was 2019 this June (as nine of at30 out three or 33%, was Executive) Chief the (including EMT the on women of proportion 2020, the June at30 As Our performance against measurable objectives set by the Board is set out below: out set is Board the by set objectives measurable against performance Our GOVERNANCE ATMERCURY. Inclusion Flexibility Age Ethnicity Area of focus Gender engage fully as part of our team. our of part as fully engage they and work best their do to supported are team our that Ensure balance responsibilities appropriately. to employees enable to arrangements workplace flexible Facilitate Ensure that everyone is rewarded fairly for their work, regardless of gender. of regardless work, their for fairly rewarded is everyone that Ensure taking into account the population that we work in. work we that population the account into taking business, our for suitable is that team our for profile age an towards Work Ensure that our leadership reflects the diversity of our teams. our of diversity the reflects leadership our that Ensure in. work we that communities and population the with team our of ethnicity the aligning towards Work Objective Improve representation of women at senior leadership levels. leadership atsenior women of representation Improve (CONTINUED) with digitalisation and automation and the available tertiary-qualified talent pool. talent tertiary-qualified available the and automation and digitalisation with associated impacts workforce consideration into taking year-on-year, reviewed be Targets will in. work we that communities and population the of ethnicity the show data) that (Census statistics national against Benchmark Asian. and Pacific – Māori, groups ethnic targeted across leaders people and members team of representation Increase Targeting better performance than the external benchmark. external the than performance Targeting better Targeting better performance than the external benchmark. external the than performance Targeting better People Leader Employees Asian People Leader Employees Pacific People Leader Employees Māori Targeting between 97% and 103% ratio on average over time. over average on 103% ratio and 97% Targeting between EMT National Labour Force Projections. Labour National Zealand New the in force labour the of age median national the against Benchmark People Leaders Ethnicity Target Board Employees
2020 2020 33% 33% 33% 22% 41% 11% 9% 4% 4% 6%
order for us to achieve our 2021 gender diversity targets. diversity gender 2021 our achieve to us for order in required is focus continued that notes Board the However, generally. Policy Diversity and Inclusion our against and objectives diversity and inclusiveness our achieving towards progress made has Mercury period reporting this for that believes Board The >36% >36% 2021 2021 34% 43% 22% 11% 9% 4% 5% 6%
>40% >40% 2022 2022 23% 45% 35% 10% 13% 5% 6% 7%
baseline benchmark of self-identified ethnicity. self-identified of benchmark baseline the provides system payroll Mercury’s 2020, from June at30 as data, * Employee employees across nearly 200 organisations globally. from responses survey on based platform) feedback employee (Mercury’s Amp Culture from is 76%. of benchmark This Benchmark Inclusion 2020 Global with compared atMercury, succeed to opportunities equal have backgrounds all from people that confirmed 78% employees of Survey, Engagement 2020 Employee our to response In compared with 2020 Oceania Large Organisations Benchmark of 78%. of Benchmark Organisations Large 2020 Oceania with compared arrangements, working flexible of use make to choose they if supported genuinely are they that confirm employees of 72% Survey, Engagement 2020 Employee our to response In People Leader Employees Asian People Leader Employees Pacific People Leader Employees Māori Māori Actual as at 30 June 2020 across all bands, excluding EMT = 93% EMT –104%. excluding bands, all 2020 across June at30 as Actual People Leaders age of the labour force in the New Zealand National Labour Force Projections. Labour National Zealand New the in force labour the of age median national the with consistent is which 43, is workforce the across age average Our Ethnicity Actual EMT Employees Board
Mercury 2020 Ethnicity* 2020 Mercury As at 30 June 2019 June 30 at As 22.4% (176) 22.4% 10.0% (12) 10.0% 4.8% (38) 6.6% (52) 1.7% (2) 1.7% 1.7% (2) 1.7% 33% 22% 25% 41%
NZ Population 2018 Census As at 30 June 2020 June 30 at As 16.5% 15.1% 39% 33% 32% 8.1% 25%
78 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU employee earning a base salary of $100,000 or more in 2020. in more or $100,000 of salary abase earning employee Mercury any for remuneration review not to Board the by made was Adecision environment. social and economic overall the of context the in with, people our of goodwill the maintain and to, fair be to need the balance to been has FY21, for remuneration setting to and FY20, for outcomes remuneration to approach Board’s The this. to critical are people Our supply. electricity of security ensure to maintained and operated are assets our important is it and service essential an supplies Mercury lockdown. into Zealand New putting response pandemic COVID-19 the with especially year challenging and interesting an 2019. been has This October in PPC the of Chair of position the up take to pleased I was Report. Annual this of section Governance Corporate the in out set is PPC the of membership and role The activities. these for PPC the by supported is Board The practice. and policy remuneration its in transparency demonstrating to committed is Board The shareholders. for value sustainable create to objectives and strategies of achievement the to reward executive aligns and culture ahigh-performance promotes that framework aremuneration to committed is Board Mercury’s report. the in out set are FY20 for Executive Chief the for data remuneration of sets two Hawksworth, –Vince Executive Chief new the of arrival the and Whineray –Fraser Executive Chief the of departure the with year This directors. and Executive Chief the to reports direct Executive, Chief the for information remuneration out sets It executives. its for particular in and remuneration to approach and strategy Mercury’s outlines report This 2020. June 30 ended year the for Report Remuneration our present to pleasure my is it Board, the of (PPC) Committee Performance and People the of Chair As Dear Shareholder REMUNERATION EMPLOYEE DIRECTOR &EXECUTIVE REMUNERATION REPORT.
CHAIR, PEOPLE & PERFORMANCE COMMITTEE JOHN ST SCOTT Zealand. New and shareholders customers, its Mercury, of benefit the for overall, year challenging avery and pandemic COVID-19 the to responded employees Mercury all and (EMT) Team Management Executive the way the of proud I am exceed on-target amounts. not would FY20 for payments incentive short-term that decided was it Further, FY21. for changed not has Executive’s, Chief the including remuneration, executives’ all Therefore,
individual’s performance, skills, expertise and experience. and expertise skills, performance, individual’s an of consideration with along peers, market comparable with competitiveness ensure to benchmarking external account into takes review The PPC. the of recommendation the on Board the by approved is remuneration Executive’s Chief The Executive. Chief the than other members EMT all for outcomes the approves and EMT the of members all for outcomes appraisal performance annual the reviews PPC The roles. market-matched equivalent for quartile upper the in package remuneration atotal exceptional, been has performance where receive, to executives for opportunity an is there and performance for pay to is philosophy remuneration Mercury’s objectives. combination of financial predetermined andnon-financial a against performance by determined is outcome the because ‘at-risk’ deemed are incentives performance term long- and Short- incentives. performance long-term and incentives performance short-term remuneration, fixed components: three of up made is Total remuneration • • • guiding principles: three on founded is EMT the for policy remuneration Mercury’s Executive remuneration simplicity over complexity will be reflected in the design. the in reflected be will complexity over simplicity and outcomes; successful of delivery and performance of level the reflect will individuals for remuneration shareholder value; sustainable long-term to aligned is remuneration been adjusted as shown. shown. as adjusted been have weightings the FY21 For pillars. key five Mercury’s and goals, and purpose objectives, strategic Mercury’s with align closely to selected are criteria The control. management’s beyond are these as hydrology in variations annual negative and positive for normalised is KPI Commercial The below. outlined as areas across applied weightings respective with Kaitiakitanga and Partnerships Customer, People, Commercial, of areas the covered FY20 in KPIs shared The priorities. company’s the with focus EMT’s the aligning of objective the with 12 months, next the for priorities business on (KPIs) based Indicators Performance Key of set ashared to related is STI the of members) EMT other 50% for and Executive Chief the for (70% A proportion 35%. to up was it members EMT other for 50% and was Hawksworth) Vince and Whineray (Fraser Executives Chief both for percentage target relevant the For FY20 salary. base executive’s the of apercentage as usually annually, set is payment STI an of value target The year. financial that in performance for reward and motivate to designed payments at-risk (STIs) are incentives Short-term Short-term performance incentives median. market pay fixed the to reference with remuneration fixed pay to is policy Mercury’s benefits. and salary base of consists Fixed remuneration Fixed remuneration
79 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU financial year. relevant the over performance reflects fairly payments STI of outcome final the ensure to discretion retains Board The made. be will payment STI no KPIs, Group the for met not are thresholds performance five all event the In measures. performance individual and unit business to related is balance the members, EMT other of case the In Board. the by set measures performance individual to related is Executive Chief the for STI the of balance The Board). the by imposed subsequently previously, to referred cap the to (subject amount on-target STI the of 178% was KPIs shared the for member EMT an for payment STI an of amount maximum The performance. exceptional for rewarded be to employees allowed levels performance stretch ‘stretch’. The and ‘on-target’ ‘threshold’, area: pillar each within levels performance three were there For FY20 Note 1: REMUNERATION REPORT. Commercial: EBITDAF Pillar Kaitiakitanga Partnerships Customer People EBITDAF isnormalisedfor positive andnegative annual variations in Waikato hydro generation. 1 (CONTINUED) FY20 Weighting % Weighting FY20 date of the grant. the of date atthe as share Mercury one of value market the by tax less grant the of value the dividing by determined is grant each for receive may executive an which shares of number maximum The cash. than rather shares in made are LTI payments • • hurdles: performance different having tranches two into divided is plan LTI that under grant Each grant. the of date atthe set was and grant each for trust in held shares of number the determine to used was tax less value face The period. athree-year over measured performance with annually made were 2018, grants 1July of date grant the to up LTI applying the plan Under period. amulti-year over value shareholder of enhancement the with executives certain of reward the align to designed (LTIs) payments at-risk are incentives performance Long-term vesting FY21 to incentives Long-term performance made on this component of the LTI the of plan. component this on made be to award any for group comparator the of percentile 50th atthe be must TSR Mercury’s but tranche this on gate performance TSR positive no is There Trustpower). Meridian Energy, Genesis Energy, Contact Energy and (comprising group peer industry an of performance the to relative TSR Mercury’s on based is grant 50% the of positive; and atleast be must period that over TSR Mercury’s “gate” that a to subject is and 50 NZX the to relative (TSR) return shareholder total Mercury’s on based is grant 50% the of 30 20 25 10 15 FY21 Weighting % Weighting FY21 40 20 10 15 15
• hurdles: performance different with tranches two LTI has also this plan under grant Each year period. athree- over measured performance with annually made be to continue will grants plan, this Under point. atthis received shares the on tax for liable is executive The period. vesting the over paid dividends of value the representing shares additional receive also may executive The share. ordinary one to converted is right share each hurdles, performance the meeting to subject At grant. vesting, the of date at the share Mercury one of value the by grant the of value face the dividing by determined rights share of anumber granted are LTI executives this plan, Under plan. rights share protected 2019 adividend- is 1July LTI commenced new that plan The vesting FY22 from plan Long-term incentive made on this component of the LTI and the of plan; component this on made be to award any for group comparator the of percentile 50th atthe be must TSR Mercury’s but tranche this on gate performance TSR positive no is There Trustpower). Meridian Energy, Genesis Energy, Contact Energy and (comprising group peer industry an of performance the to relative TSR Mercury’s on based is grant 50% the of
positively or negatively, over a three-year period. athree-year over negatively, or positively performance, impact may circumstances unanticipated where adjustments appropriate allow LTI to both plans, for outcome final the over discretion retains Board The date. atthat as salary base executive’s an of 20% 40% to between represented 2019, 1July value the commencing period grant FY20 For the • period, plus 1%.period, vesting the over equity of cost company’s the against TSR absolute Mercury’s on based is grant 50% the of
80 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU FY20 Whineray –Fraser Executive Chief FY20 Hawksworth –Vince Executive Chief Five-year summary – Chief Executive's remuneration Executive's Chief – Five-year summary Note 5: Note 4: Note 3: Note 2: Note 7: Note 6: Chief Executive's remuneration and FY19) (FY20 CHIEF EXECUTIVE’S REMUNERATION. REMUNERATION REPORT. FY19 Fraser Whineray – Executive Chief Vince Hawksworth – Executive Chief remuneration received refer inFY20 to Tilt Renewables’ annualreport. For reference: On19July2019 Fraser Whineray was appointed to theBoard of Tilt Renewables Ltd asaDirector. For details of paid inFY21. Holiday payandKiwisaver of $36,081 was paidto Fraser Whineray onthisLTI amount butisnot reported figures inFY20 dueto being Both CE’s short-term incentive was pro-rated for theperiod worked inFY20. is includedhere. Benefits includeKiwiSaver andinsurance. Vince Hawksworth received a$55,000 payment for one-off relocation costs which for FY20 was $1,200,000 andfor Fraser Whineray FY19 was $1,054,212.50 andFY20 was $1,085,838.88. paidincludesholidaypayasperNZlegislation. Actual salary forThe annualisedbasesalary Vince Hawksworth Maximum STI was 178% of ‘on-target’ performance pay. Total remuneration paidincludingSalary, Benefits, STI andLTI payments. Salary 805,883 1,124,214 309,231 2 $ Benefits FY20 FY20 65,909 FY18 65,927 57,433 FY16 FY19 FY17 3 $ remuneration remuneration Subtotal $ Subtotal (CONTINUED) 1,803,283 1,181,647 1,653,476 1,501,434 375,158 871,792 1,975,715 1,881,192 513,940 paid Total Total 6 $ 460,680 138,782 614,079 maximum Percentage Percentage STI against against STI STI 4 4 7 63 65 % 69 57 67 51
321,004 179,989 Pay for performance $ performance for Pay N/A LTI 5 vested LTI against LTI against vested maximum % maximum Percentage Percentage Subtotal 794,068 781,684 138,782 N/A 50 98 78 87 0
Total remuneration Total remuneration performance performance 2015 –2018 2016 –2019 2013 –2016 2014 –2017 2014 2017– 2020 Span of LTI of Span 1,653,476 1,975,715 513,940 period N/A $
LTI Breakdown of Chief Executive's pay for performance (FY20) pay performance for Executive's Chief of Breakdown Five-year Performance (company summary –TSR group) peer vs Note 8: STI TSR % 8 40 50 8 30 20 -5 10 0 Fraser Whineray at$368,974.382017 to gross scheme. Shares issued 1 July under the long-term incentive rewarded and issued Shares measures financialperformance non- and financial key of acombination on Based salary. at50%base of Set Description 30 June 2016 at time of hisdeparture inFY20. The above STI andLTI payments for FY20 will bepaidinFY21, with theexception of Fraser STI Whineray’s which was paid 30 June 2017 30 June 2018 30 June 2019 Executive only)Executive (for Chief KPIs business on 10% based percentile; pro rata vesting in between in vesting rata pro percentile; at75th 100% and percentile at 50th 50% vesting with Trustpower) and Energy Meridian Energy, Genesis Energy, Contact (comprising group peer industry against performance TSR relative 50% weighting in between vesting rata pro percentile; at75th 100% and percentile at50th 50% vesting with grant) (fixed 50 of date at NZX against performance TSR relative 50% weighting measures individual on 20% based weightings) for above (see table KPIs Shared Company five the on 70% based measures Performance 30 June 2020 NZX 50 Peer group Mercury Vince Hawksworth achieved by achieved by Percentage Percentage 88.5 N/A N/A N/A 95 95
Fraser Whineray achieved by achieved by Percentage Percentage 119.75 100 130 130 74
81 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU Chief Executive’s remuneration performance pay FY21 for performance remuneration Executive’s Chief Note 10: Note 9: FY21. for apply will that package and structure the advance in disclose to transparency, of interests the in elected, has Board The CHIEF EXECUTIVE’S REMUNERATIONFY21 STRUCTURE $61,819. Whineray $10,927 Fraser for was and Hawksworth Vince for contribution company’s the For incentives). FY20, long-term and short- (including earnings taxable 3% of gross of contribution acompany receive and contribute to eligible is Executive Chief the scheme, this of amember As KiwiSaver. of amember is Executive Chief The KiwiSaver REMUNERATION REPORT. $ $ $ $ $ FY21 Executive Chief $ 2 3 3 2 1 1 $ $ , , , , , , 0 0 0 0 5 5 5 5 0 0 0 0 0 0 0 0 $ 0 0 0 0 0 0 0 0 0 This LTI will begranted and,ifhurdles are inFY21 met, paidinshares in2023. Benefits includeKiwiSaver. Insurance amount isnot yet available andisadditional. Base Salary $ Salary Base F i x e 1,200,000 d Benefits O n 36,000 - plan 9 $ (CONTINUED) Subtotal $ Subtotal 1,236,000 M a x i m u m Pay for performance 'on-target' $ 'on-target' performance for Pay 600,000 STI B A L o a nnu n s LTI granted e g
S a T l a e 900,000
V l r a m a r r y
i
I a & n b c
l B 10 e e e n n t i 1,500,000 e v e fi Subtotal s t
s G r a n t e d $ Total remuneration
( 2 0 2 3
v e 2,736,000 s t i n g ) remuneration and benefits. fixed of $539,207 acombination was remaining The Hawksworth. Vince of commencement the and Whineray Fraser of departure the between Executive Chief as acting of responsibilities additional the for compensation as payment discretionary off one a $50,000 received also Officer Financial Chief The FY20. in paid but FY19 to relating LTI both a$77,500 and payment, payment STI $185,538 a included amount $852,245.This totalling remuneration received Officer Financial Chief the FY20, In Officer. Financial Chief the to paid remuneration total regarding details provide to elected has Board the remuneration, executive of transparency greater providing of interests the In CHIEF FINANCIAL REMUNERATION OFFICER’S
82 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU FY20 year in the following bands: following the in year FY20 the during directors) including (not employees 403 to benefits including $100,000 of excess in remuneration paid Group The REMUNERATION EMPLOYEE Note 12: Note 11: 2020are: June 30 as at shares Mercury of ownership Officer’s Financial Chief and Executive Chief The SHARE OWNERSHIP REMUNERATION REPORT. $100,001-$110,000 Hawksworth –Vince Executive Chief Remuneration band Remuneration EMT of Balance Chief Financial Officer Executive $120,001-$130,000 $110,001-$120,000 $150,001-$160,000 $140,001-$150,000 $130,001-$140,000 $160,001-$170,000 $170,001-$180,000 $180,001-$190,000 $200,001-$210,000 $190,001-$200,000 $210,001-$220,000 $220,001-$230,000 $240,001-$250,000 $230,001-$240,000 Olde hadarelevant interest in93,648 shares, someof which were owned by afamily trust. Chief FinancialOfficerandexcluding shares owned by Matt Olde who left thecompany on6March 2020. As at 30June2020, Matt Balance of shares owned by other EMTmembers,excluding shares owned by thecurrent Chief Executive, former Chief Executive and at 30June2019. formerJune 2020, Chief Executive, Mercury’s Fraser Whineray owned 41,200 shares, which reflects achangeof -192,151 shares owned on30March 2020,Vince Hawksworth joinedMercury assuchhissharewas ownership entry newduringthereporting period. As at 30 12 13
Number of shares owned (excludes shares shares (excludes owned shares of Number (CONTINUED) held in trust for the LTI the scheme) for trust in held 175,697 163,215 Currently employed Currently 2,080 60 44 49 35 37 14 12 61 17 4 9 6 3 3 7
Change in shares owned owned shares in Change employed No longer from 30 June 2019 June 30 from 3 2 1 1 1 1 +23,392 -82,260 +2,080 Total
60 44 38 35 52 14 19 12 61 4 9 5 3 7 7 11
employed by Mercury for only part of the year. the of part only for Mercury by employed being Hawksworth Vince to due year this remuneration actual Executive’s Chief the against acomparison We provided not have salary. base Executive’s Chief the and employees for FY20 in paid remuneration actual on based is ratio this collection, data of 1:14. ease For was Note: the salary base Executive Chief (median) and employee between FY20 for ratio remuneration total The 15: Note Note 14: Note 13: $250,001-$260,000 Remuneration band Remuneration $260,001-$270,000 Total $2,120,001-$2,130,000 $270,001-$280,000 $280,001-$290,000 $290,001-$300,000 $300,001-$310,000 $310,001-$320,000 $320,001-$330,000 $340,001-$350,000 $350,001-$360,000 $370,001-$380,000 $410,001-$420,000 $540,001-$550,000 $450,001-$460,000 $580,001-$590,000 $590,001-$600,000 $660,001-$670,000 $690,001-$700,000 $720,001-$730,000 $850,001-$860,000 $1,370,001-$1,380,000
This employee received short-term two incentive payments (inrelation andonelong-term to andFY20) FY19 incentive payment inFY20. incentive payments (inrelation to FY17-FY19 subsequent three-year andthetwo periods) inFY20. In additionto redundancy, this employee received short-term two incentive payments long-term (inrelation andtwo to andFY20) FY19 The remuneration bands above include5employees who received redundancy payments inFY20. 13
Currently employed Currently 391 4 3 3 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1
employed No longer 12 1 1 14 15 1 Total 403 4 3 3 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
83 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU was as follows: as was 2020 June 30 to year the during director by rate attendance and meetings of number The period. the during remuneration following the received 2020and June 30 to year the during directors as office held people following The business. Mercury with associated costs other and travel reasonable directors’ meets Mercury advice. benchmarking remuneration independent considered having and stakeholders key with consultation following set are fees These 2016. 2015 and in years two over implemented increase the with 2015, in reviewed last were fees Directors’ at$991,000. stands currently and approval shareholder to subject is directors to paid be to able fees of pool total The positions. these of responsibilities and involved time additional the reflect to committees Board various on directors by out carried work of respect in and Chair the to paid are fees Additional fees. directors’ of form the in paid is remuneration directors’ The DIRECTOR REMUNERATION REMUNERATION REPORT. For reference: Future Director Anna Lissaman was paid$15,000 inFY20. Note 19: Note 18: Note 17: Note 16: Note 15: No. of meetings of No. Director Total (Chair) Flacks Prue Hamling Hannah Scott St John Scott TaitokoMike Patrick Strange Keith Smith James Miller Lark Andrew Joan Withers Joan Withers (Chair) 18 Scott St JohnandHannahHamlingattended somecommittee meetingsasobservers. addition to herfees asChair. Following that period,Prueparticipated of Board incommittees inthecapacity Chairandshedidnot receive payment for thoseattendances in Nominations Committee reflect herparticipation inthosecommittees asdirector theperiod of 1July2019 to between September 27 2019. Prue Flacks’ fees cover $135,714 asChairand $24,111 of director. inthecapacity Prue’s fee for thePeople &Performance Committee andthe Joan Withers’ fees cover allCommittee meetingsthat sheattended. Disclosure Committee attendance isnot reported onastheseoccuradhoc andonanasrequired basis. James MillerandHannahHamlingreceived payment for aone-off attendance committee at atemporary established duringthereporting period.
832,944 159,825 (Chair) 98,000 98,000 98,000 98,000 98,000 98,000 40,833 es$ Fees 44,286 (Chair) Board 17 10 Attended Attended Meetings 10 10 10 10 10 10 10 5 2 46,000 26,000 es$ Fees 10,000 10,000 Risk Assurance & Risk Assurance Audit Committee (Chair) (Chair) (CONTINUED) 4 Attended Attended Meetings 2 4 4 4 4 3 1 19 19
Performance Committee Performance Committee es$ Fees 37,530 16,609 16,609 (Chair) (Chair) 8,000 8,000 4,921 People & & People 3 Attended Attended Meetings 2 3 3 3 3 1
19
es$ Fees 4,000 2,870 7,854 Nominations Nominations 984 Committee 1 Attended Attended Meetings 1 1 1 1 19 Other 5,500 8,250 2,750 Fees 15 106,000 106,000 Total 932,578 124,000 165,730 114,609 110,870 117,500 44,286 43,583 18 es$ Fees 16
84 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU as at 30 June 2020: 2020: June at30 as Register Interests Company’s the in included particulars are following The entity. or company named another in adirector by held aposition of Company the to writing in notice ageneral giving by disclosure make can (2) adirector subsection Under interests. certain disclose to acompany of adirector 1993 Act requires Companies Zealand New the of 140(1) Section Interests Directors’ of Disclosure REGISTER INTERESTS DIRECTORS’ DISCLOSURES. Community Financial Services Limited Financial Services Community subsidiaries The Warehouse Group Limited and and subsidiaries Limited Surgical Services Mobile Limited &Co H JAsmuss and subsidiaries Limited Group Motor Enterprise Keith Smith Trust Board College St Cuthbert’s Committee Investment ACC Board Limited Company Refining Zealand New The ACC Limited NZX Miller James Group Lark Andy Lark Nil Hannah Hamling Limited Corporation Queenstown Airport Limited Chorus Limited Zealand New of Bank Prue Flacks
Director ChairDeputy Chair Chair Chair Trustee Chair Director ChairDeputy Chair Chair Nil Chair Director Director 2 2 Butland Medical Foundation Medical Butland Family TrustSt John Trust Macleod Auckland of University vehicles) (and associated Foundation Next Limited Group Co-operative Fonterra LimitedCorporation Fisher & Paykel Healthcare John St Scott Limited Company Dairy Westland Limited Television Network Sky Limited TILT Renewables Limited Tree Scape Limited &O’Leary Anderson Tax of board Limited Traders Advisory subsidiaries and associates Healthcare Holdings Limited and Estate Residuary Campbell Logan John Sir Trust Board Park Cornwall subsidiaries and Limited Gold Harpers subsidiaries and (NZ) Limited Goodman
Trustee Trustee Trustee Chancellor Director Director Shareholder Director/ Director Director Shareholder Director Chair Member Chair Trustee Trustee Shareholder Director/ Chair
2 2 2 2 1
2. 1. Ministerial Advisory Group Advisory Ministerial Inclusion &Digital Economy Digital Toha Foundry Limited Waiora Consulting Limited Limited Holdings Canvasland Limited Holdings Maratini Development Tourism &Economic Events Auckland Limited Takiwa TaitokoMike Essential Energy Limited Airport International Auckland Limited Chorus Strange Patrick ended 30June2020. Entries removed by notices given by thedirectors duringthe year ended 30June2020. Entries addedby notices given by thedirectors duringthe year Member Shareholder Director/ Shareholder Director/ Shareholder Director/ Shareholder Director/ Director Shareholder Director/ Director Chair Chairman 2 2
85 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU and disposals of relevant interests in Mercury securities during the period to 30 June 2020: June 30 to period the during securities Mercury in interests relevant of disposals and acquisitions following 1993, the Act Companies Zealand New the of 148 section to pursuant disclosed, Directors Transactions Securities in Interests Directors’ of Disclosure managers. senior and directors as responsibilities and duties their out carrying in persons those of omissions or acts cover to Group the of managers senior and for, directors effected been has insurance and to, given been have Indemnities Indemnities Officers’ and Directors’ DIRECTORS’ DISCLOSURES. Scott St John St John Scott St John Scott St John Scott St John Scott St John Scott Patrick Strange Keith Smith St John Scott St John Scott Prue Flacks Prue Flacks Prue Flacks director of Name 17 March 2020 March 17 2020 March 13 2020 March 10 2020 March 9 2020 March 6 2020 March 4 2020 March 13 2020 March 2 2019 November 21 2019 November 22 2019 August 22 2019 July 11 interest disposal of relevant of acquisition/ Date (CONTINUED) of shares purchase market On of shares purchase market On of shares purchase market On of shares purchase market On of shares purchase market On of shares purchase market On shares to attached vote to of, exercise a right the control to or exercise, to of, power or disposition or to control the acquisition of, or dispose or acquire to –power person arelevant by shares of purchase market On of shares purchase market On of shares purchase market On of shares purchase market On bonds capital of purchase market On bonds ofRedemption capital interest Nature of relevant
19,086.00 20,983.00 22,777.00 23,475.00 19,207.20 117,725.95 9,838.40 22,900.00 14,282.70 14,370.00 39,798.82 40,000.00 (NZD) Consideration
5,000 5,000 5,000 5,000 4,000 25,000 2,288 5,000 3,000 3,000 38,000 (40,000) acquired/(disposed) was relevant interest a which in Securities
Directors disclosed the following relevant interests in Mercury securities as at 30 June 2020: June at30 as securities Mercury in interests relevant following the disclosed Directors Disclosure Securities of in Interests Directors’ Mercury Mike Taitoko Mike Patrick Strange Scott St John St John Scott Keith Smith James Miller Andy Lark Andy Hannah Hamling Prue Flacks Director 2,200 39,160 45,000 30,156 40,320 3,300 – 26,474 a is relevant held interest which in Shares of Number
– – – – – – – 38,000 a is relevant held interest which in Bonds of Number
– 25,000 Shares 32,000 Shares 2,288 Shares 2,288 – – – 3,000 Shares; 38,000 Bonds Change since 30 June 2019 June 30 since Change
86 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU Twenty shareholders registered largest as at 30 June 2020 SECURITY HOLDER INFORMATION. 3. 2. 1. SHAREHOLDER INFORMATION Custodial Services Limited Services Custodial Limited Pty Nominees Citicorp Limited Services Custodial Limited Custodians FNZ (NZ) Limited Nominees Paribas BNP Limited Nominee Depository Zealand New Mercury NZ Limited Mercury Limited Zealand) (New Nominees Citibank A/C Street State Limited Zealand) (New Nominees HSBC Limited Zealand) (New Nominees HSBC JP Morgan Chase Bank, N.A. NZ Branch-Segregated Clients ACCT Clients NZ Branch-Segregated N.A. Bank, Chase Morgan JP BNP Paribas Nominees (NZ) Limited Nominees Paribas BNP Limited (NZ) Nominees JBWere Total Limited Custodians Barr Forsyth Accident Compensation Corporation Her Majesty The Queen in Right of New Zealand Zealand New of Right in Queen The Majesty Her Name BNP Paribas Nominees (NZ) Limited Nominees Paribas BNP Limited (Australia) Nominees Custody HSBC Limited Nominees National Limited Fund Nominees A/C NZ Superannuation Nominees HSBC Held as treasury shares. Held astreasury which included37,711,584 shares. shares heldastreasury ordinary Percentage calculatedhaving1,400,012,517 onthebasisof Mercury shares onissueasat 30June2020, ordinary and not detailed separately. As required by theNZXListing Rules, NewZealand Central (NZCSD) Securities Depository holdingsare includedabove 1 1,097,174,682 716,140,528 10,030,805 26,322,539 39,456,228 10,499,005 37,711,584 46,610,947 65,375,914 43,125,709 6,295,444 8,069,095 16,761,503 9,495,620 15,179,433 9,028,729 8,182,226 7,047,024 4,610,786 11,102,819 6,128,744 of shares Number Number 3
% of shares % of 78.37 0.50 0.58 0.58 0.44 0.68 0.64 3.08 0.33 51.15 0.45 3.33 2.82 2.69 0.79 0.72 0.75 4.67 1.08 1.88 1.20 2
Distribution ofDistribution shareholders and holdings as at 30 June 2020 2. 1. 2020 June 30 at as holders product Substantial Total 100,001 and above above and 100,001 100,000 to 10,001 10,000 to 5,001 5,000 to 1,001 1,000 1 to Her Majesty The Queen in Right of New Zealand New of Right in Queen The Majesty Her Size of holding of Size As at 30June2020, had1,400,012,517 Mercury shares onissue, ordinary which included37,711,584 shares. shares heldastreasury ordinary Superannuation Fund of theCrown;which are theproperty and(c) 68,000 shares heldby Public Trust ontrust for theCrown andcertain iwi. This comprises(a) 716,140,528 shares heldby theCrown onitsown account; (b) 16,580,790 shares forming partof theNewZealand shareholders Number of of Number 78,323 29,399 38,767 6,444 3,602 111
Class of Securities Ordinary shares Ordinary shareholders 37.54 % of % of 8.23 49.5 0.14 100 4.6
1,400,012,517 in Substantial in Substantial 1,168,261,889 732,789,318 47,320,390 89,955,593 20,281,887 Number of of Number Number of of Number 74,192,758 Securities Holding shares 1
Securities in Class Total Number of of Total Number 1,400,012,517 quantity % quantity Holding Holding 83.45 3.38 6.43 100 1.45 5.3 2
87 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU 2. 1. 2020 June 30 at as bondholders registered Twenty largest BONDHOLDER INFORMATION SECURITY HOLDERINFORMATION. Total Limited Sterling Holdings Limited Securities Masfen Limited Custodians Barr Forsyth Inc Tindall Foundation The Citibank Nominees (New Zealand) Limited Zealand) (New Nominees Citibank Custodial Services Limited Services Custodial Best Farm Limited Trust Association Methodist Zealand New National Nominees Limited Nominees National Limited Services Custodial Limited Trust Nominees Public Kiwisaver Generate Limited Services Custodial Limited Custodians Barr Forsyth Limited Services Custodial Investment Custodial Services Limited Services Custodial Limited Services Custodial Limited Custodians FNZ Limited (NZ) Nominees JBWere Limited Custodians Barr Forsyth Name Custodial Services Limited Services Custodial Percentage calculatedhaving300,000,000 onthebasisof Mercury capital bondsonissueasat 30June 2020. and not detailed separately. As required by theNZXListing Rules, NewZealand Central (NZCSD) Securities Depository holdingsare includedabove (CONTINUED) 1 capital bonds 233,524,000 92,638,000 35,869,000 10,583,000 15,564,000 13,297,000 5,000,000 Number of of Number 6,302,000 2,900,000 14,913,000 4,904,000 1,800,000 1,200,000 7,896,000 2,815,000 5,154,000 1,455,000 3,155,000 4,187,000 2,717,000 1,175,000
% of capital % of bonds 30.88 77.84 0.40 0.60 0.39 11.96 0.49 3.53 0.94 2.63 4.43 0.97 4.97 1.40 1.05 2.10 1.63 0.91 5.19 1.67 1.72 2
Distribution ofDistribution bondholders and holdings as at 30 June 2020 100,001 and above above and 100,001 100,000 to 10,001 Total 5,001 to 10,000 to 5,001 5,000 to 1,001 Size of holding of Size Number of capital of capital Number bondholders 1,672 1,214 275 105 78 bondholders % of capital capital % of 16.45 72.61 6.28 4.67 100 300,000,000 capital bonds 254,883,000 42,045,000 Number of of Number 2,682,000 390,000
quantity % quantity Holding Holding 84.96 14.02 0.89 0.13 100
88 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU . director. as office hold to ceased Withers Joan period, reporting the During Hamling. Hannah and John, St Scott Lark, Andy Strange, Patrick Taitoko, Smith, Keith Mike Miller, James Flacks, 2020: Prue June at30 as Limited NZ Mercury of directors as office held persons following The MERCURY NZ LIMITED compliance).substituted of principle the on (based Rules Listing ASX the of most with complying from exempt is and Rules, Listing NZX the with complies NZX, the by regulated primarily is Company The ASX. the on listed still are shares Company’s the and Board, Main NZX the on listing afull have to continues Company The 2016. 19 February on trading of commencement the from effective Listing, Exempt Foreign ASX an to Listing ASX an from category admission ASX NZ Limited’s Mercury in achange approved ASX Shares. Ordinary of transfer and ownership regulating requirements the including Constitution, Mercury’s of provisions particular to due is This designation. (NS) a“non-standard” with listed is Mercury Zealand, New In exchange. stock Australian the on Listing Exempt Foreign ASX an as and exchange stock Zealand New the on listed is Company”) “the or “Mercury” as section this in to (referred NZ Limited Mercury STOCK EXCHANGE LISTINGS COMPANY DISCLOSURES. 1 Mercury NZ Limited during FY20: during NZ Limited Mercury of subsidiaries of directors as office held persons following The SUBSIDIARY COMPANIES Mercury ESPP Limited ESPP Mercury Limited Power Geothermal Mighty Limited International Power Geothermal Mighty Limited SPV Mercury Mercury Energy Limited Limited Geothermal Kawerau LimitedGlo-Bug Bosco Connect Limited Connect Bosco Company name Marlene Strawson Tony Nagel William Meek Tony Nagel William Meek Vincent Hawksworth Fraser Whineray Tony Nagel William Meek Vincent Hawksworth Fraser Whineray Tony Nagel William Meek Vincent Hawksworth Fraser Whineray Tony Nagel William Meek Vincent Hawksworth Fraser Whineray Tony Nagel William Meek Vincent Hawksworth Fraser Whineray Tony Nagel William Meek Vincent Hawksworth Fraser Whineray Tony Nagel William Meek Vincent Hawksworth Fraser Whineray Directors 2 2 2 2 2 2 2 Special General Partner Limited Special Partner General (50%) Limited Venture Joint Rotokawa Limited Geothermal Rotokawa Limited Generation Rotokawa Limited Geothermal Ngatamariki LTI Limited Mercury Mercury Geothermal Limited Geothermal Mercury Company name Tony Nagel William Meek Vincent Hawksworth Ware Robert Paul Michael Stevens Mark Thompson Landers Garth Michael Stevens Tony Nagel William Meek Vincent Hawksworth Tony Nagel William Meek Vincent Hawksworth Tony Nagel William Meek Vincent Hawksworth Fraser Whineray Strong Natasha Newton Mana Clarke Nicholas Aroha Campbell Fraser Whineray Michael Stevens Clarke Nicholas William Meek Fraser Whineray Thomas Howard Taitoko Mike Prue Flacks Fraser Whineray Directors 2 2 2 2 2 2. 1. Mercury Drive Limited Drive Mercury (2016) Crisis Limited Power What Limited Solar Mercury Blockchain Energy Limited Mighty River Power Limited Power River Mighty Company name Directors who have resigned duringFY20. Septemberon 27 2019. Joan Withers retired asadirector NZLimited of Mercury Tony Nagel William Meek Fraser Whineray Jack Julia Tony Nagel William Meek Vincent Hawksworth Fraser Whineray Tony Nagel William Meek Vincent Hawksworth Fraser Whineray Tony Nagel William Meek Vincent Hawksworth Fraser Whineray Tony Nagel William Meek Vincent Hawksworth Fraser Whineray Directors 2 2 2 2 2 2 2
89 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU • • to containConstitution provisions: the permit waivers These apply. to 8.10 8.11 and continue Rules Listing ASX from waivers The 2016. February in Listing Exempt Foreign ASX an to category admission Company’s the of change the following relevant longer no are Mercury to granted previously ASX that waivers the of majority The Zealand applicants. New not are and Offer General the under shares acquire who applicants to shares of sale the cancel to Crown the allow to and Act”) Finance 1989 Act (“Public Finance Public Zealand New the by imposed restrictions ownership the reflecting provisions contain to Constitution the allow to Rules Listing ASX the of respect in waivers Company the granted has ASX ASX • • allowing: provisions (“Constitution”) to Constitution permit Mercury’s contain 8.1.6(b). 8.1.5 and Rules waivers These Listing NZX of respect in waivers Company the granted 2020 Regulation May NZX 2020, 19 on June 30 on rulings and waivers class transitional the of expiry the of advance In transition. the to relation 2018 in 19 November on Regulation NZX by granted rulings and waivers class the on 2019, April relied 17 2019 on and 1January dated Rules Listing NZX new the to transitioned Company”) “the or “Mercury” as section this in to (referred NZ Limited Mercury NZX EXCHANGES STOCK AUSTRALIAN WAIVERS AND ZEALAND NEW FROM THE OTHER DISCLOSURES. Mercury to sell those shares. those sell to Mercury enable to and shares those transferring from applicants Zealand New not are and Offer General the under shares acquired who shareholders prevent to Mercury enabling and 10% limit; the enforce to Mercury and Crown the allowing breached. is 10% limit the where shares ordinary Mercury to attached rights voting and dividend suspend to Mercury and 10% limit; the enforce to Mercury and Crown the • • • • for monitoring and enforcing them. incorporatesConstitution these and restrictions mechanisms and consequences for breaching those The restrictions. Mercury by issued securities of types certain of ownership the on restrictions includes Act Finance Public The transfer and ownership on Restrictions • to: aright holder the gives share each Act”), 1993 (“Companies Act Companies Zealand New the and Constitution the Under Rights and privileges Mercury. in shares to attach that transfer, privileges, conditions and limitations, including on restrictions rights, the about information out sets statement This LIMITED ORDINARY SHARES INFORMATION ABOUT MERCURY NZ the Companies Act and the Constitution. the and Act Companies the by ashareholder upon conferred rights other the exercise and generally; shareholders to sent reports Company the and meeting of notices including information, certain sent be Company; the of liquidation any in assets surplus of distribution the in shareholders other with share equal an receive share; that of respect in Company the by paid and declared and Board the by any, if authorised dividends, including distribution, any in share equal an receive such as a resolution to: aresolution as such resolution, any on apoll on share per vote one cast to right the including shareholders, of atameeting vote and attend – – – – –
place the Company in liquidation; in Company the place section 221 of the Companies Act; or Companies the of 221 section under Company the of amalgamation the approve the Companies Act); Companies the in defined is (as term that transaction amajor approve adopt, revoke or alter the Constitution; appoint or remove adirector; remove or appoint broad terms, if: terms, broad In 10% Limit. the enforce to so, if and, occurred has 10% Limit the of abreach whether determine to power the has Mercury Determining abreach whether has occurred holder. that by held shares any in interest arelevant have who persons all of details applicable, where include, to required is declaration statutory That 10% Limit. the of breach in be, to likely is or is, person a that believes or knows Board the if declaration statutory a with it provide to shares of aholder require may Mercury breach or potential breach. the of Mercury notify must holder the 10% Limit, the of breach in shares in interest arelevant have may holder that by held shares in interest arelevant has who aperson that believes or knows or 10% Limit the breaches shares of aholder If abreach whether hasAscertaining occurred 10% Limit. the exceeding Crown the than other person any in result will redemption or acquisition issue, such that knowledge actual has it if shares any redeem or acquire issue, not must Company The Limit”). (“10% issue on shares the 10% of than more in interest’ a‘relevant Crown) have may the than (other person No 10% Limit 51% holding. this below falling Crown if such issue, acquisition or redemption would result in the shares any redeem or acquire issue, not must Company The issue. on shares 51% the of at least hold must Crown The 51% Holding classes of shares or voting securities. voting or shares of classes other those to apply also would below summarised restrictions the future, the in rights, voting confer which securities other or shares, of class other any issues Mercury If below. out set is Constitution the and Act Finance Public the under shares of ownership the on restrictions the of A summary • • continues: breach that as long so for then, Limit 10% of the breach in shares any in held is interest arelevant If • • must: 10% Limit of the breach in is who A person of exceeding 10% the Effect Limit matters. these on adetermination makes it before Company the to representations make to opportunity the shareholder affected the give must Mercury inadvertent. was breach that not or whether so, if and, breached has been Limit 10% the not or whether determine to required is Mercury then • • distribution authorised by the Board in respect of the shares of the respect in Board the by authorised distribution other or dividend any 10% Limit, of the excess in held is interest arelevant which in shares of the respect in receive, to entitled be not will 10% Limit of the breach in held is interest arelevant which in holder(s) of shares registered the and 10% Limit; of the excess in held is interest arelevant which in shares of the of any respect in cast may be votes no sale the has after completed. been practicable as soon as holder relevant 10% Limit), the to of the breach the of investigating costs the and brokerage (including sale the with connection in Company the by incurred costs other of any deduction the after of sale, proceeds net the pay will Company the circumstances, those In holder. relevant of the behalf on of shares number relevant of the sale the for may arrange Mercury timeframe, that within remedied not is breach the If breach. of the aware, been have to ought or aware, became they which on date the after days 60 within breach in longer no are they that ensure and breach; the of remedying purpose the for notice, the in specified are that steps other any take or shares, in interest relevant their or of shares dispose to them requiring Mercury from received notice any with comply Company, of the satisfaction reasonable the to completed been has not that adeclaration lodges or so do to required when declaration astatutory lodge to fails of shares a holder 10% Limit; or of the breach in may be aperson that considers Mercury .
90 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU and, where applicable, the shareholders. Board the by approved reconstruction capital of form other or buy-back share capital, of areduction through Company the by cancelled be could shares circumstances, certain In cancellation Share satisfied. are conditions certain that provided Limit 10% the from are exempt holders) beneficial underlying separate of number alarge of behalf on securities (that hold companies nominee and corporations Trustee companies nominee and Trustee corporations breach). suspected the investigate to steps taken not has Board the but breached been has 10% Limit the that suspects Crown the where (for example, Constitution the under it on conferred powers the of certain exercise to Board the direct to power the has Crown The directions Crown prescribed timeframe. the within Board the by it from requested declaration statutory a lodge to failed has transferee the where or 10% Limit the of abreach in result will transfer the that believes or knows it if shares of atransfer register to refuse may Board The knowledge of the breach. without and faith good in Company the by counted were restriction voting the of breach in exercised votes where invalid not is atameeting passed aresolution However, concerned. votes the counting in disregarded be must 10% Limit the of breach in held ashare to attached right avoting of exercise An shares. of, its of any respect in distributions other or dividends any receive to entitled be not will and to, attached votes the exercise not may holder registered the inadvertent, not was breach the that determine to information sufficient have not does it that or inadvertent, not was Limit 10% the of abreach that determines Board the if However, OTHER DISCLOSURES. (CONTINUED) sale of shares on those grounds: those on shares of sale a cancels Crown the If Prospectus). and Statement Investment Offer Share the in defined is (as term that Applicant’ Zealand a‘New as Offer the under shares allocated be to entitlement its misrepresented applicant the if Prospectus and Statement Investment Offer Share Power River Mighty the in Offer”) (“the Crown the by shares of offer the under applicant an to shares of sale the cancel may Crown The shares of sale of Cancellation • • • follows: as applied be will Holding a Minimum than less being for sold shares any of sale the of proceeds The sale. the effect to desirable or necessary considers Company the action other any take to Rules) or Operating Settlement ASX the in defined are terms (as those Holding Sponsored Issuer an to Holding CHESS that from shares relevant the move to Adjustment Holding a initiate notice, the in specified time the of end the may, after Company the Rules, Operating Settlement ASX 5.12.2 the of Rule with complies that notice a given has Company the where Rules, Operating Settlement 5.12 ASX Rule of the of and sale the of purposes For the sale. the to relating documents necessary all sign to and holder the of behalf on act to Mercury authorised have to deemed is holder the and behalf), Mercury’s on acting abroker through (including market on shares those sell may Mercury Holding, aMinimum than less are holder the of name the in registered then shares given, is notice the date the after months three of end if,the that Rules) at Listing NZX the in defined is term (as shares of that Holding aMinimum than less holding ashareholder to notice give may, time, atany Mercury Sale of less than aMinimum Holding administrators or assigns. administrators executors, her or his or sale the before immediately holder the was who person the to paid be any, if must residue, The shares. the of respect in Company the to owing amounts other any or calls unpaid any of satisfaction in Second, expenses. sale reasonable any of payment in First, person by relevantperson the applicant. associated the to of disposed otherwise or sold transferred, shares of number the to up person, associated that by held shares to extend will sale of power the then person, associated an to shares of disposed otherwise or transferred sold, has shares to entitlement their misrepresented who applicant an If • • will also pay a supplementary dividend of 1.66 cents per share share per cents 1.66 of dividend a supplementary pay also will Mercury dividend. final the for share per cents 3.66 of credit imputation an to amounts 28%, of which rate tax corporate ata imputed be will dividends 2020. The 15of September date record the on at5.00pm register share Company’s the on are who shareholders all to 9.4 of share per cents dividend final imputed afully declared Board 2020 the 18 August On ASX. of consent written the without securities, restricted of issue the require would Rules Listing ASX the which in circumstances in assets classified any acquire not will Mercury (Australia). 2001 Act Corporations the of 6C 6B and 6A, 6, Chapters to subject not is and Zealand New in incorporated is NZ Limited Mercury OTHER DISCLOSURES prohibited. are parties political to donations Policy, Delegations 2019). Mercury’s June 30 Under ended year the during 2020 ($101,294 June 30 ended year the during Group the by made $99,500 of were Donations DONATIONS the applicant will receive from the sale the lesser of: lesser the sale the from receive will applicant the and applicant); the of person associated an not was who aperson to shares its of all of disposed or transferred sold, previously had applicant the (unless Offer the under applicant the by acquired were shares those not or whether of irrespective Offer, the under it to sold shares of number the to up applicant, that by held shares sell must Mercury – –
Crown. the to payable being amount excess any with costs, those less shares the for paid price aggregate the and Company; the and Crown the by incurred costs the less shares the for price sale the at 30 June 2019. June at 30 $2.54 $2.69, 2020 was with June at30 as stock) compared treasury (excluding Share per Tangible Assets Net Mercury’s ownership. majority Crown’s the to due uplift one-notch a from benefits Company The outlook. astable with rating BBB+ S&P’s a has Company the report, annual this of date atthe As share). per cents 15.8 (or $215.1 to million dividends declared total the 2020, brings 1April on shareholders to share) paid per (6.4 cents million $87.1 of dividend interim the with together dividends, These dividends. supplementary to equivalent credit atax Department Revenue Inland Zealand New the from receive will Company The shareholders. non-resident to dividend final the to relating
91 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU GRI INDEX STANDARD INDEX GRI CORE REPORTING SUSTAINABILITY INDICES. 102-42 102-40 102-18 102-16 102-14 102-13 102-12 102-11 102-10 102-9 102-8 102-7 102-6 102-5 102-4 102-3 102-2 102-1 GRI 102General disclosures 2020 ORGANISATIONAL PROFILE GENERAL DISCLOSURES GRI standard stakeholders andselecting Identifying List of stakeholder groups Governance structure and normsof behavior Values, principles,standards, decision-maker Statement from senior Membership of associations External initiatives approach principleor Precautionary organisation anditssupplychain Significant changes to the Supply chain other workersand Information onemployees Scale of theorganization Markets served Ownership andlegalform Location of operations Location of headquarters and services Activities, brands, products Name of theorganisation Disclosure title
Engaging With OurStakeholders pp18-19 Engaging With OurStakeholders pp18-19 Statement Company website –Corporate Governance Company website – Code The Mercury Chair &Chief Executive Update pp9-12 Engaging With OurStakeholders p19 Catchment p27 Vulnerable Customers p24, The World’s Best Our Stakeholders p18, CloseConnections Help The World Around Us pp14-17, Engaging With Statement Company website –Corporate Governance The World Around Us pp14-17 The World Around Us pp14-17 Who Wepp4-8 Are Who Wepp4-8 Are Who Wepp4-8 Are Company Disclosures p89 Who Wepp4-8 Are p97Directory Who Wepp4-8 Are Front Cover Location Comments 103-1 GRI 103General disclosures 2020 MANAGEMENT APPROACH 102-56 102-55 102-54 102-53 102-52 102-51 102-50 102-49 102-48 102-47 102-46 102-45 102-44 102-43 GRI standard topic anditsBoundary Explanation of thematerial External assurance GRI content index with theGRIStandards Claims of reporting inaccordance regarding thereport Contact point for questions Reporting cycle Date of most recent report Reporting period Changes inreporting Restatements of information List of material topics topic Boundaries Defining report content and Financial statements consolidated Consolidated Entities includedinthe Key topics andconcernsraised engagement Approach to stakeholder Disclosure title
Pulling It All Together p21 GRI Content Indexp92 About This Report p2 p97Directory About This Report p2, Front Cover Front Cover Front Cover Pulling It All Together p21 Pulling It All Together p21 About This Report p2, Statements p52 NotesFinancial ToConsolidated The Engaging With OurStakeholders pp18-19 Engaging With OurStakeholders pp18-19 Location
assured. not beenexternally Our 2020 report has reporting frameworks. use both GRIand
92 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU SPECIFIC STANDARD DISCLOSURES SUSTAINABILITY INDICES. 303-1 303 WaterGRI GRI 103 GRI 300Environmental standards series 202-1 305-4 201-1 305-3 GRI 201 GRI 201Economic performance 305-2 GRI 103 GRI 200Economic standard series 305-1 GRI 305Emissions 307-1 GRI 307 Environmental compliance Material topics Water withdrawal by source Management approach change opportunities dueto climate implications andother risks and Consolidated Financial Emissions intensity and distributed Direct economic value generated GHG emissions Other indirect (Scope 3) Management approach GHG emissions Energy indirect (Scope 2) Management approach Direct (Scope 1)GHGemissions Description and regulations environmental laws Non-compliance with (CONTINUED)
generation. 43,426 Mm water for doesnot “withdraw” Mercury Outcomes &Strategic Goals pp7-8 Our Business Modelp6, Our FY20 Strategy p34 Metrics & Targets p35 Our Business Modelpp6-8 Metrics & Targets p35 Our Business Modelpp6-8 Metrics & Targets p35 Our Business Modelpp6-8 Metrics & Targets p35 Location Turitea 2020. construction site inJanuary minor breaches of consent conditions at its received infringement noticesMercury two for hydro generation inFY20. 3 were usedfor organisation Within the the organisation Within andoutside the organisation Within andoutside the organisation Within andoutside the organisation Within andoutside organisation Within the the organisation Within andoutside organisation Within the the organisation Within andoutside Boundaries the organisation Within andoutside the organisation Within andoutside
413-2 413-1 GRI 413 Local communities 405-1 opportunities andequal GRI 405Diversity 404-2 GRI 404 Training andeducation 403-2 403-1 and safety GRI 403Occupationalhealth 401-3 401-2 401-1 GRI 401Employment GRI 103 GRI 400Social standards series Material topics
Description local communities and potential negative impactson Operations with significant actual and development programs engagement, impactassessments Operations with localcommunity and employees of governanceDiversity bodies assistance programmes employee skillsandtransition Programmes for upgrading work related fatalities and absenteeism, andnumberof occupational diseases,lost days, Types orrate of of injury, injury and safety committees joint management-worker health Workers representation informal Parental Leave orpart-timetemporary employees employees that are not provided to Benefits provided to full-time employee turnover New employee hires and Management approach
Location pp36-38 pp27-29, Living The Leadership Journey pp24-26, The World’s Best Catchment Close Connections Help Vulnerable Customers pp36-38 pp27-29, Living The Leadership Journey pp24-26, The World’s Best Catchment Close Connections Help Vulnerable Customers pp77-78Inclusion &Diversity Our SkillsPledgep38 p37,Pillar Summary Chair andChief Executives Update p12 Our Business Modelpp6-8, committee including joint chairof thegeothermal positions onhealthandsafety committees, Workers representatives holdarange of Company website –Life at Mercury Company website –Life at Mercury voluntary turnovervoluntary rate was 12% hired 123newemployeesMercury andthe Our Business Modelpp6-8
Boundaries the organisation Within andoutside the organisation Within andoutside Within theorganisation Within theorganisation Within theorganisation Within theorganisation Within theorganisation Within theorganisation Within the organisation Within theorganisation Within theorganisation
93 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU SECTOR SPECIFIC: UTILITIES SUSTAINABILITY INDICES. EU5 EU3 EU2 EU1 GRI 103 Material Topics EU30 GRI 103 EU27 GRI 103 EU18 GRI 103 EU10 Allocation of CO Number of customer connections Net energy output Installed capacity Management approach Description source andby regulation regime Average by energy plant availability Management approach for non-payment Number of disconnections Management approach safety training undergone relevant healthand subcontractor employees that have Percentage of contractor and Management approach over thelong-term demand projected electricity against Planned capacity 2 e allowances
(CONTINUED) Our Business Modelpp6-8 Our Business Modelpp6-8 Our Business Modelpp6-8 Our Business Modelpp6-8 Location Hydro 88%,Geothermal 94% Our Business Modelp6 Vulnerable Customers pp24-26 The World Around Us p15, CloseConnections Help Our Business Modelpp6-8 Our SkillsPledgep38 Our Business Modelpp6-8 p39 Shifting Winds Dealing With Metrics & Targets p35 the organisation Within andoutside Within theorganisation Within theorganisation Within theorganisation Within theorganisation Within theorganisation Outside theorganisation Within theorganisation the organisation Within andoutside Within theorganisation the organisation Within andoutside organisation Within andoutsidethe Boundaries
TASK FORCE CLIMATE-RELATED ON FINANCIAL DISCLOSURES (TCFD) INDEX Targets Metrics and Risk Management Strategy Governance Issue
against targets opportunites andperformance climate-related risks and Targets usedto manage and any related risk Scope 1,2and3GHGemissions and riskmanagement process opportunities inline with strategy climate-related risks and Metrics andtargets usedto assess risk management climate-related risks into overall and assessing identifying Integration of theprocesses for climate-related risks Process for managing assessing climate-related risks Processes for and identifying lower scenario scenarios, includinga2°Cor consideration climate-related Strategy resilience taking into strategy and financialplanning and opportunitiesonbusiness The impactof climate-related risks short, mediumandlong-term opportunities identified over the Climate-related risks and risks andopportunities and managingclimate-related role inassessing Management’s risks andopportunities Board oversight of climate-related TCFD Recommendation
Inventory Report Metrics & Targets. Company website 2019 Emissions Annual Report 2020 –Preparing for Climate Change, website 2019 Emissions Inventory Report Annual Report 2020 –Metrics& Targets, Company website 2019 Emissions Inventory Report Annual Report 2020 –Metrics& Targets, Company Annual Report 2020 –Governance at Mercury Annual Report 2020 –Strategy Annual Report 2020 –Governance at Mercury Annual Report 2020 –Strategy Annual Report 2020 –Governance at Mercury Annual Report 2020 –Strategy Annual Report 2020 –Preparing for Climate Change Annual Report 2020 –Strategy Annual Report 2020 –Strategy Annual Report 2020 –Governance at Mercury Annual Report 2020 –Preparing for Climate Change Annual Report 2020 –Governance at Mercury Annual Report 2020 –Preparing for Climate Change Location
p33, p35 p35 p35 pp33-34, 72-78 pp33-34, 72-78 pp33-34, 72-78 pp33 pp34 pp34 pp33-34, 72-78 pp33-34, 72-78 Page No.
94 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU history. price share and news payments, dividend results, financial and operating latest our on information communications, investor regular all view to you allows Centre Investor Our company. the within happening what’s about information atmercury.co.nz website Our information Investor for contactDirectory details). (see Registrar Share the to addressed be may Enquiries service. this access to numbers investorcentre.com/nz online: updated and viewed be can portfolios investment and details payment dividend address, in Changes enquiries Shareholder INFORMATION FOR SHAREHOLDERS. . You will need your CSN and FIN FIN and CSN your . You need will is an excellent source of of source excellent an is
• • either: done be can This electronically. reports your receiving to change the make to easy and quick is It communication shareholder Electronic (see for contact Directory details). Limited Services Investor Computershare contacting By or Options’; ‘Communication select and Details’ My ‘Update select Then in. log and Portfolio’ ‘View time). Select first the for in log you (when numbers atinvestorcentre.com/nz Online by using your CSN and FIN FIN and CSN your using by
95 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU expenditure. capital business stay-in less activities operating from flow cash Net Flow Free Cash metering. third-party and sales, of costs direct other charges, line costs, energy less derivatives, and customers to sales and generation electricity from Sales Margin Energy impairments. and sale on gain instruments, financial of value fair the in change amortisation, depreciation, expense, tax expense, interest net before Earnings Earnings) (or Operating EBITDAF share. per Cents CPS providers. energy change that customers Brand Mercury of average Rolling Churn gases). greenhouse (a total of measure equivalents dioxide Carbon CO customers and non-customers. amongst Strength Brand Mercury’s reflects and average rolling a 3-month on reported is It Strength. Brand overall on impact their reflect to weighted are that 5pillars from derived score aconstructed is It survey. a monthly on based market the in perception and equity abrand’s measures This Strength Brand peers. periods and comparabilityacross amongst industry reporting report. This is provided where we believe will it provide greater to users of information. the clarity It also provides consistency financial annual the Accounting Practice) throughout (Generallyinformation Accepted non-GAAP certain presents Mercury GLOSSARY. 2 E per month. customers 2000 approximately of asample through NPS measuring survey a new to reporting our changed we FY20 In FY20. for target above increase a2-point recorded we where segments customer target our within NPS is here reported result The average. rolling a3-month on reported are Results 0-10). of ascale on 0-6 Mercury recommend to likelihood their (who rate 0-10) of Detractors and 9-10 ascale on Mercury recommend to likelihood their (who rate Promoters of percentage the between difference the is This Promoter ScoreNet (NPS) equivalents. cash and cash less non-current) and current (both Total borrowings Net Debt hours. kilowatt thousand one to equal is hour megawatt hour. One Megawatt MWh electricity market. wholesale the from purchased electricity of Price Average Weighted Load (LWAP) Price Average Load-weighted hours. kilowatt million one to equal is hour gigawatt hour. One Gigawatt GWh revenue. and assets new create to company the by incurred expenditure Capital (CAPEX) Expenditure Capital Growth market.wholesale electricity the to sold and generated electricity of Price Average Weighted Generation (GWAP) Price Average Generation-weighted and gain on sale, all net of tax expense. tax of net all sale, on gain and instruments financial derivative of value fair the in change any impairments, items), material represents which tax, before profit of million $10 (exceeding events occurring and/or infrequently one-off removing after year the for Profit Underlying Earnings Tax After price. share initial the of apercentage as expressed paid dividends any plus price share in change the from resulting loss or gain financial The (TSR) Total Return Shareholder on-site contractors. and employees including hours, 200,000 per injuries harm serious and time lost work, restricted treatment, medical reported of number the of A record Total Frequency (TRIFR) Rate Injury Recordable working order. good in assets its maintain to company the by incurred expenditure Capital (CAPEX) Expenditure Capital (SIB) Stay-in-Business revenue. other of costs direct less revenue, other and associates of Earnings Income Other other expenses. and expenses maintenance benefits, and compensation employee Represents Costs Operating
96 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU General Manager People &Performance People Manager General Marlene Strawson, Affairs Corporate Manager General Tony Nagel, Chief Financial Officer William Meek, Officer Marketing Chief Jack, Julia &Wholesale Hydro Manager General Phil Gibson, Risk Assurance Officer Lucie Drummond, &Safety Geothermal Manager General Clarke, Nick &Digital Retail Manager General Angland, Kevin Executive Chief Vince Hawksworth, Executive Team Taitoko Mike Patrick Strange St John Scott Keith Smith James Miller Lark Andy Hannah Hamling Chair Flacks, Prue Directors of Board DIRECTORY.
Phone: +64 9 357 9000 9 357 +64 Phone: 1140 Auckland 2206 Box PO 1010 Auckland West Street 15 Customs Bay Tower atCommercial PwC 34 Level Tripp Chapman Advisors Legal +61 28988Phone: 5800 2000 NSW Sydney, Street 201 Elizabeth 16, Level Limited Pty (Australia) Services c/– Corporate TMF Australia in Office Registered 1023 Auckland Newmarket, Broadway, 33 New in Zealand Office Registered Email: [email protected] 3470 517 27 +64 Phone: Zealand New 1142 Auckland 90399 P OBox NZ Limited Mercury Relations &Investor Treasury of Head Tim Thompson, Enquiries & Sustainability Relations Investor Thomas Howard Company Secretary
Level 2, 159 Hurstmere Road, Takapuna, Takapuna, Road, 159 2, Hurstmere Level Limited Services Investor Computershare Zealand – New Registrar Share Outlook: Stable Long term: BBB+ 2019) December (re-affirmed Rating Credit Westpac Mizuho Bank Mitsubishi UFJ Financial Group Bank China Construction Zealand New of Bank ASB Bank ANZ Bank Bankers Email: [email protected] Australia) +61 (outside 39415 4083 Phone: Australia) (within 366 501 1800 Phone: Australia 3001, VIC 3329, Box Melbourne, GPO 3067 VIC Abbotsford, Street, Yarra Falls, 452 Johnston Limited Pty Services Investor Computershare – Australia Registrar Share Web: www.investorcentre.com/nz Email: [email protected] 8777 9488 +64 Phone: Zealand New 1142, Auckland 92119 Bag Private 0622 Auckland
97 MERCURY ANNUAL REPORT 2020 THE TEAM BEHIND ENERGY FREEDOM MENU find out how you can Kiss Oil Goodbye. Oil Kiss can you how out find and ad latest our view to HERE CLICK
98 MERCURY ANNUAL REPORT 2020 MENU 99 MERCURY ANNUAL REPORT 2020 MENU