Meridian Energy 2014 Annual Report and related documents 24 September, 2014 Please find attached Meridian Energy's Annual Report for the year ended 30 June 2014, which will be available from Meridian Energy’s website later today. http://www.meridianenergy.co.nz/investors/reports-and-presentations/annual-reports/ For media queries, please contact: Paul Clearwater External Communications 027 282 0016 For Investor Relations queries, please contact: Owen Hackston Investor Relations Manager 021 246 4772 PG 1 Better energy MERIDIAN ENERGY LIMITED ANNUAL REPORT 2014 for the year ended 30 June 2014 02 Company overview 04 Report from our Chair and Chief Executive 50 The numbers Meridian Energy Limited Annual Report for the year ended 30 June 2014 % 6.71 EBITDAF ahead of prospectus CENTS 13.01 PER SHARE $3.5M 2 Total dividend in FY2014 Invested in communities New wind farms 24.3% higher than forecast in the prospectus, and environmental projects generating electricity including a 2.00cps special dividend. Delivering on our commitment to shareholders In our first full-year results after partially listing on the New Zealand and Australian stock exchanges in October 2013, we have achieved solid results for shareholders. EBITDAF1, a key indicator of profitability, has exceeded the prospectus forecast by $36.9 million (6.7%). We have also delivered a higher-than- forecast full-year cash dividend for our shareholders, resulting in 2014 2 a 21.8% total shareholder return highlights to 30 June 2014. FRONT COVER Jeremy Takao, Russell School, Porirua, helping to celebrate first power at Meridian’s new Mill Creek wind farm near Wellington in May 2014. Meridian Energy Limited Annual Report for the year ended 30 June 2014 IN THIS REPORT 2 Company overview 4 Report from our Chair and Chief Executive 8 Our Board 10 Our executive team 12 Customers 18 Generation 22 Environment 26 Community 30 People 34 Summary of Group performance 40 Directors’ statement 41 Governance 46 Remuneration report 50 Financial statements % % 120 Statutory information 35.3 1.7 and other disclosures Average NZ generation Growth in market share NZ customers 136 About this report 137 Directory Sustainable outcomes Caring for our Building a better Customer growth for the environment communities energy future here and abroad This year we have committed From helping to fund a new Following months of In what are considered two of $2.1 million to support important medical centre in Twizel to construction, we have now the most competitive electricity environmental projects, including sponsoring South Island Rowing, completed two new wind farms retail markets in the world4, protecting the eel population in we have granted $1.4 million – Mill Creek near Wellington and we have achieved growth both our river catchments with Ngāi this year to community projects Mt Mercer in Victoria, Australia. here and in Australia. We have Tahu and river restoration with and sponsorship partners. Our This year we have achieved first grown our New Zealand customer the Department of Conservation. partnership with KidsCan, for power at both wind farms, and numbers5 by 1.7% across both Our overall approach has seen example, has helped the charity to date both projects have been our Powershop and Meridian us recognised by Kiwis as the to distribute 30,000 raincoats, delivered safely and on budget. brands. We have also launched country’s leading company in 20,000 pairs of shoes and 40,000 Meridian has also increased Powershop in Victoria, Australia sustainability for the third year pairs of socks to Kiwi kids this year. electricity generation by 8.9% and welcomed 13,400 customers in a row3. year-on-year despite variable by June 2014. market and weather conditions. 1 EBITDAF is earnings before interest, tax, depreciation, amortisation, change in fair value 4 The VaasaETT World Energy Retail Market Rankings 2013 found that the of financial instruments, impairments, gain/(loss) on sale of assets and joint venture equity New Zealand retail electricity market is the most competitive in the world in terms accounted earnings. of switching, with the state of Victoria, Australia as the second most competitive. 2 Based on Meridian’s final initial public offering (IPO) share price and cash dividends 5 Customers are defined by Installation Control Points (ICPs). ICPs are points of connection declared for FY2014. on a local network or an embedded network that the distributor nominates as the point at which a retailer is deemed to supply electricity to a consumer. 3 Colmar Brunton Better Business Better World report 2013. 1 Meridian Energy Limited Annual Report for the year ended 30 June 2014 Company overview Meridian Energy is New Zealand’s largest electricity generator and is committed to generating electricity from 100% renewable sources – wind and water. Meridian was listed on the New Zealand Through the Meridian and Powershop brands, Meridian supports a number of environmental (NZX) and Australian (ASX) stock exchanges Meridian retails electricity to more than programmes, operates Community Funds on 29 October 2013 and is now a mixed 276,000 customer connections, including associated with each of its assets and runs a ownership model company, 51% owned homes, farms and businesses nationally. national sponsorship programme that supports by the New Zealand Government. Powershop has 13,400 residential and organisations that make a big difference to commercial customer connections in Victoria, Kiwis, such as KidsCan, Living Legends and Meridian generates approximately 30% of Australia. Our focus is on continuing to South Island Rowing. New Zealand’s electricity from its integrated achieve high levels of service and delivering chain of dams and power stations on the The Meridian Group employs approximately value to our customers. Waitaki River and Manapōuri power station 800 full-time-equivalent employees and has in Southland, the largest hydro power station Meridian owns and operates Mt Millar wind offices across New Zealand, including the in New Zealand, and from five wind farms farm in South Australia and has recently company’s head office in Wellington and an around the country. completed the construction of Mt Mercer office in Melbourne. wind farm in Victoria. Retail Hydro Wind Total New Zealand Total installed capacity Total installed capacity 276,708ICPs 2,338MW 7 617MW 7,9 New Zealand market share6 Total generation Total generation 13.9% 11,903GWh 8 1,529GWh 8,9 6 Electricity Authority, 30 June 2014. 8 Gigawatt hours. One GWh is equivalent to enough 9 Including Mt Mercer and Mill Creek wind farms. electricity for 125 average New Zealand homes 7 Megawatts. One MW is enough for one year. to light 10,000 x 100-watt light bulbs. 2 Meridian Energy Limited Annual Report for the year ended 30 June 2014 GENERATION ASSETS AUCKLAND HAMILTON HYDRO STATION WIND FARM TE UKU WAITAKI HYDRO SCHEME Capacity: 64MW FY2014 production: 211GWh Commissioned: 2010 OFFICES MERIDIAN POWERSHOP MILL CREEK TE ĀPITI Capacity: 60MW Capacity: 91MW FY2014 production: 1GWh FY2014 production: 325GWh Planned commissioning date: 2014 Commissioned: 2004 MASTERTON WEST WIND WELLINGTON Capacity: 143MW FY2014 production: 534GWh Commissioned: 2009 ŌHAU A Capacity: 264MW FY2014 production: 1,168GWh CHRISTCHURCH Commissioned: 1979 ŌHAU B Capacity: 212MW TWIZEL FY2014 production: 981GWh ŌHAU C Commissioned: 1984 Capacity: 212MW BENMORE FY2014 production: 973GWh WAITAKI Capacity: 540MW Commissioned: 1985 Capacity: 90MW FY2014 production: 2,314GWh FY2014 production: 526GWh Commissioned: 1965 Commissioned: 1935 MANAPŌURI AVIEMORE Capacity: 800MW Capacity: 220MW FY2014 production: 4,981GWh FY2014 production: 960GWh Commissioned: 1972 WHITE HILL Commissioned: 1968 Capacity: 58MW FY2014 production: 173GWh Commissioned: 2007 MT MILLAR Capacity: 70MW FY2014 production: 185GWh10 Commissioned: 2006 MT MERCER Capacity: 131MW FY2014 production: 100GWh10 Planned commissioning date: 2014 MELBOURNE 10 After the application of the marginal loss factor prescribed by the Australian Energy Market Operator. 3 Meridian Energy Limited Annual Report for the year ended 30 June 2014 Report From our Chair and Chief Executive 4 Meridian Energy Limited Annual Report for the year ended 30 June 2014 This has been an exceptionally challenging, but very satisfying year with the transition from a State-Owned Enterprise to a publicly listed company. The partial listing of Meridian consumed generate electricity at levels well in excess of a significant amount of Board, management our contracted sales position. At times during and staff time and was completed against this period we supplied between 40% and 45% a backdrop of significant public interest. of the generation market. While operating The level of commitment, planning and energy earnings were down against last year, that applied by all involved, particularly our own period benefited from six months of earnings people, ensured that the whole project went from the Tiwai Point contract at the higher exceptionally smoothly. It is also very pre-August 2013 contract variation price and gratifying that total shareholder return in from revenue from the Macarthur wind farm, the eight months since listing to the year end which was sold late in the 2013 financial year. was 21.8%11 and that we exceeded the forecast Underlying Net Profit after Tax (NPAT)12 provided in the prospectus for the year ended at $194.6 million was also significantly 30 June 2014 at the EBITDAF level by 6.7%. ahead (20.5%) of the prospectus forecast It was also pleasing to announce a final of $161.5 million and last year’s $162.7 million. ordinary dividend of 6.82 cents per share We believe Underlying NPAT more fairly (cps). Together with the interim dividend represents the performance of the business we declared in February 2014, this brought as it removes non-cash fair value movements the total ordinary dividend for the year to and other one-off items. 11.01cps. In addition, Meridian will pay a special dividend of 2.00cps funded from It was particularly pleasing to see our the sale of excess land and other assets.