Meridian Energy Annual Report for year ended !" June #"$" How much power? Meridian is the largest state-owned electricity generator in New Zealand, providing around 30% of New Zealand's total generation. We also retail electricity to more than 180,000 residential, rural and business customers. NAME: CalRENEW!1 NO. OF PV PANELS: %",""" CAPACITY: %MW TOTAL GWh PRODUCED !"##$%&#' # i NAME: Mt Millar3 NAME: Ross Island NO. OF TURBINES: !% NAME: Macarthur2 NO. OF TURBINES: ! CAPACITY: &"MW LOCATION: Victoria CAPACITY: $MW TOTAL GWh PRODUCED STAGE: Pre-construction design !"##$%&#' $" CAPACITY: '#"MW NAME: Mt Mercer LOCATION: Victoria STAGE: Pre-construction design CAPACITY: $!"MW Front Cover: The Ross Island wind farm and Mt Erebus from Observation Hill, Antarctica. Courtesy of George Blaisdell, Antarctica NZ Pictorial Collection. NAME: Central Wind NAME: Te Āpiti STAGE: Consented NO. OF TURBINES: ## CAPACITY: !"$MW CAPACITY: '$MW TOTAL GWh PRODUCED !"##$%&#' %"# TOTAL GWh PRODUCED !"##(%#$' %$' NAME: Ohau A NAME: Te Uku NO. OF GENERATORS: & STAGE: Under construction CAPACITY: ")&MW CAPACITY: )&MW NAME: West Wind TOTAL GWh PRODUCED !,!%& !"##$%&#' NO. OF TURBINES: )" NAME: Mill Creek TOTAL GWh PRODUCED '(% CAPACITY: !&%MW !"##(%#$' STAGE: Environment Court appeal TOTAL GWh PRODUCED &'* CAPACITY: )*MW !"##$%&#' TOTAL GWh PRODUCED !"##(%#$' %( NAME: Ohau B NAME: Mokihinui NO. OF GENERATORS: & STAGE: Environment Court appeal CAPACITY: "!"MW CAPACITY: (#MW NAME: Tekapo A TOTAL GWh PRODUCED '&( !"##$%&#' NO. OF GENERATORS: ! ii TOTAL GWh PRODUCED iii CAPACITY: !"##(%#$' (%& "#MW Brooklyn TOTAL GWh PRODUCED !"##$%&#' !#" TOTAL GWh PRODUCED Wellington !"##(%#$' !"& NAME: Ohau C NO. OF GENERATORS: & CAPACITY: "!"MW NAME: Hurunui Wind TOTAL GWh PRODUCED STAGE: Consultation NAME: Tekapo B !"##$%&#' '&$ CAPACITY: *(MW NO. OF GENERATORS: " TOTAL GWh PRODUCED ("( !"##(%#$' Christchurch CAPACITY: !)$MW TOTAL GWh PRODUCED !"##$%&#' (!* TOTAL GWh PRODUCED (%% NAME: Benmore !"##(%#$' Twizel NAME: Hunter Downs Irrigation NO. OF GENERATORS: ) STAGE: Environment Court appeal CAPACITY: #&$MW CAPACITY: TOTAL GWh PRODUCED N/A !"##$%&#' ","(& TOTAL GWh PRODUCED !"##(%#$' ",$%# NAME: Waitaki Key NO. OF GENERATORS: ) NAME: Hydro Power Station Aviemore CAPACITY: '$MW NO. OF GENERATORS: & TOTAL GWh PRODUCED Wind Farm #$$ CAPACITY: ""$MW !"##$%&#' O!ce TOTAL GWh PRODUCED TOTAL GWh PRODUCED &(% !"##$%&#' '&( !"##(%#$' Hydro Project TOTAL GWh PRODUCED ('$ !"##(%#$' NAME: White Hill Wind Farm Project NO. OF TURBINES: "' Irrigation Project CAPACITY: #(MW TOTAL GWh PRODUCED Solar Facility !"##$%&#' !(% North Bank Tunnel NAME: Concept1 NAME: TOTAL GWh PRODUCED Manapouri !"##(%#$' !)' STAGE: Consented MW Megawatt NO. OF GENERATORS: * CAPACITY: ""$-"($MW MWh Megawatt Hour CAPACITY: *%$MW TOTAL GWh PRODUCED Manapouri Tailrace GWh Gigawatt Hour !"##$%&#' #,!%& NAME: Amended Discharge NAME: Hayes TOTAL GWh PRODUCED !"##(%#$' &,*!! STAGE: Consented Environment Court appeal STAGE: Development project status CAPACITY: '$MW (('GWh pa) / High Court as at 30 June 2010 CAPACITY: Up to )%$MW !. Water consents only ". #$/#$ Unincorporated Joint Venture with AGL Energy %. Total GWh produced following acquisition %! May "$!$ Our Strategy OUR VISION IS TO BE THE GLOBAL REFERENCE COMPANY IN RENEWABLE ENERGY. OUR STRATEGY IS COMMUNICATED AND DELIVERED THROUGH FOUR CORE STRATEGIC THEMES. THEMES WHICH HAVE A STRONG PERFORMANCE IMPROVEMENT AND VALUE GROWTH FOCUS. Sustainably improve our earnings Deliver more renewable Improving and sustaining the profitability of our generation growth business by optimising and co-ordinating Having the best renewable generation our generation, wholesale portfolio in Australasia by securing and retail operations renewable energy development options and building generation assets that create long-term value across the Meridian group iv Invest wisely in innovation Being a leader in the adoption and Li! our customer game commercialisation of new renewable Delivering a profitable, energy technologies and solutions differentiated offering to to create and capture future value customers that transforms the way they think about, buy and consume electricity The Meridian Way The behaviours of The Meridian Way are the foundation for how we expect our people to work. WORK LIKE YOU OWN THE COMPANY RAPPORT CHALLENGE DREAM SUSTAINING We each take the same We put energy into We challenge ourselves We are powered We make decisions care as we would with positive relationships, to aim higher by imagination with a long-term view our own business, money both inside and outside and reputation Meridian “The Meridian Way is one of our greatest strengths. It has served us well from the very start and is a touchstone inspiration for the innovation and team work that has made us successful.” Tim Lusk Meridian Staff at West Wind, Project Crimson tree planting to honour our commitment to plant over 2010 trees in 2010. Contents Highlights. .1 Chairman and Chief Executive’s Report. 2 Board of Directors. 5 Management Team. 6 Performance Summary. 7 Wholesale Performance .............................................................................................11 v Renewable Generation Growth. 14 Retail Performance . 17 Innovation .............................................................................................................. 19 Our People ............................................................................................................. 20 Investing in Our Communities ....................................................................................22 Environment . .23 Governance ............................................................................................................24 Financial Statements and Notes ..................................................................................27 Report from the Audit O"ce. 86 Statutory Information .............................................................................................. 88 Greenhouse Gas Inventory ....................................................................................... 92 Global Reporting Index ............................................................................................. 96 Directory ............................................................................................................... 99 Highlights $641.7m $251.9m EARNINGS BEFORE INTEREST, TAX, UNDERLYING PROFIT AFTER TAX, DEPRECIATION, AMORTISATION AN INCREASE OF !#% AND FINANCIAL INSTRUMENTS A !"% INCREASE $200m $353.5m SUCCESSFULLY RAISED THROUGH RETURNED TO THE SHAREHOLDER NEW ZEALAND’S FIRST ON(LINE IN DIVIDENDS ISSUE OF RETAIL BONDS YEAR TO YEAR TO YEAR TO YEAR TO 30 JUNE 2010 30 JUNE 2009 30 JUNE 2008 30 JUNE 2007 Profit after Tax $184.0m $89.3m $128.6m $241.2m Underlying Profit after Tax $251.9m $195.0m $104.5m $207.7m EBITDAF $641.7m $512.4m $373.9m $476.4m 1 EBITDAF per MWh $46.29 $41.87 $31.40 $37.58 "#$MW, #$ wind turbines commissioned 17% increase at WEST WIND, in WELLINGTON in Meridian retail North Island %&MW, %& turbines, purchase of MT MILLAR customers WIND FARM, in SOUTH AUSTRALIA !MW utility-scale solar power facility, '#MW, $' wind turbines, construction CalRENEW-", commissioned, the first in commenced at TE UKU, near RAGLAN CALIFORNIA, US $ TURBINES, CONSTRUCTED AND COMMISSIONED ON ROSS ISLAND 641% growth IN ANTARCTICA – now providing clean, renewable power to New Zealand (14,211 customers) and US bases on the frozen continent in Powershop on-line retail customers – fastest-growing Consent granted for retailer in 2010 120MW Central Wind project near Waiouru Managed record high inflows The 85#100MW into storage catchments, & Mokihinui1 hydro project on the West Coast avoiding civil emergencies 50% 6% reduction in lost- increase in staff time injuries engagement 1. Environment Court appeal. Chairman and Chief Executive’s Report $))*+") WAS THE YEAR WE TOOK THE COMPANY THROUGH SIGNIFICANT CHANGE TO ENABLE US TO MEET THE CHALLENGES OF THE NEXT ") YEARS. IN THE FACE OF UNUSUAL INTERNAL AND EXTERNAL CHALLENGES OUR PEOPLE DELIVERED AN OUTSTANDING PERFORMANCE THAT EXCEEDED OUR EXPECTATIONS. Operating environment During the year we implemented a series Investing in renewable and financial performance of organisational changes that arose out of generation our “Fit for Purpose” review. These included Meridian has delivered a strong financial reducing our corporate headcount, the We remain confident in our renewables led result this year. This is an outstanding reorganisation of our retail business, a step strategy. The introduction of the Emissions achievement in the context of a challenging change in our IT outsourcing arrangements Trading Scheme in New Zealand and 2 operating environment. and other cost reduction initiatives. We also stabilisation of the Renewable Energy Credits regime in Australia both strengthen The year started with hydro storage at heightened our commercial focus through a this strategic direction. very high levels for mid-winter and saw a new performance management framework, prolonged period of high inflows combined enhanced capital allocation disciplines and a Our wind programme has seen good progress with some significant thermal plant outages. more integrated approach to making decisions during the year with the full commissioning Alongside the continuing impact of economic across our retail and wholesale businesses. of the "-%MW West Wind wind farm in conditions on demand we saw record retail Raising finance is increasingly important to Wellington ahead of time