Better energy future MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 24 FEBRUARY 2016 Disclaimer The information in this presentation was prepared by Meridian Energy with due care and attention. However, the information is supplied in summary form and is therefore not necessarily complete, and no representation is made as to the accuracy, completeness or reliability of the information. In addition, neither the company nor any of its directors, employees, shareholders nor any other person shall have liability whatsoever to any person for any loss (including, without limitation, arising from any fault or negligence) arising from this presentation or any information supplied in connection with it. This presentation may contain forward-looking statements and projections. These reflect Meridian’s current expectations, based on what it thinks are reasonable assumptions. Meridian gives no warranty or representation as to its future financial performance or any future matter. Except as required by law or NZX or ASX listing rules, Meridian is not obliged to update this presentation after its release, even if things change materially. This presentation does not constitute financial advice. Further, this presentation is not and should not be construed as an offer to sell or a solicitation of an offer to buy Meridian Energy securities and may not be relied upon in connection with any purchase of Meridian Energy securities. This presentation contains a number of non-GAAP financial measures, including Energy Margin, EBITDAF, Underlying NPAT and gearing. Because they are not defined by GAAP or IFRS, Meridian's calculation of these measures may differ from similarly titled measures presented by other companies and they should not be considered in isolation from, or construed as an alternative to, other financial measures determined in accordance with GAAP. Although Meridian believes they provide useful information in measuring the financial performance and condition of Meridian's business, readers are cautioned not to place undue reliance on these non-GAAP financial measures. The information contained in this presentation should be considered in conjunction with the condensed interim financial statements, which are included in Meridian’s interim report for the six months ended 31 December 2015 and is available at: http://www.meridianenergy.co.nz/investors/ All currency amounts are in New Zealand dollars unless stated otherwise. MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 2 24 FEBRUARY 2016 Highlights MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 3 24 FEBRUARY 2016 The New Zealand market   Modest demand growth in last six months   Growth in most regions and sectors (except industrial) NATIONAL DEMAND GWh 45,000 -1.3% 2012 40,000 -1.0% +1.3% +1.4% 2013 2014 2015 35,000   600MW of thermal plant closure has occurred in the last 6 months 30,000   Market is working through implications of completed and planned thermal plant closure   2019 ASX prices are only trading around 4% above 2018 prices, demonstrating confidence a market solution will be successful 25,000 2011 Calendar year ended 31 December source: Transpower, Meridian OTAHUHU ASX FUTURES SETTLEMENT PRICE $/MWh 95 85   Meridian is confident we can deal with our own risk position 75 65 55   High retail competition now has to be seen as a permanent feature 45 Q4 2015 Q2 Q4 Q2 2016 2016 2017 30 June 2015 30 October 2015 31 December 2015 Q4 2017 Q2 2018   Currently expecting EA to clearly signal proposed final TPM decision by 31 March 2016 MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 4 Q4 Q2 Q4 2018 2019 2019 30 September 2015 30 November 2015 year on year change 24 FEBRUARY 2016 LGC SPOT PRICE The Australian market AUD 90   LGC prices have responded to RET target decision in June 2015 and political changes in September 2015 80 70 60   Has not yet translated into investment certainty, with little new investment announced 50 40 Jul-15   Rising base wholesale prices with thermal retirement and new LNG gas consumption kicking in   Powershop Australia has good traction in NSW and Victoria, despite competition remaining strong Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 source: Bloomberg POWERSHOP AUSTRALIA CUSTOMERS FRMP (000) 70 60 50 40 30 48 20 10 22 28 56 64 35 0 Sep-14 Dec-14 Mar-15 Jun-15 MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 5 Sep-15 Dec-15 24 FEBRUARY 2016 LME SPOT ALUMINIUM PRICE Tiwai Point smelter USD/tonne 1,800   Current trading environment for the aluminium industry is difficult 1,700 1,600   USD aluminium prices have fallen 10% since the middle of 2015 1,500   Price premia have stablised from declines in the first half of 2015 1,400 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 source: London Metal Exchange   Little additional relief for NZAS from a fluctuating NZD USD cross rate between July and December 2015 NZD USD CROSS RATE Daily spot   Announcements of closure of significant US smelting capacity in 2015, however the oversupplied Chinese market is the key driver 0.70 0.68 0.66   Forecast global demand growth has moderated 0.64 0.62   TPM may potentially provide significant cost upside for NZAS 0.60 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 source: Reuters MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 6 24 FEBRUARY 2016 Wholesale and generation   Stay in business capital spend inside the annual $65m envelope   Mill Creek wind farm performance running ahead of expectations   Iconic Brooklyn turbine will be replaced in April 2016   Consent extensions gained for Central Wind and Maungharuru wind options   Meridian’s January 2016 monthly inflows were 85% of historical average   Meridian’s Waitaki catchment storage sat at 93% of historical average at the end of January 2016 MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 7 24 FEBRUARY 2016 Meridian Retail   Segment EBITDAF up +$5m (+19%)   Growth in corporate and industrial sales volumes (+4%)   Growth in residential and SMB sales volumes (+6%)   Lift in average sales price   Corporate and industrial +4% in line with movements in the forward market   Residential and SMB +2% with inflation based price changes for some networks   Some operating cost growth to counter competitive pressure MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 8 24 FEBRUARY 2016 Meridian Retail   Launch of Xero partnership   Winner of CRM contact centre award (commercial and business services)   Powershop net promoter score above 46 (energy sector average is -13)   Good performance on retail metrics MERIDIAN RETAIL Dec 14 Jun 15 Dec 15 Time to answer (seconds) 6 month avg 93 40 30 Churn (variance to market) 12 month avg -1.7% -1.5% -1.2% Customer retention rate 6 month avg 81% 80% 77% $114 $124 $129 5.1 2.4 4.1 5,792 4,657 2,104 Cost to serve per customer1 6 month cost Overdue debt > 30 days $m Disconnections 6 month total 1Excluding metering costs MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 9 24 FEBRUARY 2016 npower agreement   Franchise licence agreement with RWE npower signed in November 2015   Will take the Powershop service platform and brand to the UK without Meridian carrying market exposure   Staged delivery of electricity, smart meter integration, gas and dual fuel and white label offerings   Two year establishment phase with npower paying fixed development fees and making milestone payments   From full launch, npower will pay an annual fixed fee and a variable per customer fee MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 10 24 FEBRUARY 2016 Dividends INTERIM DIVIDENDS DECLARED   Interim ordinary dividend of 5.10 cps, 85% imputed CPS 10   Is a 6% increase on the interim dividend from last year 8   Capital management interim special dividend of 2.44 cps, unimputed 4 Ordinary dividend Special dividend +22% 7.54 6.20 2.44 6 2 1.40 4.80 5.10 2013 2014 Six months ended 31 December 2015 4.19 0   Brings capital management distributions to $125m since the programme commenced in August 2015 AMOUNT CPS IMPUTATION % Interim Ordinary Dividend 5.10 85% Interim Special Dividend 2.44 0% Total Interim Dividend 7.54 FY2016 DIVIDENDS DECLARED   To date, this has been paid as special dividends, buyback remains a consideration MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 11 24 FEBRUARY 2016 Financial performance FINANCIAL PERFORMANCE AGAINST PRIOR YEAR $M 600 Six months ended 31 December 2015 509 500 Six months ended 31 December 2014 480 400 332 324 300 206 217 194 200 159 121 112 100 104 117 122 115 106 64 60 8 28 16 0 Energy Margin +6% +$29m Other revenue -50% -$8m Transmission +7% +$4m Operating Costs +8% +$9m EBITDAF +2% +$8m NPAT -11% -$13m Underlying Operating Investment Dividend NPAT Cash Flow Expenditure Declared -74% +22% +6% -5% -$78m +$35m +$7m -$11m MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 12 24 FEBRUARY 2016 ENERGY MARGIN1 Earnings $M 1,000   ‘Like for like’ EBITDAF (excluding FY2015 insurance proceeds) increase of $12m (4%) in 1H FY2016 from: 916 924 954 481 477 474 439 435 447 480 509 2012 2013 2014 2015 2016 763 800 324 600 +6% 400 +  Higher corporate sales volume in NZ 200 +  Higher residential/SMB sales volumes in both countries -  Higher market purchases to support this volume 0 Financial year ended 30 June Interim Final half-year 1See pg 25 for a definition of energy margin before interest, taxation, depreciation, amortisation, changes in fair value of hedges and other significant items 2Earnings +  Higher retail sales prices in NZ REPORTED EBITDAF2 $M +  Higher generation prices in Australia 800 +  Higher sell-side CFD volumes and lower acquired generation costs 600 400 -  Higher HVDC charges -  Lower other revenue following sale of Arc and surplus farm land -  Higher costs including customer acquisition and Powershop expansion 200 585 308 317 294 277 268 324 332 2012 2013 2014 2015 2016 477 183 294 +2% 0 Financial year ended 30 June MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 13 618 585 Interim Final half-year 24 FEBRUARY 2016 OPERATING COSTS Costs $M 150   Operating costs have increased +$9m (+8%) in 1H FY2016 Retail segment Australia 116 6 114 100   Almost half of this growth is investment supporting Powershop expansion offshore Wholesale IPO Costs 124 38 35 50 37 Corporate/Elims +3% 121 9 23 112 11 20 40 37 38 44 44 48 2014 2015 16 19 0 2011 2012 2013 Six months ended 31 December   Continued customer acquisition pressure in NZ   Timing differences on some reoccurring spend STAY IN BUSINESS CAPEX   Change in treatment of $1.4m of costs with Arc sale (now included in operating costs rather than energy margin) $m 80 60 40   Expect cost growth in 2H FY2016 to be largely limited to growth investment 58 61 34 37 -80% 20 24   Stay in business capital expenditure is within the $65m annual envelope 23 19 0 2014 Financial year ended 30 June 2015 Interim MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 14 2016 Final half-year 24 FEBRUARY 2016 NET PROFIT AFTER TAX Below EBITDAF $M 400   Net finance costs -$1m (-3%) from lower interest on borrowings 295 300 122 200   Positive change in fair value of treasury instruments reflecting forward rate changes in 1H FY2015 100 75 0 66 9   Negative change in fair value of electricity hedges 2012 173 2013 230 247 113 130 -11% 117 117 104 2014 2015 2016 Financial year ended 30 June   Change to the treatment of LGCs and associated forward sales used to cover some future LGC production   Rising LGC prices have given rise to unrealised fair value losses on forward contracts Interim 1Net profit after tax adjusted for the effects of non cash fair value movements and one-off items A reconciliation between net profit after tax and underlying net profit after tax is on p34 UNDERLYING NPAT1 $M 300 250 195 200   $15m of gains on the sale from Arc and surplus farm land in 1H FY2015   Underlying NPAT +$7m (+6%) from higher EBITDAF and lower financing costs 150 209 163 +6% 94 75 112 100 106 7 50 99 88 83 2012 2013 2014 115 122 2015 2016 0 Financial year ended 30 June MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 15 Final half-year Interim Final half-year 24 FEBRUARY 2016 Concluding remarks   Strategic focus remains unchanged:   Supporting TPM and thermal retirement outcomes to maintain an open and competitive market   Improving asset yield and maintaining low stay in business capex   Continuing to close our retail profit gap while lifting efficiency and service   Developing Powershop and future New Zealand renewable generation growth opportunities MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 16 Questions MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 Additional information MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 24 FEBRUARY 2016 Tiwai Point smelter contract   Contract terms (other than price) similar to those previously agreed   Price on 400MW unchanged from 2013 variation, higher price on 172MW from 1 January 2017   Window to give 12 months notice to reduce to 400MW extended to 1 April 2016, then any time after 30 April 2017   Other generators provided back to back cover of varying quantity and tenure 1 Jan 2016 30 Apr 2016 1 Jan 2017 30 Apr 2017 Termination right (with 12 months notice) Price (+CPI): 2013 price on 400MW 2013 price on 172MW 2015 price on 172MW Reduction to 400MW (with 12 months notice) MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 19 31 Dec 2030 24 FEBRUARY 2016 NEW ZEALAND CUSTOMER NUMBERS New Zealand retail ICP (000) Meridian North Island 400 Powershop Customer connections 300   -0.8% decline in ICP numbers since June 2015, reflecting aggressive residential sales activity and greater SMB focus 200 Meridian South Island -0.8% 287 272 277 276 274 48 51 55 56 55 123 115 114 116 117 116 106 108 104 102 Jun-12 Jun-13 Jun-14 Jun-15 Dec-15 100 0 Residential, SMB, Agri segment   +6% increase in volumes   +2% increase in average price with inflation based price changes for some networks RETAIL SALES VOLUMES GWh 4,000 Residential, SMB, Agri 2,979 Corporate segment 2,794 2,886 1,250 1,049 1,116 1,729 1,745 2011 2012 3,000   +4% increase in volumes 2,000   +4% increase in average price in line with movements in the forward market 1,000 Corporate 2,993 +6% 3,164 1,113 1,163 1,770 1,880 2,001 2013 2014 2015 0 Six months ended 31 December MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 20 24 FEBRUARY 2016 MERIDIAN'S COMBINED CATCHMENT INFLOWS Hydrology GWh 10,000   Inflows for the six months ended December 2015 were 94% of historical average 8,000 6,000 4,000   January 2016 inflows were 85% of historical average 2,000 0   Meridian’s Waitaki catchment storage at 31 December 2015 was 97% of historical average Financial year   By 31 January 2016, this storage position was 93% of historical average 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 January YTD 82 year average MERIDIAN'S WAITAKI STORAGE GWh 2,500 2,000 1,500 1,000 500 0 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec Average 19792014 2011 2015 MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 21 2012 2016 2013 24 FEBRUARY 2016 New Zealand generation   For the six months ended 31 December 2015, Meridian’s New Zealand generation was 1% lower than the same period last year   For the six months ended 31 December 2015, the average price Meridian received for its generation was 11% lower than the same period last year NEW ZEALAND GENERATION GWh 8,000 Hydro Wind 6,651 7,000 6,000 5,000 6,190 6,050 623 618 5,567 5,432 6,902 739 660 -1% 6,858 771 5,991 6,163 6,087 2011 2012 2013 Six months ended 31 December 2014 2015 4,000   Similarly, the price Meridian paid to supply contracted sales in the six months ended 31 December 2015 was 12% lower than last year MERIDIAN'S AVERAGE GENERATION PRICE1 $/MWh 90 80 70 60 50 40 30 20 10 0 -11% 78 48 2014 2015 received for Meridian’s physical New Zealand generation MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 22 57 40 2011 2012 2013 Six months ended 31 December 1Price 64 24 FEBRUARY 2016 Movement in EBITDAF 1H FY2015 to 1H FY2016 MOVEMENT IN EBITDAF New Zealand energy margin +$19m $M 380 360 -2 +4 340 -3 +5 -15 +1 -5 +10 -4 -9 +26 320 332 324 300 EBITDAF 31 Retail Wholesale Dec 2014 contracted contracted sales sales Net VAS position Net cost of acquired generation Spot Other International exposed market costs energy revenue margin Net Arc revenue Insurance Transmission Employee & EBITDAF 31 proceeds expenses other Dec 2015 operating expenses MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 23 24 FEBRUARY 2016 EBITDAF and net profit after tax 1H FY2016 EBITDAF TO NPAT RECONCILIATION $M 350 300 -117 250 -7 200 -39 332 150 -47 -32 100 +7 +7 122 50 104 EBITDAF Depreciation and Amortisation Premiums on Electricity options Financing Expenses Taxation Underlying NPAT Fair Value Movements on Financial Instrument's Premiums on Electricity Options MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 24 Taxation NPAT 24 FEBRUARY 2016 New Zealand energy margin   Energy margin is a non-GAAP financial measure representing Energy Sales Revenue less Energy Related Expenses and Energy Distribution Expenses   Energy margin is defined as: ₊  revenues received from sales to customers net of distribution costs (fees to distribution network companies that cover the costs of distribution of electricity to customers), sales to large industrial customers and fixed price revenues from derivatives sold (Contract sales revenue) ±  the net position of virtual assets swaps with Genesis Energy and Mighty River Power ⁻  the cost of fixed cost of derivatives acquired to supplement generation and manage spot price risks, net of spot revenue received for generation acquired from those derivatives (Net cost of acquired generation) ±  revenue from the volume of electricity that Meridian generates that is in excess of volumes required to cover contracted customer sales (Spot exposed revenues) ±  other associated market revenues and costs including Electricity Authority levies and ancillary generation revenues (i.e. frequency keeping)   Energy margin is used to measure the vertically integrated performance of the retail and wholesale businesses. This measure is used in place of statutory reporting which requires gross sales and costs to be reported separately, therefore not accounting for the variability of the wholesale spot market and the broadly offsetting impact of wholesale prices on the cost of retail electricity purchases MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 25 1Ratio between the price per unit received for Meridian’s physical generation and the price paid to supply each unit of contracted sales, inclusive of line losses 24 FEBRUARY 2016 New Zealand energy margin 1H FY2016 NEW ZEALAND ENERGY MARGIN Residential/SMB contracted sales Corporate and industrial contracted sales Retail contracted sales VOLUME GWh Sell side CFDs Wholesale contracted sales Net VAS position $M VOLUME GWh 2,001 1,880 1,163 1,113 3,164 NZAS aluminium sales VWAP $/MWh 1H FY2015 $104.6 $331 2,993 2,525 2,525 676 606 3,201 $51.0 579 $163 3,131 $4 579 VWAP $/MWh $M $101.9 $305 $50.6 $159 $6 Acquired generation revenue 668 $58.6 $39 530 $63.2 $34 Cost of acquired generation 668 -$75.3 -$50 530 -$83.8 -$45 Future contract close outs -$2 -$7 Net cost of acquired generation -$13 -$18 Generation revenue 6,858 $57.0 $391 6,902 Costs to supply retail sales 3,333 3,171 Costs to supply wholesale sales 3,201 3,131 Cost to supply contracted sales 6,534 -$61.0 -$398 6,302 $64.2 $443 -$69.1 -$435 Net spot exposed revenue -$7 $8 Other market revenue/(costs) -$4 -$5 $474 $455 1.10 1.11 Energy Margin LWAP:GWAP1 MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 26 24 FEBRUARY 2016 New Zealand energy margin NEW ZEALAND ENERGY MARGIN $M 700 600 Contracted Sales Revenue $494m Fixed price variable volume 500 sales to residential and business customers (net of distribution costs), sales 400 to large corporate and industrials and fixed price leg of derivatives 300 sold 200 Spot Exposed Revenue -$7m Net Cost of Acquired Generation -$13m -2 -50 Derivatives acquired to supplement generation and cover spot price risks, net of spot revenue received from those derivatives +4 -4 39 163 -398 391 Spot revenue received for Meridian’s own generation less the cost of purchases to cover contract load 474 331 100 0 Retail Wholesale Cost to Meridian Cost of Acquired Future contracted contracted supply generation acquired generation contract sales (net) sales contracted revenue generation spot close outs sales revenue Net VAS position MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 27 Market related costs Energy margin 24 FEBRUARY 2016 Movement in energy margin 1H FY2015 to 1H FY2016 NEW ZEALAND ENERGY MARGIN $M 550 500 Contracted Sales Revenue Growth in +$30m residential, SMB and corporate customer volumes Spot Exposed Revenue -$15m +37 4 Net Cost of Acquired Generation +$5m From higher acquired generation volumes and lower wholesale prices -52 -5 +5 +5 -2 +1 +26 450 400 455 Higher derivative sales volumes and CPI increase in NZAS price Lower generation and higher purchase volumes together with lower wholesale prices decreased spot revenue and increased costs to supply customers 474 350 Energy Retail Wholesale Cost to Meridian Cost of Acquired Future Net VAS margin 31 contracted contracted supply generation acquired generation contract position Dec 14 sales (net) sales contracted revenue generation spot close outs sales revenue MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 28 Market related costs Energy margin 31 Dec 15 24 FEBRUARY 2016 Other revenue 6 MONTHS ENDED 6 MONTHS ENDED 12 MONTHS ENDED 31 DEC 2015 $M 31 DEC 2014 $M 30 JUN 2015 $M Retail service revenue (field services etc) 3 3 8 Arc Innovations - 3 3 Damwatch 2 2 5 Miscellaneous1 2 6 7 Farming - 1 1 Lease income 1 1 1 Carbon credits - - 8 Total other revenue 8 16 25 SUMMARY OF OTHER REVENUE 1Includes settlement of insurance proceeds in the year ended 30 June 2015 MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 29 24 FEBRUARY 2016 DEBT MATURITY PROFILE AS AT 31 DEC 2015 Funding $M 500   Total borrowings as at 31 December 2015 of $1,200m, up $13m from 31 December 2014 400 200 300 332 200   Net borrowings (net of cash) as at 31 December 2015 of $1,131m, up $175m from 31 December 2014 100 157 267 260 125 10 35 0   Committed bank facilities of $630m as at 31 December 2015, of which $325m were undrawn   Net finance costs -$1m (-3%) lower than 1H FY2015 from lower interest on borrowings 2016 2017 2018 2019 2020 2021+ Available facilities maturing Drawn debt maturing (face value) SOURCES OF FUNDING AS AT 31 DECEMBER 2015 4% NZ$ bank facilities drawn/ undrawn EKF - Danish export credit 12% 34% Renewable energy bonds Floating rate notes US private placement NZ 30% US private placement Aust Commercial paper MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 30 8% 7% 5% NET DEBT/EBITDAF (S&P VIEW) Funding metrics TIMES 2.0   Net debt/EBITDAF is the principal metric underpinning S&P credit rating 1.5 1.0   S&P calculation of Net debt/EBITDAF includes numerous adjustments to reported numbers 1.6 1.8 1.7 1.8 June 2014 June 2015 Dec 2015 0.5 0.0   Borrowings are adjusted for the impact of finance and operating leases   Cash balances are adjusted for restricted cash   EBITDAF is adjusted for operating leases and non core revenue 31 June 2013 Fair value movements $M CHANGE IN FAIR VALUE OF FINANCIAL INSTRUMENTS 120   Meridian uses derivative instruments to manage commodity price, interest rate and foreign exchange risk 100 80 60 40   As forward prices and rates on these instruments move, non cash changes to their carrying values are reflected in NPAT 20 94 53 18 0 -20 -33 -32 FY 2015 HY 2016 -40 FY 2012 FY 2013 FY 2014   Accounting standards only allow hedge accounting if specific conditions are met, which creates NPAT volatility   Positive change in fair value of treasury instruments reflecting forward rate changes in 1H FY2015   Negative change in fair value of electricity hedges   Change to the treatment of LGCs and associated forward sales used to cover some future LGC production   Rising LGC prices have given rise to unrealised fair value losses on forward contracts 32 24 FEBRUARY 2016 Group income statement 6 MONTHS ENDED 6 MONTHS ENDED 12 MONTHS ENDED 31 DEC 2015 $M 31 DEC 2014 $M 30 JUN 2015 $M New Zealand energy margin 474 455 900 International energy margin 35 25 54 8 16 25 Energy transmission expense (64) (60) (123) Employee and other operating expenses (121) (112) (238) 332 324 618 (117) (117) (239) Impairment of assets - - (38) Gain/(loss) on sale of assets - 15 19 Net change in fair value of electricity and other hedges (32) - (1) Net finance costs (39) (40) (78) - (26) (32) Net Profit before tax 144 156 249 Income tax expense (40) (39) (2) Net Profit after tax 104 117 247 SUMMARY GROUP INCOME STATEMENT Other revenue EBITDAF Depreciation and amortisation Net change in fair value of treasury instruments MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 33 24 FEBRUARY 2016 Group underlying NPAT 6 MONTHS ENDED 6 MONTHS ENDED 12 MONTHS ENDED 31 DEC 2015 $M 31 DEC 2014 $M 30 JUN 2015 $M 104 117 247 32 - 1 - 26 32 (7) (8) (15) Gain/(loss) on sale of assets - (15) (19) Impairment of assets - - 38 25 3 37 (7) (5) (13) Release of capital gains tax provision - - (28) Tax depreciation on powerhouse structures - - (34) 122 115 209 UNDERLYING NPAT RECONCILIATION Net profit after tax Underlying adjustments Hedging instruments Net change in fair value of electricity and other hedges Net change in fair value of treasury instruments Premiums paid on electricity options Assets Total adjustments before tax Taxation Tax effect of above adjustments Underlying net profit after tax MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 34 24 FEBRUARY 2016 Group cash flow statement 6 MONTHS ENDED 6 MONTHS ENDED 12 MONTHS ENDED 31 DEC 2015 $M 31 DEC 2014 $M 30 JUN 2015 $M 1,409 1,002 2,348 1 5 8 (1,105) (686) (1,742) Interest and income tax paid (99) (104) (174) Operating cash flows 206 217 440 Sale of property, plant and equipment - 15 19 Sale of other assets - 24 29 (20) (101) (131) (8) (5) (16) Investing cash flows (28) (67) (99) Proceeds from borrowings 270 204 366 (1) (1) (2) Dividends (307) (229) (385) Term borrowings (139) (169) (527) Financing cash flows (177) (195) (548) SUMMARY GROUP CASH FLOW STATEMENT Receipts from customers Interest and dividends received Payments to suppliers and employees Purchase of property, plant and equipment Purchase of intangible assets and investments Shares purchased for long term incentive MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 35 24 FEBRUARY 2016 Group balance sheet AS AT AS AT AS AT 31 DEC 2015 $M 31 DEC 2014 $M 30 JUN 2015 $M 69 231 69 Trade receivables 220 217 191 Other current assets 104 59 74 Total current assets 393 507 334 6,970 6,853 7,097 43 46 47 Other non-current assets 222 143 183 Total non-current assets 7,235 7,042 7,327 230 233 208 Current portion of term borrowings 211 134 213 Other 54 67 57 Total current liabilities 495 434 478 Term borrowings 989 1,053 863 1,384 1,344 1,400 236 201 172 Total non-current liabilities 2,609 2,598 2,435 Net assets 4,524 4,517 4,748 SUMMARY GROUP BALANCE SHEET Cash and cash equivalents Property, plant and equipment Intangible assets Payables, accruals and employee entitlements Deferred tax Other MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 36 24 FEBRUARY 2016 Glossary Acquired generation volumes buy-side electricity derivatives excluding the buy-side of virtual asset swaps Average generation price the volume weighted average price received for Meridian’s physical generation Average retail contracted sales price volume weighted average electricity price received from retail customers, less distribution costs Average wholesale contracted sales price volume weighted average electricity price received from wholesale customers, including NZAS Combined catchment inflows combined water inflows into Meridian’s Waitaki and Waiau hydro storage lakes Cost of acquired generation volume weighted average price Meridian pays for derivatives acquired to supplement generation Cost to supply contracted sales volume weighted average price Meridian pays to supply contracted customer sales Contracts for Difference (CFDs) an agreement between parties to pay the difference between the wholesale electricity price and an agreed fixed price for a specified volume of electricity. CFDs do not result in the physical supply of electricity Customer connections (NZ) number of installation control points, excluding vacants FRMP financially responsible market participant GWh gigawatt hour. Enough electricity for 125 average New Zealand households for one year Historic average inflows the historic average combined water inflows into Meridian’s Waitaki and Waiau hydro storage lakes over the last 81 years Historic average storage the historic average level of storage in Meridian’s Waitaki catchment since 1979 HVDC high voltage direct current link between the North and South Islands of New Zealand ICP New Zealand installation control points, excluding vacants ICP switching the number of installation control points changing retailer supplier in New Zealand, recorded in the month the switch was initiated MWh megawatt hour. Enough electricity for one average New Zealand household for 46 days National demand Transpower’s Daily Demand reporting, adjusted for embedded generation from Meridian’s Te Uku, White Hill and Mill Creek wind farms NZAS New Zealand Aluminium Smelters Limited Retail sales volumes contract sales volumes to retail customers, including both non half hourly and half hourly metered customers Sell side derivatives sell-side electricity derivatives excluding the sell-side of virtual asset swaps Virtual Asset Swaps (VAS) CFDs Meridian has with Genesis Energy and Mightly River Power. They do not result in the physical supply of electricity MERIDIAN ENERGY LIMITED Interim results presentation for the six months ended 31 December 2015 37