PRODUCT DISCLOSURE STATEMENT - Offer of 7 year unsecured, unsubordinated fixed rate green bonds. Issued by Mercury NZ Limited.
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PRODUCT DISCLOSURE STATEMENT. Offer of 7 year unsecured, unsubordinated fixed rate green bonds. Issued by Mercury NZ Limited. DATE: 21 AUGUST 2020 This document gives you important information about this investment to help you decide whether you want to invest. There is other useful information about this offer on www.companiesoffice.govt.nz/disclose. Mercury NZ Limited has prepared this document in accordance with the Financial Markets Conduct Act 2013. You can also seek advice from a financial adviser to help you to make an investment decision. Arranger, Green Bond Joint Lead Co-ordinator & Joint Managers Lead Manager
2 // 3 PRODUCT DISCLOSURE STATEMENT.
Interest payments Semi-annual in arrear in equal payments on 14 March and 14 September in each year (or if
that day is not a Business Day, the next Business Day) until and including the Maturity Date,
01. KEY INFORMATION SUMMARY. with the First Interest Payment Date being 14 March 2021. As the First Interest Payment Date
is a Sunday, interest is payable on Monday, 15 March 2021 instead.
Further payments, fees or charges Taxes may be deducted from interest payments on the Green Bonds. See section 7 of this
PDS (Tax) for further details.
WHAT IS THIS? Island, two of which are in partnership with PURPOSE OF THIS OFFER
Māori land trusts. Mercury is also building You are not required to pay brokerage or any other fees or charges to Mercury to purchase
This is an offer (Offer) of unsecured, a wind farm at Turitea, which as at the The proceeds of this Offer are intended
unsubordinated fixed rate green bonds to be earmarked to finance or refinance the Green Bonds. However, you may have to pay brokerage to the firm from whom you
date of this PDS, is expected to be New
(Green Bonds). The Green Bonds are debt new or existing projects and expenditures receive an allocation of Green Bonds. Please contact your financial adviser for further
Zealand’s largest wind farm, in the lower
securities issued by Mercury NZ Limited relating to renewable energy and other information on any brokerage fees.
North Island with full output expected in
(Mercury). You give Mercury money, and the financial year ending 30 June 2022. eligible projects (Eligible Projects), Selling restrictions The Green Bonds may only be offered or sold in conformity with all applicable laws and
in return Mercury promises to pay you in accordance with Mercury’s Green regulations in New Zealand and in any other jurisdiction in which the Green Bonds are
interest and repay the money at the end As a retailer of electricity and gas, Mercury Financing Framework dated August 2020
currently services the energy needs of offered, sold or delivered. Specific selling restrictions as of the date of this PDS are set out in
of the term. If Mercury runs into financial (as amended from time to time) (the section 8 of this PDS (Selling restrictions) for the United States, Australia, Hong Kong, Japan,
trouble, you might lose some or all of the residential, commercial and industrial Green Financing Framework). In particular,
customers. Singapore, the United Kingdom and Switzerland.
money you invested. as at the date of this PDS Mercury expects
Mercury is listed on the NZX Main Board to apply the net proceeds of the Offer No action has been or will be taken by Mercury which would permit an offer of Green Bonds,
to refinance existing debt, and to track or possession or distribution of any offering material, in any country or jurisdiction where
ABOUT MERCURY AND ITS and has a foreign exempt listing on the
an amount equal to the net proceeds
ASX. As at close of the Business Day action for that purpose is required (other than New Zealand).
SUBSIDIARIES before the date of this product disclosure within its systems, earmarked to Eligible
Projects, primarily the construction of the No person may purchase, offer, sell, distribute or deliver Green Bonds, or have in their
Mercury, together with its subsidiaries, is statement (PDS), it has a market
Turitea wind farm. The Green Financing possession, publish, deliver or distribute to any person, any offering material or any
an electricity generator and energy retailer. capitalisation on the NZX of approximately
$6.8 billion. The Crown has a minimum Framework provides for net proceeds documents in connection with the Green Bonds, in any jurisdiction other than in compliance
Currently Mercury’s electricity generation 51% shareholding in Mercury (as required of green financing (including the Green with all applicable laws and regulations and the specific selling restrictions set out in section
is 100% renewable, averaging around by the Public Finance Act 1989). Bonds) to be no greater than Mercury’s 8 of this PDS (Selling Restrictions).
6,600GWh per annum. Nine hydro debt obligation to the pool of Eligible
stations along the Waikato River generate Projects, and the total value of Eligible By subscribing for Green Bonds, you indemnify Mercury, the Arranger, the Joint Lead
on average around 4,000GWh of Projects to be at least equal to the original Managers, the Registrar and the Bond Supervisor in respect of any loss incurred as a result of
electricity each year. Mercury also operates principal amount of total green financing. you breaching these selling restrictions.
and owns (either in whole or part) five See also section 4 of this PDS (Purpose of Opening Date Monday, 31 August 2020.
geothermal stations in the central North the Offer).
Closing Date Friday, 4 September 2020 at 12.00pm.
If Mercury fails to earmark the proceeds of • no Event of Default or any other breach Green Bonds in the manner described
the Green Bonds in the manner described will occur in relation to the Green Bonds; above or to comply with the Green Issue Date Monday, 14 September 2020.
above, or fails to comply with the Green and Financing Framework, the Green Bond
Financing Framework or related matters, • neither you nor Mercury have any right Principles or the Climate Bonds Standard Minimum application amount $5,000 and multiples of $1,000 thereafter.
or if the Green Bonds cease to satisfy the for the Green Bonds to be repaid early. on an ongoing basis. See also section 5
Green Bond Principles published by the of this PDS (Key features of the Green
International Capital Market Association or This means there is no legal obligation on Bonds).
Climate Bonds Standard: Mercury to earmark the proceeds of the
NO GUARANTEE HOW GREEN BONDS RANK Further important information on the
ranking of the Green Bonds on the
Mercury is the issuer and the sole obligor FOR REPAYMENT liquidation of Mercury and its subsidiaries,
KEY TERMS OF THE OFFER in respect of the Green Bonds. None of the On a liquidation of Mercury, the Green including in relation to Guaranteed
Crown, any subsidiary of Mercury or any Bonds will rank as unsecured and Liabilities, can be found in section 5 of this
Issuer Mercury NZ Limited. other person guarantees the Green Bonds. unsubordinated obligations of Mercury and PDS (Key features of the Green Bonds).
will rank:
Description of the Green Bonds Unsecured, unsubordinated fixed rate green bonds. HOW YOU CAN GET YOUR NO SECURITY
• below any secured liabilities and
MONEY OUT EARLY liabilities which are preferred by law; The Green Bonds are not secured.
Term 7 years, maturing on 14 September 2027.
Neither you nor Mercury have a right to • equally with liabilities owed to Mercury’s
Offer amount Up to $150 million (with the ability to accept oversubscriptions of up to an additional $50 require Mercury to redeem the Green USPP noteholders, banks and certain KEY RISKS AFFECTING THIS
Bonds prior to the Maturity Date, except financial institutions that have lent
million at Mercury’s discretion).
in the case of an Event of Default (as
INVESTMENT
money to Mercury (Guaranteed
Interest Rate The Green Bonds will pay a fixed rate of interest from the Issue Date until the Maturity Date. described below). Liabilities); however (unlike Bondholders) Investments in debt securities have risks.
The Interest Rate may (at the discretion of Mercury in conjunction with the Joint Lead creditors of Guaranteed Liabilities have A key risk is that Mercury does not meet
Mercury intends to quote these Green
Managers) be determined subject to a minimum Interest Rate. Any such minimum Interest the benefit of guarantees from certain its commitments to repay you or pay you
Bonds on the NZX Debt Market. This
Rate and the indicative Issue Margin will be determined by Mercury in conjunction with subsidiaries of Mercury so may also interest (credit risk). Section 6 of this PDS
means you may be able to sell them on
the Joint Lead Managers and (as applicable) announced via NZX on the Opening Date (31 claim directly against those subsidiaries; (Risks of investing) discusses the main
the NZX Debt Market before the end of
factors that give rise to the risk. You should
August 2020). their term if there are interested buyers. If • equally with (and will be repaid at the
consider if the credit risk of these debt
you sell your Green Bonds, the price you same time and pro rata with) all other
The Interest Rate will be determined by Mercury in conjunction with the Joint Lead Managers securities is suitable for you.
get will vary depending on factors such as unsecured and unsubordinated liabilities
on the Rate Set Date (4 September 2020) and will be:
the financial condition of Mercury and its of Mercury, such as those owing to other The interest rate for these Green Bonds
• the sum of the Swap Rate on the Rate Set Date and the Issue Margin; or subsidiaries and movements in the market Bondholders; and should also reflect the degree of credit risk.
• if greater, any applicable minimum Interest Rate announced via NZX as described above. interest rates. You may receive less than • ahead of Mercury’s subordinated In general, higher returns are demanded by
the full amount that you paid for them. liabilities (including capital bonds) and investors from businesses with higher risk
The Issue Margin will be determined by Mercury in conjunction with the Joint Lead Managers of defaulting on their commitments. You
following a bookbuild on the Rate Set Date. The Interest Rate will be announced via NZX on shareholders.
need to decide whether the offer is fair.
the Rate Set Date.
4 // 5 PRODUCT DISCLOSURE STATEMENT.
Mercury considers that the most
significant risk factors are:
electricity market. Electricity demand
(such as the wind-down of the Tiwai
Mercury has been rated by S&P Global
Ratings (S&P Global). S&P Global gives
ratings from AAA through to C. S&P
CONTENTS.
Point aluminium smelter announced
• Risks relating to legislation and Global’s ratings may be modified with a (+)
by Rio Tinto), retail competition and
regulation – Mercury operates in a
highly regulated industry and legislative
regulatory and technological changes or (-) sign to show relative standing within 02 01. KEY INFORMATION SUMMARY
could impact on Mercury’s retail market a rating category.
and regulatory changes (including 06 LETTER FROM THE CHAIR
share profitability and its financial As at the date of this PDS, Mercury has
Treaty of Waitangi claims), changes
performance. been assigned a long-term credit rating
to conditions, or levies applied to the
• Fuel supply and electricity production
07 02. KEY DATES AND OFFER PROCESS
use of natural resources could affect of BBB+ with a stable outlook by S&P
Mercury’s ability to generate power and risks – If Mercury is unable to generate Global. Mercury’s current credit rating 08 03. TERMS OF THE OFFER
income, and have a material adverse expected amounts of electricity, this includes a one-notch uplift from the
effect on Mercury’s business. Such may impact on its future operating company’s stand-alone credit profile of 10 04. PURPOSE OF THE OFFER
changes may result in Mercury facing results. This could occur for a number of ‘bbb’, reflecting the legislated majority
direct or indirect restrictions, conditions reasons including adverse hydrological ownership by the Crown. The Crown does 11 05. KEY FEATURES OF THE GREEN BONDS
or additional costs for its access to conditions, competition for resources, not guarantee the Green Bonds and is
freshwater or geothermal resources for resource consents being varied or not under no obligation to provide financial 16 06. RISKS OF INVESTING
its hydro and geothermal generation being renewed, Government regulation support to Mercury.
activities. In addition, regulatory or power station availability. Mercury The Green Bonds are to be rated by S&P
20 07. TAX
changes imposed on the current may be unable to generate expected Global. Mercury expects the initial credit
electricity market structure may also levels of electricity due to reduced rating assigned to the Green Bonds by
21 08. SELLING RESTRICTIONS
affect the effectiveness of Mercury’s ‘fuel’ supplies (such as water for hydro S&P Global will be BBB+. Mercury expects 23 09. WHO IS INVOLVED?
IMAGE
integrated business model of generating generation, as described above) or the this credit rating will be assigned to the
and retailing electricity and could viability, efficiency or operability of its Green Bonds before the Issue Date.
power stations, or may face increased 24 10. HOW TO COMPLAIN
adversely impact the value of Mercury
costs to secure the necessary fuel.
in the future. Regulatory changes may WHERE YOU CAN FIND OTHER 24 11. WHERE YOU CAN FIND MORE INFORMATION
also be imposed on the New Zealand This summary does not cover all of the
electricity sector that could impact the risks of investing in the Green Bonds. You MARKET INFORMATION 24 12. HOW TO APPLY
future supply and demand of electricity should also read section 6 of this PDS ABOUT MERCURY
and affect future spot, wholesale and (Risks of investing) and section 5 of this This is a short-form offer document that 25 13. CONTACT INFORMATION
retail electricity prices. Examples may PDS (Key features of the Green Bonds). Mercury is permitted to use because these
include the Government’s investigation Green Bonds rank in priority to ordinary 26 GLOSSARY
of the large pumped hydro project at WHAT IS MERCURY’S CREDIT shares in Mercury which are traded on the
Lake Onslow, significant subsidies for
rooftop solar and promotion/subsidies
RATING? NZX Main Board. Mercury is subject to
a disclosure obligation that requires it to
for electric vehicles. A credit rating is an independent opinion notify certain material information to the
• Electricity market exposure – Spot of the capability and willingness of an NZX for the purpose of that information
prices, contract prices, market demand, entity to repay its debts (in other words, being made available to participants in
competitor behaviour, changes to its creditworthiness). It is not a guarantee the market. Mercury’s page on the NZX
the cost of ‘fuel’ (such as water for that the financial product being offered is website, which includes information made
hydro generation) and transmission a safe investment. A credit rating should available under the disclosure obligation
be considered alongside all other relevant referred to above, can be found at
capacity can all impact Mercury’s ability
information when making an investment www.nzx.com/companies/MCY.
to manage its exposure to the spot
decision.
MERCURY’S CURRENT CREDIT RATING.
S&P GLOBAL
Mercury’s credit rating
BBB+ (stable outlook)
Rating AAA AA A BBB BB B CCC CC to C
Summary description Extremely Very strong Strong Adequate Less More Currently Currently
(capacity of issuer to strong Vulnerable vulnerable vulnerable highly
meet its financial vulnerable
obligations)
Approximate probability 1 in 600 1 in 300 1 in 150 1 in 30 1 in 10 1 in 5 1 in 2
of default over 5 years*
* The approximate, median likelihood that an investor will not receive repayment on a five-year investment on time and in full based upon historical default
rates published by S&P Global, Moody’s and Fitch (source: Reserve Bank of New Zealand publication “Explaining Credit Ratings”, dated November 2008).
6 // 7 PRODUCT DISCLOSURE STATEMENT.
LETTER FROM THE CHAIR. 02. KEY DATES AND OFFER PROCESS.
DEAR INVESTOR, Opening Date Monday, 31 August 2020
On behalf of Mercury’s directors, I am Mercury has developed a Green Financing Any applicable minimum Interest Rate and the indicative Issue Margin will be
pleased to present you with this Offer to Framework to ensure that the Green Bonds determined and announced on this date.
invest in Green Bonds to be issued by comply with the Green Bond Principles
Mercury. published by the International Capital
Closing Date Friday, 4 September 2020 at 12.00pm
Market Association and the Climate Bonds
This product disclosure statement Standard. DNV GL (a current approved
describes the Green Bonds, the Offer and verifier under the Climate Bonds Standard)
other important information you should has undertaken an independent third- Rate Set Date Friday, 4 September 2020
know about the investment. party review of our Green Financing
Framework and has provided a limited
Mercury, together with its subsidiaries, is an assurance conclusion that our Green
Issue Date and allotment date Monday, 14 September 2020
electricity generator and energy retailer. Financing Framework meets the
requirements of the Green Bond Principles
Currently Mercury’s electricity generation and the Climate Bonds Standard.
is 100% renewable, averaging around Expected date of initial quotation and Tuesday, 15 September 2020
6,600GWh per annum. Nine hydro stations There are risks associated with the Green trading of the Green Bonds on the NZX
along the Waikato River generate on Bonds that may affect your returns Debt Market and earliest expected
average around 4,000GWh of electricity and repayment of your investment. An mailing of holding statements
each year. Mercury also operates and owns overview of these risks is set out in this
Interest Payment Dates 14 March and 14 September in each year.
(either in whole or part) five geothermal PDS. I encourage you to seek financial,
stations in the central North Island, two of investment or other advice from a
which are in partnership with Māori land qualified professional adviser as you
trusts. Mercury is also building the Turitea take the time to consider this Offer. First Interest Payment Date 14 March 2021.
wind farm with full output expected in the As the First Interest Payment Date is a Sunday, interest is payable on
financial year ending 30 June 2022. At On behalf of Mercury’s directors,
Monday, 15 March 2021 instead.
the date of this PDS, Turitea is expected I invite you to consider this Offer
to be New Zealand’s largest wind farm, and seek independent financial
producing approximately 840GWh per advice. I welcome your interest in Maturity Date 14 September 2027
annum. As a retailer of electricity (and this opportunity to invest in Mercury
gas), Mercury currently services the energy Green Bonds. For more information
needs of residential, commercial and on the Green Bonds, please visit our
industrial customers. website:
www.mercury.co.nz/green-bonds. The timetable is indicative only and subject to change. Mercury may, in its absolute discretion and without notice, vary the timetable (including by
Mercury has a long-term corporate credit opening or closing the Offer early, accepting late applications and extending the Closing Date).
rating of BBB+/Stable, assigned by S&P If the Closing Date is extended, the Rate Set Date, the Issue Date, the expected date of initial quotation and trading of the Green Bonds on the
Global, which was reaffirmed in December NZX Debt Market, the Interest Payment Dates and the Maturity Date may also be extended. Any such changes will not affect the validity of any
2019. This rating includes a one-notch Yours sincerely applications received.
uplift from the company’s stand-alone
credit profile of ‘bbb’, reflecting the Mercury reserves the right to cancel the Offer and the issue of the Green Bonds, in which case any application monies received will be refunded (without
legislated majority ownership by the Crown. interest) as soon as practicable and in any event within five Business Days of the cancellation.
Mercury is seeking to raise up to $150
million under the Offer, with an ability to
accept up to an additional $50 million in
oversubscriptions. The proceeds of the
Green Bonds are intended to be earmarked PRUE FLACKS
to finance or refinance new or existing CHAIR, MERCURY NZ LIMITED
projects and expenditures including
renewable energy, energy efficiency and
electrification, and clean transportation,
that have been identified by Mercury as
“Eligible Projects”.
8 // 9 PRODUCT DISCLOSURE STATEMENT.
03. TERMS OF THE OFFER. Quotation Application has been made to NZX for permission to quote the Green Bonds on the NZX
Debt Market and all the requirements of NZX relating to that quotation that can be
complied with on or before the date of distribution of this PDS have been duly complied
with. However, the Green Bonds have not yet been approved for trading and NZX accepts
no responsibility for any statement in this PDS. NZX is a licensed market operator, and the
Issuer Mercury NZ Limited. NZX Debt Market is a licensed market, under the FMCA.
Description of the Green Unsecured, unsubordinated fixed rate green bonds. NZX ticker code MCY030 has been reserved for the Green Bonds.
Bonds Transfer restrictions You may only transfer your Green Bonds in multiples of $1,000 in aggregate value and after
The Green Bond Mercury has developed and adopted the Green Financing Framework to ensure that, as at the date of this any transfer you and the transferee must each hold Green Bonds with an aggregate value
PDS, its processes for identifying Eligible Projects and managing the use of the proceeds of the Green of at least $5,000 (or no Green Bonds).
Principles and Climate
Bonds Standard Bonds are consistent with the Green Bond Principles and the Climate Bonds Standard. There is no legal Ranking On a liquidation of Mercury, the Green Bonds will rank as unsecured and unsubordinated
obligation on Mercury to comply with the Green Financing Framework, the Green Bond Principles or the obligations of Mercury and will rank:
Climate Bonds Standard on an ongoing basis. See section 5 of this PDS (Key features of the Green Bonds). • below any secured liabilities and liabilities which are preferred by law;
Term 7 years, maturing on 14 September 2027. • equally with Mercury’s Guaranteed Liabilities, however (unlike Bondholders) creditors
of Guaranteed Liabilities have the benefit of guarantees from certain subsidiaries of
Offer amount Up to $150 million (with the ability to accept oversubscriptions of up to an additional Mercury so may also claim directly against those subsidiaries;
$50 million at Mercury’s discretion).
• equally with (and will be repaid at the same time and pro rata as) all other unsecured and
Issue price $1.00 per Green Bond, being the Principal Amount of each Green Bond. unsubordinated liabilities of Mercury, such as those owing to other Bondholders; and
Interest Rate The Green Bonds will pay a fixed rate of interest from the Issue Date until the Maturity Date. • ahead of Mercury’s subordinated liabilities (including capital bonds) and shareholders.
The Interest Rate may (at the discretion of Mercury in conjunction with the Joint Lead Managers) be Further important information on the ranking of the Green Bonds on the liquidation of
determined subject to a minimum Interest Rate. Any such minimum Interest Rate and the indicative Issue Mercury can be found in section 5 of this PDS (Key features of the Green Bonds).
Margin will be determined by Mercury in conjunction with the Joint Lead Managers and (as applicable)
announced via NZX on the Opening Date (31 August 2020). No guarantee Mercury is the issuer and the sole obligor in respect of the Green Bonds. None of the
Crown, any subsidiary of Mercury or any other person guarantees the Green Bonds.
The Interest Rate will be determined by Mercury in conjunction with the Joint Lead Managers on the Rate
Set Date (4 September 2020) and will be: Financial covenant Mercury agrees to ensure that Net Worth at any time will not be less than $500 million.
• the sum of the Swap Rate on the Rate Set Date and the Issue Margin; or Early redemption You have no right to require Mercury to redeem the Green Bonds prior to the Maturity Date,
• if greater, any applicable minimum Interest Rate announced via NZX as described above. except in the case of an Event of Default (as described below).
The Issue Margin will be determined by Mercury in conjunction with the Joint Lead Managers following a See section 5 of this PDS (Key features of the Green Bonds) for further details.
bookbuild on the Rate Set Date. The Interest Rate will be announced via NZX on the Rate Set Date.
Events of Default If an Event of Default occurs, and is continuing, the Bond Supervisor may in its discretion,
and must upon being directed to do so by an Extraordinary Resolution of Bondholders,
Interest Payment Dates Semi-annual in arrear on 14 March and 14 September in each year (or if that day is not a Business Day, the declare the Green Bonds to be immediately due and payable.
next Business Day) until and including the Maturity Date, with the First Interest Payment Date being 14
March 2021. As the First Interest Payment Date is a Sunday, interest is payable on Monday, 15 March 2021 The Events of Default are set out in clause 11 of the Master Trust Deed (a copy of which is
instead. contained on the Disclose Register) and are summarised in section 5 of this PDS (Key
features of the Green Bonds).
Interest payments and Regular scheduled payments of interest will be of equal semi-annual amounts. Any other payment of
entitlement interest on the Green Bonds will be calculated based on the number of days in the relevant period and a Further payments, fees or charges Taxes may be deducted from interest payments on the Green Bonds. See section 7 of this
365-day year. PDS (Tax) for further details.
On Interest Payment Dates interest will be paid to the person registered as the Bondholder as at the record You are not required to pay brokerage or any other fees or charges to Mercury to purchase
date immediately preceding the relevant Interest Payment Date. the Green Bonds. However, you may have to pay brokerage to the firm from whom you
receive an allocation of Green Bonds. Please contact your financial adviser for further
The record date for interest payments is 5.00pm on the date that is 10 calendar days before the relevant information on any brokerage fees.
scheduled Interest Payment Date (prior to any adjustment to the Interest Payment Date to fall on a
Business Day). If the record date falls on a day which is not a Business Day, the record date will be the Selling restrictions The Offer is subject to certain selling restrictions and you will be required to indemnify
immediately preceding Business Day. certain people if you breach these.
Opening Date Monday, 31 August 2020. Governing law New Zealand.
Closing Date Friday, 4 September at 12.00pm. Bond Supervisor The New Zealand Guardian Trust Company Limited.
Scaling Mercury may scale applications at its discretion, but will not scale any application to below $5,000 or to an Securities Registrar Computershare Investor Services Limited.
amount that is not a multiple of $1,000.
Minimum application $5,000 and multiples of $1,000 thereafter. DOCUMENTS
amount
The terms of the Green Bonds, and other terms key to the Offer, are set out in the Master Trust Deed, as supplemented by the
How to apply Application instructions are set out in section 12 of this PDS (How to apply).
Supplemental Trust Deed (together, the Trust Deed).
Mercury reserves the right to refuse all or any part of any application for Green Bonds under the Offer
without giving a reason. You should read these documents. Copies may be obtained from the Disclose Register at www.companiesoffice.govt.nz/disclose.
No underwriting The Offer is not underwritten.
10 // 11 PRODUCT DISCLOSURE STATEMENT.
04. PURPOSE OF THE OFFER. 05. KEY FEATURES OF THE GREEN BONDS.
The proceeds of the Offer are intended Mercury has developed and adopted the If Mercury fails to earmark the proceeds of A number of key features of the Green • Management of proceeds: The issuer in the Climate Bonds Standard in respect
to be earmarked to finance or refinance Green Financing Framework to ensure that, the Green Bonds in the manner described Bonds are described in section 3 of this should have internal processes to track of the Green Bonds. A copy of the DNV
new or existing projects and expenditures as at the date of this PDS, its processes for in this PDS, or fails to comply with the PDS (Terms of the Offer). The other key and attest to the use of the proceeds of GL assurance statement and the CBI
relating to Eligible Projects in accordance identifying Eligible Projects and managing Green Financing Framework or related features of the Green Bonds are the green bond. certification can be found free of charge on
with Mercury’s Green Financing Framework. the use of the proceeds of the Green matters or if the Green Bonds cease to described below. • Reporting: The issuer should make, the Disclose Register at
In particular, as at the date of this PDS, Bonds are consistent with the Green Bond satisfy the Green Bond Principles published and keep, readily available up to date www.companiesoffice.govt.nz/disclose
Copies of the Trust Deed and the Green
Mercury expects to apply the net proceeds Principles and the Climate Bonds Standard. by the International Capital Market information on the use of the proceeds and on Mercury’s website at www.mercury.
Financing Framework can be accessed
co.nz/green-bonds. Both DNV GL and CBI
of the Offer to refinance existing debt, The Green Financing Framework provides Association or Climate Bonds Standard: on the Disclose Register. of the green bond.
have consented to the DNV GL assurance
and to track an amount equal to the net for net proceeds of green financing Mercury has developed and adopted the statement and the CBI certification
• no Event of Default or any other breach
proceeds within its systems, earmarked to (including the Green Bonds) to be no will occur in relation to the Green Bonds; GREEN FINANCING Green Financing Framework to address respectively being made available on the
Eligible Projects, primarily the construction greater than Mercury’s debt obligation to these principles.
of the Turitea wind farm. This purpose the pool of Eligible Projects, and the total
and FRAMEWORK Disclose Register and Mercury’s website.
• neither you nor Mercury have any right
will not change, irrespective of the total value of Eligible Projects to be at least for the Green Bonds to be repaid early. Set out below is a summary of the way Certification Use of proceeds
amount that is raised. equal to the original principal amount of in which the Green Financing Framework
This means there is no legal obligation on Mercury has also obtained certification In accordance with the Green Financing
total green financing. See further under addresses the Green Bond Principles as
Mercury is currently constructing the Mercury to earmark the proceeds of the from the Climate Bonds Initiative (CBI). CBI Framework and as described in section
“Green Financing Framework” in section 5 at the date of this PDS. To confirm the
Turitea wind farm in New Zealand’s lower is an international organisation established 4 of this PDS (Purpose of the Offer), the
Green Bonds in the manner described integrity of the Green Bonds as a “green”
of this PDS (Key features of the to promote investments that will deliver proceeds of the Green Bonds are intended
North Island. Full output is expected in the above or to comply with the Green instrument, Mercury has ensured that, as
Green Bonds). a global low-carbon and climate resilient to be earmarked to finance or refinance
financial year ending 30 June 2022, at Financing Framework, the Green Bond at the date of this PDS, the Green Bonds
economy. CBI has implemented the new or existing projects and expenditures,
which time, Turitea is expected to be the Generally, Mercury’s operations may extend Principles or the Climate Bonds Standard comply with the Green Bond Principles and
Climate Bonds Standard, currently version that have been identified by Mercury as
country’s largest wind farm at 222MW, to investments which are not governed on an ongoing basis. See also section 5 of the Climate Bonds Standard.
3.0 (Climate Bonds Standard) which sets “Eligible Projects”.
producing approximately 840GWh by the Green Bond Principles. However, this PDS (Key features of the Green Bonds). Mercury may amend the Green Financing out criteria to verify that the funds of debt
annually. As at the date of this PDS, the proceeds of the Green Bonds are intended Framework from time to time. Any instruments are being used to finance As at the date of this PDS, the Eligible
The Offer is not underwritten. Projects are categorised as follows:
Turitea wind farm is expected to increase to be earmarked to Eligible Projects. amendments to the Green Financing such investments.
Mercury’s annual generation by over 12%, Framework would apply to these Green • Renewable energy: the production,
Mercury may undertake non-Eligible Briefly, the CBI certification process
adding to the current 100% renewable Bonds. There is, however, no legal transmission, connection, appliances
Projects outside of the Green Financing involves both pre-issuance and post-
generation portfolio of hydro and obligation on Mercury to comply with the and/or products of renewable energy,
Framework. issuance certification. The pre-issuance
geothermal assets. Green Financing Framework, the Green such as wind energy, geothermal energy,
certification consists of assessment of
Bond Principles or the Climate Bonds and solar energy.
Mercury’s internal processes, including its
Standard on an ongoing basis.
selection process for Eligible Projects and • Energy efficiency and electrification:
the internal tracking of proceeds. projects that contribute to a reduction
Green Bond Principles
In respect of the post-issuance of energy consumption, including
The Green Bond Principles are voluntary energy storage (batteries), and electrical
process guidelines for issuing green certification, Mercury will seek to obtain
further assurance to reconfirm the CBI infrastructure associated with renewable
bonds published by the International generation.
Capital Market Association (and as may certification at least once during the term
be amended from time to time). As at the of the Green Bonds. • Clean transportation: clean energy
date of this PDS, the Green Bond Principles vehicles and reduction of harmful
establish four core components for an Assurance from independent verifier emissions, including low carbon
instrument to be considered to be a As part of the CBI pre-issuance transport assets (for example electric
green bond: certification process, Mercury has obtained vehicles and charging infrastructure),
a limited assurance conclusion from an systems and infrastructure, and
• Use of proceeds: The proceeds of the Information Communication Technology
independent verifier, DNV GL, that based
green bond must be used to finance or on their review as described in their (ICT) that improves monitoring,
refinance assets or other projects that assurance statement, nothing has come measurement and management of
have clear environmental benefits. to their attention that causes them to assets to maximise utilisation.
• Process for project evaluation and believe that the Green Bond is not, in all Mercury may undertake non-Eligible
selection: The issuer should provide material respects, in accordance with the Projects outside of the Green Financing
clear information to investors about the pre-issuance requirements of the Climate Framework.
issuer’s environmental sustainability Bonds Standard and associated wind and
objectives; the process for evaluation geothermal technical criteria. Mercury has
of eligible projects; and the eligibility obtained the CBI certification certifying
criteria. that Mercury has met the criteria set out
12 // 13 PRODUCT DISCLOSURE STATEMENT.
Evaluation and selection of • conformance with the eligible categories Reporting Diagram showing ranking of Green Bonds on liquidation of Mercury and its subsidaries
Eligible Projects as described above; and The Green Financing Framework provides
The project evaluation and selection • alignment with Mercury’s sustainability for Mercury to:
process is designed to ensure that the objectives. Ranking on liquidation Type of liability/equity Amount1
• make information available on its
funds raised from the Green Bonds are
Management of proceeds website including a pre-issuance Higher ranking / Earlier priority Liabilities that rank above the Secured liabilities and liabilities preferred by law $292 million
earmarked to finance or refinance the
external review, annual post-issuance Green Bonds (for example, Inland Revenue for certain unpaid
projects that meet the eligibility criteria set The Green Financing Framework provides
out in the Green Financing Framework. external reviews, and Mercury’s green taxes)2
that Mercury will track an amount equal to finance programme report on an annual
When selecting the Eligible Projects, the net proceeds of the Green Bonds within Guaranteed Liabilities (including to USPP $436 million
basis; and
Mercury’s systems. Those proceeds will noteholders, banks and certain financial
Mercury will consider each proposed • provide qualitative and/or quantitative
be managed by Mercury’s Green Finance institutions that have lent money to Mercury)3
project against the following factors: reporting of the environmental impacts
Committee (consisting of representatives
• conformance with the Green Bond from Financial Reporting, Treasury, Risk (where possible and relevant) resulting
Principles; Assurance and Sustainability). Any from Eligible Projects which may already Liabilities that rank equally with Green Bonds $200 million
• the availability of criteria under the proceeds that are not internally allocated to be disclosed in business-as-usual the Green Bonds
Other unsubordinated liabilities (including to $1,783 million
Climate Bonds Standard; Eligible Assets will be temporarily invested climate reporting.
holders of Mercury’s other senior bonds and
in assets such as cash or cash equivalents, general creditors)4
• Mercury’s own professional judgement, or otherwise applied in accordance with the
discretion and sustainability knowledge; permitted temporary investments outlined
and where Mercury chooses in Mercury’s Green Financing Framework.
conformance with any other principles, Liabilities that rank below the Subordinated liabilities (including to holders of $302 million
Green Bonds Mercury's capital bonds)
standards or tools that are or become
both commonplace and respected in
the market;
Equity5 Ordinary shares and retained earnings $3,739 million
Lower ranking / Later priority
No Event of Default Green Bond Principles or the Climate scenarios occur, the bonds may cease to
Bonds Standard, be labelled as Green Bonds but will remain
If: then: unsecured, unsubordinated fixed rate Notes:
• Mercury fails to earmark the proceeds bonds. If the bonds cease to be labelled 1 Amounts shown above are indicative based on the financial position of Mercury as at 30 June 2020. They are adjusted for the issue of the Green Bonds,
of the Green Bonds as described in this • no Event of Default will occur in relation as Green Bonds, then Mercury will make based on an issue size of $200 million, with proceeds expected to be applied within the calendar year of issue towards repaying a portion of Guaranteed
PDS; to the Green Bonds; and a public statement as such, and from Liabilities. If the amount of Green Bonds issued is less than the assumed issue size, then the expected amount of remaining Guaranteed Liabilities will be
correspondingly higher. Amounts shown above are subject to rounding adjustments.
• Mercury fails to comply with the Green • neither you nor Mercury have any right that point in time, the Green Financing
for the Green Bonds to be repaid early. 2 Liabilities that may, depending on the source of payment, rank above the Green Bonds on a liquidation of Mercury include secured liabilities, employee
Financing Framework; Framework will no longer govern the entitlements for unpaid salaries and wages, holiday pay and bonuses, and PAYE, and amounts owing to the Inland Revenue for unpaid taxes and goods and
• Mercury undertakes non-Eligible Mercury’s obligations under the Trust Deed management of the bonds. This means services tax. Secured liabilities include those secured over particular assets under a perfected purchase money security interest, which are shown as ranking
are not affected by the labelling of the there is no legal obligation on Mercury above the Green Bonds for reasons of simplicity, as in a liquidation of Mercury the secured party in relation to a perfected purchase money security interest
Projects outside of the Green Financing has first rights to the particular asset or its sale proceeds. Where it is not reasonably practicable for Mercury to identify the extent to which payables and
Framework; bonds as Green Bonds, and any breach to comply with the Green Financing accruals are subject to security (such as purchase money security interests), on a conservative basis Mercury has included those amounts as secured
of the Trust Deed (including in relation to Framework, the Green Bond Principles or liabilities in the table. There are typically other liabilities which are preferred by law or secured, including enforcement costs and similar, which arise when a
• the Green Bonds cease to satisfy the
Green Bond Principles or the Climate non-compliance with any laws, directives the Climate Bonds Standard on an ongoing company is in liquidation which are not possible to foresee and cannot therefore be quantified.
Bonds Standard; and consents, whether environmental or basis. 3 Guaranteed Liabilities are not secured and rank equally with the Green Bonds in a liquidation of Mercury as issuer. However, (unlike Bondholders) creditors
of Guaranteed Liabilities have the benefit of guarantees from certain subsidiaries of Mercury so may also claim directly against those subsidiaries. As at 30
• Mercury fails to maintain CBI otherwise) is to be determined without The Bond Supervisor has no obligations in June 2020, these subsidiaries had total assets of approximately $1,928 million and Mercury and all its subsidiaries had consolidated total assets of
certification of the Green Bonds; or regard to any such Green Bond label, relation to the application of the proceeds approximately $6,885 million.
the Green Financing Framework, the of the Green Bonds. 4 Other unsubordinated liabilities include amounts relating to Mercury’s other senior bonds and commercial paper of approximately $226 million. They also
• Mercury fails to notify Bondholders that include amounts corresponding to deferred tax (approximately $1,202 million), derivative financial instruments (approximately $254 million) and lease
Green Bond Principles or the Climate
the Green Bonds cease to comply with liabilities (approximately $68 million), not all of which would be crystallised on liquidation. Such liabilities on liquidation may be materially different.
Bonds Standard. Should any of the above
the Green Financing Framework, the 5 The amount of equity stated above includes an amount in relation to Mercury’s existing quoted equity securities (i.e. Mercury’s ordinary shares).
THE BOND SUPERVISOR RANKING
The Bond Supervisor is appointed to act as The Green Bonds constitute unsecured,
supervisor and trustee for the Bondholders unsubordinated obligations of Mercury.
on the terms contained in the Trust Deed.
The ranking of the Green Bonds on a
You can only enforce your rights under the liquidation of Mercury and its subsidiaries
Green Bonds through the Bond Supervisor. is summarised in the diagram below.
However, you can enforce your rights under The diagram is a summary of indicative
the Green Bonds against Mercury directly amounts only and in the event of a
if the Bond Supervisor is obliged to enforce liquidation of Mercury and its subsidiaries,
but has failed to do so. the actual priority amounts may differ.14 // 15 PRODUCT DISCLOSURE STATEMENT.
Further borrowing and security Equivalent restrictions on borrowing are consolidated position of Mercury and its If an Event of Default occurs, the Bond
After the issue of the Green Bonds, also included in the terms of the USPP subsidiaries). Supervisor may in its discretion, and
Mercury may (without the consent of notes issued by Mercury, as set out in the This summary does not cover all of the must upon being directed to do so by an
Bondholders) borrow money or otherwise USPP Note Purchase Agreement. permitted instances. For full details see Extraordinary Resolution of Bondholders,
incur liabilities from time to time that: clause 9.1 of the Master Trust Deed. declare the Principal Amount and any
Bondholders do not have the benefit of accrued interest on the Green Bonds due
• rank equally with the Green Bonds on a the Negative Pledge Deed or the USPP Similar terms that limit the ability and payable. If this occurs, Mercury will
liquidation of Mercury. This may include, Note Purchase Agreement, and their of Mercury to grant security are also need to repay the Principal Amount of
for example, further senior bonds issued restrictions and other terms may be contained in Mercury’s Negative Pledge the Green Bonds and any outstanding
by Mercury; amended or waived without the consent of Deed and USPP Note Purchase Agreement interest due. Outstanding interest will be
or notice to the Bondholders. (although these are not terms of the calculated based on the number of days
• rank equally with the Green Bonds
but have the benefit of a guarantee Green Bonds so Bondholders do not have since the last Interest Payment Date and
from subsidiaries of Mercury. This Restrictions on granting security the benefit of these, and they may be on a 365-day year.
may include, for example, further bank Under clause 9.1 of the Master Trust Deed, amended or waived without the consent of
Mercury agrees that it will not create or or notice to the Bondholders).
lending to Mercury or further USPP OTHER RELEVANT
notes issued by Mercury; or permit to exist any security interest over
any of its assets or any of the assets of FINANCIAL COVENANT INFORMATION ABOUT
• rank above the Green Bonds on a
liquidation of Mercury. This may include, any Principal Subsidiary, except in THE TRUST DEED
certain limited permitted instances. Mercury agrees to ensure that Net
for example, liabilities with permitted Worth at any time will not be less The Trust Deed contains a number of
security as described below and The permitted instances include security
than $500 million. standard provisions, including in relation
liabilities preferred by law. interests:
to the powers and duties of the Bond
The financial covenants and other terms • arising by operation of law or statute in Supervisor, and the process for amending
described below limit the ability of Mercury the ordinary course of business, where EVENTS OF DEFAULT the Trust Deed. You can find a copy of the
to borrow money that ranks equally with, the money secured is not in default The Events of Default are contained in the Trust Deed on the Disclose Register.
or above, the Green Bonds. or is being contested in good faith by Master Trust Deed. They include: You should read the Trust Deed for further
appropriate proceedings; information.
Restrictions on borrowing • A failure by Mercury to make a payment
• consisting of any deferred purchase or
on the Green Bonds (subject to
The Negative Pledge Deed contains title retention arrangement relating to
applicable grace periods).
certain financial and other covenants goods purchased in the ordinary course
that various lenders, other than the of business where the security interest is • A breach by Mercury of any of its other
Bondholders, have the benefit of. discharged by payment of the purchase issuer obligations under the Trust
Certain terms in the Negative Pledge price, and payment is made within six Deed in a material respect (subject to
Deed limit the ability of Mercury to borrow months of its creation; applicable remedy periods).
money. These terms currently include: • consisting of netting and set off • Any representation, warranty or
arrangements, other than those which statement by Mercury in the Trust Deed
• a requirement to ensure that the ratio
have been created with the intention of not being true, accurate or complied
of (i) total debt (calculated by reference
providing a particular creditor or class with in all material respects and this has
to the consolidated position of Mercury
of creditors with preferential rights over a material adverse effect on Mercury.
and its subsidiaries) to (ii) total debt
plus shareholders' funds (substantially creditors generally; • Indebtedness of more than $10 million
equivalent to Net Worth in relation to • given in favour of Mercury or any of its in respect of other borrowed money of
the Green Bonds) does not at any time subsidiaries; Mercury or a Principal Subsidiary is not
exceed 55%; and paid when due (or within any applicable
• over any asset that secures project
grace period), or is called up as a result
• a requirement to ensure that an finance debt incurred to finance the
of a default.
interest cover ratio of (i) EBITDA to (ii) acquisition or development of that asset;
interest and financing costs (in each • Insolvency events that affect Mercury or
• provided to the clearing manager of the
case calculated by reference to the any Principal Subsidiary (as applicable).
New Zealand electricity market; and
consolidated position of Mercury and its This summary does not cover all of the
subsidiaries, for each 12 month period • over any asset to secure indebtedness
Events of Default. For full details of the
ending on an annual or semi-annual not exceeding 5% of total assets
Events of Default see clause 11 of the
balance date of Mercury) is at least (calculated by reference to the
Master Trust Deed.
250%.16 // 17 PRODUCT DISCLOSURE STATEMENT.
06. RISKS OF INVESTING.
INTRODUCTION • The fact that a trading market for the SPECIFIC RISKS submissions on regulatory reform and could impact on Mercury’s retail market Since the closure was announced, forward
Green Bonds may never develop, or, if memberships with relevant business and share and profitability and its financial electricity prices for settlement after the
This section 6 describes the following it develops, is not very liquid. Although
RELATING TO MERCURY’S sector advocacy bodies. performance. expected closure date have dropped by
potential key risk factors: permission is expected to be granted CREDITWORTHINESS approximately 21% (based on the average
to quote the Green Bonds on the NZX Mercury’s electricity portfolio settings and settlement price for the North Island
• general risks associated with an Mercury considers that the circumstances Treaty of Waitangi and other claims resultant spot price exposure is dependent
investment in the Green Bonds; and Debt Market, this does not guarantee which could significantly affect, either Otahuhu node on 8 July 2020 and 17
Treaty of Waitangi and other claims on its ability to purchase and sell electricity
any trading market in the Green Bonds. individually or in combination, the August 2020, for futures settling in the
• specific risks relating to the by Māori to land, water or geothermal in the spot and contract electricity markets
• The level, direction and volatility of future financial position and financial period of financial year 2022 and financial
creditworthiness of Mercury, together resources may, if successful, result in which could be impacted by:
market interest rates. For example, if performance of Mercury together with its year 2023). Such changes to wholesale
with its subsidiaries. the resumption of property used by
market interest rates go up, the market subsidiaries, and therefore significantly • short-term changes in supply and electricity prices would be expected to
The selection of risks outlined in this Mercury for generation purposes, or in
value of the Green Bonds would typically increase the risk that Mercury may default demand (for example, the material cause an equivalent reduction in Mercury’s
section are based on an assessment of the imposition of restrictions, conditions
be expected to go down and vice versa. on its obligations under the Green Bonds reduction in electricity demand which generation revenue, however Mercury’s
the probability of a risk occurring and or additional costs on Mercury’s access to
are as set out below. These circumstances, occurred due to the temporary closure overall exposure would be partially
its potential impact (individually or in • The fact that Bondholders seeking to water, geothermal fluid or its generation
either individually or in combination, may of non-essential businesses during the mitigated over the short to medium term
combination with other key risks) at the sell relatively small or relatively large assets and activities.
affect Mercury’s ability to pay interest on, global pandemic COVID-19); by its general hedging, including electricity
date of this PDS. There is no guarantee or amounts of Green Bonds may not be derivatives and customer sales.
or repay, the Green Bonds. There is currently an application before • national fuel conditions based on
assurance that key risks will not change, able to do so at prices comparable to
the Waitangi Tribunal seeking binding hydrological conditions;
alter in their significance or that other risks those available to other Bondholders. Competitor behaviour, such as pricing
recommendations for the resumption of
will not emerge. • The fact that Mercury’s credit rating Risks relating to legislation and regulation • competitor behaviour; campaigns or the entry of new
land at Pouākani, which includes land at
may decrease if the rating agency no Mercury operates in a highly regulated • constrained transmission and competitors, may put downward pressure
You should carefully consider these Mercury’s Maraetai power station. Mercury
longer expects a moderate likelihood industry, encompassing the generation distribution of electricity and gas; and on retail electricity prices and may
risk factors (together with the other has received advice that the Waitangi
of extraordinary support from the New and retailing of electricity, transmission also reduce Mercury’s market share or
information in this PDS) before deciding to Tribunal’s decision on the matter is unlikely • contract market liquidity (for example
Zealand Government. Mercury’s credit and distribution, and participation in the require Mercury to increase its sales and
invest in the Green Bonds. to impair its ability to operate its hydro for ASX electricity futures).
rating includes a one-notch uplift from spot electricity market. marketing costs in order to maintain
assets. In addition, in the event Mercury is
the company’s stand-alone credit Spot prices are determined by the level of sales volumes. Competitor behaviour
Before making any investment decision The regulatory environment in which affected by the outcome of the Waitangi
profile of ‘bbb’, due to this expectation customer demand relative to supply from can also be affected by changes in
it is important that investors consider the Mercury operates has changed in the Tribunal’s recommendation, the Crown is
arising from legislated Crown majority power generation and can be affected by customer behaviour, including reductions
suitability of an investment in the Green past and it could change over the term required to compensate Mercury under the
ownership. The Crown does not levels of activity in the industrial sector, in demand, the displacement of demand
Bonds in light of their own individual of the Green Bonds, for example, due to Public Works Act 1981.
guarantee the Green Bonds and is population growth, economic conditions, by technology change or large business
risk profile for investments, investment changes in Government policy relating to
under no obligation to provide financial The Pouākani Claims Trust No 2 and a competitor behaviour including new customers choosing to buy electricity
objectives and personal circumstances freshwater, climate change and resource
support to Mercury. group of kaumatua have recently filed a generation build and closure of existing directly on the wholesale spot market
(including financial and taxation issues). management. Legislative or regulatory claim in the Māori Land Court seeking stations, technological changes or new rather than entering into fixed contracts.
The risks described in this section • The fact that the Green Bonds may changes, changes to carbon prices or a declaration that certain parts of the sources of energy, and regulatory changes.
do not take account of the personal cease to meet (or Mercury may fail consent conditions, or levies applied Mercury could also be adversely affected
circumstances, financial position or Waikato riverbed are Māori customary
to comply with) the requirements of to the use of natural resources, may One specific example of this relates to if a large group of customers, one or
investment requirements of any particular land, including the riverbed beneath
the Green Financing Framework, the result in Mercury facing direct or indirect the Tiwai Point aluminium smelter in more major customers, or a New Zealand
person other than Mercury. the Whakamaru, Maraetai I and II and
Green Bond Principles or the Climate restrictions, conditions or additional costs the lower South Island, operated by New market participant were to default on
Waipāpa dams. Mercury holds the fee
Bonds Standard; or that Mercury or for its access to freshwater, carbon credits, Zealand Aluminium Smelters, which payment for electricity provided or for
simple or beneficial title to that land and
GENERAL RISKS any Eligible Project fails to comply with or geothermal resources for its hydro and represented approximately 13% of New hedge settlements (including as a result
has received advice that the applicants
any environmental laws and standards, geothermal generation activities and New Zealand’s electricity demand in 2019. of widespread financial stress arising from
An investment in the Green Bonds is are unlikely to succeed with a claim to
or otherwise undertakes non-Eligible Zealand Emissions Trading Scheme On 9 July 2020, majority owner, Rio Tinto, COVID-19).
subject to the following general risks. customary title in those parts of the
Projects outside of the Green Financing (NZ ETS) compliance. announced the wind-down of operations
Waikato riverbed beneath the Whakamaru,
Framework; or that market practices, at the smelter with expected completion Fuel supply and electricity
Regulatory changes imposed on the Maraetai I and II and Waipāpa dams.
Credit Risk on Mercury standards, principles or regulations in August 2021. This significant reduction production risks
further develop in a way that the Green current electricity market structure may Mercury seeks to mitigate the risk of such in electricity consumption is likely to result
The risk that Mercury becomes insolvent If Mercury is unable to generate
Bonds are not consistent with. also affect the effectiveness of Mercury’s claims via active stakeholder management in a fall in spot prices in the absence of
and is unable to meet its obligations under expected amounts of electricity, this
Should any of the scenarios mentioned in integrated business model of generating and by seeking to ensure that various a supply-side response (for example,
the Green Bonds. may impact on its future operating
the last bullet point above occur, the bonds and retailing electricity and could courts and tribunals are aware of the the closure of thermal generation) or
adversely impact the value of Mercury in medium-term demand growth. In the results. This could occur for a number of
may cease to be labelled as Green Bonds effects any resumption orders may have
Secondary Market Risk the future. Regulatory changes may also short-term, Mercury anticipates that the reasons including adverse hydrological
but will remain unsecured, unsubordinated on New Zealand’s security of electricity
The risk that, if you wish to sell your Green be imposed on the New Zealand electricity impact on wholesale electricity prices conditions, competition for resources,
fixed rate bonds. Bondholders that supply, flood control and other issues.
Bonds before maturity: sector that could impact the future supply in the North Island (where Mercury’s resource consents being varied or not
invested in Green Bonds on the basis of being renewed, Government regulation
the green label or compliance with green and demand of electricity and affect Electricity market exposure generation assets are located) will be
• you may be unable to find a buyer; or future spot, wholesale and retail electricity moderated to some extent by limitations (as discussed above) or power station
principles or standards may consider Mercury’s business is subject to market availability.
• the price at which you are able to sell prices. Examples may include the on the ability of current transmission
that the bonds no longer align with their risks arising from its participation in the
them is less than the amount you paid Government’s investigation of the large assets to export excess electricity from the
intentions or requirements. Bondholders spot and retail electricity markets.
for them. pumped hydro project at Lake Onslow, lower South Island before transmission
looking to sell their bonds at that time may Spot prices, contract prices, market
These outcomes may arise because have increased difficulty finding interested significant subsidies for rooftop solar and upgrades can be completed. Changes in
promotion/subsidies for electric vehicles. demand, competitor behaviour, fuel cost forward electricity prices in the ASX New
of factors related to Mercury’s buyers or obtaining an acceptable price. changes and transmission capacity can Zealand Electricity Futures market may
creditworthiness, or because of other See also section 5 of this PDS (Key Mercury seeks to mitigate these risks via all impact Mercury’s ability to manage its indicate the combined general market
factors. These other factors may include features of the Green Bonds). active engagement with Government and exposure to the spot electricity market. view of how future wholesale electricity
the following: its regulatory agencies through direct Electricity demand, retail competition and prices could be affected by Tiwai’s closure.
regulatory and technological changesYou can also read
