Building a better Aotearoa New Zealand 2022 Integrated Report Contact INTEGRATED REPORT 2022 Welcome to our third integrated report. This report explains how Contact creates value over time, or as we say in our company vision, how we are building a better Aotearoa New Zealand. Our leadership team has reviewed the report and our CEO Mike Fuge and the Board have confirmed it is a true and accurate picture of how Contact created value for our stakeholders in the 12 months to 30 June 2022. We expect it to be of interest to our people, customers, investors, suppliers, business partners, local communities, tangata whenua, legislators, regulators, policymakers and all other stakeholders. It follows the principles-based approach of the Integrated Reporting Framework and reflects our ongoing journey towards integrated thinking, focused on value creation. This report is dated 15 August 2022 and is signed on behalf of the Board of Directors of Contact Energy: Robert McDonald Chair Sandra Dodds Chair, Audit and Risk Committee Our Chair Robert McDonald and the Board of Directors will host shareholders at the Contact Energy AGM in November 2022. The notice of meeting and agenda will be provided to shareholders in October 2022. More than 98 percent of Contact Energy shareholders receive digital reports from us. We are very keen for shareholders to move to digital, and in the meantime, we have ensured the 1,500 integrated reports we print use environmentally responsible paper and inks. We are listed on both the NZX and the ASX. Financial statements Combined Independent Auditors and Limited Assurance Report Corporate directory 101 127 131 s t n e t n o C Contents Jargon buster Glossary for Te Reo Māori FY22 summary Key activity in FY22 Chair and CEO report Who we are Our Board Our leadership team Ngā Tikanga Our operations Creating value What matters most Our supply chain External environment Energy trilemma Our business model Our strategy: Contact26 Progress against strategic themes 4 5 6 6 7 10 11 12 13 14 16 18 22 23 23 24 25 27 STRATEGIC THEMES Grow demand Grow renewable development Decarbonise our portfolio Creating outstanding customer experiences STRATEGIC ENABLERS Progress against strategic enablers Environment, social and governance Transformative ways of working Operational excellence Governance matters Our Board Code of Conduct and policies Risk management and assurance Remuneration report Additional disclosures Statutory disclosures Sustainability disclosures TCFD index GRI index 28 29 33 36 38 42 43 44 53 59 63 64 66 66 68 75 76 81 95 96 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 3 Contact INTEGRATED REPORT 2022 Jargon buster ASX CEN Contact Australian Securities Exchange. Contact’s stock ticker on NZX and ASX. The company called Contact Energy Limited. Unless otherwise stated, all activities and indicators in this report are for Contact. Contact26 Contact’s strategy which sets out the company’s priorities and key activities for the five years from 2021–2026. EBITDAF ESG FY21 FY22 GRI Earnings before interest, tax, depreciation, amortisation, and changes in fair value of financial instruments. EBITDAF is a non-GAAP (generally accepted accounting practice) measure. Information regarding the usefulness, calculation and reconciliation of this measure is provided within note A2 to the financial statements. The environmental, social and governance factors used to evaluate performance. The financial year ended 30 June 2021. The financial year ended 30 June 2022. The Global Reporting Initiative is an international independent standards organisation that helps businesses, governments and other organisations understand and communicate their impacts on things like climate change, human rights and corruption. The Group This is Contact Energy Limited, Contact Energy Trustee Company Limited (a subsidiary), Contact Energy Risk Limited (a subsidiary), Simply Energy Limited (a subsidiary), Western Energy Services Limited (a subsidiary), Drylandcarbon One Limited Partnership (an associate) and Forest Partners Limited Partnership (an associate). HSE Health Safety and Environment.NZAS NZX SDGs TCFD An abbreviation for The Integrated Reporting Framework, a principles-based framework for corporate reporting. Aotearoa New Zealand’s Aluminium Smelter is the country’s only aluminium smelter and is located on Tiwai Peninsula, across the harbour from Bluff in Southland. New Zealand Stock Exchange. Sustainable Development Goals are 17 global goals designed to be a “blueprint to achieve a better and more sustainable future for all”. The SDGs were set in 2015 by the United Nations General Assembly and intended to be achieved by 2030. The Task Force for Climate-related Financial Disclosures provides a framework for climate-related financial risk disclosures. Terrawatt hour (TWh) for one hour. A unit of energy equal to outputting one million million watts TISR TRIFR TWoW Total Incident Severity Rate is a leading indicator measure that assesses the potential severity of HSE and process safety incidents. Total Recordable Injury Frequency Rate is a globally recognised measure of injury rates that can be benchmarked. Transformative Ways of Working is one of our major strategic themes. It is focused on reimagining our traditional ways of working. r r e e t t s s u u b b n n o o g g r r a a J J CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 4 Contact INTEGRATED REPORT 2022 i r o ā M o e r e t d e s u y l n o m m o c f o y r a s s o G l CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 5 Glossary of commonly used Te Reo Māori (Māori language) Ākonga Student Aotearoa New Zealand Awa Hapū Iwi River, stream Kinship group, subtribe Extended kinship group, tribe Kaitiaki Guardian, steward Kaitiakitanga Guardianship, stewardship Kaumātua Elder, elderly person, person of status within the whānau Marae Traditional Māori meeting house Rangatahi Youth Taonga Tangata whenua Te Tiriti o Waitangi Treasure, anything prized People of the land, in Aotearoa New Zealand Māori as the Indigenous People are known as the tangata whenua The Treaty of Waitangi, Aotearoa New Zealand’s founding document between the British Crown and Māori chiefs Tikanga Custom, protocol Māori Mahi Indigenous Peoples of Aotearoa New Zealand Whakapapa Genealogy, lineage, descent Work, activity Whānau Extended family, family group Mana whenua The hapū and iwi groups that have territorial Whenua Land, ground rights and authority over land Translations have primarily been sourced from Te Aka Māori Dictionary. Contact INTEGRATED REPORT 2022 Key activity this financial year July Began seeking registrations of interest to develop the world’s largest green hydrogen plant in Southland, in conjunction with Meridian. November Successfully raised $225m from investors for Aotearoa New Zealand’s first certified green capital bond/ corporate hybrid issue. Hosted a fully virtual Annual Shareholder Meeting due to Covid-19 lockdown restrictions in Auckland, with Jon Macdonald and David Smol re-elected as directors. Sandra Dodds and Rukumoana Schaafhausen formally elected to the Board. August Delivered FY21 results with EBITDAF1 of $553m and net profit of $187m. September Sandra Dodds joined the Board as an independent director. Launched ‘Good Nights’ retail plan with free power between 9pm and midnight, and donated $50,000 to Women’s Refuge Safe Night-athon fundraising appeal. Announced we will supply Genesis Energy with up to 62.5MW of renewable electricity for 15 years from 2025. Paid 21c per share FY21 final dividend to investors, following interim dividend of 14c per share paid in April 2021. 21c per share December Hit milestone of 60,000 broadband connections. January Launched ‘It’s good to be home’ brand campaign. Donated $30,000 each to the I AM HOPE, Women’s Refuge and Plunket charities via a vaccination drive for our people. 60k broadband connections March Launched free power for three months to more than 1,000 Kiwi families with a newborn baby via our ‘Fourth Trimester’ initiative. April Announced joint venture with global solar developer Lightsource bp for a series of grid-scale solar generation projects by 2026. Acknowledged we have work to do on gender pay equity as part of the Mind the Gap initiative where our overall gap between men and women is 49 percent. May Picked up two awards at the 2022 INFINZ Awards for our green capital bond and best investor relations. Launched Bring Your Own (BYO) device capability for broadband modems. BYO modem October Inked deals to supply Oji Fibre Solutions and Pan Pac Forest Products with renewable electricity until 2034. February Upgraded Tauhara geothermal power station capacity to 168MW, and revised project costs to $818m. Announced FY22 interim results with EBITDAF1 of $322m (up 31% from FY21) and net profit of $134m (up 72% from FY21). Four potential development partners from around the world shortlisted for the Southern Green Hydrogen Project. June Contact won the top honour of Energy Retailer of the Year at the New Zealand Energy Excellence Awards and Simply Energy won the Innovation in Energy Award. Announced that Te Rapa power station will close in June 2023, reducing Contact’s long-term scope 1 and 2 greenhouse gas emissions by 20 percent. Announced 2.5 year major sponsorship agreement with Women’s Refuge. 1 EBITDAF is a non-GAAP (generally accepted accounting practice) measure. Information regarding the usefulness, calculation and reconciliation of this measure is provided within note A2 to the financial statements. r r a a e e y y l l a a i i c c n n a a n n fi fi s s i i h h t t y y t t i i v v i i t t c c a a y y e e K K CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 6 Contact INTEGRATED REPORT 2022 Robert McDonald Chair Mike Fuge Chief Executive Officer Chair and CEO report Welcome to Contact Energy’s FY22 integrated report. We are pleased to share our perspectives on another successful year. In a period of unprecedented global volatility, Contact remains focused on delivering strong performance and opportunities for growth – as we continue to create a better Aotearoa New Zealand. We’re proud of the Contact team’s achievements in FY22. The Covid-19 pandemic and associated disruptions for our own workforce, our contractors, and supply chains continued to create a challenging environment, but our people have consistently risen to the challenge. We continue to deliver good returns for our shareholders, and we have ensured Contact is in a strong position for the future. Reporting Council Framework to report on material ESG activities, and provide a balanced view of our performance. Our Contact26 strategy positions us well to play to our strengths and respond to external drivers. This includes rapidly changing stakeholder expectations and regulatory pressure around natural resource management and the imperative to reduce Aotearoa New Zealand’s greenhouse gas emissions. Strategy We continue to deliver on Contact26 – our strategy to build a better Aotearoa New Zealand by leading the country’s decarbonisation. Contact26’s strategic pillars are to grow demand for renewable electricity, develop new, flexible renewable electricity generation, decarbonise our portfolio, and create outstanding customer experiences. This is underpinned by our commitment to strong environmental, social and governance (ESG) practices, a focus on operational excellence and the ongoing transformation of how we work. This report is structured around the Contact26 strategy. It also uses the Global Reporting Initiative (GRI) standards and the International Integrated New renewable electricity generation Contact will continue to bring new renewable projects to market to meet demand. This year we made solid progress with our Tauhara geothermal development near Taupō – a nationally significant renewable generation project that will materially support the decarbonisation ambitions of Contact and Aotearoa New Zealand. In February we announced that the Tauhara power station is now expected to generate 168 MW of renewable electricity, up from 152 MW when the investment was announced in early 2021 – the result of the geothermal fluid reservoir proving more productive than anticipated. This capacity expansion, together with Covid-19 headwinds including materials, freight and supply chain challenges, have increased the overall costs of the development by about 20 percent and will delay the expected completion to the later part of 2023. We have announced a $300m investment to develop a new 51.4 MW geothermal power station at Te Huka, near Taupō, which we expect to be onstream in 2024. We have also lodged consent applications for the redevelopment of Wairākei geothermal station when consents expire in 2026. Importantly, the development will move our operations away from the Waikato river supporting the mauri of the river. Our future development pipeline of wind and solar options is progressing rapidly, as we work alongside partners including Roaring4Os and Lightsource bp (LSbp). We expect our first joint venture solar project with LSbp to begin generating in 2024, and our first wind generation to start operation around 2027. Decarbonising generation assets We are committed to substantial decreases in carbon emissions from our own portfolio. As we grow new renewable generation, we’re preparing to decarbonise our generation portfolio in an orderly way – managing the balance between t r o p e r r i a h C d n a O E C CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 7 Contact INTEGRATED REPORT 2022 continued security of supply, minimising emissions and ensuring energy affordability for New Zealand. We announced the planned closure in 2023 of our Te Rapa co-generation power station, and expect to decommission the gas-fired Taranaki Combined Cycle (TCC) power station in 2024 after the Tauhara power station commences operation. The retirement of these thermal generation plants will ensure Contact delivers on its target to reduce Scope 1 and 2 emissions 45 percent by 2026 when compared to 2018. The planned closures of Te Rapa and TCC, together with the closure of Otahuhu in 2015, will result in Contact's emissions reducing by more than 70 percent over a 10-year period. We are continuing to reduce emissions at existing generation sites. And we’ve started a trial at our existing Te Huka geothermal site, exploring how we can capture emissions from geothermal energy production and inject them back into the earth. Growing demand We continue to pursue new large-scale electrification opportunities, and are seeing good demand for our new renewable electricity generation, with an increasing appetite from major customers for long-term renewable power supply agreements. We have signed significant long-term power purchase contracts that will take around half of the total renewable energy output from Tauhara over the next 10 years. We see significant opportunities for demand growth including green hydrogen and New Zealand Aluminium Smelter indicating that it will continue operations at Tiwai Point. Customer experiences Our commitment to innovative products and experiences for our customers has also paid off with growth in customer satisfaction, retention and acquisition this year. This year we have grown our connections by 9 percent to 580,000. We launched two major innovations for customers: our Good Nights plan offering three hours of free night-time power to all customers, and Fourth Trimester offering three months of free power to more than 1,000 families with newborns. Both attracted a great response. We also continue to work hard to look out for our most financially vulnerable customers, offering a wide range of plans, payment options and tailored support to ensure customers stay connected and out of debt. Disconnections and debt write-offs were significantly down this year. Customer surveys show our customers are happier and more likely to recommend us than ever. We’re winning lots of awards for our customer service excellence too – including Energy Retailer of the Year at the New Zealand Energy Excellence Awards, and four awards at the NZ Compare Awards: Best Customer Support – Power; Best Mobile Application; Power Provider of the Year; and the Supreme Champion Award across Broadband and Power – awards that our team can feel very proud of. People We have a fantastic team, engagement is high, and we are continuing to build our capability to grow our business and to support the wellbeing of our people. We are committed to substantial decreases in carbon emissions from our own portfolio. Customer surveys show our customers are happier and more likely to recommend us than ever. Our engagement survey results show we are moving in the right direction, and we know where we need to keep evolving and improving. We’re doubling down on the wellbeing of our people, including launching the Wellbeing Tick programme and reviewing our existing mental health and Employee Assistance Programme support. The Wellbeing Tick programme will transform our wellbeing culture for the long term. Our people told us last year that they wanted more access to training and development, so this year we launched Contact University – an online learning portal. Course completions across the business are up more than 500 percent year-on-year. We have had some changes to our Leadership Team this year. Deputy CEO James Kilty and Chief Corporate Affairs Officer and General Counsel Catherine Thompson left us. James and Catherine were both highly valued members of the Leadership Team and each made a significant contribution to Contact. On behalf of the Contact whānau, we thank them and wish them both well. We are very pleased to have a number of talented and experienced individuals join the Leadership team this year. This includes Tighe Wall as Chief Digital Officer, Iain Gauld as Chief Information Officer, Jacqui Nelson as Chief Development Officer, Matt Bolton as Chief Retail Officer, Chris Abbott as Chief Corporate Affairs Officer, and John Clark as Chief Generation Officer. On the Contact Board, Dame Therese Walsh left in August 2021, and Sandra Dodds joined the Board in September 2021. t r o p e r r i a h C d n a O E C CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 8 Contact INTEGRATED REPORT 2022 t r o p e r r i a h C d n a O E C Financial performance This year we’ve delivered a solid financial performance with EBITDAF1 of $537m, a 2.9 percent decline from last year, with a net profit after tax of $182 million. The Future We are pleased with our FY22 performance, our strong pipeline of renewable generation and executional capability. We are optimistic and ambitious for the future. Our operating costs and capital expenditure have been carefully managed. This result has been achieved in a year with highly variable hydrology, and while contending with unprecedented global volatility, inflationary pressures and supply constraints. In FY22 we will deliver investors a 35 cents per share annual dividend, equal to FY21. While we see continuing turbulence in global energy markets, the domestic market is performing well and we remain well-positioned to perform strongly. Our strategy is closely aligned to Aotearoa New Zealand’s focus on achieving net zero emissions by 2050. We will make major steps forward with the completion of Tauhara and Te Huka generation plants, further geothermal investments, our first solar and wind projects, and the closure of thermal generation assets. We have a lot more to do to transition to carbon zero, and to address major issues such as energy wellbeing and the diversity in our workforce – and we are putting increasing focus into that. It continues to be a hugely exciting time to be involved in the electricity sector. We have set audacious goals. There is a lot to do but we are confident we have the people and the capability to do it. Lastly, we would like to thank everyone at Contact for their stellar work throughout the year. We are proud of you and all that you have delivered. We have a lot more to do to transition to carbon zero, and to address major issues such as energy wellbeing, and the diversity in our workforce – and we are putting increasing energy into that. Ngā mihi nui, Robert McDonald Chair Mike Fuge Chief Executive Officer CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 9 1 EBITDAF is a non-GAAP (generally accepted accounting practice) measure. Information regarding the usefulness, calculation and reconciliation of this measure is provided within note A2 to the financial statements. Contact INTEGRATED REPORT 2022 Contact INTEGRATED REPORT 2022 e r a e w o h W Who we are CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 10 e r a e w o h W CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 11 Our Board Jon Macdonald Victoria Crone David Smol Sandra Dodds Robert McDonald INDEPENDENT NON-EXECUTIVE DIRECTOR INDEPENDENT NON-EXECUTIVE DIRECTOR INDEPENDENT NON-EXECUTIVE DIRECTOR Appointed Nov 2018 Appointed Nov 2015 Appointed Oct 2018 Chair, People Committee Member, Audit and Risk Committee Chair, Development Committee Member, Development Committee Member, Safety and Sustainability Committee INDEPENDENT NON-EXECUTIVE DIRECTOR Appointed Sep 2021 Chair, Audit and Risk Committee Member, People Committee INDEPENDENT NON-EXECUTIVE CHAIR Appointed Nov 2015 Member, People Committee Rukumoana Schaafhausen INDEPENDENT NON-EXECUTIVE DIRECTOR Appointed Mar 2021 Member Safety and Sustainability Committee Member Audit and Risk Committee Elena Trout INDEPENDENT NON-EXECUTIVE DIRECTOR Appointed Oct 2016 Chair, Safety and Sustainability Committee Member, Development Committee Our directors bring broad knowledge, deep understanding and strong experience to the boardroom table. Their governance sets our strategic course and enables Contact to thrive, succeed, and navigate risk-taking. They ask the hard questions until they are satisfied with decisions, help us seize the right opportunities, and ensure we balance the interests of all our stakeholders. In the Governance section of this report we include a matrix setting out the Board’s expertise across a range of strategic skills. You can also find profiles of the directors on our website. Contact INTEGRATED REPORT 2022 e r a e w o h W CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 12 Our leadership team Jan Bibby John Clark Dorian Devers Chris Abbott Mike Fuge Matt Bolton Jacqui Nelson Iain Gauld Jack Ariel Tighe Wall CHIEF PEOPLE AND TRANSFORMATION OFFICER CHIEF GENERATION OFFICER Joined 2019 Joined 2018 Joined leadership team Feb 2022 CHIEF FINANCIAL OFFICER CHIEF CORPORATE AFFAIRS OFFICER CHIEF EXECUTIVE OFFICER CHIEF RETAIL OFFICER Joined 2018 Joined 2019 Joined 2020 Joined 2009 Joined leadership team Feb 2022 Joined leadership team Mar 2021 CHIEF DEVELOPMENT OFFICER CHIEF INFORMATION OFFICER Joined 2004 Joined 2017 Joined leadership team Sep 2021 MAJOR PROJECTS DIRECTOR CHIEF DIGITAL OFFICER Joined Apr 2021 Joined 2020 Joined leadership team Sep 2021 Our leadership team implements the strategy approved by the Board. They also ensure the Board receives accurate and timely information about Contact’s operations, performance, legal obligations, reputation, financial conditions and prospects. They demonstrate strong and clear leadership inside Contact and to our external stakeholders. They manage the day-to-day operations of our people and our resources to ensure we operate effectively and efficiently. They demonstrate strong and clear leadership inside Contact and to our external stakeholders. You can find full profiles of our leadership team on our website. Contact INTEGRATED REPORT 2022 e r a e w o h W Ngā Tikanga – our moral compass Our Tikanga guides our actions, both as individuals and as Contact, and is our set of principles, commitments and behaviours. Principles Commitments Behaviours Pointed focus sharpens us Human kindness connects us Curiosity propels us Progressive defines us We act professionally at all times. We care about the health and safety of our people and minimise health, safety and environmental impacts on customers and communities. We put our energy into things that matter by: · adding value to resources under our control · being inclusive, encouraging diversity and expression of ideas and opinions · creating value for our stakeholders · ensuring the sustainability of our business · looking after natural and shared resources · being a good neighbour in communities. We’re authentic and make sound decisions knowing they’ll be subject to scrutiny. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 13 Creating value for our customers and communities by developing smart solutions that make life easier. Creating a rewarding workplace for our people by valuing everyone’s contribution, encouraging personal development, recognising good performance and fostering equal opportunity. Respecting the rights and interests of communities by listening, and understanding and managing the environmental, economic and social impacts of our activities. Respecting the rights and interests of our business partners so we work collaboratively to create valued, rewarding partnerships. Delivering market-leading performance for shareholders by identifying, developing, operating and growing value-creating businesses. Staying a step ahead, anticipating the things that are going to matter to our business and Aotearoa New Zealand. Contact INTEGRATED REPORT 2022 e r a e w o h W CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 14 Our operations Connections 1,179employees 61k shareholders 714k spent in communities (Contact only) 580k total customer connections at 30 June 2022 0tier 1 process safety incidents 8TWh contracted electricity sales $2.8b net assets (Contact only) 35c per share dividend 87% renewable generation $89m tax paid 5.1k 4.9k Volume sold GWh 780 780 2022 2021 Electricity Natural gas 416k 438k Connections by energy type 65k 71k 51k 71k Electricity Natural gas Broadband 450k 420k Connections by account type +39Net Promoter Score (Contact only) gender pay equity 787k 95.2% tCO2e Scope 1 Group emissions 52k 52k 59k 77k Residential Business Other (including broadband) All figures at 30 June 2022 or for FY22. The data on this page is for the group (excluding associates) unless otherwise identified. Read more about Contact on our website. These connection figures include Simply Energy connnections. Contact INTEGRATED REPORT 2022 2022 generation output by station and type This graph shows the relative size of generation output from each station during the FY22 year. Where we are Total renewable generation 7,223GWh Total non-renewable generation 1,046GWh Auckland Te Rapa Stratford Poihipi Levin Simply Energy Te Mihi Ohaaki Tauhara UNDER CONSTRUCTION Whirinaki Western Energy Wairākei Te Huka 3,940 (GWh) Roxburgh (320 MW) 1,775 Hawea Clyde Wellington Simply Energy Contact sites Offices and call centres Geothermal power station Hydroelectric power station Storage lake Thermal power station Dunedin Roxburgh Subsidiaries Simply Energy Western Energy Clyde (432 MW) 2,165 1,046 (GWh) Te Rapa (44 MW) Stratford – Peakers (210 MW) Whirinaki (155 MW) Stratford – CCGT (377 MW) 4 179 190 673 Contact delivers 20 percent of Aotearoa New Zealand’s electricity generation. 20% 8.3TWh total generated Tauhara (168 MW) Under construction 3,283 (GWh) Te Huka (28 MW) Ohaaki (44 MW) Poihipi (55 MW) 189 322 331 Wairākei (132 MW) 1,055 Te Mihi (166 MW) 1,386 e r a e w o h W CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 15 Geothermal Hydro Thermal Contact INTEGRATED REPORT 2022 l e u a v g n i t a e r C Creating value CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 16 Contact INTEGRATED REPORT 2022 l e u a v g n i t a e r C Creating value Sam and Andy from our sustainability team take part in a local planting day in Taupō. We are contributing to a better Aotearoa New Zealand by putting our energy where it creates sustainable value. We start by looking at what matters most and reviewing our supply chain and where impacts occur. We consider the environment in which we operate and our business model when we develop our strategy, to ensure we create value. It includes an overview of the resources and relationships (or ‘capitals’) that are used by, or impact on, our business. This includes external influences such as access to natural resources, relationships with our communities, and partnerships with tangata whenua. The outcomes that emerge from these interactions are ultimately how we create value for our business, our suppliers and customers, and for Aotearoa New Zealand over the short, medium and long term. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 17 Contact INTEGRATED REPORT 2022 What matters most We use the Global Reporting Initiative (GRI) standards and the Integrated Reporting Council Framework to report on material environmental, social and governance activities, and aim to provide a balanced view of our performance. We also report our climate change risks using the Task Force for Climate-related Financial Disclosures (TCFD) framework. “Contact could be a bigger leader, especially explaining the decarbonisation story and helping people grasp that.” Assessing our material impacts We undertook an annual review of our material environment, social and governance (ESG) impacts to ensure we are effectively identifying and managing them. This year’s review involved scanning our external environment and in-depth interviews with internal and external subject matter experts, in accordance with the updated 2021 GRI standards guidance. Working with independent consultants Proxima, we identified 15 subject matter experts with knowledge about our sector, communities, environment and other key material topics. Proxima interviewed each expert about these topics, with a focus on each individual’s areas of expertise. Interview responses helped inform our list of material topics which considers areas of positive and negative impact of Contact’s business activities, both current and potential, and their relative significance. In partnership with Proxima, a leadership steering group then evaluated the significance of the topics and prioritised them as high, medium or low impact. As part of the prioritisation, we considered how harmful or beneficial the impact is for the stakeholders affected, how widespread the impact is, how long the effects last and how likely and severe the potential impacts are. The material topics were then presented to, and endorsed by, the Safety and Sustainability Committee. The inclusion of a material topic does not mean that the issues are not being addressed or are being addressed poorly, but that the impacts of them are significant. Areas of expertise covered by interviews The areas of expertise covered by the subject matter experts are listed below. We also incorporated insights gained from our stakeholders throughout the year, along with feedback from an internal workshop of Contact “future thinkers”. • Geothermal land impacts • Legal/regulatory • Infrastructure • Tangata whenua • Value creation, including financial • Environment, water and biodiversity • Environment and community • Renewables and innovation • Customer relationships • Market economics • Climate and carbon • Geothermal environmental and community impacts • Energy hardship • Energy efficiency/demand response l e u a v g n i t a e r C CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 18 Contact INTEGRATED REPORT 2022 “Contact has lots of opportunities for different and better partnerships with mana whenua; and needs to be aligned with mana whenua given their importance as investors as well as customers.” United Nations Sustainable Development Goals We also mapped the 13 material topics against the United Nations’ 17 Sustainable Development Goals, and identified six goals where we believe Contact can have the greatest positive impact. You will see these icons in the report where they relate to specific sections. What we heard Four clear themes emerged from our review: • Opportunities for positive impact through collaboration, partnership and leadership: Collaboration with large customers, business partners, communities, community groups and tangata whenua are seen as essential to make progress on issues of decarbonisation, energy hardship, energy efficiency, demand response, community engagement, biodiversity and the environment. • Addressing energy hardship and affordability could be a point of difference: Contact and other major retailers will be expected to do more to address energy hardship and affordability issues for those most in need. Affordability and access to the benefits of micro distributed generation (and emerging peer-to-peer markets) are seen as challenges needing to be addressed for a just transition. • Impacts on biodiversity and water will continue to grow in significance: Contact is seen to have an important role to play in ecosystem health, and this should consistently go beyond compliance. Community interest in impacts on water and biodiversity are expected to increase. The health of native fish species that are threatened with extinction is particularly significant. • Innovation on the retail side of the business can provide system benefits and opportunities: Contact has an opportunity to explore innovation on the retail side of the business. Grid flex and demand response were seen as areas ripe for innovation that could help achieve national decarbonisation goals. Stakeholders saw reputation benefits for Contact from being more active and vocal on working for the wider interests of Aotearoa New Zealand. Our next step is to look at these impacts across the business to drive and embed a greater sustainability focus, and to select two or three impact areas to focus on where Contact can deliver leadership and show significant progress in the short term. “Contact could proactively address the coming spike in energy hardship and affordability issues arising from the current economic climate.” l e u a v g n i t a e r C CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 19 Contact INTEGRATED REPORT 2022 l e u a v g n i t a e r C The material topics map Within these four themes, we identified 20 key impacts that are material to our business. These are shown below and on the next page. Our supply chain shows where these impacts occur. Material topic Definition of topic Sections of the report High impact Generation emissions Renewable energy supply Decarbonisation and electrification Demand flexibility Greenhouse gas emissions from electricity generation activities and burning fossil fuels in power plants. Secure, reliable and sufficient supply of renewable energy. Decarbonisation of commercial and residential energy use through more energy efficiency and increasing electrification to replace fossil fuels. Managing electricity time of use/demand flows and battery storage to maximise the use of renewable electricity, and minimise thermal generation to reduce national carbon emissions and maximise efficiency. Tangata whenua partnerships Partnership approach and manage whenua, awa and other taonga in the spirit of Te Tiriti to preserve and restore cultural heritage affected by generation assets and activities. Freshwater system health The health and wellbeing of native freshwater fish species; and the health of river systems relating to river flows and the discharge of cooling water from geothermal generation. Grow renewable energy Decarbonise our portfolio Environment, social and governance Grow renewable development Grow demand Decarbonise our portfolio Grow demand Environment, social and governance Environment, social and governance The health of above and below ground biodiversity is affected by hydro, gas and geothermal generation activity. Environment, social and governance In contrast with last year’s material topics: • Tangata whenua wellbeing is now a separate topic from community wellbeing. • Climate change is now broken down into decarbonisation and electrification, generation emissions, and demand flexibility to acknowledge more clearly the different ways carbon emissions arise and can be addressed, with the climate change topic covering impacts arising from climate change risks. • Energy hardship is expanded to include affordability, referring to both residential and business customers. • Water is clarified to refer specifically to the health of freshwater systems, including life in the water. • Customer wellbeing and experience is refined to customer trust. • Privacy is extended to include cyber security. • Biodiversity is clarified to include restoration (positive impact) as well as protection. • Natural resource protection is added to cover stewardship impacts of land ownership and management. • Ethical and sustainable procurement now incorporates resilient supply chain. • Diversity and inclusion incorporates human rights. Community wellbeing and job creation in the local economy. Environment, social and governance • Regulation has been removed as it is not an impact, but an influence. Energy hardship and affordability The inability of individuals, households, whānau and businesses to access adequate energy services to support wellbeing. The impact is exacerbated by current high costs of microgrid and self- generation opportunities that could reduce energy costs for customers, and support a just transition to a low carbon future. Creating outstanding customer experiences Biodiversity protection and restoration Community wellbeing CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 20 Contact INTEGRATED REPORT 2022 l e u a v g n i t a e r C CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 21 The remaining key impacts are shown on this page. Material topic Definition of topic Sections of the report Medium impact Reliable energy supply Constant and continuous energy supply to customers and broader society in the face of future change, including increased demand and impact from extreme weather events. Grow renewable development Customer trust Trust levels with customers affected by interactions with and services provided by Contact. Creating outstanding customer experiences Team culture The way that teams work together based on common goals, values, beliefs, expected and accepted behaviours and ways to treat each other. Transformative ways of working Workforce health and wellbeing Diversity and inclusion Natural resource protection Infrastructure safety Climate change impact on assets Privacy and cybersecurity Environmental pollution The safety, physical health and mental wellbeing of all workers affected by issues such as fair and flexible work practices, remuneration levels and opportunities for personal development. Transformative ways of working Equitable treatment and equal opportunity, irrespective of personal characteristics such as age, gender, sexual orientation, ethnicity, country of origin, or disability. Harm to the integrity and health of the land and Earth's natural resource systems from the extraction of renewable and non-renewable resources, including geothermal liquid, and downstream effects of hydro dam generation, such as flooding or drought due to dams holding back or releasing flows. Transformative ways of working Environment, social and governance The potential of infrastructure connected to Contact and its operations to cause harm, injury or loss to people, society or environment. Transformative ways of working Potential harm resulting to others as a result of climate change impacts on Contact’s assets and infrastructure. Environment, social and governance Privacy and security of customers’ personal information and other information required for Contact’s operations, as well as potential social and economic harm resulting from cyber-attack on Contact’s systems. Operational excellence Pollution of air, land and water either directly from the operation of geothermal and thermal energy stations, or through ancillary activities such as cleaning, weed control and drilling on well pads as well as waste generated from station activities. Environment, social and governance Sustainable procurement Procurement practices that have the potential to cause adverse impacts on the environment, economy and society, including people’s human rights. Environment, social and governance Contact INTEGRATED REPORT 2022 Our supply chain 1. We generate 2. We trade 3. We innovate 4. We sell and serve We own and operate 11 power stations and produce the majority of our electricity from our renewable hydro and geothermal stations. Our natural gas and diesel-fired power stations operate to ensure the lights stay on for New Zealanders when intermittent renewable plants cannot operate. We sell the electricity we generate on the wholesale market. We purchase goods and services from more than 2,000 suppliers. We also trade a range of financial products to manage our risk and create value. We create smart solutions that are good for people (tiaki tangata) and the environment (tiaki taiao) to help customers, partners, suppliers and communities have a better quality of life. We are an innovative, safe and efficient generator, actively working with our customers, partners and suppliers to improve energy efficiency, reduce emissions and fight climate change. As a retailer we sell products and services to thousands of individuals and businesses to meet their energy and broadband needs. National Grid Lines companies Our impacts Generation Corporate activities Operational presence Customer service Generation emissions Tangata whenua partnerships Freshwater system health Demand flexibility H G H I I M U D E M Renewable energy supply Renewable energy supply Freshwater system health Demand flexibility Biodiversity protection and restoration Decarbonisation and electrification Demand flexibility Community wellbeing Energy hardship and affordability Biodiversity protection and restoration Community wellbeing Energy hardship and affordability Infrastructure safety Workforce health and wellbeing Infrastructure safety Reliable energy supply Climate change impact on assets Diversity and inclusion Climate change impact on assets Customer trust Environmental pollution Team culture Environmental pollution Privacy and cybersecurity Natural resource protection Privacy and cyber security Climate change impact on assets Sustainable procurement l e u a v g n i t a e r C CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 22 Contact INTEGRATED REPORT 2022 External environment The energy trilemma The external environment impacts how we create value. This includes economic conditions such as the Covid-19 response, technological change, regulatory policymaking such as planning material greenhouse gas emissions reductions over the coming decades and implementing the recommendations of the Electricity Price Review, societal change as the population ages and diversifies, and environmental factors such as climate change. For more detailed observations about the external environment for Contact in FY22 and beyond, please read the report from our Chair Robert McDonald and our CEO Mike Fuge, and Contact26. “The global energy sector is facing unprecedented change as countries strive to decarbonise and shape a more inclusive energy transition as they seek to recover from the economic shocks generated by the pandemic.” The World Energy Council The World Energy Council’s energy trilemma is a three- dimensional problem that involves balancing the security of energy supply with environmental sustainability and affordability. It provides a framework for focusing the areas where Contact puts its energy to create sustainable value for New Zealanders; we’re working hard to improve accessibility, demonstrate reliability and look after the environment. The trilemma also demonstrates the competing demands and trade-offs at play. Pushing harder on one dimension of the trilemma may require concessions from the others. For example, requiring energy production in Aotearoa New Zealand to be 100 percent renewable would likely be prohibitively expensive, but a focus on electrification of industrial heat and a target of 95 percent renewable energy would still deliver excellent environmental outcomes. In the Contact context: • accessibility is focused on customer wellbeing, energy hardship and tailoring our products and services to customer needs. • reliability is focused on the resilience of our supply chain, the impact of regulation, financial sustainability, the reliable supply of energy, and the safety and wellbeing of our people. • environmental sustainability is focused on community wellbeing, climate change and greenhouse gas emissions, renewable energy, water and biodiversity. “New Zealand’s energy sector has again been ranked as one of the top 10 worldwide by the World Energy Council. We should be proud to be one of only nine countries globally – and the only country outside Europe – to achieve the top ‘AAA’ rating across the Energy Trilemma’s three metrics of security of supply, affordability and sustainability.” ERANZ l e u a v g n i t a e r C CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 23 Contact INTEGRATED REPORT 2022 Our business model – creating value by: l e u a v g n i t a e r C undertaking business activities in alignment with our Tikanga, vision and strategy, overseen by good governance deploying financial, natural, relationship, physical asset and people capitals factoring in external environment influences delivering outcomes in alignment with our strategy. Capitals Nature People Relationship Finance Asset Tikang a ā g N R e l i a b ility G o v e r n a nce Strategy c e ssibility c A E n v i r o n m e n t olders t n e m n viro E n h e S t a k Contact26 – Building a better Aotearoa New Zealand Growing electricity demand Growing renewable development Decarbonising our portfolio Creating outstanding customer experiences Operating with great ESG practices, operational excellence and transformative ways of working CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 24 We depend on various forms of capital for our success and the stocks of these increase, decrease or change in the course of our business activity. Nature Using, caring for and managing natural resources and environmental assets are fundamental parts of Contact’s business. This includes water, biodiversity, geothermal steam/fluid, gas, air quality, land, carbon, pest control and ecosystem impacts. People The expertise, competence and passion of everyone from our Board and Leadership Team through to those in our offices and sites underpins our operations. Our approach is embodied in our Tikanga. This includes how we work together, manage risks, look for improvements and treat each other with respect. Relationships Our social licence to operate relies on myriad relationships within and between our communities, stakeholders and networks. It relies on building goodwill and earning trust with all our stakeholders including tangata whenua, customers, communities, investors, regulators, media, suppliers and our own people. Finance We have a pool of funds that we deploy to produce and deliver energy, serve our customers and undertake all of our other activities. This has been generated through our business activities, investors and debt arrangements, and relies on us delivering on our strategy. Assets We use many physical and intellectual assets to deliver reliable, affordable and environmentally sustainable electricity. These include power stations, offices, vehicles, transmission/distribution connectivity, and our reputation, website and application software, IT systems, customer databases, brands, licences and internal ‘know-how’. Contact INTEGRATED REPORT 2022 Our strategy: Contact26 Our strategy to lead New Zealand’s decarbonisation Grow demand We’re growing demand for New Zealand’s renewable electricity in a range of ways. Grow renewable development We’re developing new, renewable, flexible electricity generation as the market evolves. Decarbonise our portfolio We’re decarbonising our portfolio of generation assets (and the New Zealand electricity market) via an orderly transition to renewable generation (managing the balance between continued security of supply, minimal emissions and affordability). Create outstanding customer experiences We’re creating outstanding customer experiences as we build New Zealand’s leading energy and services brand to meet more of our customers’ needs. This will be underpinned by three key enablers Environmental, Social, Governance (ESG) • Create long-term value through our strong performance across a broad set of environmental, social and governance factors. Transformative ways of working (TWoW) • Use technology to modernise our operating model • Increase employee engagement to attract and retain talent. Operational excellence • Use innovation to continue to improve business efficiency • Prudent management of stay-in-business capital expenditure to deliver value • Capture economies of scale and further digitise our business. Contact Contact INTEGRATED INTEGRATED REPORT REPORT 2022 2022 l e u a v g n i t a e r C s e m e h T l s r e b a n E 25 25 Contact INTEGRATED REPORT 2022 l e u a v g n i t a e r C CONTENTS FY22 SUMMARY CONTENTS WHO WE ARE WHO WE ARE CREATING CREATING VALUE VALUE STRATEGIC STRATEGIC THEMES THEMES STRATEGIC STRATEGIC ENABLERS ENABLERS GOVERNANCE GOVERNANCE MATTERS MATTERS ADDITIONAL ADDITIONAL DISCLOSURES DISCLOSURES FINANCIAL FINANCIAL STATEMENTS STATEMENTS 26 26 We are pursuing our long-term vision to create and contribute to a better Aotearoa New Zealand by leading the country’s decarbonisation journey. Our Contact26 strategy sets out our approach to achieving this by 2026, underpinned by the energy trilemma and two structural shifts. The first key shift was Rio Tinto's agreement in January 2021 to extend the operation of the New Zealand Aluminium Smelter (NZAS) at Tiwai Point to 2024. Rio Tinto is now looking to continue operating NZAS beyond 2024 and has begun exploring potential pathways with electricity generators. This news provides some much-needed certainty that a transition away from the electricity sector’s reliance on this significant source of demand (13 percent of total electricity demand in Aotearoa New Zealand) could be achieved in an orderly way. The second is the profound societal shift brought on by growing awareness and concern about the impact of climate change. Stakeholder expectations and regulatory pressure continue to accelerate around natural resource management, and the drive for action to reduce Aotearoa New Zealand’s greenhouse gas emissions. The drive for decarbonisation is combining with advances in technology to accelerate the shift toward electrification across the economy. Fossil fuel input costs have rapidly risen, and are expected to keep rising. Although there is near-term volatility around costs associated with green technologies (particularly off the back of Covid-19 supply chain issues), our long- term view is that technology will evolve to become more accessible, affordable and widely used. Clean, low-cost, renewable electricity is now becoming increasingly attractive and in demand, with a strong focus to electrify and move away from thermal. Opportunities within our strategy allow for reduced reliance on NZAS and the ability to deliver on decarbonisation by electrifying Aotearoa New Zealand’s energy needs as well as growing demand for renewable energy. Strategic themes Our Contact26 strategy has four strategic priorities: • we’re growing demand for Aotearoa New Zealand’s renewable electricity in a range of ways; • we’re developing renewable energy generation to remain flexible as the market evolves; • we’re decarbonising our portfolio of generation assets (and the Aotearoa New Zealand electricity market) via an orderly transition to renewable generation, as we manage the balance between secure supply, minimal emissions, and affordability; and • we’re creating outstanding customer experiences as we build Aotearoa New Zealand’s leading energy and services brand to meet more of our customers’ needs and support renewable development ambitions. Strategic enablers These priorities are underpinned by three programmes of work that are our strategic enablers: • a commitment to environment, social and governance outcomes, as we know strong ESG credentials will help us create long-term value; • the continuation of our operational excellence programme driving efficiency and best practice through innovation and digitalisation; and • our transformative ways of working to create a flexible and high-performing environment to attract and retain talented people. Why will we succeed? The key capabilities that will allow us to move on our Contact26 strategy and set us apart from our peers include: • Renewable assets and a development pipeline to back this demand. Our portfolio is able to provide firm and flexible electricity supply and low costs. Our hydro power stations deliver low-cost electricity and flexibility and attract new demand from new sources (e.g. international data centres). Our geothermal power is the lowest cost baseload power in the market, and our operating costs are unmatched. We have a strong pipeline to build on this, as we look to complement the Tauhara development with additional geothermal options when market conditions allow. Our future pipeline of wind and solar options is also progressing strongly, as we work alongside our world-class partners Roaring4Os and Lightsource bp. • Commodity risk management. We have considerable flexibility in our portfolio, with our hydro assets, demand flexibility capacity, thermal plant and gas storage. This allows us to manage our risks and make choices between different fuel sources. This will become more important as Aotearoa New Zealand’s proportion of renewable electricity generation grows, and prices become more volatile. • Knowledge and capabilities in decarbonisation that provide us with a growth platform. For example, Western Energy brings innovative capabilities that maximise well efficiency, production and value; and Simply Energy brings commercial and industrial customers with a package of demand flexibility, long-term power pricing agreements, and deep knowledge around electrification options. Last year we were also the first gentailer to complete a large-scale industrial electrification, working with Open Country Dairy on their new electrode boiler. Measuring success Each of the strategic themes has a set of ambitious measures that provide insights into the anticipated areas of activity and define what success will look like. Contact INTEGRATED REPORT 2022 l e u a v g n i t a e r C Progress against strategic themes Eighteen months into strategy execution, we have seen solid progress. Complete/On-track Minor delay Major delay Strategic theme FY22 Achievements/progress Contact26 strategy targets1 Grow demand Southern Green Hydrogen RFP completed, down to the final two participants Engaging with several parties about industrial electrification opportunities Lake Parime data centre construction underway, interest from other data centre operators Lock in major industrial user electrification NZAS negotiations underway Supported around 50MW of new-to-market lower South Island electricity demand Grow renewable development Build Tauhara Te Huka 3 investment decision Secure solar partnership or add capability Wind monitoring mast erected Completed the economic assessment of a 100MW battery energy storage system investment Current battery commodity costs make the project challenging, investment will be reconsidered when market conditions allow Decarbonise our portfolio Outline lowest cost/least carbon solutions for thermal assets in transition to 100% renewable Announced the closure of Te Rapa in 2023, 12 month extension to TCC to 2024. On target to meet carbon reduction commitments. Thermal review ongoing Electricity 'swaption' with Meridian agreed for 2023 and 2024 Create outstanding customer experiences Launch time of use offer, with extension into EVs Targeted growth in broadband and energy connections SAP finance and generation on track, CRM implementation experiencing delays Pilot launch of wireless broadband Investigate data driven energy monitoring commercial models Launch new brand position • Senior in-house capability to support industry electrification partnerships by 2021 • 100 MW of new commercial and industrial demand by 2025 • Identify 300+ MW of market-backed demand opportunities, replacing NZAS in the lower South Island by end of 2024 (e.g. hydrogen). • Tauhara online by 2023 • Final investment decision on next renewable build (e.g. Wairākei geothermal, new wind, new solar) by 2024 • Decision on North Island battery by end of 2023, for delivery in 2024 • 100 MW of demand response capacity by 2025. • Complete thermal review in 2021, and executed by the end of 2022 • TCC decommissioned by end of 2023 • Reduce Scope 1 and 2 GHG emissions 45% compared to 2018 baseline by 2026. • Top 10 ‘most trusted brand’ by 20252 • +650,000 customer connections by 2025 • CTS < $90 per connection3 • 75% of customer interactions through digital channels. 1 Set in May 2021. 2 As per the Colmar Brunton Rep Track report. 3 Re-based for operating cost reclassifications in FY22. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 27 Contact INTEGRATED REPORT 2022 Strategic themes Contact INTEGRATED REPORT 2022 s e m e h t c i g e t a r t S CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 28 Grow demand Material topics Decarbonisation and electrification Demand flexibility We’re growing demand for Aotearoa New Zealand’s renewable electricity in a range of ways. We’re making investments to help accelerate the country’s transition from thermal to renewable energy sources, and working with customers, partners and suppliers to grow demand for renewable electricity at their end. We are pursuing new large-scale demand opportunities, and have announced our first project from that pipeline – a new data centre in Otago. We are also making good progress with Southern Green Hydrogen, our Joint Venture with Meridian Energy to build the world’s first large-scale green hydrogen plant. Our work with Simply Energy is helping industrial customers to adopt energy solutions that help them reduce energy consumption, encourage off-peak power use, and to shift from coal boilers to electrification. We have also signed long-term power purchase agreements for around half of the electricity that our Tauhara geothermal power station will produce. These sorts of deals are a vote of confidence from industrial customers who are willing to make long-term commitments to support new investments in renewable generation. Growth in Demand Flex We continue to grow our demand flexibility services through our subsidiary Simply Energy's innovative Demand Flex programme. We’ve added 16 new customers, and now have 46 customers across 59 sites signed up to the programme, providing an average flexible load of over 17 MW and a maximum potential load of more than 36 MW. As well as customers being paid to power down equipment when the grid needs a helping hand (balancing supply and demand), Simply is expanding the programme to offer additional demand flexibility benefits. Customers will soon be able to reduce their energy costs by participating in ‘Demand Management’, following a proof-of-concept pilot with two customers, Mancold and Venison Lamb Packers. Demand Management will enable customers to manage load onsite by shifting consumption out of peak periods when electricity typically costs more and has a higher carbon footprint. Customers can also make further cost and carbon savings by reducing load when the local network is constrained – such as on cold winter evenings. On the electrification front, Simply is combining its flexibility services with other energy strategies, such as energy efficiency and long-term structured supply deals, to help customers shift from fossil fuels to electricity for their industrial heat demands, reducing long-term costs and carbon emissions. Simply is also providing solutions that better use existing network capacity and have the smarts to match real-time generation with consumption, alongside creating the commercial models required to deliver low-carbon solutions. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 29 Contact INTEGRATED REPORT 2022Strategic themes CASE STUDY CASE STUDY A plug for efficiency Working with Alliance Simply Energy ran a pilot this year with the Energy Efficiency and Conservation Authority (EECA), Wellington City Council, and Open Country Dairy to help reduce energy waste from buildings. EECA estimates that, on average, building energy performance could be improved by 20–25 percent. With commercial buildings using 21 percent of Aotearoa New Zealand’s electricity, there’s a big opportunity to reduce carbon emissions by reducing energy waste. The pilot uses innovative technology through a partnership with United States-based smart plug and building insights company Sapient. Installed throughout buildings, the smart plugs capture efficiency data for equipment plugged into them. After a few weeks, the system makes efficiency suggestions, and indicates how much money could be saved by implementing the suggestions. Customers can accept, override or automate the suggestions at the press of a button. Based on the pilot, the technology is expected to deliver plug load savings of around 20 percent when it is rolled out later this year. It’s another way we’re adding value for customers and creating a better Aotearoa New Zealand. In May Simply signed a three-year flexibility services agreement with Alliance, to support the operation of an electrode boiler being installed at its Lorneville plant near Invercargill. Simply worked closely with Alliance, the local network company and Transpower to identify how much spare network capacity was available to operate the boiler on terms that made the project commercially viable. The Simply team also helped Alliance size how much network capacity was needed to meet its steam requirements and materially reduce coal usage. Network capacity is normally sized by making sure the site can meet the new load in addition to running other operational activities, such as heating, cooling and refrigeration, at peak times. With limited cost-effective extra capacity available from the local network, rather than settle for a smaller boiler, Simply identified ways to increase the size of the boiler and the potential carbon savings, using its Demand Flex technology. The technology will enable Alliance to use up to 10 MW of the site’s upgraded 14 MW electrical capacity when it’s not needed elsewhere. While the upgrade doesn’t provide enough capacity to displace coal entirely, it keeps further electrification options open for Alliance and has given them the confidence to select a 16 MW electrode boiler for when additional network capacity becomes commercially viable. Simply is enabling further carbon and cost savings by using Demand Flex to allow Alliance to switch to using its coal boiler when carbon emissions are lower from burning coal onsite than using electricity produced by thermal generation. The electrode boiler is expected to be up and running by October 2023 and will save 16,800 tonnes of carbon a year, halving carbon emissions from coal at Alliance’s Lorneville plant within three years. As well as giving customers an added revenue stream, the programme gives them more control over their electricity use and empowers them to take climate action. Simply is on track to deliver 100 MW of targeted load growth by 2025, and earned the award for Innovation in Energy at this year’s Energy Excellence Awards. Decarbonising process heat One of the biggest opportunities to reduce greenhouse gas emissions is through decarbonising process heat. The energy sector (including transport) accounts for around 40 percent of Aotearoa New Zealand’s greenhouse gas emissions, and process heat makes up 27 percent of this. More than half the country’s process heat demand is met by burning carbon intensive fossil fuels. Simply Energy helps customers find commercially viable opportunities to reduce process heat carbon emissions, through efficiency and electrification – working alongside networks, engineers and energy markets to help customers navigate the challenges and opportunities. Over the past year, Simply supported several big energy users to establish commercially viable projects to reduce their process heat carbon emissions. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 30 Contact INTEGRATED REPORT 2022Strategic themes CASE STUDY Southland’s first eco-industrial park Simply Energy is working with Southland-based Makarewa Coolstore in an industry-leading project to build Southland’s first eco-industrial park. Makarewa Coolstore plans to develop its 20-hectare brownfields site into a network of circular economy businesses that contribute towards sustainable development for Southland. Simply is helping coordinate energy infrastructure for the park, which will enable Makarewa Coolstore and its tenants to benefit from sharing infrastructure and utilities. The first step was establishing market arrangements to allow tenants to share the network charges and pay only for their own consumption, as Simply explores other options such as capturing the cost benefits of flexible load and scale for increasing capacity to the park. Tenants will also have the opportunity to participate in demand management, to manage load onsite by shifting consumption out of peak periods when electricity typically costs more and has a higher carbon footprint, and to further reduce costs and carbon emissions by reducing load when the local network is constrained. Simply is helping Makarewa Coolstore explore other benefits from shared utilities, such as managing water supply to the park through the embedded network, diverting waste refrigeration heat for secondary use, installing a single large boiler to service the whole park, exploring the potential to install one or two wind turbines, and identifying options to keep the park’s capacity ahead of tenant demand. The collective benefit of the proposed energy infrastructure is significant. It will maximise the use of renewable energy, improve energy efficiency, lower energy and asset maintenance costs, and reduce energy waste and emissions. Long-term power purchase agreements for renewables Our investment in new renewable electricity generation, including our new Tauhara geothermal power station development, is paying off with major customers signing up for long-term renewable power supply agreements. International interest in Southern Green Hydrogen We have had significant international interest in the Southern Green Hydrogen Project, a joint venture between Contact and Meridian Energy to build the world’s first large-scale green hydrogen plant in Bluff. In August, we signed a new contract to supply Genesis Energy with renewable electricity from Tauhara for 15 years from 1 January 2025. Genesis will take up to 62.5MW of electricity – 37 percent of Tauhara’s total output capacity. And in October we signed two 10-year deals to supply renewable electricity to forestry products manufacturer Pan Pac Forest Products and pulp and paper company Oji Fibre Solutions. We will supply both Pan Pac and Oji Fibre Solutions with a portion of their electricity requirements through until 2034, with a combined total of 25 MW, also to be delivered by Tauhara. These sorts of deals are a vote of confidence in our strategy of displacing thermal generation and growing demand for renewable electricity, as we continue to invest in renewable generation for a better Aotearoa New Zealand. We have also signed a long-term energy supply agreement with our existing customer, Foodstuffs. The agreement gives participating Foodstuffs franchisees longer-term price certainty and stability, during a period of high wholesale prices. For Contact, we were able to maintain supply to an important customer and lock in price certainty for future electricity generation. We expect these types of deals to help drive demand for our growing pipeline of renewable projects. Negotiations are already underway with other parties who are interested in contracting for new renewable generation, including geothermal, wind and solar. An international call for registrations of interest for development partners for the 600 MW hydrogen production facility resulted in a large response from energy companies and technology providers. This process led to a shortlist of four potential partners, all with strong hydrogen supply chain capability and a willingness to invest. Two Australian companies, Woodside Energy and Fortescue Future Industries, have been shortlisted for final stage negotiations. They will provide more detailed proposals by the end of August 2022, with a lead developer likely to be selected soon after. The final investment decisions could be made as early as 2024, with production beginning in late 2026 or 2027. The plant has the potential to earn hundreds of millions of dollars in export revenue, create new employment opportunities in Southland, and help the transition to a low-emissions, climate-resilient economy in Aotearoa New Zealand, and overseas. Contact and Meridian are working closely with Ngāi Tahu on the project. Green hydrogen is regarded as the most promising energy source to modernise ‘hard to abate’ sectors such as heavy transport, fertiliser, shipping, aviation and industrial processes that currently rely on fossil fuels. It is produced by using renewable electricity to split water into hydrogen and oxygen. The strong international interest demonstrates there are imminent markets for green hydrogen and that Aotearoa New Zealand’s renewable energy resources have substantial potential for export, and to help modernise our economy. The scale of the project will create economies of CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 31 Contact INTEGRATED REPORT 2022Strategic themes CASE STUDY Demand flexibility for new data centre Contact and Simply Energy signed a renewable electricity supply agreement this year for a low-emissions data centre being developed near the Clyde Dam by UK-based digital infrastructure company Lake Parime. The data centre will use Simply’s Demand Flexibility technology, which will enable its demand to increase or decrease depending on Aotearoa New Zealand’s electricity needs, weather, and hydro generation water flows. Demand Flexibility has an important role to play in meeting growing electricity demand while Aotearoa New Zealand transitions to a low carbon future. It does this by helping to reduce our reliance on thermal generation at times of peak demand and to accommodate the fact that more of the country’s energy is sourced from intermittent renewables like wind and solar. Our agreement with Lake Parime also means that at times of low demand, if it is raining and our storage lakes are at capacity, we can continue to generate electricity for the data centre to use, rather than having to spill it. We will supply 10 MW of electricity to the data centre for high-performance, decentralised computing applications such as machine learning, weather models, data visualisations, block chain and crypto currency mining. This is the first announced project from our pipeline as we pursue new large scale industrial demand opportunities. The data centre will comprise eight 40 foot ‘power box’ containers. Earthworks have been in full swing since resource consent was granted in March and the centre is expected to be commissioned by November 2022. scale that will accelerate the development of the domestic hydrogen market. The proposals received from both final counterparties during the initial selection process make it clear that large-scale production and export of green hydrogen in Southland is technically feasible and commercially sound. Clean energy park partnership with Ngāti Tūwharetoa We entered a groundbreaking cooperation agreement with Te Pae o Waimihia Trust this year to develop a 45ha block in Tauhara into a clean energy business park. Contact sold the industrially zoned Raukanui Block to Te Pae o Waimihia (TPOW), who will develop it into a clean energy business community, offering serviced sites for around 20 businesses working in or alongside the renewable energy sector. As part of the agreement, TPOW will give preference to tenants who use geothermal energy, or whose work is related to the geothermal industry. Energy use on site must be primarily low carbon – geothermal, electricity or biomass. Contact has exclusive rights to sell geothermal energy to the tenants, as well as a right of first refusal on any electricity supplies. TPOW represents six Ngāti Tūwharetoa (Tauhara) hapū, with more than 3,300 registered members. It is involved in forestry and commercial property developments for the benefit of hapū, including providing employment opportunities, and grants for health, education, kaumātua, housing and marae. As well as rental income, the project will give TPOW and hapū preferential investment and employment opportunities with tenants, and a hub for their own projects. Representatives of Contact and Te Pae o Waimihia at the He Ahi Clean Energy Park showcase. For Contact, the project reinforces our commitment to ensuring our operations benefit Tauhara hapū. It aligns with our strategy to grow demand through the supply of geothermal energy and electricity, and contributes to our vision of a better Aotearoa New Zealand by supporting businesses in the renewable energy sector. TNUE Limited, a Kiwi company that has developed a control release membrane technology for urea fertilisers, has signed up to be the first tenant in the park. TNUE's innovative technology controls the release of nitrogen in the soil, reducing the loss of nitrates to groundwater and the atmosphere. It has the potential to reduce agricultural greenhouse gas emissions by 150,000 tonnes a year. TNUE's production process requires significant heat which will be derived from geothermal energy provided by Contact. The sale to TPOW was completed in May and the park is expected to be operating by mid 2023. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 32 Contact INTEGRATED REPORT 2022Strategic themes Grow renewable development Material topics Renewable energy supply Generation emissions Reliable energy supply We’re developing new, flexible renewable electricity generation to help meet the massive anticipated demand for reliable renewable electricity as Aotearoa New Zealand transitions away from fossil fuels. This sort of demand makes the economics for renewable energy developments, such as our new power stations at Tauhara and Te Huka, increasingly compelling. Once we have completed and commissioned Tauhara and subsequently closed our gas fired Taranaki Combined Cycle plant, our total renewable generation will increase to 95 percent. We are also working with some of the best people in the world on a pipeline of potential developments in geothermal, wind and solar. We see an important role for wind and solar in meeting long-term demand for renewable electricity, alongside geothermal and hydro, and our strategy is to be a leading provider in meeting that demand. As we work through the options for new renewable energy developments, we will continue to work closely with iwi, hapū and local communities, and we will be sensitive to the impacts of our operations on land, waterways and biodiversity. In FY22, 87 percent of the energy Contact generated came from renewable geothermal and hydro sources, and the remainder from thermal generation. This was approximately 20 percent of Aotearoa New Zealand’s total electricity generation. The Government is very clear about its desire to decarbonise Aotearoa New Zealand’s electricity production and there is strong appetite for new renewables to be built and to displace thermal generation. We’re already seeing market demand for renewable energy increase – for example, with multiple data centre projects emerging, process heat conversions ramping up, electric vehicles on the roads and a strong appetite from industrial users for long-term electricity supply deals. Solid progress at Tauhara We are making solid progress with the major build of our Tauhara geothermal power station near Taupō. The Tauhara power station is now expected to generate 168 MW of renewable electricity, up from 152 MW when the investment was announced in early 2021 – the result of the geothermal fluid reservoir proving more productive than anticipated. The project was designed with flexibility for a higher generation capacity, and we now expect to deliver to the full design potential. Costs associated with the expansion in capacity, as well as the Covid-19 pandemic, have increased the overall costs of the development from the original estimate of $678m to $818m. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 33 Contact INTEGRATED REPORT 2022Strategic themes CASE STUDY Preparing for the future at Wairākei We are preparing to modernise the way we generate power on the Wairākei geothermal steamfield through a project we are calling ‘GeoFuture’. The Wairākei A and B stations opened in 1958 and 1961 respectively, and we’ve since added the Poihipi Road, Wairākei binary and Te Mihi power stations. Together, they generate enough electricity for 380,000 homes. We need to re-consent our Wairākei operations by 2026. GeoFuture is about taking the opportunity to listen and respond to hapū and public feedback, protect and enhance the environment, and make the best use of the Wairākei geothermal reservoir to generate reliable, low carbon, renewable electricity. The original design of Wairākei A and B (the world’s second-oldest geothermal power station development) needed large volumes of water from the Waikato River to cool the geothermal steam after the turbine, with the design resulting in the water and steam mixed directly before being discharged back into the river. As part of our commitment to reducing and mitigating the impacts of our operations on the natural environment, we have worked hard to reduce discharge volumes and impacts on the river – building the Wairākei bioreactor which reduced hydrogen sulphide in the discharge to the river by 98 percent, shifting generation away from the river to our Te Mihi station, and injecting more into the ground. GeoFuture will provide the opportunity for us to stop all discharges of geothermal and cooling water from our power stations into the Waikato River and streams. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 34 Progress on the turbine hall of Tauhara Power Station. We plan to close Wairākei A and B no later than June 2031 and build up to 180 MW of new power stations at Te Mihi and a smaller 40 MW station next to the existing Wairākei A and B stations. These changes would increase the output of renewable electricity from about 320 MW to up to 380 MW – enough for 60,000 more homes. Geothermal take would increase only marginally, from 245,000 tonnes per day to 250,000 tonnes. We engaged extensively before submitting our consent application in December – we met with local authorities, hapū and close neighbours, we held public meetings, and invited local people to take part in design thinking workshops and ecological studies on the river. Our application took into account the ideas and concerns we heard. Waikato Regional Council received just seven public submissions when our application was notified – five neutral and two in support. While we wait for the outcome of our consent application, we are moving into the next phase of refining the best technology and engineering options within the proposed consent conditions. We are also continuing to work collaboratively with Wairākei hapū and Ngāti Tahu on cultural impact assessments and proposed mitigations, which will be part of the final consent. The goal is to commission the replacement power station before the current consents expire in 2026. The expansion and Covid-19 headwinds, including shortages of resources, will also delay the expected completion by a few months – from the middle of calendar year 2023 until the second half of 2023. Despite the added complexity and challenges, we are making excellent progress. We have some of the best people in the world working on the project. Our local and international contractors have taken up the challenge and are working collaboratively to enable good progress. We are proud of what we are delivering under such challenging circumstances. Tauhara is a major strategic project for Contact and for Aotearoa New Zealand, supporting our transition to a low-carbon economy. It is expected to replace 1.3 terawatt hours of thermal generation from the country’s electricity system, displacing 450,000 tonnes per year of greenhouse gas emissions. This is the equivalent of about one million people flying return from Auckland to Christchurch every year. The project has been an opportunity to re-engage with Tauhara hapū and to strengthen our relationships, including working collaboratively for the protection and restoration of natural resources, and opportunities for training and employment. Contact INTEGRATED REPORT 2022Strategic themes Building on our connection with Western Energy We’ve continued to build geothermal development capability following the purchase of Western Energy in April last year. Advances in technology since Te Huka was commissioned in 2010 mean the new 50 MW unit will be about the same physical size as the existing unit while also being 35 percent more efficient at converting geothermal steam and water to electricity. Western is based in Taupō and provides geothermal well services domestically and internationally. Working closely with Western allows us to add to our geothermal capability and continue to be innovative in geothermal technology development. Previously, Contact and Western Energy had worked closely for more than five years and had jointly developed innovation technology that has materially lowered the cost of Contact’s geothermal operations. Western has continued to operate as a separate company with its own management team and its own governance structures to deliver on ambitious growth plans, which complement our investment to build renewable generation. Increasing output at Te Huka We have announced a $300m investment to significantly increase the renewable energy output from our Te Huka binary cycle power station on the Tauhara geothermal steamfield, with a new 51.4 MW power unit. Commissioned 12 years ago, Te Huka was our first development on the Tauhara field and delivers around 26 MW of electricity to the grid. Our new 51.4 MW power unit will make use of existing, untapped production capacity in the wells and the newly installed 33 kV line between Te Huka and the Tauhara 220 kV switchyard. This 33 kV line, built in partnership with Unison, has unlocked the expansion of the plant which was previously constrained with a lack of line capacity to the Wairākei substation. The development will use our existing consents for the Tauhara geothermal steamfield, with a small amount of additional consent work for earthworks and air emissions. Although there is no formal consenting process, we have been meeting with neighbours to keep them informed, and to listen to and address their concerns. Progress on wind We signed two landowner access agreements this year for possible wind farm developments in Northland and Southland – another major step in our commitment to increasing renewable generation. If progressed, the total wind development pipeline would generate approximately 600 MW across the two regions. The projects stem from the exclusive partnership arrangement we signed in March 2021 with highly regarded wind generation developers Roaring40s, to develop a pipeline of flexible and low-cost wind projects to complement our geothermal pipeline. We have been using a wind monitoring mast to assess the generation potential at the Northland site, and will use that data to decide whether we go to the next stage of seeking resource consent. We are also continuing to build a pipeline of other potential sites in Northland, Southland and across the country. We still have a lot of work to do around assessments, consenting and construction, but we expect our first wind generation assets to start operating around 2027. We see a big role for wind in meeting long-term demand for renewable electricity in Aotearoa New Zealand, and our strategy is to be a leading provider in meeting that demand. The founders of Roaring40s have been involved in many of Aotearoa New Zealand’s existing wind farms, and our six-year exclusive partnership gives us a strong competitive advantage. As the economics around wind technology continue to improve, wind options will augment our geothermal developments. Joining forces on solar We have entered an exciting 50/50 joint venture (JV) with one of Europe’s largest solar developers, Lightsource bp (LSbp), to develop a pipeline of solar generation projects in Aotearoa New Zealand. Contact and LSbp will collaborate on grid-scale generation projects to create an initial 380 GWh of clean, affordable electricity a year by 2026 – enough to power 50,000 homes. There is also the option to increase future generation output. The JV will source, develop and construct solar farm projects across the country, and Contact will purchase the electricity generated via a long-term power purchase agreement. We expect to announce the JV’s first potential development site in FY23 and begin electricity generation by 2024. The economics and benefits of solar developments have been improving in recent years, as the technology around grid-scale solar generation has improved. We’re looking forward to bringing these opportunities to life with the LSbp team, which has an impressive track record in delivering more than 5.4 gigawatts of utility scale solar projects across 17 countries. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 35 Contact INTEGRATED REPORT 2022Strategic themes Decarbonise our portfolio Material topics Decarbonisation and electrification Generation emissions We’re decarbonising our portfolio of generation assets (and the Aotearoa New Zealand electricity market) via an orderly transition to renewable generation – managing the balance between continued security of supply, minimal emissions and affordability. As part of our thought leadership on decarbonisation, we released a report outlining proposals for an industry-wide solution to manage the retirement of thermal electricity generation in Aotearoa New Zealand, and engaged extensively on the proposal. We’re exploring innovative new battery storage options, to give more flexibility as the country transitions to more intermittent renewables such as wind and solar. We are trialling geothermal carbon capture, and continuing to invest in afforestation partnerships on economically marginal land that help Aotearoa New Zealand to meet its climate change commitments through sequestration of carbon. We will also see substantial decreases in carbon emissions from our own portfolio following the closure of our Te Rapa co-generation power station in June 2023, and the gas-fired Taranaki Combined Cycle (TCC) power station by the end of 2024 after the geothermal power station at Tauhara has been commissioned. ThermalCo: taking the lead on decarbonisation We released a report in November outlining the benefits of establishing an industry-wide, market- based solution to manage the retirement of all thermal electricity generation in Aotearoa New Zealand. Our ‘Crafting a path for New Zealand’s 100% renewable electricity market' report focused on how we can expedite the transition away from electricity generated from fossil fuels, without disrupting the secure, affordable supply of electricity to New Zealanders. Aotearoa New Zealand currently relies on thermal electricity generation from gas, coal and diesel during periods of peak demand or when there is insufficient water, wind and sun to meet demand from renewable sources. Our report proposed setting up an industry-wide entity, with appropriate competition protections, which could own, operate and retire all of the country’s major thermal generation assets as new renewable generation is built. The entity, which we’ve called ‘ThermalCo’, would ensure a smooth and efficient transition away from thermal generation, reducing greenhouse gas emissions into the atmosphere by 1.2 million tonnes a year by 2030 – about 1.5 percent of Aotearoa New Zealand’s greenhouse gas emissions (based on 2020 data). Since releasing our report, we’ve been talking with other thermal generators, gas suppliers, government agencies and regulators to share our vision and hear feedback. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 36 Contact INTEGRATED REPORT 2022Strategic themes CASE STUDY New forestry investment fund partnership We entered a new afforestation partnership called Forest Partners with Genesis Energy, Z Energy and Todd Corporation this year. Contact will put $37.5 million into the partnership over five years, for planting on land that would otherwise be economically marginal and difficult to farm. Forest Partners is about putting ‘the right trees in the right places’, in partnership with rural communities. It’s a similar approach to our existing partnership in Drylandcarbon – with Air New Zealand, Genesis Energy and Z Energy. We made our final capital contribution into Drylandcarbon this year. The Forest Partnerships fund is designed to provide a long-term supply of high-quality carbon credits for the four investors, as well as high-quality timber for the domestic and international market. Forest Partners seeks to be a distinctive and ethical operator in the Aotearoa New Zealand forestry market, with a commitment to farmers and rural communities. It believes that on the right land, responsible rotation forestry can be complementary to farming operations. On steeper and more economically marginal backcountry land, rotation forestry for timber and carbon credits can provide significant, reliable, intergenerational income to support farming families. We are continuing to provide thought leadership to stimulate meaningful discussion on the transition away from thermal energy generation. Getting the transition towards a fully renewable electricity system right could unlock a significant opportunity for Aotearoa New Zealand with benefits for the environment, people, businesses and communities. Grid-connected battery option We are continuing to explore ways to provide more flexibility to the grid, including the potential development of a 100 MW battery at Stratford in Taranaki. In May this year we lodged a resource consent application for the battery, which would be the first of its kind in Aotearoa New Zealand. Although new to Aotearoa New Zealand, the cutting-edge technology has been proven internationally and could play a vital role in the country’s transition away from reliance on thermal energy generation. Large-scale batteries could offer ongoing flexibility to the grid, reducing reliance on fossil fuels as thermal generation is replaced by intermittent wind and solar generation. Based on the past 12 months of operations at our gas peaker plant, the Stratford battery is expected to avoid around 13,500 tonnes of greenhouse gas emissions each year. The outcome of our resource consent application is expected early in FY23. The battery would be housed in up to 50 shipping containers spread over an area about the size of a rugby field. It would take around 18 months to construct. Exploring carbon capture Although geothermal generation is renewable – using steam released from water that is naturally heated in the earth – the process releases relatively small amounts of embedded carbon into the atmosphere. As part of our strategy to lead Aotearoa New Zealand’s decarbonisation, we have commenced a trial at our Te Huka geothermal site, exploring how we can capture emissions from geothermal energy production and inject them back into the earth. While each geothermal plant is different and would need different approaches to capture and inject emissions, it is an exciting trial and an important part of our commitment to decarbonisation. Te Rapa power station closure We announced in June that we will close our Te Rapa power station next year, reducing our annual carbon emissions by 200,000 tonnes a year. The 44 megawatt gas-powered station provides electricity and steam for Fonterra's nearby dairy factory, with surplus power sent to the grid. The station will close in June 2023, when our current supply agreement with Fonterra expires. Fonterra will acquire the plant's boiler to produce steam for their processes beyond next June, and the gas turbine at the power station will be retired. The closure is in line with our strategy to decarbonise our business and Aotearoa New Zealand. It will reduce Contact's long-term carbon emissions by 20 percent. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 37 Contact INTEGRATED REPORT 2022Strategic themes Creating outstanding customer experiences Material topics Energy hardship and affordability Customer trust We’re creating outstanding customer experiences as we build Aotearoa New Zealand’s leading energy and services brand. We know we play a vital role for hundreds of thousands of homes and businesses that rely on the electricity, gas and broadband that we supply. We think home is the most important place in the world, and our aspiration is to improve the quality of home life for New Zealanders – within the four walls that each of us calls home, and our collective home of Aotearoa New Zealand. To do this, we listen to our customers and align our services with what matters to them – including providing plans that are accessible, value for money, give price-certainty, and help customers to reduce their carbon footprint. We are also reimagining our services to ensure we deliver value, while balancing impacts on the environment and helping people at critical times in their lives. This led to two major innovations in FY22 – our Good Nights plan offering three hours of free night-time power to all customers, and Fourth Trimester offering three months of free power to more than 1,000 families with newborns. Both initiatives have been unmatched by competitors and have positively differentiated Contact in the energy market. We’re also committed to the wellbeing of our customers, including those most vulnerable to energy hardship. We’re using a range of tools and payment options to help customers who are struggling to keep their lights on and their homes warm and connected, and we’re achieving great results in helping customers stay connected and out of debt. We’re actively looking at further ways we can help our most vulnerable Kiwis to stay warm and connected at home, to help improve the quality of home life for all New Zealanders. We were recognised by consumers in the NZ Compare Awards – taking out four awards for: Best Customer Support – Power; Best Mobile Application; Power Provider of the Year; and the Supreme Champion Award across Broadband and Power. We were proud to be awarded Energy Retailer of the Year at the New Zealand Energy Excellence Awards in June. According to the Electricity Market Information (EMI) database, Contact saw the largest organic annual growth in customer connections in FY22. This measures all data for the industry to accurately report on the performance of electricity retailers. These sorts of awards and recognition demonstrate that we’re on the right track with providing products and services that New Zealanders want. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 38 Contact INTEGRATED REPORT 2022Strategic themes Fair and competitive pricing Wholesale energy and network prices increased this year and are expected to keep increasing in the short to medium term. In line with our pricing principles, we’ve shielded customers from the full impact of the wholesale price increases – which helps customers, while also helping us to stay competitive in a highly contested market, and keep growing our retail business. On average our customers’ electricity pricing increased 1.3 percent this year. Our pricing principles balance being fair to our customers, remaining competitive in the market, and being disciplined about cost recovery so that we can continue to grow, invest in innovative products and services for customers, and deliver returns for shareholders. Customer satisfaction and growth Our commitment to better products and experiences for our customers, fair prices, and our new brand positioning and campaigns, paid off with significant growth in customer satisfaction, retention and acquisition. We introduced a Voice of the Customer programme using new technology to get faster and more detailed insights from customer interactions and to help uncover opportunities for experience improvements. We constantly monitor progress, and have seen improvements in customer satisfaction. More than 67 percent of our customers say they are satisfied with Contact and 79 percent say Contact is easy to deal with. Our Net Promoter Score (the number of customers who say they would recommend us, versus those who wouldn’t) increased significantly again this year from +31 to +39. High customer satisfaction showed up in our low electricity switch rate (which measures properties switching away from Contact) of 15 percent, which was 4 percent below the market average. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 39 We had a 9 percent increase in our total energy and broadband connections from 523,000 to 573,000. Electricity and gas connections were up from 470,000 to 502,000 – helped significantly by the introduction of our popular Good Nights power plan. We remain one of Aotearoa New Zealand’s fastest growing broadband providers. Our broadband connections increased from 50,600 to 70,800, even with the challenges of a modem shortage caused by supply chain disruptions. We initially put new broadband connections on hold in March until we could secure more modems, rather than signing up customers who would face unreasonable wait times. Our team then turned the challenge into an opportunity, offering a ‘bring your own device’ option, so customers could sign up if they already owned a modem, with the added benefits of quicker connection and less waste. We’ve had modems back in stock since May but, given the success of the BYO option, we’re now giving customers the choice to receive a new modem, or bring their own. It’s good to be home Our purpose is to build a better Aotearoa New Zealand and this year we’ve looked at how we’re bringing our purpose to life across our entire business. We believe that ‘home’ is the best place in the world. So, we’re focusing our energy on making Aotearoa New Zealand better by improving the quality of home life for all New Zealanders. In short, we’re working to ensure ‘It’s good to be home’. New Zealanders will increasingly see how Contact ensures ‘It’s good to be home’ through the great customer experiences, products and services we deliver to help customers improve their home lives, and also through the impact we’re having on our shared home, Aotearoa New Zealand. We’re already improving the quality of home life for our customers through initiatives such as Fourth Trimester (providing three months of free power to families with newborns), Good Nights (providing three free hours of power a night), helping customers use energy better, and the options and support we provide to customers experiencing hardship. We’re also making the quality of our collective home better for all New Zealanders through renewable energy developments such as our new Tauhara and Te Huka geothermal stations, investment in wind and solar, environmental protection and restoration. ‘It’s good to be home’ is a brand commitment and much more. It provides an overarching platform for why we do what we do, which sets us apart from our competitors. Businesses have a moral responsibility to look after communities, the environment and people and ‘It’s good to be home’ demonstrates our intention to do more in these areas, improving the quality of home life for all New Zealanders. Contact INTEGRATED REPORT 2022Strategic themes Offering customers Good Nights We’ve had a fantastic response to our new power plan, Good Nights, which is helping thousands of Kiwi families to be warmer, healthier and happier when they’re home at night. Launched in August 2021, Good Nights offers three hours of free power every night, between 9pm and midnight. It means customers can keep their homes warm at night, or use the drier to get clothes dry for school the next day – without worrying about hefty power bills. Around 29,000 customers have signed up, including around 20,000 new customers. One in three of our Good Nights customers have taken up multi- product offers to include their broadband and/or gas as well. Customers have told us they love the plan because it’s flexible, helps them keep power bills down, and helps them understand how they use their energy. Aotearoa New Zealand is also better off if more customers shift to using high-energy appliances at off-peak times. Usage peaks cause significant issues for our national grid, and are the times when Aotearoa New Zealand uses the most non-renewable power (coal, gas and diesel). Good Nights will help flatten those peaks and contribute to more sustainable energy being used. We are already seeing 29 percent of existing customers on the Good Nights plan shifting more of their energy use to off-peak times. Good Nights is one small step in what Contact has in store for creating plans for customers that are better for the environment, for homes, people and Aotearoa New Zealand. Fourth Trimester support for families We helped more than 1,000 Kiwi families when they needed it most with three months of free power during their ‘Fourth Trimester’ – giving a massive two million hours of free power. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 40 Energy credits We helped 2,956 customers who were experiencing financial hardship by crediting their accounts this year. The credits largely helped customers who were struggling because of Covid-19. Some had not been paid while they were unable to work, or their bills were higher while family were isolating or schools were closed. Our team have discretion to credit customers who tell us they’re struggling, and to determine the size of each credit based on the customer’s circumstances. Many of the families we helped were facing multiple challenges – with energy bills, other utilities, rent or mortgage payments and groceries. The credits meant they could keep their power on and cover other costs too. The total value of credits increased from around $250,000 in FY21 to just over $350,000 this year. Managing customer debt We disconnect customers only as an absolute last resort. We stop all disconnections during extreme weather events or times of emergency, which included Covid-19 lockdown periods this year. We disconnected on average 0.2 percent of customers in FY22, down from 0.78 percent in FY21. We work hard to help customers who are disconnected get reconnected quickly. In FY22 we reconnected 49 percent of customers within 24 hours compared to 53 percent in FY21. Over the final quarter of FY22 the average debt balance at disconnection was $504, reducing 8 percent from $549 for the same period in FY21. Lower debt balances enable quicker reconnections as customers need to pay a smaller amount to be reconnected. Only 269 residential customers were disconnected for longer than 24 hours. Our net bad debt write-offs were $1.3 million, compared with $1.6 million last year. We know it takes a lot of energy to raise a newborn – warm baths, daily washing cycles, and cleaning everything in sight. We can’t help our customers with babies’ sleep patterns, but we can help them with the energy to keep them and their families warm and healthy. In March, we invited existing customers with (or expecting) newborn babies to receive a Fourth Trimester of free power. Within 24 hours and 48 minutes, customers snapped up all 1,000 spots. To add some extra surprise and delight, we sent each of our Fourth Trimester families a onesie for their newborn, with messages like “I can pay my power bill with my eyes closed” and “Eats, sleeps, poops, and pays the power bills”. We trialled Fourth Trimester with 1,000 customers to ensure they had a great experience before we consider rolling it out again to more Kiwi families. Fourth Trimester provides a real demonstration of how we improve the quality of home-life for New Zealanders – including our smallest and newest New Zealanders. Contact INTEGRATED REPORT 2022Strategic themes Supporting customer wellbeing We know we have an important role to help those most in need to keep their lights on and their homes warm and connected. It’s part of our commitment to customer wellbeing, and ensuring all New Zealanders can enjoy a good quality of home life. We’ve established an Energy Wellbeing Team to work with customers, community groups and industry to address the complex challenges of energy wellbeing, and we provide a raft of support and options for existing and prospective customers who are struggling. We encourage customers to get in touch if they’re struggling to pay their bill, and we use a range of tools and payment options to help them. This includes checking on their welfare and that they’re on the right plan, helping with referrals to other support agencies, offering different payment options such as PrePay, and discretionary fee waivers or other financial support in cases of hardship. We also have comprehensive credit reporting, which ensures we consider good payment behaviour alongside any missed payments. For example, we may take on a customer who has an unpaid bill from several years ago but has since paid all their bills on time. Customers who fail a credit check are all still able to use PrePay. We accepted 98 percent of all customers who applied for accounts, with many of those who were unable to qualify for post-pay accounts opting for PrePay. More than 5,100 customers have now chosen weekly or fortnightly payment plans to smooth out their payments and align due dates with pay days, and a similar number are on PrePay. While customers are on PrePay, they can pay off debt at a rate they can afford, with no interest or fees, and can access most of the same products, prices, discounts and rewards as other customers. Working collaboratively for customer wellbeing Our Energy Wellness Team referred at least 140 customers for Work and Income support and assisted many more customers with referrals to FinCap budgeting services, EnergyMate in-house energy coaching, and other community agencies. We did not track all referrals in FY22 but will do for FY23. We’re proud to fund EnergyMate as part of our membership with ERANZ (Electricity Retailers’ Association of New Zealand) alongside other electricity retailers, lines companies, and the Energy Efficiency and Conservation Authority (EECA). EnergyMate coaches, from grassroots community organisations, visit households to help them look at how they’re using power, find ways to save money, and work out if they’re on the right plan. They help households build an action plan to save power and keep their home warm, and can also connect them with other agencies to help address drivers of energy hardship. At the 2022 NZ Energy Excellence Awards, EnergyMate won the Outcomes Award, which celebrates the delivery of accessible and inclusive energy solutions. The industry has also announced a new $5 million, 5-year energy credit scheme, to support low power users when low fixed user charges are phased out. The low fixed user charge is being stopped as a result of the Government’s 2019 Electricity Pricing Review, which found that they were poorly targeted and could worsen energy hardship for some households while increasing pricing complexity and confusion. The industry has agreed to fund the credit scheme to help vulnerable Kiwis who are materially impacted by the change. There are complex factors at play in energy hardship and we know Contact has an important role to help those who are most vulnerable, alongside others in our industry, other sectors, and the Government. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 41 Contact INTEGRATED REPORT 2022Strategic themes Strategic enablers Contact Contact INTEGRATED INTEGRATED REPORT REPORT 2022 2022 l l s s r r e e b b a a n n e e c c i i g g e e t t a a r r t t S S CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 42 42 Progress against strategic enabler metrics One year into execution we are making good progress Complete/On-track Minor delay Major delay Strategic theme Target Material theme Indicators/activities FY22 result Environment Reduce Scope 1 and 2 GHG emissions 45% by 2026 compared to a 2018 base year GHG emissions Emissions from generation Reduction of 393 kT CO2e (reduced 33%) Reduce Scope 1 GHG emissions 37% per MWh by 2030 compared to a 2018 base year Emissions intensity from generation Reduction of 0.094 TCO2e / MWh (reduced 31%) Significantly reduce operational discharges of geothermal fluid to Waikato River by 2026 Water Geothermal fluid discharge to awa (rivers) 30,761ML (reduced 3,797ML from FY21) Plant 100,000 native trees around our generation sites by 2024 Biodiversity Number of trees planted 55,206 Number of initiatives 2 Social Support 100 community initiatives and organisations each year Community wellbeing Number of community organisations supported 111 initiatives supported 50% of customers disconnected for debt reconnected within 24 hours Sign up 96% of new customers, not discriminating due to credit history Energy hardship Percentage reconnected 49% reconnected Percentage of customers accepted 98% signed up Committed to understanding and removing modern slavery from our supply chain Sustainable procurement Governance outlined in code of conduct and policies and current suppliers being reviewed Ensure all Contact employees and contractors are paid a fair and equitable wage Pay equity is monitored and reported on Permanent employee gender pay equity 95.2% Governance Minimum of 40:60 female:male gender split through all levels of our company Diversity and inclusion Gender split Not yet embedded at all levels CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 43 Operational excellence Transformative ways of working Ensure no bias in recruiting procedures Implemented requirement for diverse interview panels, we advertise roles in both Te Reo and English and continue to identify unconscious bias and then seek to eliminate it Maintain Rainbow Tick accreditation Inclusion Retained accreditation Certify all debt as green Sustainable finance Percentage green debt 100% Continuously improve operations through innovation and digitisation Digital capability 69% digital interactions FY22/ 73% in June 22 Create a flexible and high-performing environment for Aotearoa New Zealand’s top talent Creating better workspaces New purpose-designed workspace opened in Auckland Shaping our Contact Community Launched leadership pathways in Contact University Contact University > 12,000 courses completed Contact INTEGRATED REPORT 2022Strategic enablers Environment, social and governance Material topics: Generation emissions Tangata whenua partnerships Freshwater system health Biodiversity protection and restoration Community wellbeing Climate change impact on assets Environmental pollution Sustainable procurement Natural resource protection Environment, social and governance (ESG) outcomes are built into our DNA at Contact. This starts with our purpose to create a better Aotearoa New Zealand, our Tikanga (our commitment to being a responsible organisation), and our reliance on natural resources, good people and strong communities to sustain our operations. We know that our families, our teams and our communities expect us to be good corporate citizens, and that investors are increasingly considering sustainability-based measures alongside traditional financial measures, when assessing a company’s performance. Although ESG factors are labelled non-financial, they have measurable financial consequences in terms of things like access to capital, risk and reputation management and efficiency. Strong ESG credentials help us create long-term value. ESG at Contact includes our market-leading efforts around decarbonisation, renewable energy development, science-based emissions targets, greenhouse gas reporting, diversity and inclusion, environmental management and sustainability- linked finance. It means being a good neighbour in the communities that we are part of. We also partner with tangata whenua in the regions where we operate. We supported 111 community initiatives this year and entered a major new partnership with Women’s Refuge. ESG also means valuing our customers, giving them access to affordable and reliable electricity, treating them fairly and ensuring their needs are met. That includes new plans like Good Nights and Fourth Trimester, the support we provide for customers experiencing hardship, and our customer pricing principles (which include making sure that prices paid by new customers and existing customers are never far apart). For our Contact people, it’s about being a fair and equitable workplace where people are proud to work. We were the first company in Aotearoa New Zealand to sign up as a supporter of the Task Force on Climate-related Financial Disclosures. We continue to use their approach to guide our climate-related reporting. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 44 Contact INTEGRATED REPORT 2022Strategic enablers Reducing greenhouse gas emissions The Contact26 strategy is grounded in a sustained, conscious effort to lead decarbonisation for Aotearoa New Zealand. That means cutting greenhouse gas emissions from our own operations, and helping our customers to cut theirs. This includes our investment in new geothermal energy generation, including our major Tauhara geothermal power station development, as well as potential solar and wind projects, and plans to close our Te Rapa power station and Taranaki Combined Cycle Plant. It includes our carbon capture trial at Te Huka geothermal power station, the work that Simply Energy does to offer options to industry customers to reduce their thermal energy consumption and carbon footprints, and our thought leadership on the retirement of thermal electricity generation, with our ‘Crafting a path for New Zealand’s 100% renewable electricity market’ report. We also take an active role in leading on decarbonisation as a member of Aotearoa New Zealand’s Climate Leaders Coalition, and this year we signed the Coalition’s new Statement of Ambition, which reflects signatories’ desire to be climate leaders as science and policy evolve. The Coalition’s purpose is to build momentum towards a zero-carbon future. Members collectively account for almost 60 percent of Aotearoa New Zealand’s gross emissions and around 38 percent of GDP. Emissions from electricity generation (tCO2e) 1,250,000 1,000,000 750,000 500,000 250,000 0 8 1 Y F 9 1 Y F 0 2 Y F 1 2 Y F 2 2 Y F Total greenhouse gas emissions by Scope (tCO2e) for Contact, Simply Energy and Western Energy FY22 66.5% Scope 1 33.4% Scope 3 0.1% Scope 2 Scope 1 – produced directly through our operations Scope 2 – emissions from purchased electricity Scope 3 – emissions in our wider supply chain Our science-based targets We have committed to ambitious climate change targets aligned with the goal of limiting global warming to 1.5 degrees Celsius, approved by the Science Based Targets Initiative (SBTI). We measure and report on our Group emissions using the Greenhouse Gas Protocol. Scope 1 emissions are direct emissions from our operations, Scope 2 emissions are from the purchase and use of electricity, and Scope 3 emissions are created throughout our supply chain. Our Group commitments are to: • reduce absolute Scope 1 and 2 emissions 45 percent by 2026 from a 2018 base year • reduce absolute Scope 1 and Scope 3 emissions from all sold electricity 45 percent by 2026 from a 2018 base year • reduce Scope 3 emissions from use of sold products 34 percent by 2026 from a 2018 base year. We plan to achieve these targets by displacing thermal generation with low-carbon renewable generation. The construction of our Tauhara geothermal power station will play a significant role, which should enable us to close our Taranaki Combined Cycle power station after Tauhara has been commissioned. In FY22 our Scope 1 and 2 emissions were 25 percent lower than the previous year. This was due to lower levels of thermal generation in FY22 when compared to FY21. Compared to our 2018 base year, our Scope 1 and 2 emissions were 33 percent lower in FY22. Our Scope 3 emissions decreased year-on-year by 26 percent, mainly as a result of a reduction in use of our swaption with Huntly power station. Further detail on our emissions is in the Sustainability disclosures or in our greenhouse gas inventory report. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 45 Contact INTEGRATED REPORT 2022Strategic enablers Where possible, external datasets (such as the Climate Change Commission’s scenarios and Transpower’s Whakamana i Te Mauri Hiko work) have been used. The modelling shows that under all three scenarios Contact’s sales, generation and EBITDAF1 continue to grow. Contact’s sales, generation and EBITDAF grow the most in Scenario 1, while Scenario 3 shows the lowest growth. While EBITDAF grows even under Scenario 3, climate change is likely to have other impacts on the Contact business model such as increased risk and volatility. It is also likely to have other costs that are not captured through this scenario modelling. The most positive climate scenario, Scenario 1, is also the most favourable for decarbonising Aotearoa New Zealand’s economy. This supports the current Contact26 strategy, especially the three strategic themes of ‘Grow Demand’, ‘Grow Renewable Development’ and ‘Decarbonise our Portfolio’. We have more on our climate-related risks and opportunities in our sustainability disclosures. Leading on sustainable finance We were the first company in Aotearoa New Zealand to establish a green borrowing programme in 2017 and we continue to be a market leader in sustainable finance. All our bank loans are now sustainability-linked, after the conversion of our remaining $305 million of bank facilities, across five banks, in June 2021. Our sustainability-linked loans currently total $430m. In November 2021 we issued Aotearoa New Zealand’s first certified green capital bond. The $225 million bond won the award for ‘New Zealand Debt Market Issue of the Year’ at the INFINZ (Institute of Finance Professionals NZ) Awards and 'New Zealand Dollar Credit Bond Deal of the Year' at the KangaNews Awards. This market-leading bond issue showed strong links to Contact’s renewable strategy and has paved the way for further green capital bond issues in Aotearoa New Zealand since. We are developing a new sustainable finance framework, which will be issued in FY23 and will encompass our green bonds and sustainability- linked loans as well as broadening our existing framework to allow potential sustainably-linked bond issues, ensuring we remain market leaders. Financial implications of climate change We reviewed and updated our scenario analysis this year to further understand the financial implications of climate-related risk on our business. Our revised analysis was based on the recommended TCFD disclosure to describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2 degrees celsius or lower scenario. To do this, we developed three scenarios: • Scenario 1: The world pulls out all the stops and maintains a global temperature increase of 1.5°C • Scenario 2: The world has some success in holding the global temperature increase between 2°C and 4°C • Scenario 3: The global temperature increase goes beyond 4°C. We took a top-down approach to develop each scenario from: • What is happening around climate change action at a global level; to • What is happening around climate change at the Aotearoa New Zealand level; to • The impacts on energy markets in Aotearoa New Zealand; and finally • The impacts on Contact’s business model and strategy. Under each scenario, more than 30 variables are changed across 30 years. These include population growth, carbon price, process heat electrification and electric vehicle uptake. This provides a range of outcomes under which Contact’s strategy can be assessed. 1 EBITDAF is a non-GAAP (generally accepted accounting practice) measure. Information regarding the usefulness, calculation and reconciliation of this measure is provided within note A2 to the financial statements. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 46 Contact INTEGRATED REPORT 2022Strategic enablers A sustainable approach to procurement We purchase a wide variety of goods and services to help us maintain our power stations, support our customers, and enable the running of our offices and overall business. We have around 2,000 suppliers, and about 5 percent are offshore. This year one of our goals has been to develop a business-wide approach to sustainable procurement. We have developed a sustainable procurement framework that has been incorporated into our business decision-making when we procure goods and services from suppliers. We’re working to build enduring partnerships that respect tangata whenua, their relationship with Aotearoa New Zealand’s natural resources, and the imperative of kaitiakitanga. We are committed to supporting tangata whenua in their aspirations, and with the resources and advice they need to engage with Contact or our resource consent processes, and we look for meaningful opportunities to contribute to their wellbeing and prosperity. We are working closely in partnership with Ngāi Tahu. This year we have signed a relationship agreement to jointly explore new development opportunities in the South Island. The framework enables us to identify and manage risks in our supply chain, including modern slavery, and allows us to directly work with suppliers when necessary to help them align their sustainability journey with our goals. We have also entered into a ground-breaking agreement with Te Pae o Waimihia Trust to develop a 45ha block in Tauhara into a clean energy business park, and our Ka Hiko ai te iwi training and employment programme. Data on supply chain impacts is in our Sustainability Disclosures. Partnering with tangata whenua We aim to work openly and collaboratively with tangata whenua, consistent with our Tikanga, and the partnership principles of Te Tiriti o Waitangi. We acknowledge the enduring relationship that tangata whenua have with the land and natural resources and that working closely with them benefits our communities, our business, and Aotearoa New Zealand. While consent processes require us to engage, listen, and build the concerns and aspirations of hapū into our mitigation measures, we aim to go beyond compliance. We recognise that our business depends on Aotearoa New Zealand’s natural resources – taonga that have been central to the lives of tangata whenua and provided for iwi and hapū for hundreds of years. Ka Hiko ai te iwi, meaning ‘Future Power of the People', has been developed to provide Tauhara hapū with more opportunities for their whānau to gain employment through our new Tauhara power station. Since launching Ka Hiko in August 2021, 36 ākonga/ trainees have completed pre-trade training courses. Of those, 23 are now working across three separate construction sites with nine different contractors. Some of these ākonga have been offered apprenticeships and others have taken on long-term employment opportunities. Three ākonga have moved into mahi or apprenticeships with contractors outside the project. All ākonga are supported through our pastoral care to ensure a positive start in the construction industry. We are pleased that 30 of the ākonga whakapapa to Tauhara hapū, Ngāti Tuwharetoa or other tangata whenua. Recruitment relies on our existing relationships and ongoing engagement with hapū, iwi and hapori whānui/wider community. Planning is currently underway to expand Ka Hiko, to potentially grow into other Contact projects and mahi over the next ten years. To grow tangata whenua capability in our sector, we also supported a collective iwi initiative amongst Tuwharetoa, Ngāti Tahu and Te Arawa to enable six post graduate students to travel to Iceland in July 2022 to attend the Energy Summer School, focused on sustainable energy and renewable technologies. Being a good neighbour Our community ethos is about ‘being the neighbour you’d want to have’. That means building relationships with our neighbours, listening to their concerns, and looking for ways to help where we can. Help could take the form of sharing our skills and knowledge, volunteering our time, or community sponsorships and donations. Our approach is to invest locally in issues that matter to our people and our communities. Each of our sites has a community engagement plan, which identifies key stakeholders and how we will engage with them, and how we’ll support our local communities through partnerships and sponsorships. We have a volunteer programme called Community Contact, so our people can volunteer with local initiatives that they care about. Each Contact site also has a community sponsorship budget to spend on grassroots community initiatives. This year we spent $714,054 in the community and supported 111 initiatives through sponsorship, donations and partnerships. Our people spent 474 hours volunteering with 17 organisations in their communities. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 47 Contact INTEGRATED REPORT 2022Strategic enablers New partnership with Women's Refuge In June 2022 we partnered with the National Collective of Independent Women’s Refuges (Women’s Refuge) for a two-and-a-half-year sponsorship. We recognise that “It’s good to be home” is not a reality for all New Zealanders and this newly formed partnership recognises the responsibility we have towards building a better Aotearoa New Zealand for all New Zealanders. Our contribution will include: • free electricity for 40 Women’s Refuges and 40 safe houses across Aotearoa New Zealand for 2.5 years; • sponsorship and promotion of Women’s Refuge fundraisers in 2022, 2023 and 2024; • support for on-the-ground research in 2022 and 2023; and • ad hoc opportunities to support Women’s Refuge through fundraisers inside Contact. Every night in Aotearoa New Zealand more than 200 women and children need a safe place to escape to. We respect the important, tough and sometimes gritty work that the Women's Refuge team does across the country, and it’s fantastic to be supporting this work. The new partnership is aligned with our Tikanga and we are building on good foundations with Women's Refuge over the past couple of years, which has included: • providing 70 Women’s Refuge properties with three months of free power during the first Covid-19 lockdown; • donating $50,000 to the Safe Night-a-thon fundraising campaign as part of our Good Nights pricing plan launch; • adding ‘Shielded’ functionality to our website to allow victims of domestic violence to see information about how they can get help without leaving a trail for an abusive partner to see; and • choosing Women’s Refuge to receive $30,000 as part of our team vaccination campaign. For each Contact team member double-vaccinated we donated $100, adding up to $90,000 which we shared between Women’s Refuge, I AM HOPE and Plunket. We worked with the Women's Refuge and other sponsors on their new fundraising campaign, The Great Night In, in July 2022. This saw Contact match 'safe night' donations from Kiwis to the tune of $100,000. We also committed to match every $20 donated by our people with $80, bringing the total to $100. Every $20 donated to Women’s Refuge provides one safe night for a family. We are looking forward to doing meaningful things together over the next few years. It’s one small way that we can help make it good to be home for more Kiwi families. Win-win pool partnership in Central Otago This year, Contact pledged $95,000 to buy and install solar panels at the Roxburgh Community Summer Pool. The money was originally intended for the Contact Epic and Blossom Festival events, which were cancelled due to Covid-19. When the pool is not open during the winter months Simply Energy will sell the excess energy from the solar panels back to the grid, with the profits gifted back to the pool. It's a win/ win opportunity for the community and the environment. Simply will look after an ongoing billing and metering system which will enable the pool to use the solar output over the summer and sell it over winter. This also means that for the life of the system, the community will receive significantly reduced admission costs to the pool. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 48 We love supporting community programmes such as SwimWell Taupō. Moving the system to solar will save 24.7 tonnes of greenhouse gas emissions a year – equivalent to the emissions from 1,741 one-way trips between Roxburgh and Queenstown in a petrol-powered car. Our Central Otago hydro team also put their community sponsorship funds towards a diverse mix of important local projects, including: • Two heat pumps for the Lake Hāwea Community Centre, meaning the centre’s basement can be heated and used by the Kahu Youth Trust. • Supporting the Haehaeata Natural Heritage Trust to propagate and grow native plants, which they then provide to other local organisations for planting. Our people are also looking at future volunteering opportunities with the Trust. • Replacing a skylight at the Kopuwai Early Learning Centre to help improve airflow in the nappy changing area. • Sponsoring a weekly ‘Top 40’ on two community radio stations, Radio Central in Alexandra and Radio Wanaka, to show our support for community radio when Covid-19 was impacting their viability. • Providing the prize for ‘the last duck’ at the Alexandra District Parents Centre’s annual duck race down the Manuherekia River. Contact INTEGRATED REPORT 2022Strategic enablers Helping grassroots groups in Taupō Contact has had a significant presence in the Taupō community since the Wairākei A and B power stations opened 60 years ago. This has only increased with the development of our new Tauhara power station, and we are continuing to look to do more. This year we continued our long-standing sponsorship of SwimWell Taupō, which gives every school-aged child in the district access to free swimming and water safety lessons. Our support enables more than 25,000 swimming and water safety lessons to be delivered to 3,500 children every year. We also use the land we operate on in Taupō to benefit the community. As well as leasing land not used for electricity generation to farmers, we offer it to community organisations that align with our Tikanga and need land to operate, including Riding for Disabled and the SPCA. We supported diverse grassroots community groups and initiatives from our Wairākei community sponsorship fund, including: • Age Concern Taupō for postage costs, to help get information to older people in the community • Taupō Family Playcentre to replace bark in their playground, to keep children safe • Taupo-nui-a-Tia College to help start a school radio station, and for hockey equipment • Volunteer Great Lake Taupō to buy computer equipment for a volunteering hub • Taupō Squash Club to buy equipment to get more women and girls participating in squash • Lake Taupō District Sports Advisory Council to buy gear bags for the girls’ coaching programme, to help more girls play cricket • Thrive Whakapuawai to fund a field worker in Tūrangi and Taupō who will help special needs and vulnerable adults to access the programme • Spa Bike Park to fund ingredients for a barbecue fundraiser, with proceeds going towards upkeep of the park. A focus on rangatahi at our thermal sites In Taranaki, we continued to sponsor water safety lessons at the TSB Pool in Stratford during the school holidays. About 60 children went through the programme this year. In a country surrounded by water, it’s important for children to learn water safety skills and confidence. Our sponsorship means children can learn those skills for free. We also provided sponsorship to Pareti Pareta – a regional programme that focuses on the mental health and wellbeing of rangatahi, delivered through Taranaki schools, iwi and hapū. And we continued to sponsor prizes for the region’s primary and secondary school science and technology fairs to encourage student innovation, and the Education award at the annual Taranaki Regional Council Environmental Awards. Our Stratford community sponsorship fund also supported: • The Kids Foundation to buy a plasma pump for a child • TET Athletics Taranaki, to help run the 2021/22 Nexans Fun Run and Walk series • Ako Wai Programme, to enable five primary school children each term to attend swimming lessons • Toko School, to provide play equipment and reading resources • Stratford Golf Club, to buy four sets of junior golf clubs for training • NZME, to assist with the Special Children’s Extravaganza. In Hawke’s Bay, Our Whirinaki site sponsorship fund supported Westshore School’s EPro8 programme – an interschool engineering and science competition that gives children aged 9–13 the chance to learn about and use engineering skills and equipment. The Westshore School team qualified for the regional competition this year. Through supporting the Wingspan Bird of Prey Centre, we helped to rehome two kārearea (NZ falcon) chicks. The Whirinaki site also supported Bay View Volunteer Fire Brigade to participate in the Firefighter Sky City Challenge. Bay View is Whirinaki Power Station’s closest fire brigade. Caring for our native birds We signed a three-year sponsorship with the Taranaki Kiwi Trust, which will provide $35,000 a year to support the Trust’s education, training and advocacy programme. We started our partnership with the trust last year, supporting the development of its education programme, and the new three-year sponsorship builds on that. The partnership aligns with our continuing sponsorship of the Kiwi Contact education programme in Wairākei. Without help, the kiwi is likely to be extinct in the wild within two generations. Community involvement and engagement is essential to its survival. We are also helping another of our native birds, the kārearea (NZ falcon). This year we supported the rehoming of two kārearea chicks, from the Wingspan Bird of Prey Centre in Rotorua to the foot of Mt Tauhara, as part of a new three-year sponsorship. The month-old baby birds were released after being raised from a pair of rescued falcons at the Wingspan centre. We hope our sponsorship will support the release of up to another 12 kārearea into the wild. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 49 Contact INTEGRATED REPORT 2022Strategic enablers Greening Kids Taupō empowers students to get involved with local biodiversity projects. The Department of Conservation estimates there are just 5,000 to 8,000 kārerea left – making them rarer than kiwi, with the current kiwi population around 68,000. Kids Greening Taupō We continue to support Kids Greening Taupō, which empowers students to get involved in projects that increase biodiversity and solve environmental problems. We funded the salary of an education coordinator and donated $5,000 to the programme’s 'Take Action Fund’, which offers grants for restoration and conservation projects in schools and early education centres. We also contributed a $1,000 prize for the winning school at Greening Taupō Day in June, where 4,500 trees were planted to ‘paint the town green’. The prize will support a restoration project at the winning school. Our support for Kids Greening Taupō aligns with our support for Greening Taupō planting events throughout the year. We donated 2,500 trees for the annual Greening Taupō and Contact Energy Planting Day in June, and donated another 1,500 native trees for the Greening Taupō and Taupō Golf Club’s ‘Project Birdlife’ planting day. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 50 Using water resources sustainably Water is a precious resource that we share with all New Zealanders. We rely significantly on access to water to run our power stations and generate electricity. Water holds both a practical and cultural significance in Aotearoa New Zealand. Our stakeholders want to know that we are using our water resources in a sustainable way, ensuring that fresh water is protected for future generations. At our hydro facilities, water is passed through our dams to generate electricity, which impacts river flow, freshwater species migration upstream and downstream, and the natural transport of sediment. At geothermal sites, we use the energy in geothermal fluid to generate electricity. It is also used by other downstream users, such as the Wairakei Terraces and Huka Prawn Park. Cooling water is used at many of our power stations to keep things running efficiently. This is reused in cooling towers or returned to the stream, river or reservoir it was taken from, while some evaporates. We also use potable water in our offices. We have a Commitment to Water, which outlines our approach to sustainable and shared use of this resource. We maintain registers for the environmental ‘aspects’ (elements of our actions, products or services that can interact with the environment) and environmental impacts at our Non-consumptive water usage in megalitres (ML) Source/water use 2022 2021 2020 Clutha Mata-Au River water** 15,730,988 15,098,980 16,624,902 Geothermal reservoir Geothermal cooling water** Total 75,339 332,270 69,180 336,840 75,992 330,047 16,138,597 15,505,000* 17,030,941 * Total re-stated due to reporting error, where last year the geothermal reservoir was not included in the total. ** Fresh water Total water usage in megalitres (ML) Source/water use Withdrawal Discharge Withdrawal Discharge Withdrawal Discharge Geothermal reservoir 105,577 15,228 103,177 15,831* 114,805 23,818* 2022 2021 2020 River and surface water** Water from third parties** Council** 2,076 294 23 2,509 321 40* 1,536 283 34 Discharge from all sources 15,533 18,727 Total 107,970 30,761 106,047 34,558 116,658 15,476 39,294 * 2021 and 2020 geothermal reservoir discharge re-stated due to double counting. 2021 total discharge reduced by 18,166 ML, 2020 total discharge reduced by 14,995 ML. 2021 Council withdrawal re-stated due to reporting error. Correction reduced 2021 withdrawal by 7,554 ML. ** Fresh water. Our areas of operation across Aotearoa New Zealand, according to the World Wildlife Fund (WWF) Water Risk Filter, are considered as 'very low risk'. WWF Water Risk Filter is a screening tool used by corporate and portfolio level companies, and investors, to help identify, prioritise, understand and take action in water stressed areas. Contact INTEGRATED REPORT 2022Strategic enablers operational sites as part of our Telarc ISO 14001 Environmental Management Certification. These help us to identify water projects for improvement each year. This year at our Te Rapa power station, we were able to capture water that we use to cool our boiler water and steam samples, and reuse it in our cooling tower instead of it going to wastewater. This initiative reduced our freshwater use and our discharge impacts. Our GeoFuture project at the Wairākei geothermal steamfield will also deliver significant benefits for waterways, as we move our operations away from the river and cease discharges of geothermal and cooling water into the Waikato River and streams by 2026. We measure our performance on a range of water- related impacts from ecological integrity to water security and water quality. This financial year we used 16,138,597 megalitres of water, 99 percent of which was returned to rivers or to geothermal reservoirs (non-consumptive), with the remainder discharged in line with our resource consents. We had no water-related incidents in the financial year, although we continue to address the impacts of the Karapiti incident in 2019, when a large amount of sediment was discharged indirectly into the Waikato River. Protecting biodiversity Biodiversity simply means the variety of all life on Earth. It is important to us because our operations have impacts on species and habitats, which differ depending on the type of generation, the region we are operating in, and the local environment. Our biodiversity commitment sets out our intent and responsibility to protect the indigenous species and unique ecosystems we impact. Our goal is to have thriving and sustainable ecosystems within all habitats that we influence. We do this by ensuring that all of our sites have site-specific biodiversity management plans and we engage with tangata whenua and local communities, work with external partners and experts in biodiversity management, and support hapū and community groups to achieve their biodiversity goals. The diversity of our operations results in a range of different impacts. At our geothermal operations in the Taupō region, we are careful to manage the impacts we can have on native vegetation that relies on warm ground or water, and are mindful that takes or discharges of freshwater can negatively affect water quality. At our hydro operations on the Clutha River, our greatest impacts are on the passage of fish past our dams and on water flow rates. At our thermal stations, our impacts on biodiversity are minimal, however, we have pest control and planting programmes to enhance ecosystems near our power stations and we work with others in the community to achieve biodiversity goals. Our approach to biodiversity management is to first look for opportunities under our control and influence, then to support community groups doing work in these areas. We have established plans to mitigate our biodiversity impacts for all our operational sites and we report on our progress to the Board’s Safety and Sustainability Committee. As part of our biodiversity plans, we have committed to begin restoring and enhancing five high-value sites by 2026, including one site of cultural significance in partnership with tangata whenua. This year we identified and developed biodiversity restoration plans for two sites of significance, including the Otumuheke Stream and Waikato–Aratiatia River Corridor. Across our sites, we caught 4,832 pests and planted 55,206 trees this year (well up from 3,354 pests caught and 29,068 trees planted last year). Our elver (young eel) trap and transfer programme is one of the ways we mitigate our impact on native fish species. We have more information on our habitat protection and restoration work in our sustainability disclosures. Elver trap and transfer One of the ways that we mitigate our impact on native fish species around our hydro power stations is through our trap and transfer programmes. Our elver (young eel) trap and transfer programme at Roxburgh dam was incredibly successful this season, with 198kg of elvers caught – more than double the previous record of 81kg in 2019. This provided an excellent opportunity to carefully release elvers in many sites across the Clutha Mata- au, including Lake Dunstan, Lake Hāwea, Lake Wānaka, Lake Roxburgh and Manuherikia River – a positive step towards restoring the tuna (native eel) populations in the upper regions of the catchment. The average weight of the elvers was 3.06 grams, so we estimate that 64,705 elvers were successfully trapped and transferred. We captured 227 large adult tuna in the headwater lakes this season and transferred them to below the Roxburgh dam to allow them to migrate when ready. This included five confirmed migrant tuna. Migrant tuna can be identified by their larger size, and features such as larger eyes or changes in head shape. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 51 Contact INTEGRATED REPORT 2022Strategic enablers Torepatutahi Wetlands. Last year 330 tuna were transferred downstream, including 19 migrant tuna. It’s difficult to compare results from previous years for the tuna transfer programme as conditions vary considerably each year. We are continuously working towards a strong understanding of the health, habits and whereabouts of the tuna in lakes Wānaka, Hāwea and Whakatipu, so ongoing monitoring and feedback is key. Working with our Torepatutahi Wetland partners As part of our reconsenting for the Ohaaki Power Station in 2013, we agreed to work with Ngāti Tahu – Ngāti Whaoa Runanga Trust, Fish and Game, the Department of Conservation and local landowners to restore the flora and fauna in the Torepatutahi Wetland next to the Waikato awa near Ohaaki. We committed to enhancing the 30ha wetland adjacent to the power station for the life of the consents (35 years), to control pest plants and animals, exclude agricultural stock, provide a habitat for indigenous species, and monitor progress of restoration. In February 2020 we did aerial spraying to control willows across a large area of the wetland due to ground-based methods being unsafe and impractical. We used a standard spraying method for controlling willows, which was recommended in the long-term restoration plan by external ecological experts, and we obtained the appropriate approvals when the project started in 2014. Following the spraying, stakeholders complained that we had not communicated with them about the spraying and that it had damaged indigenous plants. We took the criticism on board, discussed solutions with our partners and developed an interim annual management plan that provides a roadmap for restoration works over the coming 12 months. This gives stakeholders a better understanding of planned works and an opportunity to provide feedback or make suggestions. Within the wetland we prepared a site for planting last winter, selected the species and planted 4,000 native plants in areas where weeds were under control. In February 2022 our ecologist completed biannual transect monitoring, to check regrowth of native species impacted as well as regrowth of weed species and willow. The report found positive changes to the wetland flora, including regrowth of native species and effective control of target willows. The report also provided recommendations for the 2022 winter season, which we’ve discussed and agreed with partners. We plan to refresh the long-term management plan in FY23 to include newer management techniques, consent requirements as a result of new regulations (National Policy Statement for Water), and address some requests from our stakeholders relating to birds, aquatic fauna and mahinga kai (which includes the social and educational aspects of food gathering). We have also refreshed our operational pest animal control plan and made commitments for the next two years. We will test new traps on the market and trial different locations to better understand where the pests are entering the wetland. We’re continuing to see an increased presence of native birds, in particular the at-risk fernbird. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 52 Contact INTEGRATED REPORT 2022Strategic enablers Transformative ways of working Material topics Team culture Workforce health and wellbeing Diversity and inclusion Infrastructure safety Our Transformative Ways of Working (TWoW) programme is about giving our people flexibility and choice to work from anywhere, while improving their work experience and engagement and making Contact a more effective and productive place to work. It’s ensuring we make the rapid changes and transformation needed to deliver on our Contact26 strategy while also adapting and responding to Covid-19. We need our people to be ready, willing, able and excited to get things done, and to support them through our OneContact culture and exceptional safety leadership. At the start of 2020, the pandemic forced us to ‘lift and shift’ our people from corporate offices to working from home. Since then, we’ve learned a lot about how our people like to work and the best ways to create flexibility and choice. We’re using that knowledge to design our ideal environments, tools and practices to support hybrid working. This includes ensuring we have the best possible technology for working from anywhere, arming our people- leaders to support hybrid teams, creating better work spaces, and prioritising our people’s wellbeing so they can thrive. Research shows that companies that embrace flexible working are likely to attract and retain the best talent, future proof their culture and create competitive advantage – and that has been our experience too. In November 2020 we started using Peakon, a people engagement tool that includes quarterly online surveys. In April, 88 percent of our people participated in the Peakon survey. Our overall engagement score was 8.2/10, up from 7.7 at the same time last year, and our highest score since the surveys began. Our people rated us 8.7/10 for ability to work flexibly (up from 8.5 this time last year) and 9/10 for ability to work remotely (up from 8.6 last year). Our employee Net Promoter Score (the number of people who would recommend working at Contact versus those who would not) also increased to +49, up from +29 for the same period last year and +28 in November 2020. The main concerns identified through Peakon this year were workload and stress, so we’re doubling down on the wellbeing of our people, including launching the Wellbeing Tick programme and reviewing our existing mental health and EAP support. Creating better work spaces Through TWoW we’ve learned a lot about how our people like to work, including what they need to be able to connect and collaborate effectively when working in our offices. We’re applying this knowledge to the design of our workspaces. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 53 Contact INTEGRATED REPORT 2022Strategic enablers Our Auckland office lease expired in 2020 and we experimented with sharing a workspace at the Generator in Wynyard Quarter, before deciding to move to our own purpose-designed workspace. The new office, which opened in February 2022, was designed to bring our ‘It’s good to be home’ brand to life, and create dedicated meeting, working, connecting and collaborating spaces. In FY23, we’ll carry out a similar refit in our Wellington office and our Dunedin contact centre. We will also develop a work programme to create the same look and feel across all our workplaces in Aotearoa New Zealand. We’re exploring options around establishing a possible geothermal ‘centre of excellence' in Taupō. Our focus is on having the right technology and workspaces to enable our people to connect and collaborate wherever they choose to work. Shaping our Contact Community Shaping our Contact Community (SOCC) is our leadership framework, introduced in April 2021. The framework defines what leadership means at Contact, centering around our five leadership themes: constructively leading with open and honest conversations, investing deeply in knowing ourselves and others, openly and optimistically exploring all ideas, helpfully standing in the role of teacher and student, and unanimously connecting as OneContact. To embed the SOCC framework and deepen the leadership journey for our people, this year we started using the Human Synergistics Life Styles Inventory tools (LSI 1 Self description and LSI 2 Description by others) and High Performing Teams Framework. Our Leadership Team completed the programme first, and we’re now well into rolling it out across our tier 3 (senior leaders). All of our senior leaders and people leaders (around 170 people) will complete the programme over the next year and beyond. Contact University launched To be the leader we aspire to be, we need our people to be propelled by curiosity and to become lifelong learners. We embrace learning as part of our DNA and through our OneContact culture. Last year our people told us through Peakon that they wanted more access to training and development. In August we launched Contact University – an online learning portal for people in every part of our business – to build the capability and skills we need to deliver on our strategy and to help our people grow and thrive. As well as being a one-stop-shop for compliance training modules (such as health and safety and privacy) Contact University offers hundreds of courses, virtual classrooms, videos and more, that people can self-select depending on their role, learning needs and interests. It has 11 learning academies for specific disciplines (such as a Retail Academy and Generation & Trading Academy), and structured pathways for key skills within the SOCC leadership framework. Content is created in-house by skilled subject matter experts as well as externally, in partnership with our learning experience provider Open Sesame, and is updated each quarter. Our people can also contribute educational content that they’ve found interesting or helpful. Since Contact University launched, course completions are up more than 500 percent year- on-year and our people have completed more than 12,000 courses. Our Peakon score for personal growth increased from 7.2/10 to 7.9 – for factors including professional growth, career pathways, opportunities to learn new skills and a supportive manager or mentor. Changing labour market This year we continue to see the long-term impacts of Covid-19 play out in the labour market. The market continues to be tight for specialist talent and skills, such as geothermal, digital and ICT expertise. Gaining our accreditation under the AEWV (Accredited Employer Work Visa) has ensured that we will again be able to tap the international talent marketplace for hard to find skills. We are in a unique position as under the Green List occupations schedule, a large proportion of skills and capabilities fall into these categories. This will allow us to move with more agility when looking at international options. Conversely the opening of borders and 'the great resignation' has the potential to put pressure on our local labour market. To ensure we have a robust pipeline we recognise the importance in developing our people and building a strong back bench of future leaders from within. This year we launched our Talent Framework, building a robust process in identifying top talent within Contact and developing that pipeline into future leaders. We have also prioritised strategic capability and workforce planning to support our areas of growth and ensure we have a robust pipeline to execute on our strategy. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 54 Contact INTEGRATED REPORT 2022Strategic enablers Undisclosed 1.4% Women 45.6% Gender FY22 (Contact, Simply Energy and Western Energy) Men 53.0% Undisclosed 1.2% Age diversity FY22 (Contact, Simply Energy and Western Energy) Under 30 20.1% Over 50 28.8% 30–50 49.9% Ethnicity1 FY22 450 400 350 300 250 200 150 100 50 0 i r o ā M n a i s A a k fi i s a P n a e p o r u E r e h t O 2 A L E M A l d e s o c s i d n U 1 Individuals can choose to identify multiple ethnicities. Data is for Contact only, Western Energy and Simply Energy do not track ethnicity data. 2 African, Middle Eastern & Latin American. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 55 Embedding diversity and inclusion Our Inclusion and Diversity Policy and related strategy is underpinned by our vision to build a better Aotearoa New Zealand – by reflecting the diversity of our customers and communities, and creating a culture where inclusion is deeply embedded as part of our Tikanga and our people are able to truly be themselves. We continue to partner with Global Women on the Champions for Change reporting initiative, which monitors the collective and individual progress of participating organisations towards our shared goal of between 40–60 percent women in our organisations, at all levels. The Champions for Change initiative published its fourth Diversity and Inclusion Impact report in late 2021 (data reporting period 1 April 2020 – 31 March 2021). The data from participating organisations shows female representation has increased in certain workforce categories from board to senior managers between 2018 and 2021. Our Contact insights within the Champions for Change Diversity and Inclusion Impact report 2021 show that we achieved gender balance (a minimum of 40:60 women to men) across over half of our workforce categories, but there are several categories where we need to improve. We have 57 percent of women on our Board, 43 percent of women in senior management roles and 46 percent of women in our overall workforce. This year we also took part in the Mind the Gap initiative, which seeks to standardise pay equity reporting across Aotearoa New Zealand. Mind the Gap reports on the overall pay gap between men and women in terms of median pay, and our pay gap using this measure (at 30 June 2021) was 49 percent. This reflects the challenge we have with the composition of our workforce at Contact, and across the electricity sector. We have many more women than men in our customer contact teams. And it’s the other way around at power station sites, which have many highly skilled and highly paid roles. We are committed to doing more in this area and taking on the challenge to reduce the gap. We continue to support and empower WING – Women in Geothermal. WING is a not-for-profit international organisation promoting professional development, education, and equality in the geothermal industry. Last year, WING NZ and our members at Wairākei launched a successful high school internship that enabled seven students to do hands-on work and get an inside look at geothermal. This year, WING NZ is focused on promoting professional development opportunities, advocating for equitable workplace policies, and supporting our industry’s mission towards a sustainable future. We retained our Rainbow Tick accreditation this year. We have continued to embed the programme – supporting our Pride at Contact networking group to set up for success, building the group’s profile through our inductions and internal communications, and developing plans for education and training for allies. We are preparing for reassessment in late 2022, which will show us how we’re doing and help us to keep building an inclusive culture. Over summer we employed 16 interns across our ICT, Generation and Trading and Development teams – giving university students the chance to gain professional experience and to apply their knowledge in the workplace. Some of the interns were part of our Māori Summer Internship Programme, which helps to strengthen our bonds with tangata whenua, and develop their whānau, hapū, and iwi. For the 2021–2022 summer programme we had five interns work with us during their summer break – three from Ngāi Tahu and two from Ngāti Tūwharetoa. In February 2022 we employed four graduate engineers across our Wairākei, Taranaki and Clyde sites. The graduates will take part in an 18-month programme, working in different teams across the business to gain broad experience. At the end of the programme they will each be offered a permanent role in one of the teams. The graduate Contact INTEGRATED REPORT 2022Strategic enablers programme is about giving graduates a broad foundation where they are trained, supported and mentored, to accelerate their development. We are also helping to bring more tangata whenua into our contractor workforce, and support them with training and pastoral care, through our Ka Hiko programme. There are detailed diversity tables in the sustainability disclosures. Delivering through the pandemic We kept our call centres open and our power stations operating at full capacity throughout another year of the Covid-19 pandemic, thanks to an enormous effort by all our people. The pandemic response at Contact has been led by the Covid Response Group (setting the strategy) and the Covid Working Group (the day-to-day response), ensuring we have the right policies and processes in place, and adapting business continuity plans as needed. About 50 percent of our people have tested positive for Covid-19, which has put a lot of pressure on our people, especially in our control rooms and call centres, and we acknowledge their effort and flexibility. Our flexible ways of working have meant household contacts are often able to continue working if it works for them and they’re able to do so safely, while caring for family at home. In January we implemented a vaccination policy requiring anyone entering our sites to be double vaccinated, and the policy remained in place until end July 2022. We continue to review our Covid vaccination and testing policies regularly. We took part in a government trial of Rapid Antigen Tests (RATs) in late 2021, and we continue to use RATs as an important defence against Covid-19 entering our sites. Everyone on our generation sites continues to test daily, and so far our people have completed more than 50,000 RATs. We developed a mobile app for our people to let us know if they or others in their household have a positive RAT. The app was originally developed by Meridian, which offered the code to other businesses in return for a donation to the KidsCan charity, an example of the great collaboration seen across industry during the Covid-19 response. We also introduced SaferMe, a bluetooth enabled badge worn by staff, visitors and contractors at our call centre and generation sites. When we’re notified of a positive case, we can immediately identify close and casual contacts based on their proximity and length of exposure. We can then quickly determine who needs to isolate as a close contact and who can safely keep working. SaferMe is being used actively to identify close contacts of people who have tested positive and who have been on Contact sites in the days before their positive test. The system helps prevent ongoing transmission and infection of our workforce and ultimately their families and the wider community. Throughout the pandemic, we have continued to offer guidance and support to our people, including an intranet page with easily accessible resources. We have also offered our people special Covid-19 leave, meaning they don’t need to worry about staying home and getting well before returning to work, to do the right thing for their whānau and Aotearoa New Zealand. Supporting people to thrive With the ongoing complexities of the global pandemic, we have continued to focus on supporting our people and keeping them safe. Our people have been adaptable through constantly changing ways of working during the pandemic, but we also know that working differently has its own challenges, including human connection. Our people are asking for more consideration of their wellbeing, so we are making this a priority. We have always focused on a culture where safety is deeply embedded, and now we are working to embed wellbeing in the same way. In February, we became the first company to sign up to the new workplace wellbeing accreditation programme, Wellbeing Tick. The Wellbeing Tick draws on international research and best practice to set the standard for workplace wellbeing in Aotearoa New Zealand. It takes a holistic approach, including factors such as mental health, physical health, emotional and spiritual health, sleep, relationships, and financial health – everything that people need to thrive. We launched the programme with a discovery phase, including a survey and focus groups to hear about the challenges our people are facing, the support they need, what Contact currently does well, and where we could do better. We are using those insights to develop the Contact wellbeing strategy, and a plan of action towards our Wellbeing Tick accreditation. The programme will include reviewing the wellbeing programmes we already have in place, looking at how our policies and processes support or compromise wellbeing, and factors such as leadership capability, accessible and holistic support, awareness and education. The Wellbeing Tick will transform our wellbeing culture for the long term. Our progress will be assessed for ‘accredited' status in March 2023, and we will continue to use the framework to build our wellbeing culture year on year. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 56 Contact INTEGRATED REPORT 2022Strategic enablers We are looking to shift to metrics that help us to better understand how work is done, with a focus on identifying and enhancing the capacities that make things go well. Measuring our capacity to work safely, rather than measuring and focusing on an absence of safety, will allow us to boost capability and resilience, setting up our people and teams for greater success. Our TRIFR for controlled activity (work done under our health and safety management system, e.g. at our sites or by our people) was 1.7. This included five recordable injuries. There was one minor injury, and four moderate injuries. Our TRIFR measure is calculated based on hours worked (2.9m in FY22) and number of injuries. Our TRIFR for monitored activity (work done by our service delivery partners under their own health and safety systems) was 10.9, representing three minor injuries. TISR assesses all health and safety and process safety events and considers both actual and potential consequences, so that we get a view of how well our defences are working for our critical risks. TISR was 2,180 within controlled activity in FY22. Free skin checks This year we offered free skin checks for site employees, which resulted in a significant number of our people going for further checks and treatment. As an example, at the Wairākei site, 88 people attended the on-site skin check clinic, 22 were referred for further checks and two were diagnosed with melanomas. One person has told their story to encourage others to get checked, after having their melanoma removed with a good outcome. We plan to make free skin checks available for all our people in FY23. Technology for the future We’ve begun a major upgrade of our core IT platform, SAP, to better support our business, our people and our customers for the future. SAP (Systems Applications and Products) is a centralised system that enables everyone in Contact to access and share common data. It enables key IT processes in every part of the business. At 10 years old, our SAP platform needs upgrading to a new version, to keep it operating effectively and to give our people the best possible user experience. The new version is much faster, will have a better user interface, will include new tools to optimise the way people work, and can run on a mobile device. The upgrade is planned to be completed in 2023 and will deliver significant benefits to people across the business. In finance for example, a monthly vendor payment run that currently takes several hours across multiple screens, can be done with one click, on one screen, within minutes. As well as increasing efficiency, it will reduce the risk of human error. In generation we can use it to improve our plant maintenance management processes with an expected time-saving of 10 to 20 percent. Ultimately the upgrade will lead to better experiences for all of our customers too. Improving our safety culture Continuous improvement is a key part of our journey towards a truly generative safety culture. This year we’ve been working on a new safety leadership programme for our people . We’re exploring options with possible providers and will roll out the programme in FY23. The programme will build capacity in our people to adapt safely to changing work conditions. We also have a project underway investigating how health and safety information is managed and accessed at Contact. Our aim is to make it easier for our people to have access to what they need, when they need it. Measuring our health and safety performance We track our health and safety performance with two key measures – our Total Recordable Injury Frequency Rate (TRIFR) and Total Incident Severity Rate (TISR). TRIFR is a global measure that can be benchmarked. However, it is a non-predictive lagging indicator that looks back at total injury rates rather than taking the potential risk into account. The causal pathways for major injuries are different to those for minor incidents, such as a rolled ankle. This means that although managing and preventing minor injuries is important, they’re not good predictors of more serious injuries. We will continue to gather TRIFR data as it is required for some external reporting, but we will not use it internally. TISR is a measure that gives us a much better idea of exposure to risk by assessing the potential severity of Health and Safety and process safety incidents. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 57 Contact INTEGRATED REPORT 2022Strategic enablers Process safety Tier 1 Tier 2 Tier 3 FY22 FY21 FY20 FY19 0 0 0 3 0 2 0 2 40 49 24 58 Tier 1 – a significant loss of containment of hazardous material or energy. Tier 2 – a lesser loss of primary containment or a significant degradation of barriers. Tier 3 – learning event where issues have been identified in our process safety barriers or controls. Note: This table represents the number of process safety incidents across our operations. The figures exclude any incidents occurring in the Ahuroa Gas Storage or Rockgas LPG facilities. Process safety incidents As well as measuring injury frequency and incident severity rates, we measure process safety. Process safety is a disciplined framework for managing the integrity of our operating systems and processes. It relies on good design principles, engineering, and operating and maintenance practices. We were the first energy company in Aotearoa New Zealand to begin measuring process safety in FY13. Since we began reporting, we’ve had no Tier 1 process safety incidents (significant loss of containment of hazardous material or energy) within Contact's current portfolio of assets, although there were four in our LPG business before its divestment in 2018. This year we had no Tier 2 incidents (a lesser loss of primary containment or a significant degradation of barriers), and 40 Tier 3 process safety incidents (learning events where issues have been identified in process safety barriers or controls and corrective actions put in place). This was a decrease on three Tier 2 incidents and 49 Tier 3 incidents in FY21. All of the process safety incidents this year were at the lowest level, with the majority (54 percent) relating to automatic plant protection operating as intended (recorded as incidents as part of our monitoring). Every process safety incident is reviewed to identify lessons to be learnt. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 58 Contact INTEGRATED REPORT 2022Strategic enablers Operational excellence Material topic Privacy and cybersecurity Our focus on Operational Excellence enables us to make our operations much more efficient and to drive best practice. We have a strong track record of being good operators and taking costs out of the business where it makes sense. Operational Excellence is underpinned by our culture, which is safe, innovative and brave. That includes keeping our people safe; keeping our plant safe to run; and fostering an environment where it’s safe to challenge, innovate and fail, and to learn and evolve. We continue to innovate to become more efficient, including using digitalisation and analytics to transform operations across our trading, generation, and customer businesses. And we stay on the front foot to monitor and respond to our changing regulatory environment, and to engage with policy development impacting our sector. Financial performance In FY22 we have delivered a robust financial result and solid returns for our shareholders, underpinned by higher renewable generation volumes and access to flexible fuel for our back-up thermal stations. We have navigated the challenges of Covid-19 and supply chain disruptions, progressed the build of our Tauhara power station development, and continued to move forward on our Contact26 strategy which ensures we are well-positioned to keep delivering strong results into the future. Our healthy financial position supports our aspiration to lead the decarbonisation of Aotearoa New Zealand. Our profit for FY22 was $182 million, down $5 million from a year ago on lower operating earnings (EBITDAF1) and higher depreciation, partially offset by lower interest costs reflecting the capitalisation of interest to major growth capital projects, lower tax on earnings and favourable movements to the fair value of financial instruments against the prior year. Dividends (cps) – declared FY18 13 19 32 FY19 FY20 FY21 FY22 16 16 14 14 23 23 21 21 39 39 35 35 Interim dividend Final dividend 1 EBITDAF is a non-GAAP (generally accepted accounting practice) measure. Information regarding the usefulness, calculation and reconciliation of this measure is provided within note A2 to the financial statements. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 59 Contact INTEGRATED REPORT 2022Strategic enablers EBITDAF decreased by $16m to $537m, down 3 percent on the prior year on lower wholesale electricity prices and the rising gas and carbon unit costs, which were partially offset by more renewable generation. Operating free cash flow1 for the period decreased from $371m to $325m, down 17 percent year-on-year primarily on lower operating earnings, additional working capital investments in carbon, higher stay-in-business capex and higher cash tax paid on strong FY21 earnings. An interim ordinary dividend of 14 cents per share was paid in March 2022, and in August 2022 the Board approved a final ordinary dividend of 21 cents per share (imputed by up to 19 cents per share for qualifying shareholders). This will be paid to investors on 27 September 2022. This means we are delivering investors a 35 cents per share annual dividend, equal to FY21.2 The dividend policy targets a pay-out ratio of between 80 percent and 100 percent of the average operating free cash flow of the preceding four financial years. We are focused on leveraging opportunities to continue to transform our ways of working that flow through to increased efficiencies and improved profitability. We have a robust balance sheet, a world class portfolio of assets and an excellent strategy to deliver on stakeholder expectations. The last five years in review For the year ended 30 June Unit Revenue Expenses EBITDAF Profit/(loss) Profit per share – basic Operating free cash flow Operating free cash flow per share Dividends declared Dividends paid Total assets Total liabilities Total equity Gearing ratio $m $m $m $m cps $m cps cps $m $m $m $m % 20182 2,275 1,794 481 132 18.4 301 42.0 32 201 5,311 2,584 2,727 35 20192 2,519 2,001 518 345 48.2 341 47.5 39 251 4,954 2,172 2,782 28 2020 2,073 1,627 446 125 17.5 290 40.4 39 280 4,896 2,275 2,621 31 2021 2022 2,573 2,020 2,387 1,850 553 187 25.3 371 50.2 35 274 5,028 2,101 2,927 23 537 182 23.4 325 41.8 35 272 5,166 2,326 2,840 28 Investing in digital capability and transformation We’re investing in digitising our business to drive operational excellence and deliver best-in-class experiences for customers and our people. Over the past few years, we’ve focused on building digital capability in retail – delivering great results for our customers and our people. More than 70 percent of our customer interactions are now through digital channels, including our website and online self-service, the Contact Energy app, automated IVR (Interactive Voice Response), Facebook Messenger and WhatsApp. Customers can get the support and information they need faster, and it frees up our customer service representatives to help other customers who need it. We have the lowest cost-to-serve in the Aotearoa New Zealand energy sector among our Tier 1 competitors and are delivering excellent customer experiences. At the NZ Compare awards in February, our app was named Best Mobile Application – alongside our awards for Best Customer Support, Power Provider of the Year, and the Supreme Champion Award. The awards, which recognise the best of the best in the broadband and energy sector, show how far we’ve come through our people-centric approach to customer experience and the role of digital in that. This year we also turned our focus to building digital capability in our generation and trading business, with the goal to be the leading digital energy company in Aotearoa New Zealand by 2026. The increased digital capability and transformation will be accelerated through increased investment and improvements to our core generation technology platforms (like the SAP upgrade and our data platforms) to create reusable and scalable solutions. 1 Operating free cash flow is a non-GAAP (generally accepted accounting practice) measure. Information regarding the usefulness, calculation and reconciliation of this measure is provided within note A2 to the financial statements. 2 Figures reflect the combined result and position for continuing and discontinued operations. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 60 Contact INTEGRATED REPORT 2022Strategic enablers Our regulatory environment Aotearoa New Zealand’s regulatory environment provides the framework within which our business operates. We actively monitor legislative and policy changes to ensure we meet our obligations and manage risks and opportunities. We also work hard to maintain broad relationships across the political divide, pull our weight with industry and business organisations, and ensure our voice is heard by regulators on behalf of our customers and investors. Our approach is straightforward, open-minded and evidence-based, in line with our Tikanga. We aim to build sustained and trusted relationships with external stakeholders who shape and influence the environment in which we operate. Traction on climate change It was an historic year in the Government’s response to climate change. We saw the release of the first three emissions budgets, the first Emissions Reduction Plan, and the draft National Adaptation Plan. These documents form the basis of the Government’s contribution to global efforts to limit temperature rise to 1.5˚C above pre-industrial levels and adapt to the changes this will have on our environment. The documents show the critical role renewable electricity will play in reaching Aotearoa New Zealand’s emissions targets, including an accelerated move to electric vehicles and public transport, as well as electrification of heating, process heat and industry. We welcome the Government’s new target of having 50 percent of total final energy consumption coming from renewable sources by 2035. Our science-based decarbonisation targets will make a material contribution to this target, as will our strategic goal to grow demand backed by new renewable developments. We also welcome the Government’s commitment to developing an Energy Strategy for Aotearoa New Zealand. The strategy will consider strategic challenges in the energy sector and signal pathways away from fossil fuels. It will consider the challenges in delivering stable, affordable, and highly renewable electricity, as well as wider energy goals such as transitioning away from natural gas and decarbonising industry. We will engage with officials throughout the development of the strategy. Finding a solution to the ‘dry year problem’ The Government is looking at options to address Aotearoa New Zealand’s ‘dry year problem’ – that existing hydro-power catchments sometimes don’t receive enough rainfall or snowmelt and storage lake levels run low. As we transition away from fossil fuels and increasingly rely on hydro, wind and solar, the dry year problem may expand to become a dry, calm and cloudy problem. The Government is investigating solutions through a project called the New Zealand Battery Project. ‘Battery' refers to the way in which the solution may provide stored energy for the country’s electricity system. We are engaging closely with the government and officials on potential solutions to address this challenge. We consider that a number of commercial options exist to address this challenge, including demand flexibility, green hydrogen, smaller battery projects such as Contact's proposed Stratford battery, and other commercially viable options that the private sector can deliver. Resource management reforms The Government is undertaking fundamental reform of Aotearoa New Zealand’s Resource Management Act, aiming to improve environmental and development outcomes. Key provisions of the proposed Natural and Built Environments Act (NBEA), which will be the primary replacement for the RMA, were released late June 2021. Our Chief Executive Mike Fuge joined other sector CEOs in a combined letter responding to the We’re using digitalisation to optimise our existing generation assets, including asset performance and maintenance, and health and safety. And we’ll be using that capability to shape how we plan and design future generation assets, ensuring we build digital-first, with digital needs and opportunities front-of-mind. Our focus in generation includes applying advanced analytics across our assets and trading activity, introducing agile and cross-functional ways of working, and providing an omnichannel experience for our people, so they can access the same information and tools for the job wherever they’re working – whether they’re in an office or out on a steam field. Over the next year we’ll pilot a ‘digital twin’ capability in generation – virtual versions of physical generation assets – playing a coordinating role for performance measurement and maintenance planning, and increasing our ability to run scenarios and simulations. This will be a significant advance for safety and efficiency, and will help integrate our operations between our major projects teams who build our assets, and the development teams who scope and contract them, supporting activities such as bidding, supplier coordination, and plant construction. We’ll also be optimising our trading activity, using smarter technology, advanced predictive modeling and insights, and more closely aligning our plant performance and operations with our trading operations. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 61 Contact INTEGRATED REPORT 2022Strategic enablers to acceptable levels. This year we focused on new tools and services to enable us to detect, prevent, or respond to suspected security incidents more quickly; we ensured that the devices our remote workforce use to access Contact data and applications are properly managed and secured; and we expanded the requirement for multifactor authentication to reduce the risk of unauthorised remote access. We’re also reducing our ‘attack surface’ by ensuring our people have only the access privileges they need, and revoking access privileges or accounts when they’re no longer needed. proposed reforms, emphasising the important role of renewable electricity generation in decarbonising the economy, and that the NBEA needs to provide efficient and effective pathways for renewable projects. The new legislation is expected to be enacted in the second half of 2022. Transmission pricing methodology After 13 years of deliberation, Aotearoa New Zealand’s electricity regulator, the Electricity Authority, has decided to adopt a new transmission pricing methodology (TPM), which will take effect in 2023. The TPM determines how the national transmission grid owner, Transpower, recovers the costs of running the grid from its transmission customers. The grid transports electricity across 12,000km of transmission lines from where the electricity is generated to industrial customers, and through distributors’ networks to our homes and workplaces. We broadly support the principles of the TPM. It provides certainty for Contact and our large industrial customers about the future costs of connecting to the network, which gives us greater confidence as we invest and grow. Wholesale market competition review The Electricity Authority is reviewing competition in Aotearoa New Zealand’s wholesale electricity market. In a paper released in December 2021 the Authority found that prices have largely reflected underlying supply and demand conditions. However, it raised concerns about some price increases, which could not be easily explained by the Authority’s modelling. In particular, the Authority expressed concern with the price reached by Rio Tinto to supply Tiwai Point aluminium smelter in January 2021. The Authority is investigating if this price adversely impacted the efficient operation of the wholesale electricity market. identified a number of factors contributing to the unexplained prices, such as uncertainty in the gas market and transmission constraints. The Authority is expected to make final decisions by the end of 2022. Protecting privacy Privacy is important and becoming more so as the world relies increasingly on digital communications. Guided by our Tikanga, we take responsibility for looking after and respecting all personal information that we manage. We expect our people to comply with the Privacy Principles set out in the Privacy Act 2020 and we have two Privacy Officers to help drive and manage our privacy practices. We audited Contact’s updated privacy policies and procedures after the Privacy Act 2020 was introduced, and over the past year we’ve been implementing recommendations from the audit. This included further developing and enhancing our privacy policies and procedures, and developing a privacy training module for our call centre staff. Over the next year we will continue to review and refine our privacy frameworks and consider further training. We are reporting on privacy complaints and breaches in our Sustainability disclosures. Securing sensitive information We have processes in place to ensure our sensitive information is well protected from cyber security threats. Our Information Security team is continuously monitoring Contact ICT systems for suspicious behaviours, responding to potential issues, and assessing projects for new security risks they could introduce. Contact is engaging closely with the Authority in these investigations. In our submissions we have We also have an annual work programme to identify Contact’s highest risks and reduce them CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 62 Contact INTEGRATED REPORT 2022Strategic enablers Governance matters Contact Contact INTEGRATED INTEGRATED REPORT REPORT 2022 2022 s s r r e e t t t t a a m m e e c c n n a a n n r r e e v v o o G G CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 63 Contact INTEGRATED REPORT 2022 s r e t t a m e c n a n r e v o G CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 64 64 Governance matters Good corporate governance protects the interests of all stakeholders and enhances short-term and long-term value. We regularly review our corporate governance systems and always look for opportunities to improve. At 30 June, we comply with the recommendations of the NZX Corporate Governance Code in all material respects. You can see our full reporting in our Corporate Governance Statement on our website. Board composition Contact’s Board consists of seven directors, with a wide variety of skills, experience and points of view. Our Board shows appointment dates and commitee memberships. A short biography setting out the skills and experience of each director is available on our website. Our Board The Board’s role and responsibilities The Board is responsible for Contact’s governance, direction, management and performance. Specific responsibilities include: • Setting and approving Contact’s strategic direction • Approving major investments • Monitoring financial performance • Appointing the CEO and monitoring CEO and senior management performance The Board considers all of the current directors, including the Chair, to be independent in that they are not executives of the company and do not have a direct or indirect interest, position, association or relationship that could reasonably influence in a material way, their decisions in relation to Contact. In making this assessment, the Board has considered the factors in the NZX Corporate Governance Code that may affect director independence. In August 2021, Audit and Risk Committee Chair Dame Therese Walsh left the Board to focus on other governance roles and was replaced by experienced director, Sandra Dodds. Sandra brings international infrastructure experience and strong financial skills to complement the expertise of the other directors. • Ensuing appropriate systems to manage risk • Reviewing and approving compliance systems • Overseeing our commitment to our Tikanga, sustainable development, the community and environment, and the health and safety of our people. To assist with succession planning and ensure the appropriate skills and experience are represented on the Board, the Board has developed a director skills matrix. The matrix shows the areas in which the Board considers director capability is required to enable Contact’s success, and the expertise held by current directors. In 2021, the Board commissioned Korn Ferry to undertake a full review and refresh of the director skills matrix. This financial year, the matrix has been further updated to reflect the directors’ assessment of the current skills held by the Board. It’s not expected that every director will be an expert in every area, but all skills in the matrix should be represented on the Board as a whole. The matrix shows a good spread of expertise and secondary skills among current directors. In addition to the skills in the matrix, all seven Contact directors have strong governance expertise. Board performance We recognise the value of professional development and the need for directors to remain current in industry and corporate governance matters. Contact assists directors with their professional development in a number of ways, including an induction programme for new directors, briefings to upskill the Board on new developments, deep-dive workshops on key issues and Board study tours. A fund is available for director development opportunities, and the Chair may approve allocations from the fund for opportunities that benefit both Contact and an individual director. We regularly review the performance of the Board to ensure the Board as a whole, and individual directors, perform to a high standard. A full independent Board performance review was carried out by Propero Consulting in early 2022. The results were reported in confidence to the Board in April 2022. The Board was pleased with the findings of the review and has developed an action plan to implement recommendations arising from it. Contact INTEGRATED REPORT 2022Governance matters Director skills matrix Strategic Focus Director Expertise Governance Capabilities Primary Secondary Brand value and customer experience Brand identity and value. Deep customer insight and advocacy including in energy poverty. Understands generational shift and the impact on customer drivers. Retail growth and transformation expertise including customer-centric experience design, data analytics, digital marketing, sales, and agile retail. Skills to support and challenge progress towards improving the customer experience and reducing cost to serve. Energy sector including generation, renewables, and wholesale energy markets Leadership experience across the energy sector including in a generation portfolio of geothermal, hydro and thermal, energy markets, supply/demand and commercial and industrial customers. Core understanding of key drivers in value creation and prediction of market needs, moving towards a sustainable renewable energy business model. Operational risk management including health and safety. Asset infrastructure Portfolio efficiency Capital markets, investment community and ESG Government and regulation Experience successfully leading energy sector or adjacent companies (e.g. physical infrastructure, new technologies, engineering and construction), large-scale projects, investment and management. Skills to support and challenge in project investment, build and industrial maintenance. Expertise in cost base reduction and increasing flexibility of an asset portfolio with sustainability at the forefront. Proven track record in cost out, improving reliability and resource utilisation while maintaining safety. Ideally experience in process improvement in resource environments. Significant investment community experience. This spans finance, communications and securities law to enable the most effective two-way understanding of, and communication between, the company and the financial community, contributing to fair valuation and ability to gain buy-in for future strategic shifts. Experienced in sustainable investing and with the ESG data toolkit for identifying risks, informing solutions and impacting valuations, brand value and reputation. Ability to engage effectively and collaboratively with key government stakeholders. Brings an understanding of legal, policy, and regulatory environments that Contact operates in. Insight into non-financial risks around climate change, natural resources scarcity, pollution/waste and ecological opportunities. Iwi connection and relationships Iwi connection and relationships to develop shared understanding of kaitiakitanga and collaborative investment into resources. Executive experience Financial expertise IT, digital and new technologies Former CEO or C-suite executive with excellent track record of growing value, leading with purpose, strategy development and execution, including investing in people, leadership of culture, and effective delegation. Experience in international markets. Finance and accounting experience of large companies including transformation and cost optimisation. Expertise in M&A, project financing and/or wholesale commodity markets. The skills to chair the Audit and Risk Committee. Contemporary digital ecosystem platforms and systems to support lean operations, automation, security management and customer innovation. Skills to support and challenge in capital investment plans, technology-enabled operational efficiencies and service improvements. Strong exposure to trends in new energy technologies, cleantech and new products that support decarbonisation including the developments in transmission and changing nature of the ‘energy corridor’. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 65 Contact INTEGRATED REPORT 2022Governance matters Board committees The Board has four committees to perform work and provide specialist advice in certain areas. Our Board works to the principle that committees should enhance effectiveness in key areas, while still retaining Board responsibility. The Audit and Risk Committee helps the Board fulfil its responsibilities relating to Contact’s external financial reporting, internal control environment, business assurance and external audit functions, and risk management. The Safety and Sustainability Committee supports the Board in relation to health, safety and wellbeing (HSW) objectives and monitoring HSW performance, and provides governance oversight of ESG matters. The People Committee advises and supports the Board in fulfilling its responsibilities across all aspects of Contact’s people and capability strategies, risks, policies and practices. The Development Committee advises and supports the Board in relation to Contact’s development pipeline, growth opportunities and major project delivery. Contact does not have a Nominations Committee. Instead, this responsibility is held by the full Board. This reflects the importance all directors place on ensuring the Board is performing well and has the necessary skills. The current members of the committees are: Committee Members Audit and Risk Safety and Sustainability People Development Sandra Dodds (Chair) Victoria Crone Rukumoana Schaafhausen Elena Trout (Chair) David Smol Rukumoana Schaafhausen Jon Macdonald (Chair) Robert McDonald Sandra Dodds David Smol (Chair) Elena Trout Jon Macdonald Code of Conduct and policies We expect all of our people to act honestly, with integrity, in Contact’s best interests and in accordance with the law, all the time. This expectation, along with our Tikanga, is enshrined in our Code of Conduct, which underpins our corporate policy framework. Our corporate policies address key risks and set expected standards of behaviour for our people. Information about how our key policies operate is in our Corporate Governance Statement and the policies themselves are on our website. We have a Protected Disclosure (Whistleblowing) Policy which offers protections for employees who disclose serious wrongdoing in accordance with the process in the policy. Our whistleblower hotline has been replaced with an online portal to help ensure we’re aware of any breaches of the Code of Conduct, our policies or any other illegal or unethical activity. The portal is easily accessible and user friendly – anyone at Contact who is concerned about any incident or behaviour can use the whistleblower portal to report that matter, anonymously if they choose. Any whistleblower disclosures are reported to the General Counsel and CEO and where appropriate, the Chair of the Board to investigate and take appropriate action. During FY22, we published our second Modern Slavery Statement, which sets out the steps we have taken to identify, manage and mitigate the specific risks of modern slavery in our operations and supply chain. We also have a Supplier Code of Conduct, which outlines the behaviours we expect from suppliers, particularly regarding ethical, social and environmental business practices. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 66 Approving strategic direction, monitoring of performance Board Governance structures, policies and objectives, identification of significant risk Strategic Direction Risk Capacity & Tolerance Monitor the environment, respond to stakeholder material issues, anticipate long-term threats and opportunity Risk management and assurance Risk management Our risk management framework enables the Board to set an appropriate risk strategy and ensure that risk is managed throughout the organisation. The framework ensures we have appropriate systems in place to identify material risks and that, where applicable, the Board sets appropriate tolerance limits. We assign responsibility to individuals to manage identified risks and we monitor any material change to Contact’s risk profile. Contact INTEGRATED REPORT 2022Governance matters Contact’s enterprise risk management framework is supported by a range of systems and tools that help assess and report all risk types including environmental, social and governance risks across the organisation. The Contact26 strategy has a strong focus on ESG commitments to create long-term value. A wide range of risks and environmental factors are considered by the Board during the strategy setting process including various climate-related analyses performed by the team to support stronger climate action practices in our decision-making. Our corporate governance model is vertically integrated to ensure an appropriate level of support and oversight of our key climate-related risks. • The full Board considers a wide range of risks (including economic, environment, social and governance risks) when reviewing the business strategy alongside a market update. The reports our teams produce ensure the Board understand the key risks and issues (such as climate change) that contribute to their decision-making. • Top risks are reported to the Board Assurance and Risk Committee on a quarterly basis, reviewed with the full Board, and are actively monitored by the Leadership Team. • The Board Safety and Sustainability Committee have formal oversight of climate-related issues and regularly review all ESG risks across Contact. • Risks rated high and above are regularly monitored for active management by the leadership team. • There is regular engagement with stakeholders (including local communities and tangata whenua in an area of growth as we aim to maintain our positive relationships) to assess and communicate the impacts of the changing environment. • People at all levels of the organisation are encouraged to identify and manage potential risks to Contact. There were no significant instances of non- compliance with laws and regulations, no fines were paid during the reporting period and there were no critical concerns. The integrated nature of our operations means that climate-related risks are regularly assessed as part of our strategic, operational and emerging risk assessments. Mitigation plans for material risks are implemented to proactively manage the impact to Contact. Auditors We recognise that the role of our external auditor is critical for the integrity of our financial reporting. KPMG has been our external auditor since 2005. The Audit and Risk Committee ensures that the audit partner is changed at least every five years. Following a formal request for proposal process, Contact has elected to appoint Ernst & Young as the Group’s new external auditor for the financial year commencing 1 July 2022. The change of auditor reflects Contact taking a governance leadership stance, applying best practice and developments in overseas regulation around external auditor rotation. Our External Audit Independence Policy sets out the framework we use to ensure the independence of our external auditors is maintained and their ability to carry out their statutory audit role is not impaired. Under this policy, the external auditor may not do any work for Contact that compromises, or is seen to compromise, the independence and objectivity of the external audit process. In addition, the external auditor confirms its continuing independent status to the Board every six months. The Chair of the Audit and Risk Committee approved KPMG to perform additional engagements this year including assuring our green borrowing programme, greenhouse gas emissions and Global Reporting Index (GRI) indicators. Representatives from the external auditor KPMG attend Contact’s annual shareholder meeting, where they’re available to answer shareholders’ questions relating to the audit. Board and Board Committees are provided with ESG analysis and reporting The Leadership Team review all management materials and address mitigation plans for key risks Management and staff across the business regularly assess, review, analyse, monitor and report on all risks (including ESG-related risks) within integrated governance structures to ensure Contact takes a proactive approach to mitigate risk impacts Assurance Our business assurance team fulfils our internal audit function and provides objective assurance of the effectiveness of our internal control framework. The team is based in-house, and draws on external expertise where required. The team brings a disciplined approach to evaluating and improving the effectiveness of risk management, internal controls and governance processes. We use a risk-based assurance approach driven by our risk management framework. The team also assists external audits by making findings from the internal assurance process available for the external auditor to consider when providing their opinion on the financial statements. The team has unrestricted access to all other departments, records and systems of Contact, and to the external auditor and other third parties as it deems necessary. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 67 Contact INTEGRATED REPORT 2022Governance matters Remuneration report Dear fellow shareholders I am pleased to present Contact’s remuneration report for FY22 on behalf of the Board’s People Committee. FY22 financial results and remuneration Contact has delivered a solid financial result for shareholders this year with profit of $182 million, EBITDAF1 of $537 million, and operating free cash flow1 of $325 million. Operating costs and capital expenditure have been managed well, while contending with inflationary pressures and supply constraints. Our discretionary short-term incentive pool reflects Contact’s performance in FY22 and any payments under these arrangements to eligible participants will be made in September 2022. Given the company’s performance over the past year, we consider executive remuneration is appropriate. We are committed to paying appropriate market rates for all roles, and making sure people are rewarded for their performance and experience. A detailed overview of current employee remuneration is set out in Employee remuneration. The Contact team has proven resilient and flexible through further changes in Covid-19 alert levels and restrictions in FY22, ensuring minimal business disruption. We know our people are key to our success and we are continuously looking for ways to improve as part of our commitment to being a good employer. We have made good progress and we look forward to continuing to make progress through FY23 and beyond. You can read more about our overall employee proposition in Transformative ways of working. Jon Macdonald Chair, People Committee 1 EBITDAF and operating free cash flow are non-GAAP (generally accepted accounting practice) measures. Information regarding the usefulness, calculation and reconciliation of these measures is provided within note A2 to the financial statements. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 68 Contact INTEGRATED REPORT 2022Governance matters Details of the total remuneration paid to each Contact director for FY22 are as follows: Audit and Risk Committee Safety and Sustainability Committee People Committee Development Committee Total Remuneration Directors Board fees Robert McDonald $290,000 $290,000 $163,250 $166,458 Victoria Crone $140,000 $23,250 Sandra Dodds** $116,667 $38,750 $11,042 Jon Macdonald $140,000 $26,500 $13,250 $179,750 Rukumoana Schaafhausen David Smol Elena Trout $140,000 $23,250 $13,250 $176,500 $140,000 $140,000 $13,250 $26,500 $26,500 $179,750 $13,250 $179,750 Dame Therese Walsh* $23,333 $7,750 $2,208 $33,292 Total $1,130,000 $93,000 $53,000 $39,750 $53,000 $1,368,750 * Dame Therese Walsh resigned from the Board on 31 August 2021. ** Sandra Dodds joined the Board on 1 September 2021 and replaced Dame Therese Walsh as Chair of the Audit and Risk Committee and Member of the People Committee. Directors’ remuneration The total directors’ fee pool is $1,500,000 per year. It has not been increased since it was approved by shareholders in 2008. Actual fees paid to directors are determined by the Board on the recommendation of the People Committee. Between FY21 and FY22, fees for Board and Committee fees increased by around 2 percent, with a bigger increase for the Development Committee to bring it in line with the other Committees. Directors' fees exclude GST, where appropriate. In addition, Board members are reimbursed for costs directly associated with carrying out their duties, such as travel costs. Contact employees appointed as directors of Contact subsidiaries do not receive any director fees. Chris Seel was a non-executive director of Simply Energy Limited and was paid $18,000 in director fees during FY22. Chris resigned from the Simply Board on 11 March 2022. Dane Coppell is a non-executive director of Western Energy Services Limited and was paid $24,000 in director fees during FY22. FY22 Chair per annum Member per annum Board of Directors $290,000* $140,000 Audit and Risk Committee Safety and Sustainability Committee $46,500 $23,250 $26,500 $13,250 People Committee $26,500 $13,250 Development Committee $26,500 $13,250 * No additional fees are paid to the Board Chair for committee roles. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 69 Contact INTEGRATED REPORT 2022Governance matters Contact employee remuneration We’re committed to paying appropriate market rates for all our roles, and ensuring our people are rewarded for their performance and experience. There are three parts to employee remuneration – fixed remuneration, variable remuneration, and other benefits. These combine to attract, reward and retain high-performing employees. In 2021, Contact amended its remuneration framework so that only our senior people remained eligible for any variable component of remuneration, e.g. STI, LTI. Our people below senior management were provided with a commensurate increase to their fixed remuneration. In FY22, Contact has 48 people with a component of cash STI variable remuneration. Fixed remuneration Fixed remuneration is based on the role responsibilities, individual performance and experience, and current market remuneration data. Contact targets fixed remuneration at the median of the market range. Variable remuneration Variable remuneration recognises and rewards high-performing senior employees and comprises short-term incentives (cash and deferred share rights) and long-term incentives (performance share rights). Short-term incentives (STI) STIs are designed to recognise and reward high performance with cash incentives and deferred share rights through Contact’s equity scheme for some higher-level roles and key talent. STIs have a maximum potential level set reflecting the person’s role grade, and are based on performance measured against key performance indicators (KPIs), which consist of company and individual objectives. The Board reserves the right to adjust STI awards if necessary. Long-term incentives (LTI) Contact provides awards of performance share rights through Contact’s equity scheme to our senior people and key talent. This aims to encourage and reward longer-term decision-making and align participants’ interests with Contact’s shareholders. These are subject to performance hurdles. Equity scheme At 30 June 2022 there were 88 participants in Contact’s equity scheme. For further details on the equity scheme and the number of performance share rights and deferred share rights granted, exercised, lapsed and on issue at the end of the reporting period, see note E10 of the financial statements. Other benefits We know that rewards mean more than just money, so we offer our people a range of other benefits too. Some of these have eligibility criteria and include: discounts for home energy and broadband; employer-subsidised health insurance; an employee share ownership plan called ‘Contact Share’ (see note E11 in financial statements for more detail); and additional benefits and offers from retailers and service providers. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 70 Contact INTEGRATED REPORT 2022Governance matters Chief Executive Officer and Executive Team remuneration structure The CEO and Executive Team remuneration is reviewed by our Board each year. The Board works closely with and is advised by Contact’s People Committee. The remuneration reflects the complexity of the roles and the wide-ranging skills needed to do them well. We also consider market remuneration data benchmarks, look at the achievement of performance goals and factor in creating long- term sustainable shareholder value. The total remuneration is made up of a fixed remuneration component, which includes cash salary and other employment benefits, and variable remuneration containing short-term incentives (cash and equity awarded through deferred share rights) and long-term incentives (equity awarded through performance share rights). The CEO and Executive Team variable remuneration is structured as follows: Scheme Description Performance measures Cash STI Cash STI is a discretionary scheme based on achievement of KPIs. Equity STI (awarded as deferred share rights) Equity LTI (awarded as performance share rights) Equity STI allows the participant to acquire shares at a $0 exercise price subject to a tenure hurdle. Equity LTI allows the participant to acquire shares at a $0 exercise price subject to the exercise hurdle being achieved. 70% based on corporate shared KPIs: • 40% financial results (operating free cash flow1, EBITDAF1, OPEX) • 15% safety targets • 30% strategy delivery and key operational milestone targets • 15% transformation targets 30% based on individual KPIs. Executive Team individual KPIs are a mix of shared objectives and goals specific to each individual. The CEO individual KPIs for the year ending 30 June 2022 including leadership performance of Contact's key strategic initiatives, leadership of the executive team and stakeholder engagement. The participant’s performance rating influences the Equity STI awarded by the Board. The exercise hurdle to receive these is to remain employed by Contact 2 years from the grant date. The exercise hurdles to receive these are: • 50% Contact’s relative total shareholder return (TSR) ranking within an energy industry peer group of other New Zealand NZX50 listed utilities companies. • 50% internal hurdle related to our strategic priority of decarbonisation. For the issue in FY22 this included renewable generation development, stimulation of the transition of fossil fuel usage to electricity, and the delivery of our Tauhara power station. Tested once, at year 3. Potential Executive Team maximum potential 35% of base salary. CEO maximum potential 50% of base salary. Executive Team maximum potential 30% of base salary. CEO maximum potential 30% of base salary. Executive Team set at 20% of base salary. CEO set at 35% of base salary. 1 EBITDAF and operating free cash flow are non-GAAP (generally accepted accounting practice) measures. Information regarding the usefulness, calculation and reconciliation of these measures is provided within note A2 to the financial statements. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 71 Contact INTEGRATED REPORT 2022Governance matters CEO remuneration The following table details the nature and amount of remuneration paid to Mike Fuge for his time as CEO during the year. The structure of the CEO remuneration is detailed on the previous page. The scenario chart below demonstrates the elements of Mike Fuge’s CEO remuneration design for FY22. CEO remuneration for the period ended 30 June 2022 Position Fixed remuneration Pay-for-performance remuneration Salary paid $ Benefits $ Subtotal $ Cash STI $ Equity STI $ Equity LTI $ Subtotal $ Total remuneration $ FY22 1,150,000 48,7131 1,198,713 329,5902 197,8003 402,5004 929,890 2,128,603 Five-year CEO remuneration summary Total remuneration paid5 Percentage Cash STI awarded against maximum Percentage vested Equity STI against maximum Span of Equity STI performance period Percentage vested Equity LTI against maximum Span of Equity LTI performance period 0% 0% 0% n/a n/a n/a 0% 0% 0% n/a n/a n/a Financial year Mike Fuge FY22 FY21 FY206 $2,128,603 $2,280,840 $669,641 Dennis Barnes FY207 $995,566 FY19 $1,787,816 FY18 $3,031,608 57% 75% 40% 32% 78% 55% Equity LTI Equity STI Cash STI Base salary & benefits $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Maximum potential remuneration On-plan remuneration Fixed remuneration 1 Benefits include 3% KiwiSaver contribution calculated on remuneration amounts including cash STI, and health insurance. 100% 2017–2019 2018–2019 2015 Options/PSR 89.54% 2016 Options/PSR 50% 2015–2020 2016–2020 2 STI for FY22 period 57% of maximum potential, paid in FY23 (September 2022). 100% 2016–2018 2013 Options 100%8 2014 Options 100% 2013–2018 2014–2019 3 Equity STI, 57% of maximum potential, based on fair value allocation. To be granted 1 October 2022 and tested October 2024. 100% 2015–2017 0% n/a 4 Equity LTI is based on fair value allocation. To be granted 1 October 2022 and tested October 2025. 5 Total remuneration paid includes salary, benefits, Cash STI, and value of STI and LTI Equity (paid in shares). Five-year summary TSR9 performance graph Company NZX50 Peer group10 6 24 February 2020 – 30 June 2020 40% 30% 20% 10% 0% -10% 30 June 2018 30 June 2019 30 June 2020 30 June 2021 30 June 2022 6.01% 2.75% -8.05% 7 1 July 2019 – 28 February 2020 8 100% of STI and LTI Equity vested as a result of Origin selling its shareholding in Contact triggering vesting of equity due to the change of control. 9 TSR calculated using the volume-weighted average price for the 3 months prior to year end. 10 Peer group is a simple average of Meridian, Genesis, Mercury, Vector and Trustpower, with Trustpower only in the group from FY18. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 72 Contact INTEGRATED REPORT 2022Governance matters Group1 employees who earn over $100k The table shows the number of our people (including any who have left) who received remuneration and other benefits during FY22 of at least $100,000 for the year ended 30 June 2022. The value of remuneration benefits analysed includes: • fixed remuneration including allowance/overtime payments • employer superannuation contributions • short-term cash incentives relating to FY21 performance but paid in FY22 (Contact and Simply Energy) • the value of equity-based incentives at fair value allocation received during FY22 (Contact) • the value of Contact Share received during FY22 (Contact) • redundancy and other payments made on termination of employment. The figures do not include amounts paid after 30 June 2022 that relate to the year ended 30 June 2022 or the remuneration (and any other benefits) of the Contact CEO, Mike Fuge, as this is disclosed in CEO remuneration. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 73 1 Excludes Drylandcarbon and Forest Partners. Table of employees who earn over $100k Remuneration band Number of employees Remuneration band Number of employees $100,001–$110,000 $110,001–$120,000 $120,001–$130,000 $130,001–$140,000 $140,001–$150,000 $150,001–$160,000 $160,001–$170,000 $170,001–$180,000 $180,001–$190,000 $190,001–$200,000 $200,001–$210,000 $210,001–$220,000 $220,001–$230,000 $230,001–$240,000 $240,001–$250,000 $250,001–$260,000 $260,001–$270,000 $270,001–$280,000 $280,001–$290,000 $290,001–$300,000 $300,001–$310,000 $310,001–$320,000 $320,001–$330,000 $330,001–$340,000 $360,001–$370,000 $370,001–$380,000 $390,001–$400,000 $400,001–$410,000 $420,001–$430,000 $430,001–$440,000 $450,001–$460,000 $460,001–$470,000 $510,001–$520,000 $540,001–$550,000 $550,001–$560,000 $560,001–$570,000 $580,001–$590,000 $620,001–$630,000 $630,001–$640,000 $660,001–$670,000 $670,001–$680,000 $720,001–$730,000 $800,001–$810,000 $830,001–$840,000 $940,001–$950,000 $1,170,001–$1,180,000 2 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Grand Total 571* * Includes 42 former employees across the group (excluding Drylandcarbon and Forest Partners). 47 51 52 56 55 52 46 36 27 12 13 9 16 13 11 15 4 10 3 2 4 3 2 1 4 1 2 3 2 Contact INTEGRATED REPORT 2022Governance matters Gender pay reporting Contact's pay reporting Contact's commitment One of the principles of our Tikanga (our moral compass) is to put our energy into things that matter. Being inclusive, encouraging diversity and expressions of ideas and opinions is a key focus of that. We are committed to building a workforce that reflects, and is inclusive of, the diverse communities of Aotearoa. Understanding our pay reporting Pay reporting is broadly defined as: Gender parity – is when men and women are equally represented at all levels at Contact. Gender pay gap – is the gap between the pay of women and the pay of men. Pay gap calculation: average male hourly rate – average female hourly rate average male hourly rate Closing the gender pay gap typically relies on addressing all of these elements. Pay equity (equal pay for equal work) will typically not close the overall gender gap especially if genders are not equally represented at each level of the organisation. Gender pay equity – is equal pay for equal work – that is people undertaking the same work (i.e. roles requiring a similar level of skills, knowledge, and accountabilities) being paid the same regardless of gender. (Note, Equal pay is a legal requirement in New Zealand. We have processes and monitoring in place to ensure our people are treated and paid fairly, meeting both our legal and moral obligations.) Pay equity calculation: average female (fixed remuneration/midpoint of salary range) average male (fixed remuneration/midpoint of salary range) CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 74 We recognise and respect that gender is not binary. For this reporting we have calculated our gender pay equity and pay gap only as the difference between those who identify as Woman and Men (around 1.5% of our people identify as gender diverse). Contact's average pay gap is 32.7% (median 50.2%). There are two key drivers of our gender pay gap. The first being a higher proportion of our women in our customer channels and secondly a lower proportion of woman in highly skilled energy roles. Closing our gaps requires us to improve the gender balance with these areas. Contact's pay equity sits at 95.2%. We assess all roles at Contact based on the skills, capability and experience required for the role. We then use market data to apply an appropriate remuneration range for each role. Roles are then grouped into pay bands, which cluster similar sized roles together. The bands contain different roles that may be filled by people with a range of experience. This can include people recently promoted into higher roles or bands, and who sit at the lower end of the range. Each year, as part of our annual salary review we review all our data to ensure that we are maintaining our commitment to gender pay equity, and make adjustments if required. We remain committed to achieving more balance of gender across all levels at Contact. We’re implementing a number of initiatives to drive improvement, including external partners to improve female participation in some historically male dominated fields, applying gender recruitment targets where appropriate to increase the representation of women, and a continued focus to promote women internally into more senior level roles. We recognise that these activities will take time to have an impact. Additional Contact remuneration disclosures • CEO-to-employee pay ratio, 29:1. The ratio between the total annual compensation of the CEO and the median employee compensation. • Contact does not implement any clawback practices on employee remuneration other than in situations permitted by Aotearoa New Zealand legislation (e.g. for correction of overpayments). • Contact has remediated underpayments to our current and ex-employees following a review of how we applied the regulations in the Holidays Act 2003. • Contact does not have a share ownership requirement for the CEO or Executive Team. • The notice period for Mike Fuge in his role as CEO is six months. Career Level Executive Strategic Senior Management Operational Management/National Specialist Team Leader/Technical Specialist Team Member Overall % Women population % Men population Pay Equity Pay Gap 0.2% 1.0% 4.5% 15.2% 25.8% 46.6% 0.8% 3.0% 9.0% 32.8% 7.8% 53.4% N/A 96.9% 96.3% 97.2% 100.9% 95.2% 12.1% 3.1% 7.9% 13.5% 1.6% 32.7% Contact INTEGRATED REPORT 2022Governance matters Additional disclosures CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 75 Contact INTEGRATED REPORT 2022Additional disclosures Statutory disclosures Disclosures of interests by directors The table below lists the general disclosures of interest by directors of Contact Energy Limited as at 30 June 2022 in accordance with section 140 of the Companies Act 1993. Robert McDonald University of Auckland Council University of Auckland Business School Advisory Board Fletcher Building Limited AIA Limited Chartered Accountants Australia & New Zealand Victoria Crone Statistics New Zealand Callaghan Innovation* Figure.NZ ASB Bank Limited Variety – the Children’s Charity *Resigned effective 15 July 2022 Sandra Dodds Beca Group Limited Member Chair Director Director Director Chair Chief Executive Officer Chair Director Chair Director Snowy Hydro Limited (Australian Government owned entity) Director OceanaGold Limited (listed TSX & ASX) Director Jon Macdonald Sharesies Limited and various subsidiaries Director Titan Parent New Zealand Limited (Parent company of Trade Me Ltd). Director Mitre 10 (New Zealand) Ltd and various subsidiaries My Food Bag Group Limited Summer of Technology Limited Director Director Director Rukumoana Schaafhausen Alvarium Investments (NZ) Limited Three Waters National Transition Unit Board AgResearch Limited KGS Limited Director Board Member Director Chair Te Waharoa Investments Limited Managing Director Miro (Hautupua) Limited Water Governance Board, Waikato District Council Tindall Foundation Princes Trust NZ Equippers Church Trust David Smol New Zealand Growth Capital Partners Limited Department of Internal Affairs’ External Advisory Committee Ministry of Social Development’s Risk and Audit Committee Chair Director Trustee Trustee Trustee Chair Chair Chair New Zealand Transport Agency Board Member GeoNet Advisory Panel The Co-operative Bank Limited Victoria Link Limited Elena Trout Te Rāhui Herenga Waka Whakatāne Limited Citycare Limited Hāpaitia Limited Ara Ake Limited Waihanga Ara Rau Construction and Infrastructure Workforce Development Council Callaghan Innovation Chair Director Chair Independent Director Independent Director Director Director Co-Chair Director Ngāpuhi Asset Holding Company Limited and various subsidiaries Director Joint NZ Defence Force and Ministry of Defence Capability Governance Board (CGB) External Member Energy Efficiency and Conservation Authority (EECA) Chair Harrison Grierson Holdings Limited and various subsidiaries Director Motiti Investments Limited Director CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 76 Contact INTEGRATED REPORT 2022Additional disclosures Information used by Directors No director issued a notice requesting to use information received in his or her capacity as a director that would not otherwise be available to the director. Indemnity and insurance In accordance with section 162 of the Companies Act 1993 and the constitution of the company, Contact has continued to indemnify and insure its directors and officers, including directors of subsidiaries, against potential liability or costs incurred in any proceeding, except to the extent prohibited by law. Directors’ security participation The Contact Board has determined that directors should hold a minimum of 20,000 Contact shares within three years of appointment to further align the interests of directors with the interests of shareholders. Securities of the company in which each director has a relevant interest at 30 June 2022 Director Ordinary shares Bonds Capital Bonds Robert McDonald Victoria Crone* Sandra Dodds Jon Macdonald Rukumoana Schaafhausen David Smol Elena Trout 34,602 21,860 15,170 23,930 – 21,201 21,978 35,000 Jon Macdonald 20,000 * In addition, Victoria Crone has an interest in 4,401 ordinary shares as a trustee of a family trust. David Smol 15/9/21 30/3/22 Elena Trout 15/9/21 30/3/22 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 77 Securities dealings of directors During the year, Contact directors acquired a relevant interest in securities as follows. Consideration per share/bond is stated in NZD unless otherwise specified. Director Date of acquisition Nature of transaction Victoria Crone 30/3/22 Sandra Dodds 12/11/21 30/3/22 21/6/22 15/9/21 19/11/22 30/3/22 Consideration per share/ bond Number of shares/ bonds acquired $7.8750 327 AUD$7.710350 10,000 $7.8750 170 AUD$6.500000 5,000 $8.1127 503 $1.00 20,000 $7.8750 359 $8.1127 380 $7.8750 271 $8.1127 462 $7.8750 330 Acquisition of ordinary shares under DRP On-market purchase of ordinary shares Acquisition of ordinary shares under DRP On-market purchase of ordinary shares Acquisition of ordinary shares under DRP Acquisition of Capital Bonds (CEN060) upon allotment Acquisition of ordinary shares under DRP Acquisition of ordinary shares under DRP Acquisition of ordinary shares under DRP Acquisition of ordinary shares under DRP Acquisition of ordinary shares under DRP Contact INTEGRATED REPORT 2022Additional disclosures Shareholder statistics Twenty largest shareholders at 30 June 2022 Number of ordinary shares % of ordinary shares National Nominees New Zealand Limited HSBC Nominees (New Zealand) Limited Citibank Nominees (Nz) Ltd HSBC Nominees (New Zealand) Limited Custodial Services Limited JPMORGAN Chase Bank Accident Compensation Corporation FNZ Custodians Limited Bnp Paribas Nominees NZ Limited Bpss40 New Zealand Superannuation Fund Nominees Limited JBWERE (Nz) Nominees Limited Forsyth Barr Custodians Limited Tea Custodians Limited New Zealand Depository Nominee Premier Nominees Limited New Zealand Permanent Trustees Limited Cogent Nominees Limited J P Morgan Nominees Australia Pty Limited Private Nominees Limited Bnp Paribas Nominees NZ Limited 66,016,208 54,804,047 53,010,232 51,426,514 51,081,577 40,971,392 30,455,807 28,570,447 26,445,282 22,075,119 18,946,648 18,811,091 15,161,019 12,079,808 11,113,172 9,558,863 9,398,708 8,142,487 7,991,457 7,082,957 8.46 7.02 6.79 6.59 6.54 5.25 3.9 3.66 3.39 2.83 2.43 2.41 1.94 1.55 1.42 1.22 1.2 1.04 1.02 0.91 Total for top 20 543,142,835 69.57 Distribution of ordinary shares and shareholders at 30 June 2022 Size of holding 1–1,000 1,001–5,000 5,001–10,000 10,001–50,000 50,001–100,000 100,001 and over Number of shareholders % of shareholders Number of ordinary shares % of ordinary shares 27,209 28,217 3,501 2,432 195 117 44.12 17,290,030 45.75 52,170,579 5.68 3.94 0.32 24,670,723 46,793,804 13,573,385 2.21 6.68 3.16 5.99 1.74 0.19 626,139,782 80.21 Total 61,671 100.00 780,638,303 100.00 Substantial product holders According to notices given under the Financial Markets Conduct Act 2013, the following persons were substantial product holders of the company as at 30 June 2022: Substantial product holder Number of ordinary shares in which relevant interest is held Date of notice Milford Asset Management Limited 47,603,648 26 January 2022 The total number of voting securities of Contact at 30 June 2022 was 780,638,303 fully paid ordinary shares. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 78 Contact INTEGRATED REPORT 2022Additional disclosures Bondholder statistics Twenty largest CEN040 bondholders at 30 June 2022 Twenty largest CEN050 bondholders at 30 June 2022 Number of CEN040 bonds % of CEN040 bonds Number of CEN050 bonds % of CEN050 bonds Citibank Nominees (Nz) Ltd Custodial Services Limited FNZ Custodians Limited Bnp Paribas Nominees NZ Limited Bpss40 HSBC Nominees (New Zealand) Limited Cogent Nominees Limited Southern Cross Medical Care Society Forsyth Barr Custodians Limited Private Nominees Limited Tea Custodians Limited Investment Custodial Services Limited NZ Permanent Trustees Ltd Grp Invstmnt Fund No 20 Forsyth Barr Custodians Limited JBWERE (Nz) Nominees Limited Hobson Wealth Custodian Limited FNZ Custodians Limited Forsyth Barr Custodians Limited Xiaofeng Chen FNZ Custodians Limited Dunedin City Council Total for top 20 18,922,000 13,264,000 12,062,000 7,684,000 7,038,000 5,785,000 4,000,000 3,967,000 2,527,000 2,404,000 2,233,000 1,537,000 1,418,000 1,288,000 1,070,000 966,000 936,000 638,000 609,000 600,000 18.92 13.26 12.06 7.68 7.04 5.79 4.00 3.97 2.53 2.4 2.23 1.54 1.42 1.29 1.07 0.97 0.94 0.64 0.61 0.60 Custodial Services Limited FNZ Custodians Limited Bnp Paribas Nominees (Nz) Limited Bnp Paribas Nominees NZ Limited Bpss40 Citibank Nominees (Nz) Ltd HSBC Nominees (New Zealand) Limited Westpac Banking Corporation Forsyth Barr Custodians Limited Cogent Nominees Limited Tea Custodians Limited Forsyth Barr Custodians Limited University Of Otago Foundation Trust JBWERE (Nz) Nominees Limited HSBC Nominees (New Zealand) Limited Investment Custodial Services Limited Mt Nominees Limited Private Nominees Limited NZ Permanent Trustees Ltd Grp Invstmnt Fund No 20 FNZ Custodians Limited Woolf Fisher Trust Inc 22,325,000 11,462,000 10,500,000 6,850,000 4,580,000 4,530,000 3,932,000 3,769,000 3,766,000 3,050,000 2,345,000 1,750,000 1,747,000 1,300,000 1,265,000 1,241,000 1,000,000 998,000 988,000 950,000 22.33 11.46 10.5 6.85 4.58 4.53 3.93 3.77 3.77 3.05 2.35 1.75 1.75 1.30 1.26 1.24 1.00 1.00 0.99 0.95 88,948,000 88.96 Total for top 20 88,348,000 88.36 Distribution of CEN040 bonds and bondholders at 30 June 2022 Distribution of CEN050 bonds and bondholders at 30 June 2022 Size of holding 1,001–5,000 5,001–10,000 10,001–50,000 50,001–100,000 100,001 and over Total Number of bondholders % of bondholders Number of bonds % of bonds Size of holding Number of bondholders % of bondholders Number of bonds % of bonds 33 66 143 13 28 283 11.66 23.32 50.53 4.59 9.89 165,000 631,000 3,762,000 996,000 0.17 0.63 3.76 1.00 1,001–5,000 5,001–10,000 10,001–50,000 50,001–100,000 94,446,000 94.45 100,001 and over 100.00 100,000,000 100.00 Total 6 41 105 20 26 198 3.03 20.71 53.03 10.10 13.13 30,000 401,000 2,765,000 1,496,000 0.03 0.40 2.77 1.50 95,308,000 95.31 100.00 100,000,000 100.00 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 79 Contact INTEGRATED REPORT 2022Additional disclosures Twenty largest CEN060 bondholders at 30 June 2022 Number of CEN060 bonds % of CEN060 bonds Forsyth Barr Custodians Limited JBWERE (Nz) Nominees Limited Custodial Services Limited 53,984,000 33,924,000 31,563,000 New Zealand Permanent Trustees Limited 19,289,000 Hobson Wealth Custodian Limited National Nominees New Zealand Limited FNZ Custodians Limited Forsyth Barr Custodians Limited Tea Custodians Limited Adminis Custodial Nominees Limited Mmc Limited Francis Horton Tuck Bnp Paribas Nominees NZ Limited Bpss40 Investment Custodial Services Limited University Of Otago Foundation Trust Fletcher Building Educational Fund Hobson Wealth Custodian Limited Jml Capital Limited Thomas Hermann Grothe CONTENTS Forsyth Barr Custodians Limited 14,999,000 14,662,000 10,738,000 4,201,000 3,481,000 2,007,000 1,800,000 1,640,000 1,632,000 1,522,000 1,000,000 900,000 809,000 650,000 630,000 418,000 23.99 15.08 14.03 8.57 6.67 6.52 4.77 1.87 1.55 0.89 0.80 0.73 0.73 0.68 0.44 0.40 0.36 0.29 0.28 0.19 Directors of Contact Energy Limited and subsidiaries The following people held office as directors of Contact Energy Limited as at 30 June 2022: Robert McDonald, Victoria Crone, Sandra Dodds, Jon Macdonald, Rukumoana Schaafhausen, David Smol and Elena Trout. Sandra Dodds was appointed in September 2021 and Dame Therese Walsh left the Board in August 2021. The below table lists the subsidiaries of Contact Energy Limited and the people who held office as directors as at 30 June 2022. Company name Directors Further information Simply Energy Limited Dorian Devers Murray Dyer James Flannery Jacqui Nelson Stephen Peterson Western Energy Services Limited Contact Energy Risk Limited Dane Coppell Dorian Devers Michael Dunstall Jacqui Nelson Antony Balfour Will Dorian Devers Mike Fuge Jacqui Nelson was appointed effective 19 October 2021. James Flannery was appointed effective 27 April 2022. Christopher Seel ceased being a director on 11 March 2022. Catherine Thompson ceased being a director on 19 October 2021. James Kilty ceased being a director on 26 July 2021. Jacqui Nelson was appointed effective 19 October 2021. Catherine Thompson ceased being a director on 19 October 2021. James Kilty ceased being a director on 29 July 2021. Contact Energy Risk Limited was duly incorporated on 18 May 2022 as an international company with its registered office in the Cook Islands. FY22 SUMMARY Total for top 20 199,849,000 88.84 NZX waivers WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 80 Distribution of CEN060 bonds and bondholders at 30 June 2022 Size of holding 1,001–5,000 5,001–10,000 10,001–50,000 50,001–100,000 100,001 and over Total Number of bondholders % of bondholders Number of bonds % of bonds 78 228 381 50 55 792 9.85 28.79 48.11 6.31 6.94 390,000 2,236,000 9,742,000 4,082,000 0.17 0.99 4.33 1.81 208,550,000 92.69 100.00 225,000,000 100.00 There were no waivers granted by NZX or relied on by Contact in the 12 months preceding 30 June 2022. Stock exchange listings Contact’s ordinary shares are listed and quoted on the NZX Main Board and the Australian Securities Exchange (ASX) under the company code ‘CEN’. Contact has two tranches of green retail bonds listed and quoted on the NZX Debt Market under the company codes ‘CEN040’ and ‘CEN050’, and one tranche of green capital bonds listed and quoted on the NZX Debt Market under the company code ‘CEN060’. Contact’s listing on the ASX is as a Foreign Exempt Listing. For the purposes of ASX listing rule 1.15.3, Contact confirms that it continues to comply with the NZX listing rules. Contact INTEGRATED REPORT 2022Additional disclosures Exercise of NZX disciplinary powers NZX did not exercise any of its powers under Listing Rule 9.9.3 in relation to Contact during FY22. Auditor fees KPMG has continued to act as auditors of the company. The amount payable by Contact and its subsidiaries to KPMG as audit fees in respect of FY22 was $568,000. The fees for other services undertaken by KPMG during FY22 totalled $100,500. These related to other assurance activities: reasonable assurance reviews of Contact’s green borrowing programme and greenhouse gas emissions reporting, and a limited assurance review of Contact’s GRI reporting. Donations In accordance with section 211(1)(h) of the Companies Act 1993, Contact records that it donated $199,688 in FY22 including charitable donations, and where we have given a koha. Donations are made on the basis that the recipient is not obliged to provide any service such as promoting Contact’s brand and are separate from Contact’s sponsorship activity. No political contributions were made during the year. Contact spent $714,054 in the community and supported 111 initiatives through sponsorship, donations and partnerships. Our people spent 474 hours volunteering with 17 organisations in their communities. Credit rating Contact Energy Limited has a Standard & Poor's long-term credit rating of BBB/stable and short term rating of A-2. The $100 million unsubordinated, unsecured fixed rate bonds issued in February 2017 are rated BBB by Standard & Poor's. The $100 million unsubordinated, unsecured fixed rate bonds issued in March 2019 are rated BBB by Standard & Poor's. The $225 million subordinated, unsecured, redeemable, fixed rate capital bonds issued in November 2021 are rated BB+ by Standard & Poor’s. Sustainability disclosures All sustainability disclosures are for 1 July 2021 to 30 June 2022 unless stated otherwise. Reported data is for Contact only unless stated otherwise. Scope 1 emissions Contact, Simply Energy and Western Energy All emissions reported are for Contact, Simply Energy and Western Energy. Emissions from Drylandcarbon and Forest Partners are not reported, however are considered minimal. Emissions (tCO2e) Thermal Generation Emission Intensity (tCO2e per MWh) Total Generation Emission Intensity (tCO2e per MWh) FY22 FY21 FY22 FY21 FY22 FY21 Fuel used for thermal generation Fuel used for geothermal generation Total fuel used for generation Fuel used in vehicles Fugitive emissions – SF6 604,929 866,013 181,615 178,524 786,544 1,044,537 0.578 0.544 0.095 0.124 297 178 1 29 Total Scope 1 786,842 1,044,744 Scope 2 emissions Contact, Simply Energy and Western Energy FY22 tCO2e FY21 tCO2e Contact – electricity consumption 1,394 1,300 Simply Energy – electricity consumption Western Energy – electricity consumption Total Scope 2 3 2 3 N/A 1,399 1,303 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 81 Contact INTEGRATED REPORT 2022Additional disclosures Scope 3 emissions Contact, Simply Energy and Western Energy External commitments Purchased goods and services Capital goods FY22 tCO2e FY21 tCO2e 6,371 57,876 16,699 41,726 Fuel- and energy-related activities 149,743 330,207 Upstream distribution and transportation Waste Business travel Employee commuting Use of sold products Downstream leased assets Total Scope 3 444 108 567 832 27 149 263 306 178,554 165,259 289 399 394,784 555,035 Total Scope 1, 2 & 3 emissions Contact, Simply Energy and Western Energy Total emissions Total solid waste disposed Total waste generated (metric tonnes) Total waste used/recycled/ sold (metric tonnes) FY22 tCO2e FY21 tCO2e 1,183,025 1,601,082 FY22 91.7 FY21 132.0 FY20 108.6 FY19 126.1 0.7 6.0 3.6 3.4 We do not track used/recycled/sold waste for all our sites of operation, figures indicate recycled waste where tracked. Direct mercury emissions Direct mercury emissions (metric tonnes) FY22 0.202 FY21 0.079 FY20 0.174 FY19 0.303 Organisation/ Group Date of adoption Commitment Wellbeing Tick workplace accreditation February 2022 Climate Leaders Coalition July 2019 Rainbow Tick workplace accreditation November 2018 We've committed to a partnership with The Wellbeing Tick Workplace Accreditation programme, which will see Contact systemically design wellbeing into the way we work, to enable our people to thrive. Aiming for accreditation in Feb 2023. • To measure our greenhouse gas emissions, have them independently verified and publicly report on them. • Adopt targets grounded in science that will deliver substantial emissions reductions so organisations contribute to being carbon neutral by 2050. These targets will be considered in current planning cycles. • Assess our climate change risks and publicly disclose them. • Proactively support our people to reduce their emissions. • Proactively support our suppliers to reduce their emissions. • Committed to the Paris Agreement Target to keep warming below 2°C and to further pursue efforts to limit temperature increases to 1.5°C. We continue to retain The Rainbow Tick and are committed to creating an inclusive and diverse workplace environment in which differences in gender, age, ethnicity, religion, sexual orientation, gender identity, background and experience are valued. Science Based Targets initiative – Committed Champions for Change reporting initiative March 2018 We commit to progressing emission reduction in line with verified target. November 2015 We continue to partner with Global Women on the Champions for Change reporting initiative, which monitors the collective and individual progress of participating organisations towards our shared goal of between 40–60 percent of women in our organisations, at all levels. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 82 Contact INTEGRATED REPORT 2022Additional disclosures Climate-related risks and opportunities The following table presents an overview of Contact’s most material climate-related risks and opportunities in the short, medium and long term. We review these annually. In 2019, we commissioned NIWA to model the potential impacts of climate change on our operations. We modelled two scenarios: a business-as- usual scenario where greenhouse gas concentrations continue unabated (Representative Concentration Pathway 8.5); and a mitigation scenario with a global effort to heavily reduce concentrations (RCP 2.5). Under either scenario used we saw that most sites will experience a tripling of the number of hot days, with spring and summer expected to become drier and winter wetter. Our hydro catchment is likely to have increased inflows, with potential for hydro generation increasing – especially under the business-as-usual scenario. Given this, and also what we know about the transitional risks of climate change, such as changing regulation, stakeholder expectations and market dynamics, we have identified a range of risks which we have then rated as low, medium, or high based on the likelihood, time-horizon and potential impact/size of the opportunity or risk. We use our existing risk management systems to capture, monitor and report on climate-related risks. Risks rated high are also monitored by the leadership team and the Board Audit and Risk Committee. The Board Health, Safety and Environment Committee, who have formal oversight of climate related issues, also review the climate-related risks. The full Board, when setting strategy, also considers a wide range of risks and environmental factors, and the work that our teams do to understand issues such as climate change contributes to their decision-making. Short term (now–2023) Medium term (2023–2035) Long term (2035–onwards) These may impact near-term financial results, including those that may materialise within the current reporting cycle. May materially impact financial results over the longer term and may require us to adjust our strategy. Risks that could fundamentally impact the long- term strategy and business model. Market transition risks and opportunities Contact’s emissions profile • Reputational impact of continued use of thermal • National imperative to reduce carbon emissions • Stakeholder rejection of fossil fuels including and high-emissions generation. through policy and other means. natural gas. Leading the market to decarbonise • Heightened scrutiny from customers and investors on environmental, social, governance (ESG) performance of businesses. • Rising gas and carbon costs. • Rising stakeholder expectations increase the pace of change in which businesses must adapt/ respond to climate-related issues. • Increased opportunity for renewable developments. • New opportunities and markets developed to support low-carbon transition activities. • Opportunity to deepen relationships with customers who are looking to decarbonise. • Heightened scrutiny of emissions from geothermal energy generation. • Leadership of decarbonisation initiatives including delivering on science-based targets. • Transition to lower-carbon economy creates more demand for electricity. • Opportunities for innovative customer and technology solutions. • Increased electricity demand. • Increased demand for green energy products/ certification. • Wider options for new generation development. Thermal transition • Opportunity for renewable generation to displace thermal. • Potential for high-emissions industries to favour gas as a transition fuel, resulting in increased gas use and emissions in the short term. • Continued requirement for thermal peaking plant in Aotearoa New Zealand to ensure affordable security of supply. • Opportunity to develop ThermalCo. • Ensuring an orderly transition to a low-emissions energy sector. • Potential for significant renewable overbuild, and massive distributed generation. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 83 Contact INTEGRATED REPORT 2022Additional disclosures Short term (now–2023) Medium term (2023–2035) Long term (2035–onwards) New technology • Customer adoption of new technologies and/or • Customer adoption of new technologies and/or • New technology makes current generation energy-efficient solutions impacts on demand for grid-connected electricity. energy-efficient solutions impacts on demand for grid-connected electricity. • Opportunity for smart solutions for customers to • Opportunity for innovative new energy sources assist decarbonisation. e.g. hydrogen. • Increase in demand due to changing industry energy requirements. redundant and/or impacts demand significantly. Regulation • Changes to regulation impacts on costs of business and/or licence to operate. • New regulation requires Contact to offset or reduce emissions faster than planned. • Aotearoa New Zealand’s costs become higher relative to globe which results in production moving offshore and reduced demand. Physical risks and opportunities Temperature increases • Changes to maintenance requirements as • Impacts on operational plant may require change temperatures increase. in design. • Changes to electricity demand as temperatures change. • Health, safety and wellbeing impacts on people working in warmer conditions. • Impacts on the efficiency and availability of generation plants. • Implications on resource consent requirements which may increase costs and/or impact on licence to operate. • Increased demand and competition for natural resources, including fresh water, impacts on access to natural resources for generation. • Drilling programme requires access to significant • Water storage requirements change. • Increased hydro inflows create opportunities to increase generation output, but may also increase flood risk and require spilling at hydro. volumes of water. • Consents required for new developments. • Potential for increased power outages due to transmission failure caused by storms. • Increased flood risk around rivers and lakes impacts on generation operations. Access to natural resources • Changes to hydro inflows impact on our renewable generation. • Consent renewal required for Wairākei in 2026. • Changes in regulation may impact on access to water, consent conditions and/or costs. • Increased potential for erosion issues. • Disruption to physical works during storms. • Stormwater systems require redesign and/ or replacement to meet changing capacity requirements. CONTENTS FY22 SUMMARY Intensity of storms WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 84 Contact INTEGRATED REPORT 2022Additional disclosures Habitat protection and restoration work – area Description of habitat restoration and location Major species conserved or protected at site Size of area restored in hectares Partnerships Area status as of 30 June 2022 Monitoring and reporting frequency Torepatutahi Wetland restoration project Willow wetland restored to natives. Three at-risk taxa including swamp nettle, fernbird and spotless crate 36.9 hectares Working in collaboration with Ngāti Tahu – Ngāti Whaoa Runanga, Department of Conservation (DoC), Fish & Game, landowners as part of our Consent requirements Systematic removal of pest plants and pest animals, maintenance, and annual planting programme We undertake biannual monitoring of transects to track restoration progress* Wairākei station entrance beautification Karapiti pine poisoning Wasteland cleared, replanted in natives and fruit trees for community garden Poisoning wilding pines in restoration areas 2.5 hectares Greening Taupō 14.5 hectares No Planting complete, ongoing maintenance Ongoing maintenance of pest plants and animals Wairākei Stream wilding pine poisoning Poisoning wilding pines and trapping pest animals 6.2 hectares No Poisoning complete, ongoing maintenance Wai-ora Hill (Alum Lakes) geothermal area pest plant and animal control Oruanui geothermal area retirement Poisoning wilding pines and pampas on hot ground and peripheral areas. At-risk geothermal ferns and vegetation within project area Protection of geothermal vegetation site from pastoral agriculture and wilding pine control 67.5 hectares Waikato Regional Council, Land Information NZ and Ministry for Primary Industries Ongoing maintenance of pest plants and animals 3.3 hectares No Ongoing pest plant maintenance Karapiti mānuka and native planting Planting mānuka in area where pines were harvested 13.5 hectares No Ongoing maintenance and pest control Rakaunui and Otumuheke Block riparian management Planting stormwater drain and stream flowing from Taupō native nursery 1.8 hectares No Planting complete, ongoing maintenance Waipuwerawera stream restoration project Restoring five distinct areas of stream by removing pest plants and planting natives. Including geothermal vegetation site 5.7 hectares Tūwharetoa Māori Trust Board, Taupō District Council (TDC), Pāmu Farms and Department of Conservation Systematic removal of pest plants and pest animals, maintenance and annual planting programme Te Rau o Te Huia stream restoration project Ecological restoration of the stream environment and sites of cultural importance 20.5 hectares Ngāti Te Rangiita Ki Oruanui Systematic removal of pest plants and pest animals, maintenance and annual planting programme Never formally; informally when monitoring the maintenance required Never formally; informally when monitoring the maintenance required Never formally; informally when monitoring the maintenance required Monitoring report completed FY22 to track progress and refresh management since project began in 2019 Never formally; informally when monitoring the maintenance required Never formally; informally when monitoring the maintenance required Never formally; informally when monitoring the maintenance required Never formally; informally when monitoring the maintenance required Never formally; informally with working partners when monitoring the maintenance required and planning for future years' works * Independent assurance has been undertaken for the Torepatutahi Wetland restoration work. Other restoration and protection work has not been assured. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 85 Contact INTEGRATED REPORT 2022Additional disclosures Description of habitat restoration and location Major species conserved or protected at site Size of area restored in hectares Partnerships Area status as of 30 June 2022 Monitoring and reporting frequency Huka/Quarry Block enhancement planting Removal of weeds and planting natives in geothermal area and within stormwater controls 1.3 hectares No Wairākei Drive – Karapiti and Pony Club Beautification/aesthetic planting along Wairakei Drive 2.6 hectares No Retirement of land from pastoral agriculture and enhancement of wetland/gully environment 4.2 hectares No Retirement of land from pastoral agriculture and enhance screening/ blending of flexible elements into landscape 2.2 hectares No Ongoing maintenance and pest control Never formally; informally when monitoring the maintenance required Annual Greening Taupō planting, aligned with community desires Never formally; informally when monitoring the maintenance required Planting complete and maintenance will commence for next two years Planting complete and maintenance will commence for next two years Consent requirement which will require Council inspection and assessment Consent requirement which will require Council inspection and assessment Removal of exotic tree species, eco-sourced planting and traps 0.5 hectares Hāwea Community Association (HCA). Wānaka Backyard trapping Ongoing to enhance natural indigenous biodiversity on lakefront Monitored by HCA, reviewed within HFLMP, progression and work plans monitored through our Biodiversity Management Plan Tauhara Power Station Development (fixed elements – retired gully, screening and stormwater pond) Tauhara Power Station Development (flexible elements well-pads and pipelines/broadscale landscaping) Gladstone Gap, Hāwea Not an offset site, but required through our Hāwea Foreshore and Landscape Management Plan (HFLMP). Area of mixed exotic and native plantings, weed species CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 86 Contact INTEGRATED REPORT 2022Additional disclosures Habitat protection and restoration work – biodiversity measurables Description of habitat restoration and location Major species conserved or protected at site Removal of exotic tree species, eco-sourced planting and traps Inanga, eels, lamprey and giant kōkopu Gladstone Gap, Hāwea Not an offset site, but required through our HFLMP. Area of mixed exotic and native plantings, weed species As part of Native Fish programme, restoration continued at multiple locations in lower Clutha Mata-au in 2021/22. Ongoing riparian planting, maintenance, fencing and weed control takes place each year Activities • Removal of exotic pine trees in June 2022 • 145 trees planted • Tracking tunnels installed Partnerships HCA. Wānaka Backyard trapping Area status as of 30 June 2022 Monitoring and reporting frequency Ongoing to enhance natural indigenous biodiversity on lakefront Monitored by HCA, reviewed within HFLMP, progression and work plans monitored through our Biodiversity Management Plan Annually as part of our resource consent requirements. DoC carry out monitoring and annually provide reports. Progression and work plans monitored through our Biodiversity Management Plan All sites are ongoing. Where plantings are complete this will be followed by further maintenance/weed control. Ambition is to annually increase the pockets of native planting to allow a broader scope of habitat restoration. Monitoring of aquatic habitat will also occur in time DoC Murray Riverside Property: • 414 plants planted Morrison Property (Matai Pond): • 295 plants planted • 85 metres of fencing installed along waterway Glaister Paretai: • 675 plants planted • 24 hours dedicated to weed control and plant release of previous plantings Alister Lister Property (Frasers Stream): • 1,221 plants planted • 48 hours dedicated to weed control and plant release of previous plantings Tweed Property (Waitahuna River Tributary): • 428 plants planted • 180 metres of fencing installed along waterway McRae Property (Bobs Creek): • 6 hours dedicated to weed control and plant release of previous plantings • Glyceria weed control at six sites. Restoration at multiple locations as part of Contact's Sports Fish Management programme Large variety of fish species, specifically aiming to improve habitat for sports fish species such as salmon and trout Manuka Island Site: • 320 plants • Willow control-maintenance of existing plants Fish & Game All sites are ongoing. Where plantings are complete this will be followed by further maintenance/weed control Annually as part of our resource consent requirements. Progression and work plans monitored through our Biodiversity Management Plan Native plantings • 343 traps in total across all new native No Ongoing pest control Never formally; informally when Terrestrial pest control at all native planting sites plantings • 575 plants monitoring the maintenance required Taranaki Regional Council Annual planting programme – ongoing maintenance Monitored by Taranaki Regional Council as part of the Riparian Management Plan Ex Keegan Stratford Farmland to natives in riparian margin CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 87 Contact INTEGRATED REPORT 2022Additional disclosures Workforce by contract type, gender, and region – Contact FY22 Permanent Fixed term Casual Total Part time Full time Non-guaranteed Total FY21 Permanent Fixed term Casual Total* Full time Part time Total headcount Women 1,023 53 6 1,082 132 944 6 1,082 470 30 2 502 99 401 2 502 Total headcount Women 876 40 7 923 806 110 7 923 395 21 2 418 329 87 2 418 Gender Region Men 538 23 4 565 33 528 4 565 Other Undisclosed North Island South Island Undisclosed 0 0 0 0 0 0 0 0 15 0 0 15 0 15 0 15 813 46 5 864 82 777 5 864 206 7 1 214 50 163 1 214 4 0 0 4 0 4 0 4 Gender Region Men 480 19 5 504 476 23 5 504 Other Undisclosed North Island South Island Undisclosed 0 0 0 0 0 0 0 0 1 0 0 1 1 0 0 1 706 28 6 740 664 70 6 740 170 12 1 183 142 40 1 183 0 0 0 0 0 0 0 0 CONTENTS Non-guaranteed FY22 SUMMARY Total* WHO WE ARE * FY21 total re-stated due to exclude Simply Energy employees. CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 88 Contact INTEGRATED REPORT 2022Additional disclosures Workforce by business unit, gender, and region – Contact, Simply Energy and Western Energy Total headcount 10 86 465 34 351 94 42 1,082 64 33 1,179 Total headcount 9 73 507 26 308 923 49 29 1,001 Gender Region Women Men Other Undisclosed North Island South Island Undisclosed 2 54 329 12 65 28 12 502 30 6 538 8 32 127 22 285 63 28 565 33 27 625 0 0 0 0 0 0 0 0 0 0 0 0 0 9 0 1 3 2 15 1 0 16 10 83 321 34 288 88 40 864 53 32 949 0 3 143 0 63 3 2 241 10 0 224 0 0 1 0 0 3 0 4 1 1 6 Gender Region Women Men Other Undisclosed North Island South Island Undisclosed 3 47 309 8 51 418 24 7 449 6 26 197 18 257 504 25 22 551 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1 0 0 1 9 71 383 26 251 740 40 29 809 0 2 124 0 57 183 9 0 192 0 0 0 0 0 0 0 0 0 FY22 Officers Corporate Retail Development Generation and Trading ICT Digital Total Simply Energy Western Energy Total FY21 Officers Corporate Customer CONTENTS Development FY22 SUMMARY Generation and Trading WHO WE ARE Total Simply Energy Western Energy Total CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 89 Note: Customer separated out to become Retail, ICT and Digital in FY22. Contact INTEGRATED REPORT 2022Additional disclosures Board diversity – Contact Women Men Total Under 30 30–50 Over 50 Total European/ Pākehā Māori Pasifika Total Board of directors FY22 Board of directors FY21 4 4 3 3 7 7 0 0 3 4 4 3 7 7 6 6 1 1 1 1 7 7 Employee diversity by business unit – Contact Simply Energy and Western Energy FY22 Women Men Undis- closed Under 30 30–50 Over 50 Undis- closed European/ Pākehā Māori Pasifika Asian Other AMELA Officers Corporate Retail Development Generation and Trading ICT Digital Total Simply Energy Western Energy Total FY21 Officers Corporate Customer Development Generation and Trading Total Simply Energy Western Energy Total 2 54 329 12 65 28 12 8 32 127 22 285 63 28 502 565 30 6 33 27 538 625 0 0 9 0 1 3 2 15 1 0 16 0 13 153 3 36 13 6 5 55 206 18 154 55 30 5 17 102 13 158 26 6 224 523 327 6 7 42 23 9 3 0 1 4 0 3 0 0 8 7 0 4 34 189 18 143 33 17 0 6 69 0 22 8 1 0 3 21 0 3 1 0 0 8 42 2 25 19 11 4 24 107 7 120 18 9 1 0 3 1 5 1 3 438 106 28 107 289 14 256 237 588 339 15 438 106 28 107 289 14 256 Women Men Undis- closed Under 30 30–50 Over 50 Undis- closed European/ Pākehā Māori Pasifika Asian Other AMELA 3 47 309 8 51 418 24 7 449 6 26 197 18 257 504 25 22 551 0 0 1 0 0 1 0 0 1 0 9 138 2 31 180 4 8 192 3 48 248 10 122 431 32 20 483 6 15 117 14 152 304 7 1 0 1 4 0 3 8 6 0 4 26 196 12 121 359 0 5 57 0 18 80 0 0 15 0 2 17 0 7 53 1 17 78 3 19 124 7 108 261 1 0 6 1 4 12 240 312 14 359 80 17 78 261 12 240 Note: Individuals can choose to identify multiple ethnicities. Simply Energy and Western Energy do not track ethnicity data. Customer separated out to become Retail, ICT and Digital in FY22. Undis- closed 1 24 120 6 71 26 8 Undis- closed 1 23 140 5 71 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 90 Contact INTEGRATED REPORT 2022Additional disclosures Employee diversity by employee category – Contact FY22 Women Men Undis- closed Under 30 30–50 Over 50 Undis- closed European/ Pākehā Māori Pasifika Asian Other AMELA Key managerial personnel Other Execs/ GMs Senior Management Other Managers Non-Managers Total STEM1 Sales FY21 Key managerial personnel Other Execs/ GMs2 Senior Management Other Managers 2 2 11 48 439 502 112 329 8 4 23 84 446 565 380 127 0 0 0 0 15 15 6 9 0 0 0 4 220 224 56 153 5 5 21 69 423 523 251 206 5 1 13 58 250 327 188 102 0 0 0 1 7 8 3 4 4 1 16 60 357 438 202 189 0 0 2 8 96 106 28 69 0 0 0 1 27 28 4 21 0 0 1 8 98 107 56 42 4 2 15 35 233 289 145 107 1 0 0 2 11 14 10 3 Women Men Undis- closed Under 30 30–50 Over 50 Undis- closed European/ Pākehā Māori Pasifika Asian Other AMELA 3 3 13 34 5 5 18 73 0 0 0 0 1 1 0 0 0 2 3 7 21 49 5 1 10 55 178 180 351 431 233 304 0 0 0 1 7 8 3 1 16 49 290 359 0 0 1 7 72 80 0 0 0 1 16 17 0 0 1 6 71 78 3 3 14 33 208 261 1 0 0 0 11 12 Non-Managers Total 365 418 403 504 1 Science, technology, engineering and mathematics. 2 Numbers re-stated due to job reclassifications. Undis- closed 1 3 6 30 216 256 107 120 Undis- closed 1 4 5 23 207 240 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 91 Contact INTEGRATED REPORT 2022Additional disclosures Customer privacy Lost-Time Injury Frequency Rate (LTIFR) – Employees & Contractors FY22 FY21 FY22 FY21 FY20 FY19 Number of complaints received from outside parties and substantiated by the organisation Number of complaints received from regulatory bodies Total number of identified leaks, thefts, or losses of customer data 0 0 1 0 76* 28* Employees (n/million hours worked) Contractors (n/million hours worked) Safety data 0 2.5 0 8.1 0.5 4.6 3.9 2.1 * We started recording the number of privacy breaches from 1 December 2020. While the number appears high, most of the privacy breaches were considered minor in nature (for example, affected one or two customers causing little or no harm) and did not require being reported to the Office of the Privacy Commissioner. We've identified that the increased number of breaches is a result of increased reporting, rather than an increased number of breaches. The Privacy Act 2020 came into force on 1 December 2020 and introduced, among other things, mandatory privacy breach reporting for notifiable privacy breaches. A notifiable privacy breach is a privacy breach where serious harm has been caused or is likely. One breach met this threshold. We do not expect any further action to be taken in respect of that breach. Hiring Total number of new employee hires Percentage of open positions filled by internal candidates (internal hires) Employee turnover rate Total employee turnover rate Voluntary employee turnover rate FY22 363 FY21 172 FY20 198 FY19 186 41.0% 45.4% 48.6% 55.8% FY22 19.2% FY21 17.4% FY20 16.9% FY19 19.0% 13.4% 11.8% 12.5% 12.1% Employees Non-employees Number Rate Number Rate Fatalities High-consequence work-related injuries Recordable work-related injuries 0 0 0 0 0 0 0 0 5 Number of hours worked 2,028,778 N/A 911,130 0 0 5.49 N/A The main types of work-related injuries Open wound not involving traumatic amputation (i.e cut finger) Work-related hazards that pose a risk of high-consequence injury Energy sources, hazardous substances, working at height, working in confined spaces, lifting heavy loads, working with mobile plant, working around water, excavations, fitness for work, staying safe while driving, scope of work change. The hazards listed above have been determined through identification of critical tasks and based on consequences of injuries that happen in these areas. Our hazard ID processes cover actions taken to eliminate these hazards and minimize risks. Rates have been calculated based on 1,000,000 hours worked. Monitored contractors are excluded because the work is contracted and takes place off sites. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 92 Contact INTEGRATED REPORT 2022Additional disclosures Green Borrowing Programme In line with our commitment to a low-carbon economy, Contact has a Green Borrowing Programme to finance Contact’s past and future renewable energy generation investments. This is a progressive approach to financing and provides investors and lenders with an opportunity to access a broad range of accredited green debt instruments where proceeds have been applied to eligible green assets. The Green Borrowing Programme is described in Contact’s Green Bond Framework (Framework), which aligns with the Green Bond Principles and is certified by the Climate Bonds Initiative (CBI) under Climate Bond Standard V3.0 with assurance from KPMG. The Framework, CBI certification and KPMG’s annual assurance statement are available on our website. The Framework articulates which of Contact’s debt instruments and assets qualify as green, and provides for a comprehensive compliance and disclosure regime to ensure the Climate Bonds Standard V3.0 is always met, in turn ensuring that the existing CBI certification remains in place. A key compliance metric is the Green Ratio whereby the total green asset value must be at least equal to total green debt instruments (i.e. a ratio of 1.0 minimum). This indicator is reported on a half-yearly basis. The following table sets out the total green asset value and total green debt instruments for the current reporting period, and confirms that the Green Ratio is met at 1.34. Contact confirms to the best of its knowledge that its Green Borrowing Programme continues to remain in compliance with the CBI certification in place, including the requirements of the Climate Bonds Standard V3.0. Geothermal assets data Book value $m Generation (GWh) Emissions (tCO2e) Emissions intensity (gCO2e/KWh) Compliance with CBI standards (<100 gCO2e/KWh) Poihipi Tauhara Te Mihi Te Huka Wairākei Tenon and Nature’s Flame1 Ohaaki2 Geothermal portfolio total/average Eligible Green Asset total/average CONTENTS Total Green Debt Instruments Green Asset Ratio 140 497 481 114 700 8 101 2,042 1,941 1,446 1.34 331 – 1,386 189 1,055 188 322 3,471 3,149 12,565 – 54,784 10,018 18,528 1,622 85,494 183,011 97,517 38 N/A 40 53 18 9 266 53 31 Yes Yes Yes Yes Yes Yes No 1 Includes direct heat sold to Tenon and Nature’s Flame. 2 Ineligible green asset in relation to Contact’s Green Borrowing Programme. FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 93 Contact INTEGRATED REPORT 2022Additional disclosures Contributions and other spending Annual total monetary contributions to and spending for political campaigns, political organisations, lobbyists or lobbying organisations, trade associations and other tax-exempt groups: $ NZD FY22 FY21 FY20 FY19 Lobbying, interest representation or similar Local, regional or national political campaigns/organisations/candidates Trade associations or tax-exempt groups Other (e.g. spending related to ballot measures or referendums) 161,000 167,986 169,540 161,852 – – – – – – – – – – – – Total 161,000 167,986 169,540 161,852 IT Security/Cybersecurity Governance The Chief Information Officer is responsible for overseeing cybersecurity within the company. Supply chain impacts FY22 FY21 Suppliers assessed for environmental and social impacts Suppliers identified as having significant actual and potential negative environmental and social impacts Percentage of suppliers with which improvements have been agreed upon as a result of assessment Percentage of suppliers with which relationships have been terminated as a result of assessment 49 0 0% 0% 5 1 0% 0% Our supplier reviews focused on existing suppliers and identified differing maturity levels in ESG reporting. In all cases suppliers expressed commitment to improving ESG reporting and processes for tracking environmental and social impacts. Our number of suppliers assessed represents 31% of total vendor spend. Membership of associations or advocacy organisations Holds a position on the governance body Electricity Retailers’ Association of New Zealand (ERANZ) Gas Industry Company Participates in projects or committees Aotearoa Circle Australasian Investor Relations Association (AIRA) Business New Zealand (Energy Council Major Companies Group, Corporate Affairs Group, Corporate Taxpayers Group) Champions for Change Climate Leaders Coalition Drive Electric Electricity Authority Market Development Advisory Group ENA Joint Implementation Working Group ENA Technical Implementation Working Group ERANZ Communications Committee ERANZ Data Working Group ERANZ Policy Committee ERANZ Retailer Revenue Assurance Advisory Forum ERANZ Retailers’ Operational Forum ERANZ Vulnerable Customer & Medically Dependent Customer (VCMDC) Working Group Generator Forum Hugo Group International Geothermal Association Liquefied Petroleum Gas Association NZ Geothermal Association NZ Hydrogen Association NZ Initiative Sustainable Business Council Wellington Chamber of Commerce Women in Geothermal CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 94 Contact INTEGRATED REPORT 2022Additional disclosures TCFD index Disclosure Page number Describe the board’s oversight of climate-related risks and opportunities. 66–67 Describe management’s role in assessing and managing climate-related risks and opportunities. Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term. Describe the impact of climate-related risks and opportunities on the organisation's businesses, strategy and financial planning. Describe the resilience of the organisation's strategy, taking into consideration different climate-related scenarios, including a 2 degree or lower scenario. Describe the organisation's processes for identifying and assessing climate-related risks. Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation's overall risk management. Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process. 66–67 83–84 46 46 46 25–26 25–27, 43 Disclose Scope 1, 2 and if appropriate 3 greenhouse gas (GHG) emissions, and the related risks. 45, 81–82 Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets. 27, 43–45 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 95 Contact INTEGRATED REPORT 2022Additional disclosures GRI index Contact has reported in accordance with the GRI Standards for the period 1 July 2021 to 30 June 2022. GRI 1 used GRI 1: Foundation 2021 Applicable GRI Sector Standard(s) There is no current applicable sector standard. GRI Standard/ Other source Disclosure GRI 2: General Disclosures 2021 Page Explanation Organisational details Entities included in the organisation’s sustainability reporting 103, 131 81 Reporting period, frequency and contact point 2, 81, 103 Restatements of information 50, 88, 115, 126 External assurance 67, 129 Activities, value chain and other business relationships 14–24 Employees 88 Workers who are not employees Omitted Information unavailable: We do not have any comprehensive tracking of non-employees (i.e contractors) however are aiming to introduce better tracking in the near future. Governance structure and composition 64–67 Further detail can be found on pages 4–5 in our Corporate Governance Statement. Nomination and selection of the highest governance body – Information is on page 3 of our Corporate Governance Statement. 2–1 2–2 2–3 2–4 2–5 2–6 2–7 2–8 2–9 2–10 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 96 GRI Standard/ Other source Disclosure Page Explanation 2–11 2–12 2–13 2–14 Chair of the highest governance body 64 Further detail can be found in our Corporate Governance Statement. Role of the highest governance body in overseeing the management of impacts Delegation of responsibility for managing impacts 64, 66–67 66–67 Role of the highest governance body in sustainability reporting 66–67 2–15 Conflicts of interest 76–78 Further detail can be found 2–16 2–17 2–18 2–19 2–20 2–21 2–22 in our Corporate Governance Statement, Conflict of Interest Policy, and Code of Conduct. Communication of critical concerns 67 Collective knowledge of the highest governance body Evaluation of the performance of the highest governance body 65–66 Further detail can be found on pages 2–6 of our Corporate Governance Statement. 64 Further detail can be found on page 3 of our Corporate Governance Statement. Remuneration policies 69–73 Process to determine remuneration 70–71 Further detail can be found on page 7 of our Corporate Governance Statement. Annual total compensation ratio 74 2–21 b has been omitted as not applicable: Mike Fuge joined Contact part-way through FY20, therefore his STI / equity component is not for a full year in FY21. Statement on sustainable development strategy 7–9 Contact INTEGRATED REPORT 2022Additional disclosures GRI Standard/ Other source Disclosure Page Explanation GRI Standard/ Other source Disclosure Page Explanation 2–23 Policy commitments 66 Further detail can be found in our Code of Conduct, and within our policies. GRI 303: Water and Effluents 2018 303–1 Interactions with water as a shared resource 2–24 2–25 2–26 2–27 2–28 2–29 2–30 Embedding policy commitments Processes to remediate negative impacts – Information can be found in our Code of Conduct, and within each of our policies. Omitted Information incomplete: We have engaged with local communities in the past to remediate negative impacts, such as our remediation efforts following the 2019 Karapiti incident, and have a Stakeholder Engagement Policy detailing our engagement with stakeholders. Mechanisms for seeking advice and raising concerns Compliance with laws and regulations Membership associations Approach to stakeholder engagement Collective bargaining agreements 66, 131 67 94 47 – Also indicator for material topics natural resource protection and environmental pollution. 303–2 Management of water discharge-related impacts Omitted Information incomplete: Contact is in a growth phase with the construction of a new Geothermal Power Station and reconsenting of an existing one. This means changes to our impacts on waterways and interactions with communities, Tangata Whenua and other users. Conditions of consents, engagement and agreements that are ongoing identify that impacts on waterways are all proposed to be improved in line with our water statement position. This disclosure will be included going forward. Omitted Confidentiality constraints: All discharge impacts to waterways are managed as part of our licence to operate within consent conditions as well as energy supply agreements held with third parties. Disclosure will be reviewed for next year. 9.3% of total Contact employees were covered by collective bargaining agreements as at 30 June 2022. Contractor data not collected. GRI 3: Material Topics 2021 3–1 3–2 Process to determine material topics 18–19 List of material topics 20–21 Material Topics Water and effluents GRI 3: Material Topics 2021 3–3 Management of material topic 50–51 Indicators for material topics freshwater system health, biodiversity protection and restoration, natural resource protection and environmental pollution. 303–3 303–4 303–5 Biodiversity Water withdrawal Water discharge Water consumption 50 50 50 GRI 3: Material Topics 2021 3–3 Management of material topic GRI 304: Biodiversity 2016 51–52 Indicators for material topics biodiversity protection and restoration, natural resource protection and environmental pollution. 304–1 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas Omitted Information incomplete: Biodiversity impacts and attention of focus has been at operational sites that have significant impacts as well areas as considered to have intrinsic biodiversity value. Therefore, not every operational site has been included in reporting. Will look to disclose next year. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 97 Contact INTEGRATED REPORT 2022Additional disclosures GRI Standard/ Other source Disclosure Page Explanation GRI Standard/ Other source Disclosure Page Explanation 304–2 304–3 304–4 Significant impacts of activities, products and services on biodiversity 51 Habitats protected or restored 85–87 IUCN Red List species and national conservation list species with habitats in areas affected by operations Omitted Information unavailable: An assessment was carried out to identify any areas where Contact’s operations have an impact on IUCN Protected Areas. Our thermal, geothermal and hydro activities do not operate within any IUCN Protected Areas. We have acknowledged multiple IUCN Protected Areas fall near our key operational sites. We have assessed these areas in terms of their proximity to our operational sites and can confirm we have no influence on the biodiversity in these areas. Contact follows Government Policy and implements work standards to ensure best environmental practice. There are no impacts identified from our activities at this time, however we will review the Red List species in next year. Emissions GRI 3: Material Topics 2021 Management of material topic 30, 37, 44–45 Indicators for material topics generation emissions, decarbonisation and electrification, natural resource protection and environmental pollution. CONTENTS 3–3 FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 98 GRI 305: Emissions 2016 305–1 305–2 305–3 305–4 Direct (Scope 1) GHG emissions Energy indirect (Scope 2) GHG emissions Energy indirect (Scope 3) GHG emissions GHG emissions intensity 81 81 82 81 305–5 305–6 305–7 Reduction of GHG emissions 45 Emissions of ozone- depleting substances (ODS) Omitted Not applicable: New Zealand legislation prevents emission of ODS. Nitrogen oxides (NOx), sulfur oxides (SOx), and other significant air emissions Omitted Information unavailable: NOx, SOx and other emission data for FY22 is currently unavailable, and is expected to be calculated at a later date. Reliable and renewable energy GRI 3: Material Topics 2021 3–3 Management of material topic 33–35 Indicator for material topics renewable energy supply, reliable energy supply. Own measure Percentage of renewable generation 14 Demand flexibility GRI 3: Material Topics 2021 3–3 Management of material topic 29–30, 40 Indicator for material topic demand flexibility. G4 Electric Utilities Aspect Disclosures Describe demand side management programs 29, 40 Supplier environmental assessment GRI 3: Material Topics 2021 3–3 Management of material topic 47 Indicator for material topic sustainable procurement. GRI 308: Supplier Environmental Assessment 2016 308–1 308–2 New suppliers that were screened using environmental criteria Omitted Information unavailable: We have not assessed new suppliers in FY22, however are aiming to introduce this in the near future. Negative environmental impacts in the supply chain and actions taken 94 Contact INTEGRATED REPORT 2022Additional disclosures GRI Standard/ Other source Disclosure Page Explanation GRI Standard/ Other source Disclosure Page Explanation GRI 414: Supplier Social Assessment 2016 414–1 414–2 New suppliers that were screened using social criteria Omitted Information unavailable: We have not assessed new suppliers in FY22, however are aiming to introduce this in the near future. Negative social impacts in the supply chain and actions taken 94 Occupational health and safety GRI 3: Material Topics 2021 3–3 Management of material topic 57–58 Indicators for material topic workforce health and wellbeing. GRI 403: Occupational Health and Safety 2018 403–9 Work-related injuries Own measure TISR 92 57 Occupational health and safety management system Hazard identification, risk assessment, and incident investigation Occupational health services Worker participation, consultation, and communication on occupational health and safety Worker training on occupational health and safety Omitted Omitted Information unavailable: While some of the information for the omitted disclosures is contained throughout the report and on our website, we opted not to meet the disclosure requirements. This is due to our aim of continuing disclosures we had reported last year. We will review our choice of disclosures in the next financial year. Omitted Omitted Omitted Promotion of worker health Omitted 403–1 403–2 403–3 403–4 403–5 403–6 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 99 403–7 403–8 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships Workers covered by an occupational health and safety management system Omitted Information unavailable: While some of the information for the omitted disclosures is contained throughout the report and on our website, we opted not to meet the disclosure requirements. This is due to our aim of continuing disclosures we had reported last year. We will review our choice of disclosures in the next financial year. Omitted 403–10 Work-related ill health Omitted Process safety GRI 3: Material Topics 2021 3–3 Management of material topic 57–58 Indicator for material topic infrastructure safety. Own measure Process safety data 58 Climate change impact on assets GRI 3: Material Topics 2021 3–3 Management of material topic 46, 83–84 Indicator for material topic climate change impact on assets. Own measure Impacts on assets from physical risks of climate change 83–84 Diversity and equal opportunity GRI 3: Material Topics 2021 3–3 Management of material topic 53–56 Indicators for material topic diversity and inclusion. GRI 405: Diversity and Equal Opportunity 2016 405–1 405–2 Diversity of governance bodies and employees 90–91 Ratio of basic salary and remuneration of women to men Omitted Information unavailable: The information to breakdown our employee remuneration by employee category and area of operation is not currently captured. We will review our process in the next financial year. We do include information on pay equity. Contact INTEGRATED REPORT 2022Additional disclosures GRI Standard/ Other source Disclosure Staff engagement GRI 3: Material Topics 2021 Page Explanation GRI Standard/ Other source Disclosure Energy Hardship GRI 3: Material Topics 2021 Page Explanation 3–3 Management of material topic 53–54 Indicator for material topic team 3–3 culture. Management of material topic 38–39 Indicator for material topic energy hardship and affordability. Own measure Staff engagement 53 44, 47 Indicator for material topics 3–3 Management of material topic 38–39 Indicator for material topic customer trust. Own measure Reduction of customer debt expressed as a percentage 40 Customer experience GRI 3: Material Topics 2021 Own measure Customer satisfaction (Net Promoter Score) 39 Local communities GRI 3: Material Topics 2021 3–3 Management of material topic GRI 413: Local Communities 2016 413–1 413–2 Operations with local community engagement, impact assessments, and development programs Operations with significant actual and potential negative impacts on local communities Customer privacy GRI 3: Material Topics 2021 tangata whenua partnerships and community wellbeing. 47–52 Omitted Information incomplete: While we discuss our impacts on biodiversity, habitats, and the environment throughout the report, we do not discuss this in context of the local community in the detail that the disclosure requires. We will review local community engagement plans. 3–3 Management of material topic 62 Indicator for material topic privacy and cybersecurity. GRI 418: Customer Privacy 2016 418–1 92 Substantiated complaints concerning breaches of customer privacy and losses of customer data CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 100 Contact INTEGRATED REPORT 2022Governance matters Financial statements Contact Contact INTEGRATED INTEGRATED REPORT REPORT 2022 2022 s t n e m e t a t s l a i c n a n F i 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 101 101 Financial statements Contents About these financial statements A. Our performance E. Other disclosures Statement of comprehensive income Statement of cash flows A1. Segments A2. Earnings Statement of financial position A3. Free cash flow Statement of changes in equity Notes to the financial statements B. Our funding E1. Tax E2. Operating expenses E3. Inventory E4. Trade and other receivables E5. Trade and other payables B1. Capital structure E6. Provisions B2. Share capital B3. Distributions B4. Borrowings E7. Profit to operating cash flows E8. Hedging activities E9. Financial instruments at fair value B5. Net interest expense E10. Financial instruments at amortised cost C. Our assets E12. Related parties C1. Property, plant and equipment and E13. New accounting standards intangible assets C2. Goodwill and asset impairment testing E14. Contingencies E11. Share-based compensation D. Our financial risks D1. Market risk D2. Liquidity risk D3. Credit risk CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 102 Contact INTEGRATED REPORT 2022Financial statements for the year ended 30 June 2022 About these financial statements For the year ended 30 June 2022 These financial statements are for Contact, a group made up of Contact Energy Limited, the entities over which it has control and its associates. Contact Energy Limited is registered in New Zealand under the Companies Act 1993. It is listed on the New Zealand Stock Exchange (NZX) and the Australian Securities Exchange (ASX) and has bonds listed on the NZX debt market. Contact is an FMC reporting entity under the Financial Markets Conduct Act 2013. Contact’s financial statements are prepared: • in accordance with New Zealand generally accepted accounting practice (GAAP) and comply with New Zealand equivalents to International Financial Reporting Standards (IFRS) and IFRS as appropriate for profit-oriented entities • in millions of New Zealand dollars (NZD) unless otherwise noted • on a historical cost basis except for financial instruments held at fair value • using the same accounting policies for all reporting periods presented • with certain comparative amounts reclassified to conform to the current year’s presentation. Estimates and judgements are made in applying Contact’s accounting policies. Areas that involve a higher level of estimation or judgement are: • useful lives of property, plant and equipment and intangible assets (note C1) • impairment testing of cash-generating units and future generation development capital work in progress (note C2) • fair value measurement of financial instruments (notes D1 and E9) • provision for future restoration and rehabilitation obligations (note E6). CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 103 The financial statements were authorised on behalf of the Contact Energy Limited Board of Directors on 12 August 2022. Robert McDonald Chair Sandra Dodds Chair, Audit and Risk Committee Contact INTEGRATED REPORT 2022Financial statements for the year ended 30 June 2022 Statement of comprehensive income For the year ended 30 June 2022 Statement of cash flows For the year ended 30 June 2022 $m Revenue Operating expenses Net interest expense Depreciation and amortisation Change in fair value of financial instruments Profit before tax Tax expense Profit Note A2 A2 B5 C1 D1 E1 Items that may be reclassified to profit/(loss): Change in hedge reserves (net of tax) E8 Comprehensive income Profit per share (cents) – basic and diluted 2022 2,387 2021 $m Note 2,573 Receipts from customers (1,850) (2,020) Payments to suppliers and employees 2022 2,397 2021 2,524 (1,880) (1,970) (36) (262) (50) (249) Interest paid Tax paid 14 7 Operating cash flows E7 253 (71) 182 (31) 151 23.4 261 (74) 187 (2) 185 25.3 Purchase and construction of assets Capitalised interest Investment in associates Proceeds from sale of assets Acquisition of subsidiaries Investing cash flows Dividends paid Proceeds from borrowings Repayment of borrowings Financing costs B3 (28) (89) 400 (347) (19) (11) 1 (43) (79) 432 (129) (8) (8) – (5) (32) (381) (242) 536 (291) (4) (177) (274) 356 (623) – Net proceeds from share issue – 392 Financing cash flows Net cash flow Add: cash at the beginning of the year Cash at the end of the year B4 (1) 18 150 168 (149) 106 44 150 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 104 Contact INTEGRATED REPORT 2022Financial statements for the year ended 30 June 2022 Statement of financial position At 30 June 2022 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 105 $m Cash and cash equivalents Trade and other receivables Inventories Intangible assets Derivative financial instruments Assets held for sale Total current assets Property, plant and equipment Intangible assets Goodwill Investments in associates Derivative financial instruments Total non-current assets Total assets Trade and other payables Tax payable Borrowings Derivative financial instruments Provisions Total current liabilities Borrowings Derivative financial instruments Provisions Deferred tax Other non-current liabilities Total non-current liabilities Total liabilities Net assets Share capital Retained earnings Hedge reserves Share-based compensation reserve Shareholders’ equity Note B4 E4 E3 C1 D1 C1 C1 C2 E12 D1 E5 B4 D1 E6 B4 D1 E6 E1 B2 E8 E11 2022 168 227 58 27 23 5 508 4,095 200 214 21 128 4,658 5,166 261 36 287 98 15 697 812 128 58 616 15 1,629 2,326 2,840 1,955 958 (82) 8 2021 150 255 69 24 56 – 554 3,961 221 214 10 70 4,476 5,030 305 39 163 92 23 622 693 84 51 637 16 1,481 2,103 2,927 1,922 1,048 (51) 8 2,840 2,927 Contact INTEGRATED REPORT 2022Financial statements for the year ended 30 June 2022 Statement of changes in equity For the year ended 30 June 2022 $m Balance at 1 July 2020 Profit Change in hedge reserves (net of tax) Change in share capital Dividends paid Balance at 30 June 2021 Profit Change in hedge reserves (net of tax) Change in share capital Dividends paid Balance at 30 June 2022 Note Share capital Retained earnings Other reserves Shareholders’ equity 1,528 1,134 (41) 2,621 E8 B2 B3 E8 B2 B3 – – 187 – 394 – – 1,922 – – 33 – 1,955 (274) 1,048 182 – – (272) 958 – (2) – – (43) – (31) – – 187 (2) 394 (274) 2,927 182 (31) 33 (272) (74) 2,840 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 106 Contact INTEGRATED REPORT 2022Financial statements for the year ended 30 June 2022 Notes to the financial statements A. Our performance A1. Segments Contact reports activities under the Wholesale segment and the Retail (previously named ‘Customer’) segment. The Wholesale segment includes revenue from the sale of electricity to the wholesale electricity market, to Commercial & Industrial (C&I) customers and to the Retail segment, less the cost to generate and/or purchase the electricity and costs to serve and distribute electricity to C&I customers. The results of Simply Energy Limited and Western Energy Services Limited, following their acquisition in the prior year, have been included within the Wholesale segment in the relevant line items. The Retail segment includes revenue from delivering electricity, natural gas, broadband and other products and services to mass market customers less the cost of purchasing those products and services, and the cost to serve customers. ‘Unallocated’ includes corporate functions not directly allocated to the operating segments. The Retail segment purchases electricity from the Wholesale segment at a fixed price in a manner similar to transactions with third parties. A2. Earnings The table on the next page provides a breakdown of Contact’s revenue, expenses and earnings before interest, tax, depreciation, amortisation and changes in fair value of financial instruments (EBITDAF) by segment, and a reconciliation from EBITDAF to profit reported under NZ GAAP. EBITDAF is used to monitor performance and is a non-GAAP profit measure. $13 million (2021: $12 million) of metering costs, previously included within ‘Other operating expenses’, have been reclassified to ‘Electricity networks, levies & meter costs’ to better reflect the direct nature of these costs and to improve comparability with the industry. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 107 The key revenue categories are: • Electricity and gas Electricity and gas revenue (including mass market electricity, C&I electricity and gas) is recognised when energy is supplied for customer consumption. Mass market electricity includes net revenue for AA Smartfuel rewards. Revenue is initially recognised net of prompt payment discounts. • Wholesale electricity, net of hedging Revenue received from electricity generated and sold through the wholesale market, the net settlement of electricity hedges sold on the electricity futures markets and to generators, other retailers and industrial customers. Revenue is recognised as the energy is delivered. • Electricity-related services Revenue from the sale of complementary products and services to the wholesale market for the provision of instantaneous reserves, frequency keeping and other ancillary services. Revenue is recognised as the services are provided. • Steam and broadband Revenue from the sale of steam is recognised as the steam is delivered. Broadband revenue is recognised as the broadband services are provided. Revenue recognition involves the calculation of unbilled revenue accruals for mass market, C&I electricity and gas, as well as the recognition of contract assets (note E4). Simply Energy Limited revenue for electricity supply and billing services is included in the ‘C&I electricity – fixed price’, ‘C&I electricity – pass through’ and ‘Wholesale electricity, net of hedging’ revenue lines. Revenue is recognised when energy is supplied for customer consumption and as billing services are provided. Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 $m Mass market electricity C&I electricity – fixed price C&I electricity – pass through Wholesale electricity, net of hedging Electricity-related services revenue Inter-segment electricity sales Gas Steam Geothermal services Broadband Other income Total revenue Electricity purchases, net of hedging Electricity purchases – pass through Electricity-related services cost Inter-segment electricity purchases Gas and diesel purchases Gas storage costs Carbon emissions costs Generation transmission & levies Electricity networks, levies & meter costs – fixed price Electricity networks, levies & meter costs – pass through Gas networks, transmission & meter costs Geothermal service costs Broadband costs Other market costs Other operating expenses Total operating expenses EBITDAF Depreciation and amortisation Net interest expense Change in fair value of financial instruments Tax expense Profit CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 108 Wholesale Retail Unallocated Eliminations Total Wholesale Retail Unallocated Eliminations Total 2022 2021 – 215 34 1,071 8 395 7 33 3 – 6 869 – – – – – 82 – – 53 7 1,772 1,011 (793) (26) (8) – (95) (24) (38) (24) (60) (8) (6) (2) – (25) (115) – – – (395) (33) – (6) – (407) – (40) – (45) – (68) (1,224) (994) 548 17 – – – – – – – – – – – – – – – – – – – – – – – – – – (28) (28) (28) (1) 868 – 839 215 249 34 44 1,071 1,285 8 338 – – – – – 8 – 89 33 3 53 13 2 74 28 3 – 4 – – 32 6 – – – – (395) – – – – – (396) 2,387 1,961 951 – – – 395 (793) (26) (8) – (974) (30) (7) – – – – – – – – – – – (128) (126) (24) (44) (24) (467) (8) (46) (2) (45) (25) (24) (41) (28) (82) (13) (7) (1) – – 1 (210) (101) 396 (1,850) (1,434) – – – (338) (24) – (4) – (390) – (38) – (33) – (68) (895) – 537 527 56 (262) (36) 14 (71) 182 – – – – – – – – – – – – – – – – – – – – – – – – – – (1) 838 – – – – 249 44 1,285 8 (338) – – – – – – 76 28 3 32 10 (339) 2,573 – – – 338 – – – – – – – – – – (974) (30) (7) – (150) (24) (45) (28) (472) (13) (45) (1) (33) – (30) (30) (30) 1 (198) 339 (2,020) – 553 (249) (50) 7 (74) 187 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 A3. Free cash flow Free cash flow is a non-GAAP cash measure that shows the amount of cash Contact has available to distribute to shareholders, reduce debt or reinvest in growing the business. A reconciliation from EBITDAF to NZ GAAP operating cash flows and to free cash flow is provided below. $m EBITDAF Tax paid Note A2 Change in working capital, net of investing and financing activities Non-cash items included in EBITDAF Net interest paid, excluding capitalised interest Operating cash flows E7 Stay-in-business capital expenditure Operating free cash flow Proceeds from sale of assets Free cash flow Operating free cash flow per share (cents) B3 2022 537 (89) (17) (3) (28) 400 (75) 325 1 326 41.8 2021 553 (79) 3 (2) (43) 432 (61) 371 – 371 50.2 Stay-in-business capital expenditure is required to maintain our business operations and includes major plant inspections and replacements of existing assets. B. Our funding B1. Capital structure Contact’s capital includes equity and net debt. Our objectives when managing capital are to ensure Contact can pay its debts when they are due and to optimise the cost of our capital. To manage the capital structure, the Board of Directors may adjust the amount and nature of distributions to shareholders, issue new shares and increase or repay debt. Contact manages its capital structure to support an investment grade credit rating and a gearing ratio suitable to our operating environment. Contact issued $225 million of capital bonds during the year which are classified as subordinated debt. $m Borrowings Shareholders’ equity Total capital funding Gearing ratio Gearing ratio excluding subordinated debt Note B4 2022 1,099 2,840 3,939 27.9% 23.5% 2021 856 2,927 3,783 22.6% 22.6% CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 109 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 Weighted average Number of shares (basic) Number of shares (diluted) 2022 2021 778,794,640 738,614,475 779,812,908 739,042,889 The basic earnings per share calculation uses the weighted average number of shares on issue over the period. The diluted weighted average number of shares takes into account the number of performance share rights and deferred share rights that are currently exercisable or will become exercisable depending on likelihood of meeting vesting conditions. Dividends paid 2020 final 2021 interim 30 June 2021 2021 final 2022 interim 30 June 2022 Comprising: Cash dividends Dividend reinvestment plan Cents per share 23.0 14.0 21.0 14.0 $m 165 109 274 163 109 272 242 30 On 12 August 2022, the Board resolved to pay a 90% imputed final dividend of 21 cents per share on 27 September 2022. On 12 August 2022, Contact had $41 million of imputation credits available for use in future periods. B2. Share capital Share capital comprises ordinary shares listed on the NZX and ASX. Certain ordinary shares are held in trust on behalf of employees under the Contact Share scheme (note E11). All shareholders are entitled to receive distributions and to make one vote per share. $30 million of shares issued during the year were from the dividend reinvestment plan. Balance at 30 June 2021 Share capital issued Balance at 30 June 2022 Comprising: Ordinary shares Contact Share B3. Distributions Note Number $m 776,122,070 1,922 4,516,233 33 780,638,303 1,955 780,394,402 1,956 E11 243,901 (1) Earnings and operating free cash flow per share 60 40 CONTENTS FY22 SUMMARY WHO WE ARE 20 . 4 3 2 . 3 5 2 Profit (basic) . 4 3 2 . 3 5 2 Profit (diluted) 0 cps . 8 1 4 . 2 0 5 Operating free cash flow (basic) 2022 2021 CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 110 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 B4. Borrowings Borrowings are recognised initially at fair value less financing costs and subsequently at amortised cost using the effective interest rate method. Some borrowings are designated in fair value hedge relationships, which means that any changes in market interest and foreign exchange rates result in a change in the fair value adjustment on that debt. Borrowings denoted with an asterisk (*) are Green Debt Instruments under Contact’s Green Borrowing Programme, which has been certified by the Climate Bonds Initiative. At 30 June 2022 Contact remains compliant with the requirements of the programme. Further information is available on the Sustainability section on Contact’s website. $m Maturity Coupon 2022 2021 Bank overdraft < 3 months Floating * Commercial paper < 3 months Floating * Drawn bank facilities Various Floating Lease obligations Various Various * Retail bonds – CEN030 * Retail bonds – CEN040 * USPP notes – US$22m * USPP notes – US$51m * USPP notes – US$42m * Retail bonds – CEN050 * USPP notes – US$58m * USPP notes – US$43m Nov 2021 Nov 2022 Dec 2023 Dec 2023 Dec 2023 Aug 2024 Dec 2025 Dec 2025 4.40% 4.63% 4.19% 4.09% 3.63% 3.55% 4.33% 3.85% * Export credit agency facility Nov 2027 Floating * USPP notes – US$15m * USPP notes – US$23m * USPP notes – US$30m * Capital bonds Face value of borrowings Deferred financing costs Dec 2027 Dec 2028 Dec 2028 Nov 2051 3.95% 4.44% 4.51% 4.33% Total borrowings at amortised cost Fair value adjustment on hedged borrowings Carrying value of borrowings Current Non-current 2 175 7 25 – 100 28 64 61 – – – 21 150 100 28 64 61 100 100 73 62 40 22 29 38 225 1,050 (6) 1,044 55 1,099 287 812 73 62 47 22 29 38 – 795 (3) 792 64 856 163 693 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 111 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 Changes in borrowings $m Borrowings at the start of the year Net cash borrowed/(repaid) Non-cash change in lease obligations Non-cash change in deferred financing costs Non-cash change in fair value adjustment Borrowings at the end of the year 2022 856 245 10 (3) (9) 1,099 2021 1,198 (267) 3 1 (80) 856 Short-term funding Contact uses bank facilities for general corporate purposes including to manage its liquidity risk (note D2). Whilst drawings under our bank facilities are typically for periods of three months or less, the amounts drawn down can be rolled for the term of the facility. Drawn facilities are classified as current when the facility will expire within one year of the reporting period end. Contact’s total bank facilities have a range of maturities as follows: Maturity $m Between 1 and 2 years Between 2 and 3 years More than 3 years 2022 50 265 115 430 2021 – 50 380 430 All of these bank facilities form part of Contact’s Green Borrowing Programme. Lease obligations Contact’s leases predominately relate to property and connections to the national electricity grid. These assets are included in the carrying value of property, plant and equipment (note C1). Security Contact’s Deed of Negative Pledge and Guarantee and its United States Private Placement (USPP) note agreements restrict Contact from granting security interest over its assets, subject to certain permitted exceptions. Because of these restrictions, Contact’s borrowings are all unsecured, except for lease obligations secured over the leased assets. The Deed of Negative Pledge and Guarantee and the USPP note agreements contain various debt covenants, all of which Contact complied with during the reporting period. Cash and cash equivalents Cash and cash equivalents exclude bank overdrafts which are included within borrowings. Contact trades electricity price derivatives on the ASX market using a broker that holds collateral on deposit for margin calls. At 30 June 2022, this collateral was $164 million (2021: $109 million) and is included within total cash and cash equivalents of $168 million (2021: $150 million). B5. Net interest expense $m Interest expense on borrowings Interest expense on finance leases Unwind of discount on provisions Unwind of deferred financing costs Capitalised interest Interest income Net interest expense Note E6 C1 2022 (48) (1) (5) (1) 19 – (36) 2021 (52) (1) (5) (1) 8 1 (50) CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 112 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 C. Our assets Property, plant and equipment C1. Property, plant and equipment Balance at 1 July 2020 $m Cost Generation plant and equipment Other land, buildings, plant and equipment Capital work in progress Leased assets 5,658 7 – 53 – 121 1 15 – – 197 124 1 (53) (2) 42 3 – – (3) Additions Acquisitions Transfers from capital work in progress Disposals Total 6,018 135 16 – (5) 6,164 359 – (17) (6) 6,500 (1,992) (208) (6) 3 (2,203) (215) 12 1 – – (1) 51 (17) (4) – 3 (18) (5) – 1 Balance at 30 June 2021 5,718 137 267 42 Additions 7 Transfers from capital work in progress Transfers to assets held for sale Disposals 30 (17) (5) 5 7 – – (37) – – 337 10 Balance at 30 June 2022 5,733 149 567 Depreciation and impairment Balance at 1 July 2020 Depreciation charge Acquisitions Disposals Balance at 30 June 2021 Depreciation charge Acquisitions Disposals (1,872) (200) – – (2,072) (206) 12 – (102) (4) (6) – (112) (4) – – Balance at 30 June 2022 (2,266) (116) (1) – – – (1) – – – (1) Carrying value At 30 June 2021 At 30 June 2022 3,646 3,467 25 33 266 566 24 29 3,961 4,095 (22) (2,405) and intangible assets Contact’s property, plant and equipment (PP&E) and intangible assets include: • Generation plant and equipment: hydro, geothermal and thermal power stations and geothermal wells and pipelines. • Computer software: our SAP system that is used for customer service and billing, finance functions and generation asset management, which has a carrying value of $135 million (2021: $169 million) and a remaining life of seven years. All assets are recognised at cost less accumulated depreciation or amortisation and impairments. Generation plant and equipment acquired before 1 October 2004 is recognised at deemed historical cost, which is the fair value of those assets at 1 October 2004, less accumulated depreciation and accumulated impairment losses. Included within additions for the year ended 30 June 2022 is capitalised interest of $19 million (2021: $8 million) in relation to the build of the Tauhara geothermal plant and steamfield. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 113 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 Intangible assets $m Cost Balance at 1 July 2020 Additions Acquistions Disposals Balance at 30 June 2021 Additions Disposals Transfer to assets held for sale Balance at 30 June 2022 Amortisation Balance at 1 July 2020 Amortisation charge Balance at 30 June 2021 Amortisation charge Balance at 30 June 2022 Carrying value At 30 June 2021 At 30 June 2022 Current Non-current Software and capital work in progress Carbon emission units Other Total Cost Contact capitalises the costs to purchase and bring assets into service. When Contact develops an asset, employee time and other directly attributable costs are capitalised and held as capital work in progress until the asset is commissioned. Contact capitalises costs to obtain resource consents and to drill geothermal exploration wells. These costs are expensed if the existing area of operations that they relate to is unsuccessful or abandoned. All other geothermal exploration costs are expensed. Carbon emission units are purchased to offset our emissions under the New Zealand Emissions Trading Scheme (ETS). The units are measured at weighted average cost. They are classified as current assets when they will be used to offset our ETS obligations at balance date or obligations expected to be incurred within one year of balance date. Depreciation and amortisation The cost of Contact’s assets is spread evenly over their useful lives (straight line method) or, for certain thermal assets, over the equivalent operating hours (EOH) those assets are expected to be of benefit to Contact. Management estimates an asset’s useful life or EOH and this is reviewed annually. Land, capital work in progress and carbon emission units are not depreciated or amortised. The depreciation and amortisation rates for all other assets are: 486 87 16 (47) 542 122 (92) (1) 571 (256) (41) (297) (47) (344) Asset Rate/hours 245 227 27 Generation plant and equipment Straight line Equivalent operating hours Other buildings, plant and equipment 16 200 Computer software 1 – 33% 40,000 – 100,000 2 – 33% 5 – 50% 482 19 – – 501 27 (1) (1) 526 (256) (40) (296) (46) (342) 205 184 – 184 3 68 – (47) 24 94 (91) – 27 – – – – – 24 27 27 – 1 – 16 – 17 1 – – 18 – (1) (1) (1) (2) 16 16 – Capital commitments At 30 June 2022, Contact was committed to $275 million of contracted capital expenditure (2021: $334 million) and $150 million of carbon forward contracts (2021: $60 million), of which $252 million is due within one year of balance date. During the year ended 30 June 2022, Contact concluded its review of existing software assets in light of the IFRIC agenda decision Configuration or Customisation costs in a Cloud Computing Arrangement and wrote off $1 million of software assets relating to software-as-a-service arrangements. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 114 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 C2. Goodwill and asset impairment testing Contact has two cash-generating units (CGUs): Wholesale and Retail. The Retail CGU includes goodwill of $179 million (2021: $179 million). The Wholesale CGU includes goodwill of $35 million (2021: $41 million, restated to $35 million) following the acquisition of Simply Energy Limited and Western Energy Services Limited in the prior year, and subsequent purchase price allocation. Further information on the acquisition of Western Energy Services Limited is provided in note E12. Capital work in progress (CWIP) includes $493 million (2021: $223 million) related to future generation developments, of which $9 million is not allocated to a CGU. The recoverable amount of an asset or CGU is calculated as the higher of its value in use and fair value less costs to sell. Every reporting period management estimates the value in use expected to be recovered from Contact’s CGUs and any significant future generation developments in CWIP that are not allocated to a CGU. An impairment is recognised when the recoverable value is lower than the carrying value. Determining value in use involves estimating future cash flows for each CGU. These cash flows are adjusted for future growth based on historical inflation and discounted at a post-tax discount rate between 6.5% and 7.5% to arrive at the present value, or value in use, of each CGU. Future generation developments are assessed separately until the build has substantially commenced, however key inputs are the same as for the Wholesale CGU plus an estimate of plant commissioning costs. No impairments were recognised in the current or prior period. The key inputs to CGU and future generation development cash flows, and their method of determination, are: Retail CGU Post-tax discount rate and inflation External WACC report prepared by Cameron Partners and implicit inflation rate. Customer numbers and churn Actual customer numbers adjusted for historical churn data and expected market trends. Margin per customer Actual margin per customer adjusted for expected market changes. Estimated future capital expenditure and operating costs Budgeted capital and operating expenditure, reflecting historical levels and known differences. Cost of purchased energy ASX future electricity prices adjusted for location and seasonal shape. Wholesale CGU and future generation developments Post-tax discount rate and inflation External WACC report prepared by Cameron Partners, and implicit inflation rate. Wholesale electricity price path Modelled wholesale prices based on ASX future Generation volume and mix electricity prices adjusted for location and seasonal shape, and price estimates based on an analysis of expected demand and cost of new supply for periods not quoted on the ASX market. Generation strategy based on expected demand, hydro volumes, planned outages and expected market pricing. Estimated future capital expenditure and operating costs Budgeted capital and operating expenditure, reflecting historical levels and known differences. Fuel costs Contracted gas and carbon prices, otherwise Contact’s best estimate of future prices. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 115 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 Sensitivities The calculation of the value in use for the CGUs is most sensitive to the inputs for wholesale electricity prices and the post tax discount rate. Wholesale electricity prices are influenced by a number of factors that are difficult to predict, in particular weather, which can impact short-term prices. Wholesale electricity prices may also be adversely affected by a reduction in demand, the availability of fuel and generation capacity in the wholesale electricity market, competitor and transmission system availability. The post-tax discount rate is an estimate of Contact’s weighted average cost of capital and is influenced by a number of external factors such as the risk- free rate and inflation. The sensitivity of the valuation model to the wholesale electricity prices and discount rate, where all other inputs remain constant, is as follows: Significant unobservable inputs Sensitivity Impact $m D1. Market risk Interest rate risk Contact has fixed and floating rate debt and is exposed to movements in interest rates. For fixed rate debt the exposure is to falling interest rates as Contact could have secured that debt at lower rates, while for floating rate debt there is uncertainty of future cash interest payments. Contact manages these risks through the use of interest rate swaps (IRS) and cross-currency interest rate swaps (CCIRS) to ensure that the total debt portfolio has an appropriate amount of fixed and floating rate exposure. The risk is monitored by assessing the notional amount of debt on a fixed and floating basis and ensuring this is in accordance with set policies. Foreign exchange risk Contact is exposed to movements in foreign exchange rates through its commitments to pay certain suppliers and United States Private Placement (USPP) note holders. Post tax discount rate Wholesale electricity price path - 0.5% + 0.5% + 10% - 10% + 663 - 563 + 515 - 515 To mitigate this risk, forward foreign exchange contracts are used to fix future cash flows in NZD terms. Foreign debt is hedged through the use of CCIRS, which converts foreign currency principal and interest payments to NZD at a fixed exchange rate. The value in use exceeded the carrying value for all sensitivities carried out. There is interrelation between the key inputs in the valuation. Any changes in the price path and post tax discount rate would not occur in isolation and would drive other changes which could also impact the value in use. D. Our financial risks Contact’s financial risk management system mitigates exposure to market, liquidity and credit risks by ensuring that material risks are identified, the financial impact is understood and tools and limits are in place to manage exposures. Written policies provide the framework for Contact’s financial risk management system. Commodity price risk Contact is exposed to electricity price risk through the sale and purchase of electricity on the wholesale electricity market. Contact’s integrated Wholesale and Retail businesses provide a natural hedge for most of this exposure. Derivatives may be used to fix the price at which Contact buys or sells any residual exposure to electricity price risks. In addition, Contact is party to a fixed price swaption to provide cover in extreme price situations. Contact is also exposed to natural gas price risk on purchases of natural gas. Short- and long-term gas purchase contracts are used to fix the price of gas. These are not derivative financial instruments. Related to this, Contact is exposed to carbon price risk on its carbon obligations. Spot purchases, forward purchases and auction participation are used to manage the price risk relating to carbon. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 116 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 Summary of derivative financial instruments A summary of the exposures from derivatives and the impact on Contact’s financial position is provided below grouped by type of hedge relationship. Further information on hedging activities and fair value of derivatives is provided in notes E8 and E9. Fair value hedge Cash flow and fair value hedge $m 2022 Notional amount of derivatives Maturity years Average rate/price Cash flow hedge Electricity price derivatives Foreign exchange contracts No hedge relationship Electricity price derivatives IRS 350 CCIRS IRS 376 1,195 13,833 GWh 118 2,456 GWh 2022 – 2029 2023 – 2028 2022 – 2027 2022 – 2039 2022 – 2026 2022 – 2025 4.5% 5%/0.75USD1 3.1% $99/MWh Various2 $145/MWh Carrying value of derivatives – asset – 75 37 3 3 33 Carrying value of derivatives – liability (16) (5) (4) (154) (5) (42) Carrying value of hedged borrowings (331) (448) – – – Fair value adjustments to borrowings 16 (71) – – – – – 2021 Notional amount of derivatives 188 376 800 6,160 GWh 179 1,220 GWh Maturity years Average rate/price 2021 – 2024 2023 – 2028 2021 – 2027 2021 – 2025 2021 – 2026 2021 – 2024 1.7% 2.5%/0.75USD 3.2% $83/MWh Various $128/MWh Carrying value of derivatives – asset 5 59 5 32 3 22 CONTENTS Carrying value of derivatives – liability – (5) (53) (93) (2) (24) FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 117 Carrying value of hedged borrowings (192) (436) – – – – Fair value adjustments to borrowings (5) (59) – – – – Average interest rates for IRS and CCIRS are based on their pay legs. For pay-float swaps (CCIRS and IRS in fair value hedges), the rate comprises the floating base rate plus the margin. The CCIRS liability arises from the cash flow hedge component. Notionals, maturities and average prices for electricity price hedges not in hedge relationships do not include options not yet called. 1 The NZD/USD closing spot rate at 30 June 2022 was 0.62. 2 Average exchange rates include 0.93 AUD, 0.58 EUR, 0.68 USD and 76.74 JPY. Total 151 (226) (779) (55) 126 (176) (628) (64) Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 Change in fair value of derivatives recognised in the statement of comprehensive income $m 2022 Hedge ineffectiveness Hedge effectiveness Non-hedge movements Fair value hedge Cash flow and fair value hedge IRS CCIRS IRS Cash flow hedge Electricity price derivatives Foreign exchange contracts No hedge relationship Electricity price derivatives – – 24 – – – (21) 12 – – – – – – – – – (10) Fair value adjustments to hedged borrowings 21 (12) – – – – Total change in fair value of financial instruments recognised in profit/(loss) – – 24 – – (10) Hedge effectiveness recognised in OCI – 4 52 (125) (2) – Amortisation of hedge reserve balance – – – (10) (1) – Amounts reclassified to profit/(loss) – – 5 38 – – 2021 Hedge ineffectiveness Hedge effectiveness Non-hedge movements – – 8 – – – (7) (73) – – – – – – – – – (1) Fair value adjustments to hedged borrowings 7 73 – – – – Total change in fair value of financial instruments recognised in profit/(loss) – – 8 – – (1) CONTENTS Hedge effectiveness recognised in OCI – (3) 27 (61) 1 – FY22 SUMMARY Amounts reclassified to profit/(loss) – – 7 25 – – Total 24 (9) (10) 9 14 (71) (11) 43 8 (80) (1) 80 7 (37) 32 WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 118 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 Sensitivities The table (right) summarises the impact on derivative valuations of possible changes in forward wholesale electricity prices and forward interest rates. The analysis assumes that all variables were held constant except for the relevant market risk factor. The amounts in the table represent the impact of changes in the market risk factors on the derivative valuations. These movements would be offset elsewhere by an opposite movement on the hedged item. $m Favourable/(unfavourable) Hedging impact on hedge reserves Forward interest rates Forward electricity prices Forward foreign exchange rates Hedging impact on post-tax profit/(loss) Forward interest rates Forward electricity prices 2022 2021 8 (7) (76) 76 11 (8) 2 2 (6) 6 12 (2) (27) 28 18 (14) 7 – 1 (1) +100bps -25bps +10% -10% +10% -10% +100bps -25bps +10% -10% D2. Liquidity risk To manage liquidity risk, Contact maintains a diverse portfolio of funding, debt maturities are spread over a number of years and any new financing or refinancing requirements are addressed with an appropriate lead time. Contact maintains a buffer of undrawn bank facilities over its forecast funding requirements to enable it to meet any unforeseen cash flows. Management monitors the available liquidity buffer by comparing forecast cash flows to available facilities to ensure sufficient liquidity is maintained in accordance with internal limits. Information on contracted cash flows in the table (right) is presented on an undiscounted basis. CCIRS cash flows are included within Borrowings in the table. US dollar inflows on the CCIRS offset the US dollar outflows on the USPP notes. $m 2022 Trade and other payables Borrowings Electricity price derivatives – net settled IRS – net settled Foreign exchange derivatives – inflow Foreign exchange derivatives – outflow 2021 Trade and other payables Borrowings Electricity price derivatives – net settled IRS – net settled Foreign exchange derivatives – inflow Foreign exchange derivatives – outflow Total contractual cash flows Less than 1 year 1–2 years 2–5 years More than 5 years (177) (1,296) (157) 16 116 (118) (1,617) (197) (918) (64) 3 178 (180) (177) (234) (67) (6) 104 (106) (486) (197) (193) (27) (8) 93 (93) – – – (198) (53) 2 6 (6) (330) (64) 19 6 (6) (535) 27 1 – – (249) (375) (507) – – – (139) (23) (3) (463) (14) 13 (123) – 1 74 11 – (75) (12) – (1,178) (425) (166) (465) (122) CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 119 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 D3. Credit risk Total credit risk exposure is measured by the financial instruments in an asset position of $530 million (2021: $476 million). To minimise credit risk exposure, Contact has a policy to only transact with credit worthy counterparties and to not exceed internally imposed exposure limits to any one counterparty. Where appropriate, collateral is obtained. Further information on customer related credit risk is provided in note E4. E. Other disclosures E1. Tax Tax expense is made up of current tax expense and deferred tax expense. Current tax expense relates to the current financial reporting period while deferred tax will be payable in future periods. Tax is recognised in profit, except when it relates to items recognised directly in OCI. $m Profit before tax Tax at 28% Tax effect of adjustments: – Other Tax expense Current Deferred 2022 253 (71) – (71) (87) 16 2021 261 (73) (1) (74) (91) 17 Contact’s deferred tax liability is calculated as the difference between the carrying value of assets and liabilities for financial reporting purposes and the values used for taxation purposes. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 120 $m Balance at 1 July 2020 Recognised in profit/(loss) Recognised in balance sheet Recognised in OCI Recognised in other reserves Balance at 30 June 2021 Recognised in profit/(loss) Recognised in balance sheet Recognised in OCI Recognised in other reserves PP&E and intangible assets Derivative financial instruments Other Total (712) 16 (3) – – (699) 26 – – – 34 (2) – 25 3 (1) 2 – – 34 (8) – 8 – 34 1 28 (2) (2) – (1) 23 (653) 17 (4) 2 1 (637) 16 (2) 8 (1) (616) Balance at 30 June 2022 (673) E2. Operating expenses Other operating expenses (note A2) include total labour costs of $107 million (2021: $111 million). Labour costs include contributions to KiwiSaver of $4 million (2021: $3 million). Audit fees paid to Contact’s auditor (KPMG) amounted to $564,500 for review of the interim, and audit of the year end, financial statements (2021: $541,000). Other fees paid to the auditor were $100,500 for other assurance work (2021: $53,750), and $3,500 for supervisor reporting (2021: $3,500). Other assurance work relates to review of greenhouse gas emissions reporting, Global Reporting Initiative indicators and our Green Borrowing Programme. E3. Inventories Contact’s inventories comprise gas in storage for use in thermal generation, consumables and spare parts for power stations, and diesel fuel for use in the Whirinaki power plant. Inventory gas is measured at weighted average cost. All other inventories are stated at cost. $m Inventory gas Consumables and spare parts Diesel fuel 2022 2021 41 13 4 58 56 10 3 69 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 E4. Trade and other receivables $m Trade receivables Unbilled receivables Provision for impairment Net trade receivables Contract assets Prepayments 2022 133 83 (2) 214 7 6 2021 168 76 (2) 242 9 4 Trade and unbilled receivables are recognised net of discounts based on past experience of the amount of discounts taken up by customers. Unbilled receivables represent Contact’s best estimate of unbilled retail sales at the end of the reporting period. The estimate uses smart meter data to determine the relevant unbilled amount for the period. Consumption history is used if smart meter data is not available. Ageing of trade receivables past due but not impaired are: $m Less than one month Greater than one month $m Opening balance Additions Amortised to revenue Closing balance 227 255 Amortised to operating expenses 2022 2021 $m 11 3 14 12 4 16 Trade payables and accruals Employee benefits Interest payable Other liabilities Trade and other payables Contract assets Contact capitalises the incremental costs incurred to acquire new customers and amortises these costs to operating expenses over the expected life of the customer relationship. Incentives given to customers are also capitalised as a contract asset and amortised to revenue over a period of one to three years. Of the total contract assets balance, $5 million (2021: $7 million) is expected to be amortised within one year of the reporting period end and the remainder between one to three years of the reporting period end. E5. Trade and other payables 2022 2021 9 6 (7) (1) 7 13 8 (10) (2) 9 2022 211 17 4 29 261 2021 251 27 3 24 305 When Contact has been unable to collect amounts due from customers those debts are written off. Trade receivables, net of recoveries, of $2 million (2021: $1 million) were written off during the reporting period. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 121 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 Other Total Change in fair value of financial instruments (14) E6. Provisions Contact recognises restoration and environmental rehabilitation provisions for the expected costs to abandon and restore geothermal wells and generation sites and to remove asbestos from properties. Other provisions include $8 million for Simply Energy performance payments (2021: $8 million). $m Balance at 1 July 2021 Created Released Utilised Unwind of discount Balance at 30 June 2022 Current Non-current Restoration/ environmental rehabilitation (50) (1) – 1 (5) (55) (5) (50) (24) (3) 7 2 – (18) (10) (8) (74) (4) 7 3 (5) (73) (15) (58) These provisions are based on estimates of future cash flows to make good the affected sites at the end of the assets’ useful lives. The expected future cash flows are discounted to their present value using a pre-tax discount rate equivalent to a post-tax rate of between 6.5% and 7.5%. E7. Profit to operating cash flows A reconciliation of profit to operating cash flows is provided below. $m Profit Depreciation and amortisation Amortisation of contract assets 2022 182 262 8 Hedge reserve balance to be amortised Movement in provisions Deferred finance costs Bad debt expense Share-based compensation Share of profit/loss in associates Changes in assets and liabilities, net of non-cash, investing and financing activities Trade and other receivables Inventories and intangible assets Trade and other payables Tax payable Deferred tax Operating cash flows (10) (4) 1 3 4 3 20 8 (45) (3) (15) 400 2021 187 249 11 (7) – 2 1 2 2 1 (68) (35) 92 11 (16) 432 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 122 E8. Hedging activities Contact has designated derivatives used to manage market risks into fair value and cash flow hedge relationships. A hedge ratio of 1:1 is applied for all hedge relationships, as the notional value of the derivative matches the notional value of the hedged item. Fair value hedges Interest rate risk The derivatives (IRS) Contact uses to manage its interest rate risk meet the criteria for hedge accounting where they directly relate to issued debt. The hedge is against future fair value movements in the debt and can be for a portion of the debt. Contact has designated $350 million of retail bonds into fair value hedge relationships with receive-fixed, pay-floating IRS. The fixed interest rates and other terms match the relevant bond to create an economic relationship. Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 The bonds are recognised at amortised cost. Both the hedged risk and the hedging instrument (IRS) are recognised at fair value. The change in the fair value of both items is recognised in profit/(loss) and will offset to the extent the hedging relationship is effective. There are no material sources of ineffectiveness. Cash flow hedges The derivatives Contact uses to manage exposure to wholesale electricity prices, floating interest rate risk and foreign exchange rates usually qualify for cash flow hedge accounting. For cash flow hedges, only the derivative is recognised at fair value with the effective portion of all changes in fair value recognised in the cash flow hedge reserve. Any ineffective portion is recognised immediately in profit/(loss). Amounts recognised in the cash flow hedge reserve are reclassified to profit/(loss) or the Statement of Financial Position according to the nature of the hedged item. The movement in hedge reserves is reconciled below. Note 2022 2021 $m Opening balance Effective portion of cash flow hedges D1 Amortisation of hedge reserve Transferred to revenue Transferred to deferred tax Closing balance (51) (71) (11) 43 8 (82) (49) (37) – 33 2 (51) Included in the closing balance at 30 June 2022 is $2 million relating to the cost of hedging reserve (2021: $3 million). Commodity price risk Contact designates forecast electricity sales and purchases into cash flow hedges with electricity price derivatives. Volumes are matched to create an economic relationship. There are no material sources of ineffectiveness. Interest rate risk Contact designates a certain level of its floating rate exposure into cash flow hedges with receive-floating, pay-fixed IRS in line with set internal policies. An economic relationship exists between the floating rate exposure and the IRS based on the reference interest rate. Ineffectiveness arises due to IRS that have been designated into hedge relationships part way through their term. These IRS were designated on 1 July 2018 on adoption of NZ IFRS 9. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 123 Combined fair value and cash flow hedges Contact has designated all its USPP notes into both fair value and cash flow hedge relationships with CCIRS, depending on the component of the USPP note being hedged: • For the fair value hedges the change in fair value of the USPP note is recognised in profit/(loss) to offset the change in fair value of the relevant CCIRS component. • For the cash flow hedges the change in fair value of the CCIRS component is recognised in the cash flow hedge reserve. • The cost to convert foreign currency cash flows under CCIRS is excluded from the hedge relationship and recognised in the cost of hedging reserve. An economic relationship exists based on the reference interest rates, exchange rate and other terms. There are no material sources of ineffectiveness. Derivatives not in hedge relationships These are electricity price derivatives purchased and sold as part of a requirement to participate in the ASX futures electricity market, electricity derivatives entered into for profit-making, financial transmission rights and electricity price options. All changes in fair value of these derivatives are recognised directly in profit/(loss). E9. Financial instruments at fair value Fair value Contact uses discounted cash flow valuations with market observable data, to the extent that it is available, in estimating the fair value of all derivatives and borrowings. The key variables used in these valuations are forward prices (for the relevant underlying interest rates, foreign exchange rates and wholesale electricity prices) and discount rates (based on the forward IRS curve adjusted for counterparty risk). All inputs are sourced or derived from market information except for forward wholesale electricity prices which are: • derived from ASX market quoted prices adjusted for Contact’s estimate of the effect of location and seasonality, or • when quoted prices are not available or relevant (i.e. long dated and large contracts), Contact’s best estimate of the cost of new supply is used. This is derived using key unobservable inputs, relevant wholesale market factors and management judgement. Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 Additional key inputs and assumptions used to determine the fair value of electricity derivatives include Contact’s best estimate of volumes called over the life of electricity options and forward quoted commodity prices (e.g. adjustments as a consequence of initial recognition differences). E10. Financial instruments at amortised cost The value of financial instruments carried at amortised cost is provided in the table below. The following table provides a breakdown of the fair value of derivatives by the source of key valuation inputs: $m $m Sourced from market data Derived from market data Electricity price estimates 2022 2021 (81) 86 (81) (76) (20) 12 (42) (50) Cash and cash equivalents Trade and other receivables Trade and other payables Borrowings The fair value of borrowings is $1,105 million (2021: $852 million). This fair value is derived from market data. 2022 168 211 (177) (1,044) 2021 150 207 (197) (792) The electricity price derivatives most affected by estimates are reconciled below: E11. Share-based compensation $m Opening balance Gain/(loss) in profit/(loss): – wholesale electricity revenue Gain/(loss) in OCI Instruments issued Closing balance 2022 (42) 16 (21) (34) (81) 2021 (11) 10 (4) (37) (42) Equity Scheme Contact provides an equity award to certain eligible employees made up of performance share rights (PSRs) and deferred share rights (DSRs). Options are no longer issued and all outstanding options were exercised or lapsed during the year. If performance hurdles are met, or there is a company change in control, the awards vest and become exercisable. On exercise, PSRs and DSRs convert to ordinary shares at no cost to the employee. There are no holding/ retention periods or ownership requirements for employees who exercise equity rights. The awards lapse if the performance hurdles are not met, if they are not exercised by the lapse date or if an employee voluntarily leaves Contact. The scheme continues on redundancy but the entitlements are adjusted. For these derivatives a 10% increase in the electricity price would result in an unfavourable movement in fair value of $78 million (2021: $20 million) and a 10% decrease would result in a favourable movement in fair value of $78 million (2021: $21 million). Outstanding options and weighted average exercise price Balance at 1 July 2020 Lapsed Balance at 30 June 2021 Exercised Lapsed Balance at 30 June 2022 Options Number outstanding 1,499,654 (555,559) 944,095 (660,866) (283,229) – Price $5.33 $4.97 $5.54 $5.54 $5.54 – CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 124 Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 Outstanding PSRs and DSRs Number outstanding Balance at 1 July 2020 Granted Exercised Lapsed These shares have a weighted average remaining life of 1 year and 4 months (2021: 1 year and 4 months). PSRs DSRs 586,515 670,179 Changes in share-based compensation reserve Note 2022 2021 228,761 301,355 $m – (434,021) Opening balance (151,518) (33,141) Exercised share scheme awards Balance at 30 June 2021 663,758 504,372 Lapsed share scheme awards Granted Exercised Lapsed 232,556 497,697 Share-based compensation expense (223,869) (273,197) Deferred tax on share scheme E1 (100,305) (15,671) Closing balance 8 (3) (1) 4 – 8 8 (4) – 3 1 8 Balance at 30 June 2022 572,140 713,201 PSRs had a weighted average remaining life of 2 years and 6 months (2021: 1 year and 11 months) and DSRs had 1 year and 1 month (2021: 11 months). Contact Share Contact Share is Contact’s employee share ownership plan that enables eligible employees to acquire a set number of Contact’s ordinary shares. The shares are issued and legally held by a trustee company for a restrictive period of three years, during which time the employee is entitled to receive distributions and direct the exercise of voting rights that attach to shares held on their behalf. At the end of the restrictive period the shares are transferred to the employee. Employees who leave Contact due to redundancy, and in certain other circumstances, may have their shares transferred at that time; all other employees who leave Contact have their shares transferred to an unallocated pool. Shares in the unallocated pool can be used by the trustee company for future allocations under Contact Share. Number outstanding Balance at 1 July 2020 Shares purchased Transferred to employees Balance at 30 June 2021 Shares issued Transferred to employees Balance at 30 June 2022 Contact Share 278,155 87,741 (98,234) 267,662 66,172 (89,933) 243,901 CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 125 Share-based compensation expense Share-based compensation expense is based on the fair value of the awards granted, adjusted to reflect the number of awards expected to vest. The fair values of awards granted during the reporting period are: $ per share 9 8 7 6 5 4 3 2 1 0 PSRs – with Relative TSR hurdle PSRs – with internal hurdle DSRs Contact Share Key inputs in determining the fair values Risk-free interest rate Expected dividend yield Expected share price volatility 2022 1% 5% 30% 2022 2021 2021 0.1% 6% 25% Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 E12. Related parties Contact group entities Name of entity Subsidiaries Principal activity Holding Country Simply Energy Limited Energy solutions 100% New Zealand Western Energy Services Limited Geothermal well services 100% New Zealand Contact Energy Trustee Company Limited Trust for Contact Share 100% New Zealand Capital contributions Contact Energy Risk Limited Captive insurance 100% Cook Islands Associates Drylandcarbon One Limited Partnership Investment in forestry 16.5% New Zealand Forest Partners Limited Partnership Investment in forestry 14% New Zealand Western Energy Services Limited During the financial year, Contact finalised the acquisition accounting for Western Energy Services Limited. $8 million has been allocated to brand and intellectual property, with a related $2m deferred tax liability, resulting in a $6 million reduction of goodwill. Refer to the related parties disclosure in the 2021 Annual Report for provisional calculations at 30 June 2021, which have been restated. Drylandcarbon One Limited Partnership and Forest Partners Limited Partnership On 11 April 2022, Contact acquired 14% of Forest Partners Limited Partnership (Forest Partners) by committing to invest up to $37.5 million of capital over the next five years. Both Drylandcarbon and Forest Partners invest in afforestation projects on economically marginal land in New Zealand to produce a stable supply of carbon units which will offset Contact’s carbon obligations. Drylandcarbon and Forest Partners are accounted for as associates, as Contact has significant influence over both entities through its participation in financial and operating policy decisions being equivalent to the other investors. Contact applies the equity method of accounting for its investments in Drylandcarbon and Forest Partners. The initial investments are recognised at cost and are subsequently adjusted for Contact’s share of the entity’s profits or losses. CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 126 Related party transactions Contact’s related parties also include its Directors and the Leadership Team (LT). Transactions with Simply up until acquisition date are disclosed below. Received/(paid) $m Simply Energy Limited Electricity contracts Drylandcarbon One Limited Partnership Forest Partners Limited Partnership Capital contributions Key management personnel Directors’ fees LT – salary and other short-term benefits1 LT – share-based compensation expense Balances payable at end of the year Key management personnel 2022 2021 – (9) (2) (1) (7) (1) (1) 1 (7) – (1) (5) (1) (2) 1. Salary and other short-term benefits is the cash amount paid in the year Members of the LT and directors purchase goods and services from Contact for domestic purposes on normal commercial terms and conditions. For members of the LT this includes the staff discount available to all eligible employees. E13. New accounting standards There are no new accounting standards issued but not yet effective which materially impact Contact. E14. Contingencies In the normal course of business, Contact is subject to inquiries, claims and investigations. In late 2021 Contact was notified of an unexpected and unexplained increase in pressure recorded in the Ahuroa Gas Storage facility by the owner and operator, Flexgas, to whom Contact sold the facility in 2018. This suggests the current storage capacity of the facility is less than previously thought, which may impact the storage capacity available to Contact. Contact and Flexgas have formed a joint technical working group to investigate these concerns and assess whether there are actions that could be taken to improve the performance of the facility. The technical working group is expected to report back within the next reporting period. There are no other material matters to disclose in this respect at 30 June 2022. Contact INTEGRATED REPORT 2022Notes to the financial statements for the year ended 30 June 2022 t r o p e r s ’ r o t i d u A t n e d n e p e d n I 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 127 Combined Independent Auditor’s and Limited Assurance Report General Our assurance procedures consisted of the audit of the Consolidated Financial Statements of Contact Energy Limited and limited assurance procedures in relation to Contact Energy Limited’s Global Reporting Initiative (‘GRI’) disclosures within Contact Energy Limited’s Annual Report. Our scope can be summarised as follows: Consolidated Financial Statements GRI Disclosures Audit Scope Reasonable assurance Assurance Scope Limited assurance Other Information in Contact Energy Limited’s Annual Report Consider consistency with Consolidated Financial Statements No assurance Independent Auditor’s Report To the shareholders of Contact Energy Limited Report on the audit of the consolidated financial statements Opinion In our opinion, the accompanying consolidated financial statements of Contact Energy Limited (the ’company’), the entities over which it has control and its associates (the 'group') on pages 102 to 126: i. present fairly in all material respects the Group’s financial position as at 30 June 2022 and its financial performance and cash flows for the year ended on that date; and ii. comply with New Zealand Equivalents to International Financial Reporting Standards and International Financial Reporting Standards. We have audited the accompanying consolidated financial statements which comprise: • the consolidated statement of financial position as at 30 June 2022; • the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended; and • notes, including a summary of significant accounting policies and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We are independent of the group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the consolidated financial statements section of our report. Please refer to the section of our report entitled “Our independence and quality control” below for detail of the other services we have provided to the group. Scoping The scope of our audit is designed to ensure that we perform adequate work to be able to give an opinion on the consolidated financial statements as a whole, taking into account the structure of the group, the financial reporting systems, processes and controls, and the industry in which it operates. The context for our audit is set by the group's major activities being wholesale electricity generation and an electricity retailer in the financial year ended 30 June 2022. Materiality The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the consolidated financial statements as a whole. The materiality for the consolidated financial statements as a whole was set at $12.5 million determined with reference to a benchmark of group profit before tax. We chose the benchmark because, in our view, this is a key measure of the group’s performance. Contact INTEGRATED REPORT 2022 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that the shareholders as a body may better understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate elements of the consolidated financial statements. The key audit matter How the matter was addressed in our audit Carrying value of cash-generating units – Note C2 of the financial statements The Group separates its business into two cash- generating units (CGUs) for the purpose of asset impairment testing. The value of each CGU, including any allocated goodwill, is supported by a discounted cash flow model which is inherently subjective. In terms of the Wholesale CGU we focus on the generation assets due to the significance of the assets relative to the Group’s financial position and goodwill related to recent acquisitions. Our focus for the customer CGU is the valuation of goodwill of $179 million. The key judgements in determining the CGUs’ value in use are: forward electricity prices, future generation volumes, customer transfer price and margin, forecast operating and asset costs, the terminal growth rate and the discount rate applied to the future cash flows. Our work to assess whether the Group should recognise any impairment to the CGUs included ensuring the methodology adopted in the model is consistent with accepted valuation approaches. We also assessed whether the modelled cash flows appropriately reflect the Group’s strategy and budget. As part of this we considered the appropriateness of inclusion of the Tauhara future generation development within the wholesale CGU. We tested the significant judgements in the modelled cash flows by comparing: • forward electricity prices to external projections; • future generation volumes to historical volumes; • customer transfer price and margin to budget, historic data; • operating costs and asset renewal costs to historical levels and budgets; and • the modelled terminal growth and discount rates to our own independently determined rates. We challenged the assumptions by performing a sensitivity analysis, considering a range of likely outcomes based on various scenarios. We are satisfied that the key assumptions are within acceptable ranges and in line with current market view. As an overall test we compared the market-based enterprise value of $6.7 billion to the Group’s carrying value at 30 June 2022 of $4.4 billion. Other information The Directors, on behalf of the group, are responsible for the other information included in the entity’s Annual Report. Other information includes Key activity this financial year, Chair/CEO report, Who we are, Creating value, Strategic themes, Strategic enablers, Governance matters and Additional disclosures. Our opinion on the consolidated financial statements does not cover any other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Use of this independent auditor’s report This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been undertaken so that we might state to the shareholders those matters we are required to state to them in the independent auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the shareholders as a body for our audit work, this independent auditor’s report, or any of the opinions we have formed. Responsibilities of the Directors for the consolidated financial statements The Directors, on behalf of the company, are responsible for: • the preparation and fair presentation of the consolidated financial statements in accordance with generally accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial Reporting Standards) and International Financial Reporting Standards; • implementing necessary internal control to enable the preparation of a consolidated set of financial statements that is fairly presented and free from material misstatement, whether due to fraud or error; and • assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so. t r o p e r s ’ r o t i d u A t n e d n e p e d n I 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 128 Contact INTEGRATED REPORT 2022 t r o p e r s ’ r o t i d u A t n e d n e p e d n I 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 129 Auditor’s responsibilities for the audit of the consolidated financial statements Our objective is: • to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error; and • to issue an independent auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (NZ) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of these consolidated financial statements is located at the External Reporting Board (XRB) website at: http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors- responsibilities/audit-report-1/ This description forms part of our independent auditor’s report. Independent limited assurance report on the GRI Disclosures To the Directors of Contact Energy Limited Conclusion Our limited assurance conclusion has been formed on the basis of the matters outlined in this report. Based on our limited assurance engagement, nothing has come to our attention that would lead us to believe that the Global Reporting Initiative disclosures of the company (as referenced on pages 96 to 100 in the GRI index within the Annual Report) (‘GRI disclosures’) have not, in all material respects, been prepared in accordance with the Global Reporting Initiative Reporting Standards 2021 (‘GRI Standards’), for the period 1 July 2021 to 30 June 2022. Basis for conclusion We have performed an engagement to provide limited assurance in relation to whether anything has come to our attention to indicate the GRI disclosures have not been prepared in all material respects in accordance with the GRI Standards for the year ended 30 June 2022. Standards we followed We conducted our limited assurance engagement in accordance with International Standard on Assurance Engagements (New Zealand) 3000 (Revised) Assurance Engagements other than audits or reviews of historical financial information and Standard on Assurance Engagements SAE 3100 (Revised) Assurance Engagements on Compliance. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. In accordance with those standards we have: • used our professional judgement to plan and perform the engagement to obtain limited assurance that the information subject to assurance is free from material non-compliance, whether due to fraud or error; • considered relevant internal controls when designing our assurance procedures, however we do not express a conclusion on the effectiveness of these controls; and • ensured that the engagement team possess the appropriate knowledge, skills and professional competencies. Use of this limited assurance report Our report should not be regarded as suitable to be used or relied on by any parties other than Contact Energy Limited for any purpose or in any context. Any party other than Contact Energy Limited who obtains access to our report or a copy thereof and chooses to rely on our report (or any part thereof) will do so at its own risk. To the fullest extent permitted by law, we accept or assume no responsibility and deny any liability to any party other than Contact Energy Limited for our work, for this independent limited assurance report, or for the conclusions we have reached. We acknowledge a copy of our limited assurance report is included in Contact Energy Limited’s Annual Report for information purposes only. Management’s responsibility for the GRI indicators Management of the company are responsible for the preparation and fair presentation of the GRI disclosures in all material respects in accordance with the GRI standards, and the information and assertions contained within the Annual Report. This responsibility includes such internal control as Management determine is necessary to enable the preparation of the GRI Disclosures that is free from material misstatement and non-compliance whether due to fraud or error. Our responsibility Our responsibility is to express a conclusion to the directors on whether anything has come to our attention that the GRI disclosures of Contact Energy Limited have not, in all material respects, been prepared in accordance with the GRI standards for the year ending 30 June 2022. Contact INTEGRATED REPORT 2022 Procedures performed A limited assurance engagement consists of making inquiries, primarily of persons responsible for the preparation of information presented in the GRI disclosures, and applying analytical and other evidence gathering procedures, as appropriate. These procedures included: • Inquiries of management to gain an understanding of Contact Energy Limited’s processes for determining the material issues for Contact Energy Limited’s key stakeholder groups; • Interviews with senior management and relevant staff concerning sustainability strategy and policies for material issues, and the implementation of these across the business; • Interviews with relevant staff responsible for providing the information in the GRI disclosures; • Comparing the information presented in the GRI disclosures to corresponding information in the relevant underlying sources to determine whether all the relevant information contained in such underlying sources has been included in the GRI disclosures; and • Reading the information presented in the GRI disclosures to determine whether it is in line with our overall knowledge of, and experience with, the sustainability performance of Contact Energy Limited. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement, and consequently the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained has a reasonable assurance engagement been performed. Due to the inherent limitations of any internal control structure it is possible that errors or irregularities in the information presented in the GRI disclosures may occur and not be detected. Our engagement is not designed to detect all weaknesses in the internal controls over the preparation and presentation of the GRI disclosures, as the engagement has not been performed continuously throughout the period and the procedures performed were undertaken on a test basis. Our independence and quality control We have complied with the independence and other ethical requirements of Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. The firm applies Professional and Ethical Standard 3 (Amended) and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Our firm has provided services to Contact Energy Limited in relation to statutory audit, trustee reporting and other assurance for Greenhouse gas emissions reporting, Green Borrowings Programme reporting and Global Initiative Reporting. Subject to certain restrictions, partners and employees of our firm may also deal with the Contact Energy Limited on normal terms within the ordinary course of trading activities of the business of the Contact Energy Limited. These matters have not impaired our independence as assurance providers of Contact Energy Limited for this engagement. The firm has no other relationship with, or interest in, Contact Energy Limited. The partner on the engagement resulting in this Combined Independent Auditor’s and Limited Assurance Report is Sonia Isaac. Sonia Isaac KPMG Wellington 12 August 2022 t r o p e r s ’ r o t i d u A t n e d n e p e d n I 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f CONTENTS FY22 SUMMARY WHO WE ARE CREATING VALUE STRATEGIC THEMES STRATEGIC ENABLERS GOVERNANCE MATTERS ADDITIONAL DISCLOSURES FINANCIAL STATEMENTS 130 Contact INTEGRATED REPORT 2022 Contact INTEGRATED REPORT 2022 y r o t c e r i d e t a r o p r o C 131 Corporate directory Board of Directors Robert McDonald (Chair) Victoria Crone Sandra Dodds Jon Macdonald David Smol Rukumoana Schaafhausen Elena Trout Leadership team Mike Fuge Chief Executive Officer Chris Abbott Chief Corporate Affairs Officer Jack Ariel Major Projects Director Jan Bibby Chief People and Transformation Officer Matt Bolton Chief Retail Officer John Clark Chief Generation Officer Dorian Devers Chief Financial Officer Iain Gauld Chief Information Officer Jacqui Nelson Chief Development Officer Tighe Wall Chief Digital Officer Registered office Contact Energy Limited Harbour City Tower 29 Brandon Street Wellington 6011 New Zealand T +64 4 499 4001 Find us on Facebook, Twitter, LinkedIn and YouTube by searching for Contact Energy Company secretary Kirsten Clayton General Counsel and Company Secretary Company numbers NZ Incorporation 660760 ABN 68 080 480 477 Auditor KPMG PO Box 996 Wellington 6140 Utilities Disputes 0800 223 340 If you live around one of our power stations or offices and want to get in touch, give us a shout on 0800 000 458 (North Island) or 0800 66 33 35 (South Island). Registry Change of address, payment instructions and investment portfolios can be viewed and updated online: investorcentre.linkmarketservices.co.nz investorcentre.linkmarketservices.com.au New Zealand Registry Link Market Services Limited PO Box 91976, Auckland 1142 Level 30, PWC Tower 15 Customs Street West Auckland, 1010 contactenergy@linkmarketservices.co.nz T + 64 9 375 5998 Australian Registry Link Market Services Limited, Locked Bag A14, Sydney South, NSW 1235 680 George Street, Sydney, NSW 2000 contactenergy@linkmarketservices.com.au T +61 2 8280 7111 Investor relations enquiries Matthew Forbes GM Corporate Finance investor.centre@contactenergy.co.nz Sustainability enquiries Taria Tahana Head of Sustainability sustainability@contact.co.nz contact.co.nz