WEBVTT - What’s going on with NZ's power grid? 0:00:03.840 --> 0:00:08.039 Jakoto. Welcome to shared Lunch. I'm Garth Bray. Mercury Energy 0:00:08.160 --> 0:00:11.440 is one of our largest electricity generators, just over nine 0:00:11.480 --> 0:00:14.680 point one billion dollars by market cap. A year ago. 0:00:14.960 --> 0:00:18.360 Mercury's board put Stu Hamilton in the top job, just 0:00:18.400 --> 0:00:22.200 as dwindling gas supplies and lower rainfall hit generation and 0:00:22.320 --> 0:00:25.400 retail margins pretty hard. But it's not just how you 0:00:25.480 --> 0:00:28.640 take the hit, it's how you rise again. So how 0:00:28.640 --> 0:00:31.400 will Mercury rise and what will the second year look 0:00:31.520 --> 0:00:34.280 like for the new CEO? Before we head inside to 0:00:34.320 --> 0:00:37.360 find out, it's some important information you should always consider 0:00:37.440 --> 0:00:38.120 when investing. 0:00:38.400 --> 0:00:41.000 Investing involves for risk you might lose the money you 0:00:41.040 --> 0:00:44.320 start with. We recommend talking to a licensed financial advisor. 0:00:45.040 --> 0:00:48.880 We also recommend reading product disclosure documents before deciding to invest. 0:00:49.159 --> 0:00:51.519 Everything you're about to see and here is current at 0:00:51.520 --> 0:00:52.440 the time of recording. 0:00:52.720 --> 0:00:56.480 Stu Hamilton, thank you so much for making time for us. Welcome, 0:00:56.560 --> 0:01:00.040 great happy anniversary. I understand it must be with a 0:01:00.120 --> 0:01:04.000 few days away from your first year, right. Actually, yeah, 0:01:04.040 --> 0:01:06.640 so you got your first result that you've put out there, 0:01:07.040 --> 0:01:09.480 first full year result just the other day. Do you 0:01:09.520 --> 0:01:11.119 mind sort of running us through the numbers a little 0:01:11.120 --> 0:01:12.120 bit giving us the highlights. 0:01:12.160 --> 0:01:15.200 Yeah, absolutely so first full year result for myself. Obviously, 0:01:15.200 --> 0:01:19.120 it's been a really challenging twelve months for the sector 0:01:19.160 --> 0:01:20.920 and actually New Zealand in general. And if you look 0:01:20.959 --> 0:01:23.880 at the result, we had an even DAFH of seven 0:01:23.959 --> 0:01:25.160 hundred and eighty six million. 0:01:25.560 --> 0:01:27.600 It's a good number. 0:01:27.560 --> 0:01:30.479 Considering the year that we had and the reason why 0:01:30.560 --> 0:01:32.840 we had a challenge in year one was because it 0:01:32.880 --> 0:01:35.560 was very very dry, one of the driest on record, 0:01:36.040 --> 0:01:39.679 and that represents itself in the result, but equally quite 0:01:40.080 --> 0:01:42.520 a good result in that we're actually had a very 0:01:42.560 --> 0:01:45.680 resilient set of assets and a team which able to 0:01:45.720 --> 0:01:48.600 perform very well during those tough conditions. I think that 0:01:48.600 --> 0:01:50.280 a lot of our analysts and our owners were very 0:01:50.320 --> 0:01:52.520 excited about is what we project for the next year 0:01:52.520 --> 0:01:56.080 and beyond. And so for next year we're guiding to 0:01:56.160 --> 0:01:59.080 one billion dollars, which is a great number for us 0:01:59.120 --> 0:02:00.960 to be looking at on the way to a one 0:02:01.000 --> 0:02:03.840 point one to one point two and by twenty thirty 0:02:03.840 --> 0:02:07.000 and that's exciting. And underneath that even further is excitement 0:02:07.040 --> 0:02:09.639 around what we're building. Over half of the money we're 0:02:09.639 --> 0:02:13.960 making is going straight back into new projects or to 0:02:13.960 --> 0:02:16.920 maintain our current projects. And that's exciting because we've got 0:02:17.280 --> 0:02:19.400 a really good balance sheet puts us in a great 0:02:19.400 --> 0:02:24.400 position to really leverage this electrification sort of movement ahead 0:02:24.400 --> 0:02:26.680 of us maintain maintenance. 0:02:26.680 --> 0:02:29.600 Who spends money on maintenance in New Zealand just wait 0:02:29.639 --> 0:02:31.200 till it breaks and then fix it kind. 0:02:31.040 --> 0:02:34.639 Of thing, And that's a really good thing from our industry. Actually, 0:02:34.720 --> 0:02:38.360 look at we actually got got a lot of really 0:02:38.400 --> 0:02:40.520 amazing assets that are up to one hundred years old. 0:02:40.639 --> 0:02:43.040 We have these amazing hydra assets that have been built. 0:02:43.280 --> 0:02:44.440 Now's our time. 0:02:44.240 --> 0:02:46.880 To actually reinvest into them, so they've got another hundred 0:02:46.919 --> 0:02:47.840 years to go in more. 0:02:48.840 --> 0:02:50.880 Can you give me a sense of how you can 0:02:50.919 --> 0:02:54.040 be so confident in a business where basically, if it rains, 0:02:54.040 --> 0:02:56.400 you make money. How can you be so confident with 0:02:56.480 --> 0:02:59.320 that forward guidance that people seem. 0:02:59.120 --> 0:03:02.200 To have business where we make money when there is fuel, 0:03:02.400 --> 0:03:06.800 whether that's water or wind or sun. They're our renewable 0:03:06.800 --> 0:03:10.800 fuels produce electricity. One of the things we have that's 0:03:11.160 --> 0:03:14.000 very useful and a unique to Mercury is a diversity 0:03:14.160 --> 0:03:17.760 of our assets or our power stations. Diversity in terms 0:03:17.800 --> 0:03:20.160 of the types of renewable fuels they use, and also 0:03:20.680 --> 0:03:24.119 diverse in terms of the geographic location. So we have 0:03:24.480 --> 0:03:28.040 hydro just water, we have wind, and we have gef thermal. 0:03:28.440 --> 0:03:30.840 The great thing about gef thermal is that whether it's 0:03:31.160 --> 0:03:34.399 blowing or raining or shining, it keeps producing energy. Where 0:03:34.440 --> 0:03:37.960 we draw this hot liquid out of the ground, extract 0:03:38.040 --> 0:03:40.760 eltricity and then we reinject that liquid back into the ground, 0:03:41.440 --> 0:03:45.480 so base load really really nice. Then with wind we 0:03:45.560 --> 0:03:48.120 actually spread it around the country. So from the far north, 0:03:48.160 --> 0:03:50.440 which we're building a wind farle at the moment near 0:03:50.520 --> 0:03:54.080 Dargable called Cola Koa, to the deep south another project 0:03:54.080 --> 0:03:56.800 of ours called Cora downs too. And you tend to 0:03:56.800 --> 0:03:59.160 find in New Zealand that when the wind's not blowing 0:03:59.160 --> 0:04:01.360 in the north, it's actually the south and vice versas. 0:04:01.400 --> 0:04:05.600 So having that diversity of location is really good. Diversity 0:04:05.640 --> 0:04:07.200 of fuel is really good. So if we do have 0:04:07.240 --> 0:04:10.560 a dryer year, we're better able to manage that risk. Now, 0:04:10.600 --> 0:04:13.360 it does have an impact, but we pride ourselves and 0:04:13.400 --> 0:04:16.240 being able to limit that impact as much as we can. 0:04:16.440 --> 0:04:18.400 The geo thermal stuff, and I know you're an engineer 0:04:18.480 --> 0:04:20.920 by training, so you'll probably be happy to nerd out 0:04:20.920 --> 0:04:23.200 on these things through a bit. But it's not a 0:04:23.240 --> 0:04:26.080 completely carbon neutral process, isn't it. You do get a 0:04:26.080 --> 0:04:28.560 little bit of caress CO two and other gases coming out, 0:04:28.560 --> 0:04:31.560 so it's not a completely net zero. Is there any 0:04:31.600 --> 0:04:33.599 technology that you guys are working on or working with 0:04:33.680 --> 0:04:36.200 others to turn that around or to capture more out 0:04:36.200 --> 0:04:37.880 of that energy stream? 0:04:37.960 --> 0:04:41.000 Yeah, absolutely right, So definitely from a from a geo 0:04:41.120 --> 0:04:45.919 thermal perspective. Firstly, awesome power source, nice space load that 0:04:46.080 --> 0:04:49.400 operates when you do extract the Brian hot Brian out 0:04:49.400 --> 0:04:52.200 of the ground does have some dissolved carbon dioxide in 0:04:52.240 --> 0:04:55.200 it and that gets released to the atmosphere. We have 0:04:56.000 --> 0:04:59.279 both ourselves and others industry looking at how we can 0:04:59.279 --> 0:05:02.599 capture that CO two and then reinjected back into the 0:05:02.600 --> 0:05:05.440 ground so basically becomes a closed loop. And we've been 0:05:05.480 --> 0:05:07.520 pretty successful at one of our sites that we've been 0:05:07.520 --> 0:05:10.440 trialing at the moment, capturing over fifty percent of the 0:05:10.480 --> 0:05:12.920 CO two and reinjecting it into the ground and really 0:05:12.920 --> 0:05:15.120 looking at rolling out to other sites. It's it's a 0:05:15.120 --> 0:05:17.200 little bit like the old soda stream and sodas stream 0:05:17.200 --> 0:05:19.000 bottles and you kind of pressed the button and inject 0:05:19.040 --> 0:05:21.560 the CO two into your soda stream bottle. 0:05:21.640 --> 0:05:22.240 It's the same thing. 0:05:22.279 --> 0:05:24.839 We're kind of injecting that CO two back into the 0:05:24.839 --> 0:05:27.440 liquid stream, so it's captured and sequested underground. 0:05:27.640 --> 0:05:30.280 Great, and that's is it Morkinmaki or one of his 0:05:30.480 --> 0:05:32.839 Somki is the main site we're doing at the moment, 0:05:32.880 --> 0:05:36.800 and that that's sort of close to topol and then 0:05:36.839 --> 0:05:39.000 looking at doing a similar thing for our sites from 0:05:39.279 --> 0:05:43.320 Marcai to Cowado and na Alparua. A lot of those 0:05:43.320 --> 0:05:46.680 fields if I understand, they were drilled and tested and 0:05:46.760 --> 0:05:49.640 explored like in the eighties. Yeah, but it's only in 0:05:49.680 --> 0:05:54.000 the last ten maybe twenty years that there's been construction 0:05:54.080 --> 0:05:57.200 there to actually capture Have we left it a little 0:05:57.200 --> 0:05:59.160 bit late? Should we have been doing much more and 0:05:59.279 --> 0:06:02.039 much sooner geo thermal and why not? 0:06:02.320 --> 0:06:03.440 Yeah? You're right. 0:06:03.440 --> 0:06:05.880 Really, New Zealand is actually world leading in geo thermal 0:06:06.000 --> 0:06:09.039 and New Zealand's electricity grid is twenty percent close to 0:06:09.080 --> 0:06:11.560 twenty percent GEOFRM. With that that's on a global scale, 0:06:11.600 --> 0:06:14.160 pretty amazing. It is off the back of work that 0:06:14.279 --> 0:06:18.240 was done through the nineteen sixties, seventies, eighties to drill 0:06:18.480 --> 0:06:20.960 to find not only the hot zones, but the hot 0:06:21.080 --> 0:06:23.480 zones that have the water that you can actually extract 0:06:23.720 --> 0:06:27.120 and then reinject back in. So we're really New Zealand 0:06:27.120 --> 0:06:30.640 built its geo thermal fleet through largely the nineteen nineties 0:06:30.640 --> 0:06:33.920 to the two thousands on the basis of all that drilling. Now, 0:06:33.960 --> 0:06:36.240 then what happened in New Zealand was that demand for 0:06:36.279 --> 0:06:38.719 electricity was very, very flat for the sort of twenty 0:06:38.760 --> 0:06:42.200 year period. So without that demand, we largely sort of said, well, 0:06:42.440 --> 0:06:45.320 there's nothing to keep building into. We'll keep operating those 0:06:45.360 --> 0:06:48.600 power stations very well. What that means now that we 0:06:48.600 --> 0:06:50.640 can see the demand going off, we're kind of just 0:06:51.160 --> 0:06:55.200 getting re against match fit teaching ourselves what does it 0:06:55.200 --> 0:06:57.159 mean to develop geo thermal And that's one of the 0:06:57.200 --> 0:07:01.719 really exciting things out of our Natzamriiki obviously five unit 0:07:01.800 --> 0:07:04.159 we're just expanding at the moment, is that we've built 0:07:04.160 --> 0:07:06.919 this muscle again, We've learned how to develop power stations 0:07:06.920 --> 0:07:09.960 and it's almost like a renaissance period of geo thermal 0:07:10.000 --> 0:07:12.360 four for us in the industry, because I think it's 0:07:12.360 --> 0:07:14.760 got a massive role to play in the future of 0:07:14.800 --> 0:07:16.520 New Zealand's electrification journey. 0:07:17.200 --> 0:07:19.640 If you think about that period where there wasn't that 0:07:19.760 --> 0:07:22.840 much demand, you say, and therefore there was much incentive 0:07:22.880 --> 0:07:25.000 to try and build more. What was behind that do 0:07:25.040 --> 0:07:27.280 you think? I mean, some people would say it's we 0:07:27.440 --> 0:07:29.400 just got more efficient so we didn't need as much 0:07:29.680 --> 0:07:32.320 to do more. Other people might say we were actually losing, 0:07:32.400 --> 0:07:35.120 we were deindustrializing, we were losing businesses at quite a 0:07:35.160 --> 0:07:37.160 high scale that nobody really kind of. 0:07:37.080 --> 0:07:37.600 Picked up on. 0:07:37.800 --> 0:07:40.560 Yeah, I'd say the first point is absolutely right. What's 0:07:40.640 --> 0:07:43.480 tended to happen is people are using more appliances electrically, 0:07:43.720 --> 0:07:46.720 but they're more efficient, So definitely see that the consumption 0:07:46.840 --> 0:07:50.240 of electricity has stayed about flat from a retail from 0:07:50.240 --> 0:07:55.200 a household perspective, From an industrial perspective, it's New Zealand's 0:07:55.600 --> 0:07:57.480 last one hundred years has been off the back of 0:07:57.680 --> 0:08:00.360 our great resources and energy and that has been led 0:08:00.400 --> 0:08:03.559 to some pretty significant global companies coming to New Zealand, 0:08:03.560 --> 0:08:05.680 one of which I used to work at the Too 0:08:05.760 --> 0:08:08.840 Point Elements Smelter, New Zealand Steel. Some of those big 0:08:08.880 --> 0:08:12.080 companies are still doing very strong in New Zealand. Sort 0:08:12.120 --> 0:08:14.400 of over the last twenty years it has been that 0:08:14.720 --> 0:08:16.520 not much growth. But the other thing that's been sort 0:08:16.560 --> 0:08:19.240 of sitting there has been the risk of some companies leaving, 0:08:19.520 --> 0:08:22.080 like Too Point. Now, if Too Point was to leave, 0:08:22.120 --> 0:08:25.040 that's fifteen percent of New Zealand's power. So when you 0:08:25.080 --> 0:08:28.040 have that risk there, there's a risk that fifteen percent 0:08:28.120 --> 0:08:30.320 is going to drop out, you can understand why it 0:08:30.400 --> 0:08:32.600 might be a little bit cautious about what you build 0:08:32.640 --> 0:08:35.920 because you could build and then that low drops, price 0:08:36.000 --> 0:08:38.080 crashes and your left not being able to recover your 0:08:38.080 --> 0:08:40.840 return on those assets. So that's been a big part 0:08:40.880 --> 0:08:43.000 of it. And then the other really interesting thing over 0:08:43.040 --> 0:08:44.880 the last couple of years has been that the sun 0:08:45.000 --> 0:08:47.840 and drop off and gas, and that has been really 0:08:47.880 --> 0:08:51.040 challenging because typically we've relied on gas to support us 0:08:51.120 --> 0:08:53.800 during the dry years because we are dominated by hydro 0:08:53.840 --> 0:08:54.440 in New Zealand. 0:08:54.640 --> 0:08:55.800 Now without those couple. 0:08:55.640 --> 0:08:58.080 Of things there, it's meant that we've almost have been 0:08:58.080 --> 0:09:00.360 a little bit late to actually picking up the rate 0:09:00.400 --> 0:09:02.560 that we build and now we are a. 0:09:02.440 --> 0:09:04.480 Lot of people would say the gas thing though, was 0:09:04.720 --> 0:09:09.280 a little bit for seeable, because we know from overseas 0:09:09.320 --> 0:09:12.120 that a lot of gas fields they get old, they 0:09:12.160 --> 0:09:14.600 stop producing there's only so much you can do. I 0:09:14.600 --> 0:09:16.320 think in the North Sea there's some talk that they 0:09:16.400 --> 0:09:19.160 were able to find technologies to ring a little bit 0:09:19.200 --> 0:09:21.960 more out of there. We're not probably seeing that happening 0:09:21.960 --> 0:09:23.480 at this stage, are we now. 0:09:23.679 --> 0:09:25.600 I think you could foresee that it was going to 0:09:25.640 --> 0:09:27.959 drop off, but just not at the rate that it's happened. 0:09:27.960 --> 0:09:31.240 Because the gas industry has continued to keep drilling on 0:09:31.280 --> 0:09:34.679 the current fields, it just hasn't been able to find 0:09:35.480 --> 0:09:38.680 or increase the production from those fields and what was 0:09:38.720 --> 0:09:41.080 expected to happen. So it has caught us a little 0:09:41.120 --> 0:09:43.960 bit by surprise, just the rate and the quantity that 0:09:43.960 --> 0:09:44.800 it's dropped off at. 0:09:45.440 --> 0:09:49.880 How did that specifically affect mercury? Then, because you're, as 0:09:49.880 --> 0:09:52.200 you say, you're mostly in those renewables, how much of 0:09:52.280 --> 0:09:56.000 that is contracted from fields you're an owner of any 0:09:56.000 --> 0:09:56.160 of those? 0:09:56.400 --> 0:09:56.720 That's right. 0:09:57.360 --> 0:10:01.720 All of our electricity comes from renewable renewable sources and 0:10:01.720 --> 0:10:05.840 renewal electricity assets. We do for our household customers who 0:10:05.880 --> 0:10:08.720 provide eltricity from us, we do provide gas for them, 0:10:08.960 --> 0:10:10.720 so we do have to go and buy that gas 0:10:10.760 --> 0:10:12.000 from someone to provide it. 0:10:12.240 --> 0:10:13.199 That's an impact on. 0:10:13.240 --> 0:10:16.360 Us The other thing though, is gas is important from 0:10:16.400 --> 0:10:19.960 the whole the eltricity sector. So while we're producing eltricty 0:10:20.000 --> 0:10:24.679 from hydro and from wind and from geo thermal at 0:10:24.760 --> 0:10:27.640 various times, it's very useful for the whole of the 0:10:27.679 --> 0:10:29.439 grid to have a little bit of gas there so 0:10:29.640 --> 0:10:31.920 when there's a little less rain, it can actually come 0:10:31.960 --> 0:10:35.679 into the ultricty grid and keep the stability there so 0:10:35.679 --> 0:10:37.800 that ultimately in New Zealand can keep turning the lights 0:10:37.800 --> 0:10:40.760 on and have power flowing through our businesses. 0:10:40.840 --> 0:10:45.040 Back on that idea about the pipeline for new generation 0:10:45.160 --> 0:10:47.840 and so on and how we're now catching up, I mean, 0:10:48.200 --> 0:10:50.400 I get the risk part, but some people would also 0:10:50.480 --> 0:10:53.160 say there was a sort of an incentive in there 0:10:53.480 --> 0:10:57.080 not to overbuild, not to take the risk, because obviously 0:10:57.240 --> 0:10:59.199 you're trying to make a return for showers and so on. 0:11:00.080 --> 0:11:02.600 That put us in a worse position. 0:11:02.720 --> 0:11:05.760 Now, I'd say there are incentives. 0:11:06.800 --> 0:11:08.120 There have been incentives to build. 0:11:08.440 --> 0:11:10.960 It's just making sure that you are building the right 0:11:11.000 --> 0:11:13.040 type of assets in the right place at the right time. 0:11:13.440 --> 0:11:15.120 And so if you look at the last year when 0:11:15.200 --> 0:11:18.360 we didn't have the rain that was there, prices went 0:11:18.440 --> 0:11:21.560 up and that has a massive impact on particularly those 0:11:21.559 --> 0:11:25.320 businesses that don't have long term heages in place. Ultimately 0:11:25.360 --> 0:11:28.360 it does flow through to household prices, but it's pretty 0:11:28.440 --> 0:11:33.360 pretty slow. But the big issue with not having that 0:11:33.720 --> 0:11:38.439 energy there is that ultimately we are having to ourselves 0:11:39.200 --> 0:11:41.559 purchase power from somewhere else to. 0:11:41.520 --> 0:11:42.600 Provide to our customers. 0:11:42.640 --> 0:11:44.800 So last year, when we didn't have so much water 0:11:44.840 --> 0:11:46.640 in our lakes, we had to go and purchase that 0:11:46.800 --> 0:11:49.360 power from others and the price was quite high. And 0:11:49.400 --> 0:11:53.040 that's the main reason why our deft performance. The amount 0:11:53.040 --> 0:11:55.240 of money we earned last year was down by about 0:11:55.320 --> 0:11:56.160 nineteen million dollars. 0:11:56.200 --> 0:11:59.120 And you've now baked that and along with the other 0:11:59.440 --> 0:12:01.760 sort of two of your major competitors by sort of 0:12:01.800 --> 0:12:06.079 buying some firming capacity from Huntley from Genesis. 0:12:06.160 --> 0:12:06.760 Right correct. 0:12:07.040 --> 0:12:10.280 There's a big part of the risk mitigation or process 0:12:10.280 --> 0:12:12.560 we have in place now, and it's really really important 0:12:12.559 --> 0:12:14.240 because the other thing it does is it gives us 0:12:14.280 --> 0:12:17.479 the confidence to keep building intimate renewables. 0:12:18.440 --> 0:12:22.240 Are you do you think you're a completely relaxed that say, 0:12:22.240 --> 0:12:23.920 the Communce Commission when they take a look at that, 0:12:24.000 --> 0:12:26.600 aren't going to say, oh, cracky, this is just four 0:12:26.600 --> 0:12:31.520 big players getting together and funding an asset and not 0:12:31.559 --> 0:12:36.640 necessarily involving others. What gives you confidence that that's. 0:12:35.480 --> 0:12:37.199 Not going to be the case? Absolutely? Right? 0:12:37.400 --> 0:12:40.800 Commerce commissions still have to sign off on this deal 0:12:40.880 --> 0:12:44.680 between four competitors, and it's been two key things that 0:12:44.720 --> 0:12:47.360 have happened on the way. Firstly, we've had an independent 0:12:47.520 --> 0:12:50.319 company look across it to make sure that it's. 0:12:50.160 --> 0:12:51.120 Fair and reasonable. 0:12:51.559 --> 0:12:54.320 The second thing is that it's actually a product that 0:12:54.360 --> 0:12:57.319 it's now available to others as well, so it's not exclusive. 0:12:57.520 --> 0:13:00.960 It's been negotiated between the four big gentile and yet 0:13:00.960 --> 0:13:03.960 it's also there available for anybody else at very similar 0:13:04.040 --> 0:13:07.680 terms and conditions, very similar. It'll be slightly different depending 0:13:07.679 --> 0:13:10.920 on we want fifty megawats, you might be slightly smaller. 0:13:10.920 --> 0:13:13.160 You might only want one or two megawats, so it'll 0:13:13.160 --> 0:13:15.920 be different in terms of what you require, but the 0:13:16.000 --> 0:13:19.680 terms and conditions in terms of price are very very similar. 0:13:19.800 --> 0:13:23.000 Because there's that word cartel, which is it's very easy 0:13:23.440 --> 0:13:25.240 to prove a cartel, isn't it a lot easier than 0:13:25.240 --> 0:13:26.920 it is to prove that there's a monopoly going on? 0:13:27.400 --> 0:13:30.040 Yeah, And it's tough for because there is New Zealand 0:13:30.080 --> 0:13:33.800 does have some great gen tailors and I can absolutely 0:13:33.840 --> 0:13:36.880 understand what the ComCom the Comms Commissioner are doing in 0:13:36.920 --> 0:13:39.319 Eltricity Authority. They're trying to make sure that there's a 0:13:39.360 --> 0:13:43.439 competition in the market, primarily because they want affordable electricity 0:13:43.440 --> 0:13:46.800 prices for New Zealand. Perfect absolutely the right thing to 0:13:46.840 --> 0:13:49.960 be doing. Now, we think that the market is really strong. 0:13:50.440 --> 0:13:52.280 There are a lot of retailers out there and there's 0:13:52.320 --> 0:13:54.679 a lot of there's twenty percent churn happening each year, 0:13:54.720 --> 0:13:57.920 so that shows that twenty percent of customers move every years. 0:13:58.040 --> 0:14:01.280 That's a pretty healthy measure of competition going on. 0:14:01.520 --> 0:14:03.920 They're mostly moving between the majors right and you are 0:14:04.000 --> 0:14:07.520 seeing consolidation and so on. You know, TrustPower might have 0:14:07.600 --> 0:14:10.600 come on board, and what tends to happen is a 0:14:10.640 --> 0:14:13.719 smaller retailer winds up being brought out by a bigger one. 0:14:13.800 --> 0:14:15.160 Yeah, it can happen. You're right. 0:14:15.360 --> 0:14:19.120 There's actually about fifty roughly fifty independent retailers in New 0:14:19.200 --> 0:14:21.800 Zealand compared to a place like the UK where it 0:14:21.840 --> 0:14:24.960 is about twenty. So there's a lot of independence in 0:14:25.000 --> 0:14:28.960 New Zealand. It's how do we help transparency of prices 0:14:29.000 --> 0:14:32.480 so that people can be confident that the prices are 0:14:32.520 --> 0:14:33.640 competitive and affordable. 0:14:33.840 --> 0:14:36.800 So I think the Electricity Authority was talking about making 0:14:36.840 --> 0:14:40.120 some part of that market kind of compulsory for you 0:14:40.160 --> 0:14:42.760 and your three major competitors to kind of contribute to 0:14:42.920 --> 0:14:45.480 you already playing in that. This is the shaped hedges, 0:14:45.520 --> 0:14:48.560 which has got nothing to do with with topieri or 0:14:48.640 --> 0:14:50.520 mazes or whatever. It's got to do with, you know, 0:14:50.680 --> 0:14:52.200 creating a product through the day. 0:14:52.440 --> 0:14:56.280 Yeah, we rank in the top ten best markets globally 0:14:56.320 --> 0:15:00.640 from an euctricity perspective, whether that's affordability, sustainability. 0:15:00.160 --> 0:15:00.720 Or security. 0:15:00.760 --> 0:15:02.200 So we do have a market that's very good, but 0:15:02.280 --> 0:15:05.240 can it be better? Absolutely it can be. And what 0:15:05.320 --> 0:15:07.240 the ComCom and the EA are trying to do is 0:15:07.400 --> 0:15:08.520 create transparency. 0:15:09.200 --> 0:15:11.160 That's part of that is shape hedges, so that. 0:15:12.120 --> 0:15:15.320 Everybody, whether you're independent retailer or someone who's actually looking 0:15:15.360 --> 0:15:18.240 at bringing on a new project, you can see what 0:15:18.760 --> 0:15:21.040 a megawatt or a killer what is worth. And that 0:15:21.120 --> 0:15:23.640 gives you the confidence to be able to buy or 0:15:23.680 --> 0:15:26.760 to sell the electricity very supportable. That One of the 0:15:26.800 --> 0:15:28.760 things I've been looking at is something called the level 0:15:28.800 --> 0:15:32.600 playing field provision. Now it's early and it's not a 0:15:32.600 --> 0:15:35.000 lot of detail associated with that yet, so we're a 0:15:35.000 --> 0:15:36.240 little bit cautious to see. 0:15:36.040 --> 0:15:39.680 What comes out of it. Again, understand that it's trying. 0:15:39.400 --> 0:15:43.440 To create a better transparency and ultimately make sure we 0:15:43.520 --> 0:15:47.400 have affordable prices, just not highly sure that this is 0:15:47.440 --> 0:15:49.080 the right way to do it. Because if you look 0:15:49.080 --> 0:15:52.080 at a household bill that you and I get at 0:15:52.080 --> 0:15:54.800 our houses, only about ten or eleven percent of that 0:15:54.960 --> 0:15:57.640 is from retail costs. So we can do some work 0:15:57.680 --> 0:16:00.920 to make sure that retailer is competitive, but it's only 0:16:01.040 --> 0:16:03.720 eleven percent of the bill. We believe that actually the 0:16:03.720 --> 0:16:05.960 bigger parts of the bill, which is about forty percent 0:16:06.000 --> 0:16:09.480 associative with generation and about maybe thirty percent associator with 0:16:09.680 --> 0:16:12.880 the lines and transmission, they are things that actually we 0:16:12.920 --> 0:16:15.080 could do a lot more on. And the things that 0:16:15.120 --> 0:16:17.560 Mercury can control is around generation, and the best that 0:16:17.640 --> 0:16:20.520 we can do in that space is to build more projects. 0:16:20.240 --> 0:16:23.840 And that would be your profit solution than regulating the 0:16:23.880 --> 0:16:25.560 market or creating a split or. 0:16:25.560 --> 0:16:26.080 Anything like that. 0:16:26.520 --> 0:16:28.160 Many of you modeled that, have you looked at whether 0:16:28.440 --> 0:16:32.240 what sort of impact yeap, you know, breaking the business 0:16:32.280 --> 0:16:32.760 up might have. 0:16:32.920 --> 0:16:35.680 Yeah, so you talked about basically in New Zealand where 0:16:35.680 --> 0:16:38.320 we have the generators and the retailers connected together so 0:16:38.480 --> 0:16:43.200 Gen Taylors, and they're called vertically integrated. We believe that 0:16:43.600 --> 0:16:44.920 they're not just in New Zealand. We've had a lot 0:16:44.920 --> 0:16:46.880 of lookers cross the world. It's actually a lot of 0:16:46.880 --> 0:16:49.880 benefit in doing that. A lot of synergies that ultimately 0:16:50.360 --> 0:16:52.520 some of the studies show do get passed on to 0:16:52.600 --> 0:16:53.280 customers in. 0:16:53.280 --> 0:16:55.440 Terms of what that connection creates. 0:16:55.600 --> 0:16:58.800 So by the same token, unwinding those synergies, what have 0:16:58.880 --> 0:17:00.840 you looked at what that could do for the business? 0:17:00.920 --> 0:17:03.680 Yes, again, and it does create things that lead to 0:17:03.720 --> 0:17:06.679 inefficiencies in the way that the companies work. If they 0:17:06.680 --> 0:17:09.439 were separated, creates risk that won't be it wouldn't have 0:17:09.440 --> 0:17:11.960 been there previously. So our belief is that the split 0:17:12.160 --> 0:17:16.480 will not add additional value either to customers, to New Zealanders. 0:17:16.080 --> 0:17:17.400 Or to the owners of those companies. 0:17:17.520 --> 0:17:20.120 People said the same thing about Telecom when they broke 0:17:20.160 --> 0:17:22.520 it off and said, hey, here's Chorus and here's Telecom 0:17:22.560 --> 0:17:24.760 over here. Will make it spark and then you know 0:17:24.840 --> 0:17:27.680 whatever it is. Fifteen twenty years later, we've got too well, 0:17:28.480 --> 0:17:32.000 one pretty successful company and another one that's had had 0:17:32.040 --> 0:17:34.919 some rough times, but come along and certainly had an 0:17:34.920 --> 0:17:37.119 interesting journey. If you're talking about Spark, so I mean 0:17:37.440 --> 0:17:40.720 it's not like a fat company that cutting something in half. 0:17:41.280 --> 0:17:43.400 No, even in the electricity industry, the same. 0:17:43.200 --> 0:17:45.280 Thing from an investment point of view, I suppose, or 0:17:45.320 --> 0:17:46.320 for an investor's point of. 0:17:46.320 --> 0:17:48.840 View, correct, and even from that in the electricity sector, 0:17:48.880 --> 0:17:51.600 we do have this split there already. So yes, Spark 0:17:51.640 --> 0:17:54.800 and Chorus is split. You look at the electricity industry transpower, 0:17:54.840 --> 0:17:57.880 which looks after the transmition lines, that is separate from 0:17:57.920 --> 0:18:00.920 the gent tailors, that is separate from the distributed distribution 0:18:01.040 --> 0:18:04.040 companies as well the EEDB. So there is actually an 0:18:04.040 --> 0:18:08.320 element of disegregation that occurs already, which is trying to 0:18:08.359 --> 0:18:11.639 separate some of their more infrastructure nature to some of 0:18:11.640 --> 0:18:13.560 the more development and retail side. 0:18:13.359 --> 0:18:14.080 Of the businesses. 0:18:14.600 --> 0:18:17.480 So that split is there and has been useful just 0:18:17.480 --> 0:18:20.240 trying to find the right synergies and model that actually 0:18:20.280 --> 0:18:24.920 ultimately results in lowest cost to customers and ultimately. 0:18:24.520 --> 0:18:25.800 Good value for its owners. 0:18:26.920 --> 0:18:29.320 We're a year out more or less, maybe fourteen months 0:18:29.359 --> 0:18:31.600 from an election. Are you worried at all that the 0:18:31.640 --> 0:18:34.440 politicians are just maybe going, yeah, that's fine, you that's fine, 0:18:34.440 --> 0:18:38.440 But we need some wins and this is an easy one. Potentially. 0:18:39.800 --> 0:18:41.800 The reason why I'm worried is because the Zealander is 0:18:41.840 --> 0:18:44.520 facing costs lit in crisis still, right, and it has 0:18:44.560 --> 0:18:46.760 been going on for a while, and I think we'll 0:18:46.760 --> 0:18:50.679