Speaker 1: Jakoto. Welcome to shared Lunch. I'm Garth Bray. Mercury Energy
Speaker 1: is one of our largest electricity generators, just over nine
Speaker 1: point one billion dollars by market cap. A year ago.
Speaker 1: Mercury's board put Stu Hamilton in the top job, just
Speaker 1: as dwindling gas supplies and lower rainfall hit generation and
Speaker 1: retail margins pretty hard. But it's not just how you
Speaker 1: take the hit, it's how you rise again. So how
Speaker 1: will Mercury rise and what will the second year look
Speaker 1: like for the new CEO? Before we head inside to
Speaker 1: find out, it's some important information you should always consider
Speaker 1: when investing.
Speaker 2: Investing involves for risk you might lose the money you
Speaker 2: start with. We recommend talking to a licensed financial advisor.
Speaker 2: We also recommend reading product disclosure documents before deciding to invest.
Speaker 2: Everything you're about to see and here is current at
Speaker 2: the time of recording.
Speaker 1: Stu Hamilton, thank you so much for making time for us. Welcome,
Speaker 1: great happy anniversary. I understand it must be with a
Speaker 1: few days away from your first year, right. Actually, yeah,
Speaker 1: so you got your first result that you've put out there,
Speaker 1: first full year result just the other day. Do you
Speaker 1: mind sort of running us through the numbers a little
Speaker 1: bit giving us the highlights.
Speaker 3: Yeah, absolutely so first full year result for myself. Obviously,
Speaker 3: it's been a really challenging twelve months for the sector
Speaker 3: and actually New Zealand in general. And if you look
Speaker 3: at the result, we had an even DAFH of seven
Speaker 3: hundred and eighty six million.
Speaker 4: It's a good number.
Speaker 3: Considering the year that we had and the reason why
Speaker 3: we had a challenge in year one was because it
Speaker 3: was very very dry, one of the driest on record,
Speaker 3: and that represents itself in the result, but equally quite
Speaker 3: a good result in that we're actually had a very
Speaker 3: resilient set of assets and a team which able to
Speaker 3: perform very well during those tough conditions. I think that
Speaker 3: a lot of our analysts and our owners were very
Speaker 3: excited about is what we project for the next year
Speaker 3: and beyond. And so for next year we're guiding to
Speaker 3: one billion dollars, which is a great number for us
Speaker 3: to be looking at on the way to a one
Speaker 3: point one to one point two and by twenty thirty
Speaker 3: and that's exciting. And underneath that even further is excitement
Speaker 3: around what we're building. Over half of the money we're
Speaker 3: making is going straight back into new projects or to
Speaker 3: maintain our current projects. And that's exciting because we've got
Speaker 3: a really good balance sheet puts us in a great
Speaker 3: position to really leverage this electrification sort of movement ahead
Speaker 3: of us maintain maintenance.
Speaker 1: Who spends money on maintenance in New Zealand just wait
Speaker 1: till it breaks and then fix it kind.
Speaker 3: Of thing, And that's a really good thing from our industry. Actually,
Speaker 3: look at we actually got got a lot of really
Speaker 3: amazing assets that are up to one hundred years old.
Speaker 3: We have these amazing hydra assets that have been built.
Speaker 4: Now's our time.
Speaker 3: To actually reinvest into them, so they've got another hundred
Speaker 3: years to go in more.
Speaker 1: Can you give me a sense of how you can
Speaker 1: be so confident in a business where basically, if it rains,
Speaker 1: you make money. How can you be so confident with
Speaker 1: that forward guidance that people seem.
Speaker 3: To have business where we make money when there is fuel,
Speaker 3: whether that's water or wind or sun. They're our renewable
Speaker 3: fuels produce electricity. One of the things we have that's
Speaker 3: very useful and a unique to Mercury is a diversity
Speaker 3: of our assets or our power stations. Diversity in terms
Speaker 3: of the types of renewable fuels they use, and also
Speaker 3: diverse in terms of the geographic location. So we have
Speaker 3: hydro just water, we have wind, and we have gef thermal.
Speaker 3: The great thing about gef thermal is that whether it's
Speaker 3: blowing or raining or shining, it keeps producing energy. Where
Speaker 3: we draw this hot liquid out of the ground, extract
Speaker 3: eltricity and then we reinject that liquid back into the ground,
Speaker 3: so base load really really nice. Then with wind we
Speaker 3: actually spread it around the country. So from the far north,
Speaker 3: which we're building a wind farle at the moment near
Speaker 3: Dargable called Cola Koa, to the deep south another project
Speaker 3: of ours called Cora downs too. And you tend to
Speaker 3: find in New Zealand that when the wind's not blowing
Speaker 3: in the north, it's actually the south and vice versas.
Speaker 3: So having that diversity of location is really good. Diversity
Speaker 3: of fuel is really good. So if we do have
Speaker 3: a dryer year, we're better able to manage that risk. Now,
Speaker 3: it does have an impact, but we pride ourselves and
Speaker 3: being able to limit that impact as much as we can.
Speaker 1: The geo thermal stuff, and I know you're an engineer
Speaker 1: by training, so you'll probably be happy to nerd out
Speaker 1: on these things through a bit. But it's not a
Speaker 1: completely carbon neutral process, isn't it. You do get a
Speaker 1: little bit of caress CO two and other gases coming out,
Speaker 1: so it's not a completely net zero. Is there any
Speaker 1: technology that you guys are working on or working with
Speaker 1: others to turn that around or to capture more out
Speaker 1: of that energy stream?
Speaker 3: Yeah, absolutely right, So definitely from a from a geo
Speaker 3: thermal perspective. Firstly, awesome power source, nice space load that
Speaker 3: operates when you do extract the Brian hot Brian out
Speaker 3: of the ground does have some dissolved carbon dioxide in
Speaker 3: it and that gets released to the atmosphere. We have
Speaker 3: both ourselves and others industry looking at how we can
Speaker 3: capture that CO two and then reinjected back into the
Speaker 3: ground so basically becomes a closed loop. And we've been
Speaker 3: pretty successful at one of our sites that we've been
Speaker 3: trialing at the moment, capturing over fifty percent of the
Speaker 3: CO two and reinjecting it into the ground and really
Speaker 3: looking at rolling out to other sites. It's it's a
Speaker 3: little bit like the old soda stream and sodas stream
Speaker 3: bottles and you kind of pressed the button and inject
Speaker 3: the CO two into your soda stream bottle.
Speaker 4: It's the same thing.
Speaker 3: We're kind of injecting that CO two back into the
Speaker 3: liquid stream, so it's captured and sequested underground.
Speaker 1: Great, and that's is it Morkinmaki or one of his
Speaker 1: Somki is the main site we're doing at the moment,
Speaker 1: and that that's sort of close to topol and then
Speaker 1: looking at doing a similar thing for our sites from
Speaker 1: Marcai to Cowado and na Alparua. A lot of those
Speaker 1: fields if I understand, they were drilled and tested and
Speaker 1: explored like in the eighties. Yeah, but it's only in
Speaker 1: the last ten maybe twenty years that there's been construction
Speaker 1: there to actually capture Have we left it a little
Speaker 1: bit late? Should we have been doing much more and
Speaker 1: much sooner geo thermal and why not?
Speaker 4: Yeah? You're right.
Speaker 3: Really, New Zealand is actually world leading in geo thermal
Speaker 3: and New Zealand's electricity grid is twenty percent close to
Speaker 3: twenty percent GEOFRM. With that that's on a global scale,
Speaker 3: pretty amazing. It is off the back of work that
Speaker 3: was done through the nineteen sixties, seventies, eighties to drill
Speaker 3: to find not only the hot zones, but the hot
Speaker 3: zones that have the water that you can actually extract
Speaker 3: and then reinject back in. So we're really New Zealand
Speaker 3: built its geo thermal fleet through largely the nineteen nineties
Speaker 3: to the two thousands on the basis of all that drilling. Now,
Speaker 3: then what happened in New Zealand was that demand for
Speaker 3: electricity was very, very flat for the sort of twenty
Speaker 3: year period. So without that demand, we largely sort of said, well,
Speaker 3: there's nothing to keep building into. We'll keep operating those
Speaker 3: power stations very well. What that means now that we
Speaker 3: can see the demand going off, we're kind of just
Speaker 3: getting re against match fit teaching ourselves what does it
Speaker 3: mean to develop geo thermal And that's one of the
Speaker 3: really exciting things out of our Natzamriiki obviously five unit
Speaker 3: we're just expanding at the moment, is that we've built
Speaker 3: this muscle again, We've learned how to develop power stations
Speaker 3: and it's almost like a renaissance period of geo thermal
Speaker 3: four for us in the industry, because I think it's
Speaker 3: got a massive role to play in the future of
Speaker 3: New Zealand's electrification journey.
Speaker 1: If you think about that period where there wasn't that
Speaker 1: much demand, you say, and therefore there was much incentive
Speaker 1: to try and build more. What was behind that do
Speaker 1: you think? I mean, some people would say it's we
Speaker 1: just got more efficient so we didn't need as much
Speaker 1: to do more. Other people might say we were actually losing,
Speaker 1: we were deindustrializing, we were losing businesses at quite a
Speaker 1: high scale that nobody really kind of.
Speaker 4: Picked up on.
Speaker 3: Yeah, I'd say the first point is absolutely right. What's
Speaker 3: tended to happen is people are using more appliances electrically,
Speaker 3: but they're more efficient, So definitely see that the consumption
Speaker 3: of electricity has stayed about flat from a retail from
Speaker 3: a household perspective, From an industrial perspective, it's New Zealand's
Speaker 3: last one hundred years has been off the back of
Speaker 3: our great resources and energy and that has been led
Speaker 3: to some pretty significant global companies coming to New Zealand,
Speaker 3: one of which I used to work at the Too
Speaker 3: Point Elements Smelter, New Zealand Steel. Some of those big
Speaker 3: companies are still doing very strong in New Zealand. Sort
Speaker 3: of over the last twenty years it has been that
Speaker 3: not much growth. But the other thing that's been sort
Speaker 3: of sitting there has been the risk of some companies leaving,
Speaker 3: like Too Point. Now, if Too Point was to leave,
Speaker 3: that's fifteen percent of New Zealand's power. So when you
Speaker 3: have that risk there, there's a risk that fifteen percent
Speaker 3: is going to drop out, you can understand why it
Speaker 3: might be a little bit cautious about what you build
Speaker 3: because you could build and then that low drops, price
Speaker 3: crashes and your left not being able to recover your
Speaker 3: return on those assets. So that's been a big part
Speaker 3: of it. And then the other really interesting thing over
Speaker 3: the last couple of years has been that the sun
Speaker 3: and drop off and gas, and that has been really
Speaker 3: challenging because typically we've relied on gas to support us
Speaker 3: during the dry years because we are dominated by hydro
Speaker 3: in New Zealand.
Speaker 4: Now without those couple.
Speaker 3: Of things there, it's meant that we've almost have been
Speaker 3: a little bit late to actually picking up the rate
Speaker 3: that we build and now we are a.
Speaker 1: Lot of people would say the gas thing though, was
Speaker 1: a little bit for seeable, because we know from overseas
Speaker 1: that a lot of gas fields they get old, they
Speaker 1: stop producing there's only so much you can do. I
Speaker 1: think in the North Sea there's some talk that they
Speaker 1: were able to find technologies to ring a little bit
Speaker 1: more out of there. We're not probably seeing that happening
Speaker 1: at this stage, are we now.
Speaker 3: I think you could foresee that it was going to
Speaker 3: drop off, but just not at the rate that it's happened.
Speaker 3: Because the gas industry has continued to keep drilling on
Speaker 3: the current fields, it just hasn't been able to find
Speaker 3: or increase the production from those fields and what was
Speaker 3: expected to happen. So it has caught us a little
Speaker 3: bit by surprise, just the rate and the quantity that
Speaker 3: it's dropped off at.
Speaker 1: How did that specifically affect mercury? Then, because you're, as
Speaker 1: you say, you're mostly in those renewables, how much of
Speaker 1: that is contracted from fields you're an owner of any
Speaker 1: of those?
Speaker 4: That's right.
Speaker 3: All of our electricity comes from renewable renewable sources and
Speaker 3: renewal electricity assets. We do for our household customers who
Speaker 3: provide eltricity from us, we do provide gas for them,
Speaker 3: so we do have to go and buy that gas
Speaker 3: from someone to provide it.
Speaker 4: That's an impact on.
Speaker 3: Us The other thing though, is gas is important from
Speaker 3: the whole the eltricity sector. So while we're producing eltricty
Speaker 3: from hydro and from wind and from geo thermal at
Speaker 3: various times, it's very useful for the whole of the
Speaker 3: grid to have a little bit of gas there so
Speaker 3: when there's a little less rain, it can actually come
Speaker 3: into the ultricty grid and keep the stability there so
Speaker 3: that ultimately in New Zealand can keep turning the lights
Speaker 3: on and have power flowing through our businesses.
Speaker 1: Back on that idea about the pipeline for new generation
Speaker 1: and so on and how we're now catching up, I mean,
Speaker 1: I get the risk part, but some people would also
Speaker 1: say there was a sort of an incentive in there
Speaker 1: not to overbuild, not to take the risk, because obviously
Speaker 1: you're trying to make a return for showers and so on.
Speaker 1: That put us in a worse position.
Speaker 3: Now, I'd say there are incentives.
Speaker 4: There have been incentives to build.
Speaker 3: It's just making sure that you are building the right
Speaker 3: type of assets in the right place at the right time.
Speaker 3: And so if you look at the last year when
Speaker 3: we didn't have the rain that was there, prices went
Speaker 3: up and that has a massive impact on particularly those
Speaker 3: businesses that don't have long term heages in place. Ultimately
Speaker 3: it does flow through to household prices, but it's pretty
Speaker 3: pretty slow. But the big issue with not having that
Speaker 3: energy there is that ultimately we are having to ourselves
Speaker 3: purchase power from somewhere else to.
Speaker 4: Provide to our customers.
Speaker 3: So last year, when we didn't have so much water
Speaker 3: in our lakes, we had to go and purchase that
Speaker 3: power from others and the price was quite high. And
Speaker 3: that's the main reason why our deft performance. The amount
Speaker 3: of money we earned last year was down by about
Speaker 3: nineteen million dollars.
Speaker 1: And you've now baked that and along with the other
Speaker 1: sort of two of your major competitors by sort of
Speaker 1: buying some firming capacity from Huntley from Genesis.
Speaker 4: Right correct.
Speaker 3: There's a big part of the risk mitigation or process
Speaker 3: we have in place now, and it's really really important
Speaker 3: because the other thing it does is it gives us
Speaker 3: the confidence to keep building intimate renewables.
Speaker 1: Are you do you think you're a completely relaxed that say,
Speaker 1: the Communce Commission when they take a look at that,
Speaker 1: aren't going to say, oh, cracky, this is just four
Speaker 1: big players getting together and funding an asset and not
Speaker 1: necessarily involving others. What gives you confidence that that's.
Speaker 4: Not going to be the case? Absolutely? Right?
Speaker 3: Commerce commissions still have to sign off on this deal
Speaker 3: between four competitors, and it's been two key things that
Speaker 3: have happened on the way. Firstly, we've had an independent
Speaker 3: company look across it to make sure that it's.
Speaker 4: Fair and reasonable.
Speaker 3: The second thing is that it's actually a product that
Speaker 3: it's now available to others as well, so it's not exclusive.
Speaker 3: It's been negotiated between the four big gentile and yet
Speaker 3: it's also there available for anybody else at very similar
Speaker 3: terms and conditions, very similar. It'll be slightly different depending
Speaker 3: on we want fifty megawats, you might be slightly smaller.
Speaker 3: You might only want one or two megawats, so it'll
Speaker 3: be different in terms of what you require, but the
Speaker 3: terms and conditions in terms of price are very very similar.
Speaker 1: Because there's that word cartel, which is it's very easy
Speaker 1: to prove a cartel, isn't it a lot easier than
Speaker 1: it is to prove that there's a monopoly going on?
Speaker 3: Yeah, And it's tough for because there is New Zealand
Speaker 3: does have some great gen tailors and I can absolutely
Speaker 3: understand what the ComCom the Comms Commissioner are doing in
Speaker 3: Eltricity Authority. They're trying to make sure that there's a
Speaker 3: competition in the market, primarily because they want affordable electricity
Speaker 3: prices for New Zealand. Perfect absolutely the right thing to
Speaker 3: be doing. Now, we think that the market is really strong.
Speaker 3: There are a lot of retailers out there and there's
Speaker 3: a lot of there's twenty percent churn happening each year,
Speaker 3: so that shows that twenty percent of customers move every years.
Speaker 3: That's a pretty healthy measure of competition going on.
Speaker 1: They're mostly moving between the majors right and you are
Speaker 1: seeing consolidation and so on. You know, TrustPower might have
Speaker 1: come on board, and what tends to happen is a
Speaker 1: smaller retailer winds up being brought out by a bigger one.
Speaker 4: Yeah, it can happen. You're right.
Speaker 3: There's actually about fifty roughly fifty independent retailers in New
Speaker 3: Zealand compared to a place like the UK where it
Speaker 3: is about twenty. So there's a lot of independence in
Speaker 3: New Zealand. It's how do we help transparency of prices
Speaker 3: so that people can be confident that the prices are
Speaker 3: competitive and affordable.
Speaker 1: So I think the Electricity Authority was talking about making
Speaker 1: some part of that market kind of compulsory for you
Speaker 1: and your three major competitors to kind of contribute to
Speaker 1: you already playing in that. This is the shaped hedges,
Speaker 1: which has got nothing to do with with topieri or
Speaker 1: mazes or whatever. It's got to do with, you know,
Speaker 1: creating a product through the day.
Speaker 3: Yeah, we rank in the top ten best markets globally
Speaker 3: from an euctricity perspective, whether that's affordability, sustainability.
Speaker 4: Or security.
Speaker 3: So we do have a market that's very good, but
Speaker 3: can it be better? Absolutely it can be. And what
Speaker 3: the ComCom and the EA are trying to do is
Speaker 3: create transparency.
Speaker 4: That's part of that is shape hedges, so that.
Speaker 3: Everybody, whether you're independent retailer or someone who's actually looking
Speaker 3: at bringing on a new project, you can see what
Speaker 3: a megawatt or a killer what is worth. And that
Speaker 3: gives you the confidence to be able to buy or
Speaker 3: to sell the electricity very supportable. That One of the
Speaker 3: things I've been looking at is something called the level
Speaker 3: playing field provision. Now it's early and it's not a
Speaker 3: lot of detail associated with that yet, so we're a
Speaker 3: little bit cautious to see.
Speaker 4: What comes out of it. Again, understand that it's trying.
Speaker 3: To create a better transparency and ultimately make sure we
Speaker 3: have affordable prices, just not highly sure that this is
Speaker 3: the right way to do it. Because if you look
Speaker 3: at a household bill that you and I get at
Speaker 3: our houses, only about ten or eleven percent of that
Speaker 3: is from retail costs. So we can do some work
Speaker 3: to make sure that retailer is competitive, but it's only
Speaker 3: eleven percent of the bill. We believe that actually the
Speaker 3: bigger parts of the bill, which is about forty percent
Speaker 3: associative with generation and about maybe thirty percent associator with
Speaker 3: the lines and transmission, they are things that actually we
Speaker 3: could do a lot more on. And the things that
Speaker 3: Mercury can control is around generation, and the best that
Speaker 3: we can do in that space is to build more projects.
Speaker 1: And that would be your profit solution than regulating the
Speaker 1: market or creating a split or.
Speaker 4: Anything like that.
Speaker 1: Many of you modeled that, have you looked at whether
Speaker 1: what sort of impact yeap, you know, breaking the business
Speaker 1: up might have.
Speaker 3: Yeah, so you talked about basically in New Zealand where
Speaker 3: we have the generators and the retailers connected together so
Speaker 3: Gen Taylors, and they're called vertically integrated. We believe that
Speaker 3: they're not just in New Zealand. We've had a lot
Speaker 3: of lookers cross the world. It's actually a lot of
Speaker 3: benefit in doing that. A lot of synergies that ultimately
Speaker 3: some of the studies show do get passed on to
Speaker 3: customers in.
Speaker 4: Terms of what that connection creates.
Speaker 1: So by the same token, unwinding those synergies, what have
Speaker 1: you looked at what that could do for the business?
Speaker 3: Yes, again, and it does create things that lead to
Speaker 3: inefficiencies in the way that the companies work. If they
Speaker 3: were separated, creates risk that won't be it wouldn't have
Speaker 3: been there previously. So our belief is that the split
Speaker 3: will not add additional value either to customers, to New Zealanders.
Speaker 4: Or to the owners of those companies.
Speaker 1: People said the same thing about Telecom when they broke
Speaker 1: it off and said, hey, here's Chorus and here's Telecom
Speaker 1: over here. Will make it spark and then you know
Speaker 1: whatever it is. Fifteen twenty years later, we've got too well,
Speaker 1: one pretty successful company and another one that's had had
Speaker 1: some rough times, but come along and certainly had an
Speaker 1: interesting journey. If you're talking about Spark, so I mean
Speaker 1: it's not like a fat company that cutting something in half.
Speaker 3: No, even in the electricity industry, the same.
Speaker 1: Thing from an investment point of view, I suppose, or
Speaker 1: for an investor's point of.
Speaker 3: View, correct, and even from that in the electricity sector,
Speaker 3: we do have this split there already. So yes, Spark
Speaker 3: and Chorus is split. You look at the electricity industry transpower,
Speaker 3: which looks after the transmition lines, that is separate from
Speaker 3: the gent tailors, that is separate from the distributed distribution
Speaker 3: companies as well the EEDB. So there is actually an
Speaker 3: element of disegregation that occurs already, which is trying to
Speaker 3: separate some of their more infrastructure nature to some of
Speaker 3: the more development and retail side.
Speaker 4: Of the businesses.
Speaker 3: So that split is there and has been useful just
Speaker 3: trying to find the right synergies and model that actually
Speaker 3: ultimately results in lowest cost to customers and ultimately.
Speaker 4: Good value for its owners.
Speaker 1: We're a year out more or less, maybe fourteen months
Speaker 1: from an election. Are you worried at all that the
Speaker 1: politicians are just maybe going, yeah, that's fine, you that's fine,
Speaker 1: But we need some wins and this is an easy one. Potentially.
Speaker 3: The reason why I'm worried is because the Zealander is
Speaker 3: facing costs lit in crisis still, right, and it has
Speaker 3: been going on for a while, and I think we'll
Speaker 3: continue for a while. And that doesn't just apply to energy.
Speaker 3: It applies to food, it applies to access to money
Speaker 3: through banks, and so it's part of a broader concern
Speaker 3: that exists for New Zealanders and energy has a big
Speaker 3: part to plan that.
Speaker 4: So yes, it definitely has an impact.
Speaker 3: And so we are working as well as we can
Speaker 3: to try and address the problem of getting affordable energy
Speaker 3: as well as we can and make sure it's sustainable.
Speaker 3: That's a really complicated problem to solve in a small
Speaker 3: period of time, and it's whether or not we actually
Speaker 3: have the time to do that and demonstrate that we're
Speaker 3: on the right path before someone says, you know, going
Speaker 3: fast enough, we'll do something different. A lot of people say, oh,
Speaker 3: the government owns you, there must be must be.
Speaker 1: Well, there's an intentive there, or certainly there's a mixed
Speaker 1: mixed incentive, right, there's a shareholding minister on one hand
Speaker 1: of saying, hey, we need to pay for hospitals, schools,
Speaker 1: everything else. And this is part of how we do
Speaker 1: that in this country without taxing people versus we want
Speaker 1: to try and deliver energy at lowest possible cost.
Speaker 3: So that they regres regulating and a concern for New
Speaker 3: Zealanders from a customer perspective. And at the same time,
Speaker 3: government receives dividends from us and taxes from us. So
Speaker 3: if you look at the money which we made in
Speaker 3: the last year, about a third of that goes to
Speaker 3: the government some way, whether it's through dividends because they
Speaker 3: are our owner, or through taxes, and so that's a
Speaker 3: great revenue stream that the government can use for hospitals
Speaker 3: and schools, roads equally, want to make sure that we're
Speaker 3: doing that a way which is globally competitive and affordable.
Speaker 3: And that's really the other conversation we have with the government.
Speaker 1: How different is it being on the other side of
Speaker 1: the table from where you were before because you ran
Speaker 1: the t why point aluminium smell exactly right? It's huge,
Speaker 1: as you said, massive electricity user. Who's got the power there?
Speaker 1: The person that's like the government owned company that's selling
Speaker 1: electricity or this very large, ultimately multinationally owned company that's saying, hey,
Speaker 1: we represent thousands of jobs and export earnings for this country.
Speaker 3: First, So I say there's more similarities than differences. Both
Speaker 3: if you look at electricity industry large and a large
Speaker 3: sort of aluminium industry, both employing lots of people and
Speaker 3: also having massive impact on community.
Speaker 4: So lots of similarities.
Speaker 3: And actually, if you look at the connection, they are
Speaker 3: so connected that they need each other. If you look
Speaker 3: at two point element smelter that was built because parody
Speaker 3: of power station was built, and Amnto POWERstation was built
Speaker 3: because the Ti smelter was there, So they are kind
Speaker 3: of yin and yang, necessary for each other to exist,
Speaker 3: and that creates this interesting dynamic between both talking about
Speaker 3: power prices, and yet you can imagine that from time
Speaker 3: to time the power balance might move between the two parties,
Speaker 3: but they're just so intricately linked that they actually do
Speaker 3: need to come to a common deal to actually make
Speaker 3: sure that together they can exist and not sort of
Speaker 3: almost look at it as there's a pie of value
Speaker 3: that has to be split between the two. How do
Speaker 3: you ultimately sort grow that pie in a way that
Speaker 3: leads to value for both.
Speaker 1: We'll probably do it by trying to strike the cheapest
Speaker 1: price you possibly can for your electricity.
Speaker 4: Is that about right?
Speaker 3: Having affordable electricity is really important, but equally having the
Speaker 3: ability to flick. So one of the reasons why the
Speaker 3: industry got through Winter of last was that ty was
Speaker 3: able to work out how it can actually drop its
Speaker 3: load through times.
Speaker 4: WI power prices is high.
Speaker 3: Now that's value adding to the sector because they can
Speaker 3: use their electricity to get elsewhere, and ultimately tea wise
Speaker 3: also is paid and compensated for that as well. And
Speaker 3: so trying to find those things where the user of
Speaker 3: eletricity knows how they can best optimize their process but
Speaker 3: don't really know what the value of that is from
Speaker 3: a power perspective, and the generator knows what the value
Speaker 3: of that is but doesn't know how it could be done.
Speaker 3: So that's where you can come together to work out
Speaker 3: how you might actually grow the size of the value together.
Speaker 1: Is that making a virtue out of a fault because
Speaker 1: we're basically saying, in order to keep this country running,
Speaker 1: we have to ask businesses to shut down. That doesn't
Speaker 1: sound like a great situation to be in the first place.
Speaker 4: Awesome questions.
Speaker 3: I get that a lot people saying that it's a
Speaker 3: form of de industrialization, this is value destruction. I actually
Speaker 3: see it another way. I see it that we have
Speaker 3: a choice. We could go out there and spend billions
Speaker 3: and billions and billions dollars overbuilding lots of projects. From
Speaker 3: a powerspective, all we could spend a little bit of
Speaker 3: money engaging with the customer and utilize them as a
Speaker 3: bit of a battery, and they actually get compensated for
Speaker 3: doing it. So it's actually commercially beneficial for that for
Speaker 3: the power user, and it's better for New Zealand because
Speaker 3: we don't actually have to overbuild and spend a whole
Speaker 3: lot of money that might not get the return. So yes,
Speaker 3: does have an impact on that customer. Ultimately they get
Speaker 3: compensated for it and still make money. And ultimately for
Speaker 3: New Zealand, it's actually good because it puts out grid
Speaker 3: in a much like it is more resilient place.
Speaker 1: I think it's even better maybe if it's a very
Speaker 1: open system so over and can see what those deals
Speaker 1: are rather than the necessarily being one to one.
Speaker 4: Spot on yeh.
Speaker 3: So that's that's very much that the work that's been
Speaker 3: done to give some transparency to what those prices are.
Speaker 3: So rather than bilateral engagement where you and I can
Speaker 3: sort of work together on what the prices are, we
Speaker 3: actually between us know what a fair and a reasonable
Speaker 3: price for that will be because it's traded, and that's
Speaker 3: something which the electricity authority in the ComCom I'm looking
Speaker 3: at and we're very supportive for that.
Speaker 1: It's probably a hard question I'm going to ask you
Speaker 1: now because you're only a year in, but I mean,
Speaker 1: we've got twenty five years to work out how in
Speaker 1: this country we're going to be at net zero. Presumably
Speaker 1: you've got all sorts of plans for how that's going
Speaker 1: to work. Do you, I mean, do you actually have
Speaker 1: a clear idea of what this place will look like
Speaker 1: in twenty five years and what Mercury.
Speaker 3: Will look like that We believe that eltricity and electrification
Speaker 3: has a huge role to play. A lot of the
Speaker 3: times people look at what percentage is our electricity gred renewable,
Speaker 3: and at the moment it's hovering around high eighty percent
Speaker 3: to about ninety percent, and people talk about trying to
Speaker 3: get to it to one hundred percent. Our view is
Speaker 3: that should get to maybe mid nineties and we will easily
Speaker 3: get that, and we've got many projects and training to
Speaker 3: get there. And then what you do is actually, rather
Speaker 3: than focusing on electricity grid, then you turn a focus
Speaker 3: on the other forms of fossil fuel usage. In New Zealand,
Speaker 3: cars transportation is about twenty percent of New Zealand's carbon footprint.
Speaker 3: Many industries contribute to carbon as well, So the electrification
Speaker 3: of those industries away from fossil fuels, vehicles away from
Speaker 3: fossil fuels, that's got massive potential and that's a big
Speaker 3: part of what mercury is good at and that's where
Speaker 3: where we can absolutely support. And then the other part
Speaker 3: of it is actually looking at what New Zealand's actually
Speaker 3: economies should look.
Speaker 4: Like over the next ten to twenty years.
Speaker 3: And there's a big part to play in different types
Speaker 3: of industry. So you'll see the load potentially move away
Speaker 3: from more heavy industry and they'll still have the load,
Speaker 3: but the percentage will grow more towards other things like
Speaker 3: data centers and other forms of electricity which actually create
Speaker 3: a normost potential for us as well.
Speaker 1: Yeah, I'm just waiting for the day that they build
Speaker 1: a massive data center in Coodo.
Speaker 3: Actually data centers often people think they should be close
Speaker 3: to where people are using the data, so build them
Speaker 3: in the US where there's lots of use for data.
Speaker 3: And yet there's a big part that New Zealand could
Speaker 3: play because data centers that therefore artificial intelligence need to
Speaker 3: be trained. I need to have kindergartens for artificial intelligence
Speaker 3: and so that doesn't actually need to be close to
Speaker 3: the load. So there's potential for New Zealand to get
Speaker 3: very good at artividual artificial intelligence. Kindergarten centers, training centers,
Speaker 3: and they can be a long way away from the US.
Speaker 3: So that's when New Zealand can actually be very strong.
Speaker 1: Kindergarten for AI artifices, what a great place to raise
Speaker 1: children and large language models correctastic It seems like a
Speaker 1: long way from running a gold mine in Tanzania, an
Speaker 1: extractive industry in a developing part of the world, and
Speaker 1: must have brought with that. What on earth took you
Speaker 1: over there?
Speaker 3: Yeah?
Speaker 4: When did I go? Kind of?
Speaker 3: I spent a career in New Zealand and Australia for
Speaker 3: twenty years in engineering and largely in aluminum, and I
Speaker 3: had this really interesting discussion with my boss's boss and
Speaker 3: they said, Jude, you're doing an amazing job, but you've
Speaker 3: been in New Zealand all your life. If you've stuck
Speaker 3: to the same company and you've stuck to you probably.
Speaker 4: Need to get out and learn a bit about the world.
Speaker 3: So I actually did my MBA and I met some
Speaker 3: cool people there, and then through this process said, ah,
Speaker 3: I've been suggested I should do something different, and that
Speaker 3: person was going to Tanzania and said us to come.
Speaker 4: Over to work for us.
Speaker 3: So I went back to my boss's boss and said,
Speaker 3: thank you very much. I appreciate your support of me
Speaker 3: and my career, but I'm going gold mining in Tanzania.
Speaker 3: And so I went over there was very fortunate to
Speaker 3: be a general manager of a large gold mining operation
Speaker 3: with about twelve hundred people in the middle of community
Speaker 3: in northwest Tanzania, and it was fantastic experience, just recognizing
Speaker 3: again the big thing I took away from that was
Speaker 3: the value that an organization can have on the community
Speaker 3: in a country, and you just don't want to take
Speaker 3: that for granted. And part of the situation there that
Speaker 3: we actually fell into was the company was ultimately held
Speaker 3: to account by the government because they didn't feel like
Speaker 3: the company was sharing fairly the value of the gold
Speaker 3: mine with the company, with the country. And that's something
Speaker 3: something I take on board coming back to New Zealand
Speaker 3: is how do we make sure that these amazing assets
Speaker 3: that New Zealand has and that Mercury has been shared
Speaker 3: fairly in terms of our owners, in terms of our community,
Speaker 3: terms of EWI.
Speaker 4: And in terms of ultimately customers in New Zealand.
Speaker 1: So social license and.
Speaker 4: Afraid spot on.
Speaker 1: Yeah, yeah, and you think you're handling that pretty well here.
Speaker 3: I think Mercury does it pretty well. Can it be better?
Speaker 4: It absolutely can be. But I'm very proud well.
Speaker 3: I think if you look at the kind of the
Speaker 3: role that Mercury plays across all people, we're very good
Speaker 3: at supporting customers and hardship. We're very good at supporting
Speaker 3: customers who like to have a bundled product. Can we
Speaker 3: do better in terms of some communities, I think we
Speaker 3: possibly can be. We have some really strong relationships with EWI.
Speaker 3: Actually we have some commercial joint ventures with EWE and
Speaker 3: or Trust, which is fantastic. I still think part of
Speaker 3: what happened over a few years ago when TrustPower and
Speaker 3: Mercury merged is. We have brought ourselves together to be
Speaker 3: one company, and yet how we show up in some
Speaker 3: communities can be a little bit different to other communities,
Speaker 3: and I'd like to make sure we're a bit more
Speaker 3: consistent than who Mercury is and therefore, how do we
Speaker 3: show up in Amoru versus Totong versus other parts.
Speaker 4: In His Zealand.
Speaker 1: It's been a busy year.
Speaker 4: Then it has, yeah, but this is a lot to come.
Speaker 1: It was the most surprising thing. You think that you
Speaker 1: didn't realize you'd need to do better, or didn't didn't
Speaker 1: realize was so important thing for me.
Speaker 3: Actually last week was really really amazing because it was
Speaker 3: the first chance to really talk with a lot of
Speaker 3: the analysts and a lot of our investors. And it
Speaker 3: went into there thinking, oh, this will be this will
Speaker 3: be tough, and it was challenging at times, and yet
Speaker 3: it which is really nice to see a really good
Speaker 3: recognition of the work that we've done over the last year.
Speaker 3: I've done a lot of work to simplify our strategy,
Speaker 3: refresh it so it's really really clear on how we
Speaker 3: add value and communicate that to our owners and our analysts,
Speaker 3: and they really really like that. It's really clear. We
Speaker 3: can see what you're doing as a company. You're focusing
Speaker 3: on efficiencies in your business. You've got a great pipeline,
Speaker 3: particularly excited about gfm or, which is awesome. You've got
Speaker 3: a really strong balance sheet, gives your options to go ahead,
Speaker 3: and we like what we can see in terms of
Speaker 3: what you're saying you're going to deliver and then how
Speaker 3: you're going to I guess return that value back to
Speaker 3: our owners.
Speaker 4: Now we just need to get on and deliver. STU.
Speaker 1: Thank you very much for your time, and thank you
Speaker 1: as well for watching, for listening wherever you're picking this up,
Speaker 1: whether it's on iHeart or on Apple podcasts or straight
Speaker 1: off the Shares's app. Let us know what you thought,
Speaker 1: let us know what we should be taking a look at,
Speaker 1: and we'll be back next time.
Speaker 4: Quimbitu.
Speaker 1: That's us for now.