1 00:00:00,160 --> 00:00:02,880 Speaker 1: Afternoon. Well, the issues with the country's power keep on coming. 2 00:00:02,960 --> 00:00:05,840 Speaker 1: Another mill is shuttered. This time it's pan Packs pulp 3 00:00:05,880 --> 00:00:09,119 Speaker 1: mill near Napier, which has stopped production until power prices 4 00:00:09,160 --> 00:00:11,239 Speaker 1: fall again. It says the energy crisis has become so 5 00:00:11,360 --> 00:00:14,040 Speaker 1: bad now it's actually cheaper to stop working rather than 6 00:00:14,040 --> 00:00:17,000 Speaker 1: produce at a loss. Pan Pack's managing director is Tony Clifford. 7 00:00:17,000 --> 00:00:18,799 Speaker 2: Hey, Tony, Hello Heather. 8 00:00:19,440 --> 00:00:21,520 Speaker 1: How long do you expect you'll have to keep this. 9 00:00:21,480 --> 00:00:25,640 Speaker 2: Production on Holt for Ah, That's a very good question, 10 00:00:26,440 --> 00:00:29,080 Speaker 2: you know. I just want to emphasize that we've at PMPEC. 11 00:00:29,160 --> 00:00:31,479 Speaker 2: We've still got our forestry and lumber business running at 12 00:00:31,520 --> 00:00:34,640 Speaker 2: one hundred percent, but it's the energy intensive side of 13 00:00:34,640 --> 00:00:38,000 Speaker 2: our business. It's making mechanical pulp that we've had to 14 00:00:38,440 --> 00:00:43,919 Speaker 2: halt since Saturday. Power prices went through the roofline on Saturday, 15 00:00:44,320 --> 00:00:48,840 Speaker 2: and we just cannot generate profit when prices are as 16 00:00:48,920 --> 00:00:52,279 Speaker 2: they are. But how long, I've said to my staff 17 00:00:52,640 --> 00:00:54,279 Speaker 2: there's a couple of things that had to happen. Either 18 00:00:54,320 --> 00:00:56,200 Speaker 2: it has to rain a lot in the South Island 19 00:00:56,920 --> 00:01:00,440 Speaker 2: and the hydroc catchment areas, or we have to have 20 00:01:00,560 --> 00:01:06,280 Speaker 2: the commercial operation of the Tihara plant in Topol come 21 00:01:06,319 --> 00:01:09,479 Speaker 2: online where we have a power purchasing agreement with that 22 00:01:09,560 --> 00:01:13,080 Speaker 2: company and currently they are experiencing problems. And so yeah, 23 00:01:13,080 --> 00:01:15,440 Speaker 2: we're at the moment one hundred feet exposed to the 24 00:01:15,800 --> 00:01:17,199 Speaker 2: also electricity market. 25 00:01:17,319 --> 00:01:20,120 Speaker 1: What do you reckon? What's your outlook? I mean, Winston's 26 00:01:20,120 --> 00:01:22,440 Speaker 1: talking about being downing tools for two weeks. Are you 27 00:01:22,440 --> 00:01:23,520 Speaker 1: guys looking at this kind. 28 00:01:23,360 --> 00:01:27,600 Speaker 2: Of period, It's at least two weeks. You know, we 29 00:01:27,800 --> 00:01:34,319 Speaker 2: are expecting Tahi potentially can't come online until October, and 30 00:01:34,400 --> 00:01:37,640 Speaker 2: you know maybe in that time that's two months, yes, 31 00:01:37,720 --> 00:01:40,800 Speaker 2: and then we're talking here. The point I may deal 32 00:01:40,840 --> 00:01:43,920 Speaker 2: with ministers in our meeting on Wednesday that this is 33 00:01:44,000 --> 00:01:47,040 Speaker 2: just not a pan PAC issue. This is all energy 34 00:01:47,080 --> 00:01:52,360 Speaker 2: intensive and particularly energy intensive trade exposed businesses, because there's 35 00:01:52,440 --> 00:01:56,880 Speaker 2: absolutely no hope that we can pass on escalating power 36 00:01:56,960 --> 00:02:00,840 Speaker 2: prices through to our customer, our international customer. We're competing 37 00:02:00,840 --> 00:02:04,600 Speaker 2: against supplies from all around the world and they just 38 00:02:04,640 --> 00:02:07,880 Speaker 2: are not exposed to these type of electricity prices. So 39 00:02:08,360 --> 00:02:11,320 Speaker 2: the other message I'm really trying to get people get 40 00:02:11,360 --> 00:02:14,040 Speaker 2: through is that this is not just a one year event. 41 00:02:14,160 --> 00:02:17,760 Speaker 2: You know, low hydro situations do happen every seven to 42 00:02:17,840 --> 00:02:22,520 Speaker 2: ten years. But we've been experiencing escalating electricity prices at 43 00:02:22,560 --> 00:02:26,679 Speaker 2: the wholesale level since twenty eighteen. And what we've got 44 00:02:26,720 --> 00:02:30,240 Speaker 2: now is a shortage of gas, and a shortage of water, 45 00:02:30,480 --> 00:02:34,079 Speaker 2: and recently shortage of wind and some and those things 46 00:02:34,080 --> 00:02:37,680 Speaker 2: that will come together to just give exceptionally high spot prices. 47 00:02:37,720 --> 00:02:42,600 Speaker 2: And yeah, so what we believe it is solvable. This 48 00:02:43,120 --> 00:02:45,880 Speaker 2: as it said to people, this is not a This 49 00:02:45,960 --> 00:02:48,480 Speaker 2: is not like a transmission tower falling over or someone 50 00:02:48,520 --> 00:02:52,360 Speaker 2: digging up a gas line. Those are hard engineering problems 51 00:02:52,360 --> 00:02:55,560 Speaker 2: that have to be fixed. This is a market design issue. 52 00:02:55,320 --> 00:02:58,200 Speaker 2: The way the market works is that the half hour 53 00:02:58,320 --> 00:03:02,600 Speaker 2: spot price is set by the peak supply price in 54 00:03:02,639 --> 00:03:05,640 Speaker 2: any one half hour, and the assumption for the market 55 00:03:05,680 --> 00:03:09,360 Speaker 2: design has been that there is gas and coal available 56 00:03:09,400 --> 00:03:14,160 Speaker 2: for firming other options under normal conditions, and that that 57 00:03:14,200 --> 00:03:17,000 Speaker 2: gas supply has just been gradually getting less and less, 58 00:03:17,040 --> 00:03:19,440 Speaker 2: and that's been putting the price of electricity up more 59 00:03:19,480 --> 00:03:22,600 Speaker 2: and more. And you know, we've we've got a probably 60 00:03:22,639 --> 00:03:24,440 Speaker 2: you know that one of the solutions that could be 61 00:03:24,480 --> 00:03:28,200 Speaker 2: done temporarily is breaking that connection between the cost of 62 00:03:28,240 --> 00:03:31,160 Speaker 2: gas and the cost of electricity, because there is no 63 00:03:31,360 --> 00:03:35,640 Speaker 2: ongoing shortage of electricity while it is an ongoing shortage 64 00:03:35,640 --> 00:03:36,160 Speaker 2: of gas. 65 00:03:36,280 --> 00:03:39,560 Speaker 1: All right, listen, Tony, is there any possibility that you 66 00:03:39,640 --> 00:03:42,320 Speaker 1: may in fact shut down some of your production permanently? 67 00:03:44,280 --> 00:03:48,320 Speaker 2: I would, I would hope not. That's not on my radar. 68 00:03:49,800 --> 00:03:52,360 Speaker 2: We believe Do you believe. 69 00:03:52,160 --> 00:03:54,640 Speaker 1: That the gent tailors are price gouging or profitearing? 70 00:03:56,080 --> 00:04:00,000 Speaker 2: I don't beat up on the generators. The generators are 71 00:04:00,080 --> 00:04:02,800 Speaker 2: operating their business under the set of rules that are 72 00:04:02,800 --> 00:04:05,000 Speaker 2: given to them, and that's to maximize this year holding 73 00:04:05,040 --> 00:04:08,840 Speaker 2: for their for their maximizing profit for their yearholders. To 74 00:04:08,880 --> 00:04:11,320 Speaker 2: the best of my knowledge, in the last ten years, 75 00:04:11,360 --> 00:04:14,320 Speaker 2: has only been one generator who've got a bit of 76 00:04:14,360 --> 00:04:17,599 Speaker 2: a slap on the risk for not for wasting water 77 00:04:17,640 --> 00:04:19,839 Speaker 2: when it could have been going into generation. But for 78 00:04:19,880 --> 00:04:24,320 Speaker 2: the most part that hasn't been able to be proven. Again, 79 00:04:24,480 --> 00:04:28,400 Speaker 2: you know, the market design doesn't encourage lots of generation 80 00:04:28,520 --> 00:04:33,200 Speaker 2: to be brought onto the market. It does encourage a 81 00:04:33,240 --> 00:04:37,039 Speaker 2: degree of scarcity, and that that again, that has to 82 00:04:37,080 --> 00:04:40,520 Speaker 2: be reviewed. And the other problem is, you know, everyone 83 00:04:40,600 --> 00:04:42,920 Speaker 2: knows that gestation period to build a power station in 84 00:04:42,960 --> 00:04:47,000 Speaker 2: New Zealand is measured in years, not months, and so 85 00:04:47,240 --> 00:04:50,160 Speaker 2: you know we're not going to fix this problem overnight. 86 00:04:50,279 --> 00:04:52,760 Speaker 2: It's the short term solution. I believe we have to 87 00:04:52,800 --> 00:04:55,520 Speaker 2: break this connection between the gas price and electricity price. 88 00:04:55,839 --> 00:04:58,160 Speaker 2: The long term solution is, you know, we need more generation. 89 00:04:58,480 --> 00:05:00,320 Speaker 1: Yeah, totally listen Tonally, thank you for very much for 90 00:05:00,360 --> 00:05:01,800 Speaker 1: your time and best of luck dealing with this. It's 91 00:05:01,839 --> 00:05:05,520 Speaker 1: Tony Clifford, pan Pack's managing director. For more from Hither 92 00:05:05,600 --> 00:05:06,760 Speaker 1: Duplessy Allen Drive. 93 00:05:06,920 --> 00:05:10,280 Speaker 2: Listen live to news talks it'd be from four pm weekdays, 94 00:05:10,440 --> 00:05:12,640 Speaker 2: or follow the podcast on iHeartRadio.