Speaker 1: Kyoda and welcome to Shed Lunch, brought to you by Shears's.
Speaker 1: In this bonus episode, we continue our conversation with outgoing
Speaker 1: Meridian CEO Neil Barclay as he reflects on his seven
Speaker 1: years at the helm of one of our largest companies.
Speaker 1: We have this conversation at a time when New Zealand
Speaker 1: faces another uncertain winter around power supply and as prices
Speaker 1: start to rise for consumers. Before we jump in, here's
Speaker 1: some important information.
Speaker 2: Investing involves the 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: Neil, welcome to the studio. Just thinking about the last
Speaker 1: year and given that you are moving on in so
Speaker 1: a few months time, would you describe it as the
Speaker 1: annis horribilist? Just recently you said something about taking one
Speaker 1: for New Zealand and your media release.
Speaker 3: Yeah, it was an extreme drought last year and it
Speaker 3: cost us a lot of money to manage through it.
Speaker 3: But we we did what was right, you know. We
Speaker 3: made sure that we invested money to ensure that there
Speaker 3: were some physical responses from thermal generators, from companies like
Speaker 3: the aluminum smelter who could reduce demand, and then we
Speaker 3: could use that energy for other customers. We paid for
Speaker 3: all of that and that ensured that the light stayed on.
Speaker 3: So that's that's an important part of the role that
Speaker 3: we play as a gen Taylor in the New Zealand market.
Speaker 3: We are large. We have the financial capacity to help
Speaker 3: support the system and New Zealand through significant drought situations
Speaker 3: like we you know, like we had last year. But
Speaker 3: at the same time, we've we've progressed our development options considerably.
Speaker 3: We've now got four projects coming up to five fully
Speaker 3: consented and ready to build, including to Hoe. We've continued
Speaker 3: to grow our share of the retail market in New Zealand.
Speaker 3: So magically the businesses has had a fantastic year, just
Speaker 3: a financial hit based on a drought that that do
Speaker 3: come along and we prepare for them.
Speaker 1: What are some of the other things that you've done
Speaker 1: I think for customers, I mean, would this for example,
Speaker 1: would this deal if it goes through, have an effect
Speaker 1: on them?
Speaker 3: Ultimately? Yeah, because the more renewables that we build into
Speaker 3: the system, they have a very low cost marginal cost,
Speaker 3: so when they're generating, it's very low cost and that
Speaker 3: will drive energy costs down in New Zealand on the
Speaker 3: whole and on the average over time. It'll take a
Speaker 3: week bit of time for.
Speaker 1: That to flow through, because aren't we all, I mean,
Speaker 1: most of us are seeing increases in our electricity bill
Speaker 1: and that's probably going to take a while. It could
Speaker 1: be five percent I think I've seen in some cases.
Speaker 3: Yeah, there are some price increases coming through. Most of
Speaker 3: them are actually coming through the monopoly parts of the business,
Speaker 3: so lines companies just yea, the generators generate the energy
Speaker 3: and then we sell it to customers at the retail end,
Speaker 3: you've got all those wires and transformers and things that
Speaker 3: get it between the generation plant and the customer premises.
Speaker 3: Because that those businesses are largely monopolies, they get regulated
Speaker 3: by the Commics Commission. The Commics Commission sets what their
Speaker 3: maximum price can be, so the Commis Commission has how
Speaker 3: to look at that and put the prices up. We
Speaker 3: think that needs a bit of looking at, but you know,
Speaker 3: we're not the experts in that area. So those costs
Speaker 3: have to get passed on to consumers, because there's no
Speaker 3: way we can absorb them, or offset them, or become
Speaker 3: more efficient through them. What we do, though, is take
Speaker 3: a long term view on the cost of energy. So
Speaker 3: that's how part of the business what we generate. And
Speaker 3: whilst generation costs wholesale generation costs were very high last year,
Speaker 3: that does not get passed through to consumers because we
Speaker 3: take a long term view and we know that once
Speaker 3: we're through this gas pinch point we're calling it, we've
Speaker 3: got a whole bevy of new renewable generation projects that
Speaker 3: get delivered probably within the twenty seven twenty nine time frame,
Speaker 3: that pinch point will be resolved and you'll start to
Speaker 3: see a moderation those whole high wholesale prices again and
Speaker 3: then we you know, so we wear the cost in
Speaker 3: the meantime if you like, to not put too much
Speaker 3: burden on the customers.
Speaker 1: So you're saying in time, power prices will come down.
Speaker 3: Energy costs in New Zealand and time will come down.
Speaker 3: That's my strong belief. That's what the global trend would
Speaker 3: tell us. Cost renewables is coming down. It's now cheaper
Speaker 3: to build to really or a soul the farm in
Speaker 3: this country than to run an existing gas fire plant.
Speaker 3: So it's inevitable. We're just going to build these renewables.
Speaker 3: It will drive costs down in the long run. And
Speaker 3: as people electrify their use, so stop burning petrol in
Speaker 3: your car and go to an EV, the cost of
Speaker 3: powering your vehicles, powering your homes, powering your businesses will
Speaker 3: come down.
Speaker 1: You've got an EV, yeah, yeah, Tesla.
Speaker 3: No, no, it BMW AND's got a little money as well,
Speaker 3: so yeah.
Speaker 1: And do people get enough money back though from the grid.
Speaker 1: That's all often a thing in terms of because the
Speaker 1: solar they have, and yeah, and because I've heard people
Speaker 1: grumble a little bit about that. Is that going to change?
Speaker 3: It goes through stages. At the moment, Meridians buyback rates
Speaker 3: are pretty competitive. I shouldn't quote this because it's you know,
Speaker 3: we're marketing, we're changing prices all the time, but it's
Speaker 3: I think it's up around seventeen cents. So we're buying
Speaker 3: energy off people and there's who have solar on their
Speaker 3: roofs at that sort of price. But we can build
Speaker 3: terillary hoe for probably something around eight cents or so.
Speaker 3: It's far more expensive for us to buy it off
Speaker 3: solar customers than to build a wind farm or build
Speaker 3: a grit scale solar plant. But what we're trying to
Speaker 3: do is still support customers who want to build solar
Speaker 3: on their rooftops because we think it's still going to
Speaker 3: be a really important part of decarbonizing the whole economy
Speaker 3: and the whole system. We can't do it all with
Speaker 3: grit scale generations. So we do need you know, we
Speaker 3: do need solar on most roofs in this country, and
Speaker 3: so we're trying to support that through buy back rates
Speaker 3: and through also coming up with a decent solar proposition
Speaker 3: that support.
Speaker 1: Yeah, I think so because we had that solar company
Speaker 1: that went bust, didn't we that was earlier in the Yeah,
Speaker 1: and I think that's kind of tainted a few people's
Speaker 1: views on things.
Speaker 3: Yeah, that's unfortunate. I don't think any of the customers
Speaker 3: have been left in the lurch, which is really good. Okay,
Speaker 3: and you know, but we need to have a look
Speaker 3: at what went wrong with that business model. There's no
Speaker 3: need for solars installers to be going broke. I don't
Speaker 3: think the business is only going to grow.
Speaker 1: Surely we can arn off Australia.
Speaker 3: Yeah, we can and Australia haven't necessarily done it the
Speaker 3: smart way, so they've you know, they've invested a lot
Speaker 3: of subsidy dollars to support customers to build solar, and
Speaker 3: what that has meant is has created distortions within their markets.
Speaker 3: So there's actually too much solar in Australia in those
Speaker 3: sunny days, and it means that the grid scale big
Speaker 3: coal plants that have to run and can't slow down
Speaker 3: or speed up when there's a whole bunch of solar
Speaker 3: being injected into the grid have to keep running and
Speaker 3: have to pay to run, so you're not getting negative prices,
Speaker 3: and what that's doing is discouraging the investment in new renewables.
Speaker 3: It's really perverse impacts, but it's so sort of nono
Speaker 3: unintended consequences you do tend to get when governments and
Speaker 3: policy makers decide to intervene in a market and decide
Speaker 3: what they think is going to work best. You're best
Speaker 3: off letting the economics drive the right activities and allow
Speaker 3: customers customers to make informed choices on the fundamental economics
Speaker 3: of what's driving things at that time.
Speaker 1: Now, now you've been at Meridium, I think it's actually
Speaker 1: close to two decades, if I'm not wrong, and seven
Speaker 1: years at the Helm. It sounds like there's going to
Speaker 1: be quite a change for your life coming up. I
Speaker 1: think you're going to be on the board of the
Speaker 1: New Zealand and Chorus. Is there anything else that you
Speaker 1: can to tell us?
Speaker 3: Not of any interest. I mean, my wife's looking forward
Speaker 3: to having some help. We've got a bit of a
Speaker 3: lifestyle block six an rfect. There's there's always stuff to do.
Speaker 3: I need to upgrade the chainsaw, for sure. I love fishing,
Speaker 3: hunting and need to do a bit more of that.
Speaker 3: I'll probably look at another board appointment or two, just
Speaker 3: so I keep my hand in. But certainly it's a
Speaker 3: lifestyle change for me. You know, when you're a chief
Speaker 3: executive of a business like Meridian, it takes a lot
Speaker 3: of effort. And you know, my sixtieth birthday this.
Speaker 1: Year, so congratulations.
Speaker 3: And hand it over to a young whipper snapper like Mike,
Speaker 3: who's he's got heaps of energy. He has a lot
Speaker 3: of good ideas.
Speaker 1: We had him on the frogum not so long ago.
Speaker 1: And I don't think I've got a word in hitch ways.
Speaker 3: I never do either. But but no it's it's it's
Speaker 3: great to have a bit of change, fresh injection of
Speaker 3: ideas and enthusiasm and energy, and the time is right
Speaker 3: for me to sort of bark on a different stage
Speaker 3: of my life and career.
Speaker 1: So would you you're still an investor and I imagine
Speaker 1: an advisor at some point if you need to be,
Speaker 1: I mean your knowledge, Look that.
Speaker 3: There's it's not it's not considered good governance in New
Speaker 3: Zealand for a chief executive to go straight on to
Speaker 3: the board.
Speaker 1: Point.
Speaker 3: Yeah, so there is a sort of a standown period.
Speaker 3: But I Obviou said, hey, look in three years time,
Speaker 3: if you need another director, I'll be around.
Speaker 1: I'll be the one I'll be around.
Speaker 3: And I'll be more than willing because I love the business.
Speaker 3: It's a fantastic company, it's a fantastic culture, and like
Speaker 3: I say, the opportunities to support New Zealand to decarbonize,
Speaker 3: it's just that there isn't a better one, and the
Speaker 3: opportunities to grow the businesses outstanding as well. Whilst supporting
Speaker 3: our customers ultimately pay less for the energy and that's
Speaker 3: pretty fundamental to what we're trying to achieve it.
Speaker 1: So would that be the most exciting thing you think
Speaker 1: in that tenure that you've been able to achieve or
Speaker 1: with the team.
Speaker 3: There's a lot that we've done internally, difficult to go
Speaker 3: into a couple of things. I'm immensely proud of our
Speaker 3: energy hardship program. We got the board a few years
Speaker 3: to go to sign off on a five billion dollar
Speaker 3: program of work over a couple of years that would
Speaker 3: allow us to support five thousand customers in a hardship.
Speaker 3: We know there's more of our customers that are in
Speaker 3: energy hardship, so we've got to do better. But that
Speaker 3: was a real step forward. I think we set the
Speaker 3: standard across all retailers in New Zealand around that and
Speaker 3: how we pork people to be able to afford to
Speaker 3: pay and keep for their bills and keep their homes,
Speaker 3: women and so forth. Like say, our retail business has
Speaker 3: grown by more than sixty percent, and retail in New
Speaker 3: Zealand has not grown by anything in fifteen years, so
Speaker 3: that's all been market share. We have one market share
Speaker 3: off other retailers because I think we're doing it better.
Speaker 3: We care more for our customers, We've got the pricing
Speaker 3: service propositions right. We can always improve and we've got
Speaker 3: some really exciting ideas and opportunities how to do that,
Speaker 3: particularly supporting customers to use assets within their home to
Speaker 3: be able to move their energy around and therefore get
Speaker 3: cost savings as a result. For example, we've launched a
Speaker 3: hot water product, So if you allow us to control
Speaker 3: your hot water cylinder, we'll make sure that you don't
Speaker 3: have a cold shower in the morning, but we will
Speaker 3: move the time that that water in that cylinder gets
Speaker 3: heated around to fit better within low rice periods of
Speaker 3: the day. Those sorts of ideas, and it can all
Speaker 3: be done automatically, so the customer doesn't have to be
Speaker 3: involved or think about it or pushing buttons or telling
Speaker 3: us what to do, and we just set it up
Speaker 3: in advance. Same with charging your ev you know, we
Speaker 3: can move that energy around, and there's quite a lot
Speaker 3: you can do with solar and batteries. So these are
Speaker 3: the sorts of ideas that we're working through that will
Speaker 3: save customers money and I think further enhanced the Meridian brand.
Speaker 3: So yeah, there's a lot of stuff on the customer
Speaker 3: front that I'm just super chupped with and a lot
Speaker 3: more opportunity to go for.
Speaker 1: To Finnish Neil Any regrets that.
Speaker 3: Has no point in hand regrets. There's a few things
Speaker 3: I would have liked to have got done that it
Speaker 3: probably won't happen on my watch. I'm very determined that
Speaker 3: Terrari will be one of those will get done on me,
Speaker 3: not one that wouldn't. But now I would have liked
Speaker 3: to have moved faster, if anything. But it's it is hard,
Speaker 3: it's complex. It's very difficult getting a project of the
Speaker 3: scale consented in New Zealand. Meridians never had a consent
Speaker 3: turned down. We always do the right thing by both
Speaker 3: the environment, by the communities in and around who operate
Speaker 3: in and around these sort of large scale ultricy generation plants.
Speaker 3: But it takes time.
Speaker 1: It's hard too, isn't it.
Speaker 3: And it's expensive.
Speaker 1: Yeah, because Contact's been kicked back in christ Church for
Speaker 1: a big soldo.
Speaker 3: Down and down in the Deep South. I don't know
Speaker 3: all the facts that all the ins and outs around that.
Speaker 3: It'll be disappointing for them. Like I say, we've never
Speaker 3: been kicked back, but we've had to go through the
Speaker 3: hoops and we need to find a way to streamline,
Speaker 3: streamline that Companies like Meridian contact and others. We need
Speaker 3: to do the right thing by the environment. You need
Speaker 3: to be trusted to be able to do that. But
Speaker 3: we need to speed up the whole process if we're
Speaker 3: going to successfully decarbonize the economy, and we will, we will.
Speaker 3: It's happening. The government's working on it, we're all working
Speaker 3: on it. It's happening. It's just this pesky little problem
Speaker 3: with gas that we've got at the moment. But like
Speaker 3: I say, and I don't want to my understate that
Speaker 3: because it is significant, but it will be resolved and
Speaker 3: its projects exactly like Terry whole, that will make all
Speaker 3: the difference.
Speaker 1: So you'll be watching from the sidelines but doing a
Speaker 1: fear bit more fishing and leisure of time is going
Speaker 1: to be where it's at from now on pretty well.
Speaker 3: But I think the New Zealand Bord will keep me with.
Speaker 1: Yes, a few challenges there.
Speaker 3: And I was sitting next to someone I barely knew
Speaker 3: on a plane the other day. It was pointing out
Speaker 3: some improvements that I could take back to the boot,
Speaker 3: So yeah, you get that. I think being an the
Speaker 3: New Zealand ambassador in our country because that company is
Speaker 3: so important to us all and the chorus Borders is
Speaker 3: also really citing connectivities everything, and they they are you know,
Speaker 3: they know, they're run five a network in this country
Speaker 3: that connects us all. So I mean, I've tried to
Speaker 3: choose businesses that matter, and they are two that do,
Speaker 3: and Maridin obviously is one that does well.
Speaker 1: I wish you all the best, Neil, thank you for
Speaker 1: coming in today and talking to us, and thanks everyone
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