1 00:00:00,280 --> 00:00:02,520 Speaker 1: The information provided in this program is of a general 2 00:00:02,600 --> 00:00:05,320 Speaker 1: nature and is not intended to be personalized financial advice. 3 00:00:05,400 --> 00:00:07,720 Speaker 1: We encourage you to seek appropriate advice from a qualified 4 00:00:07,760 --> 00:00:11,080 Speaker 1: professional to suit your individual circumstances. It's the biggest deal 5 00:00:11,119 --> 00:00:14,560 Speaker 1: in our electricity industry since the mixed ownership model began. 6 00:00:15,120 --> 00:00:18,320 Speaker 1: Contact Energy wants to buy all of Manaware how much 7 00:00:18,360 --> 00:00:21,639 Speaker 1: of a powerhouse will the companies be? What would you 8 00:00:21,680 --> 00:00:24,160 Speaker 1: say to competitors, Mike, the likes of Meridian, the likes 9 00:00:24,160 --> 00:00:26,200 Speaker 1: of Genesis, Mercury. Looking at this, should they be a 10 00:00:26,239 --> 00:00:28,440 Speaker 1: bit scared about how big you're going to be? Now? 11 00:00:28,720 --> 00:00:31,760 Speaker 2: I wouldn't use the terms scared. We're always up for competition. 12 00:00:31,840 --> 00:00:33,240 Speaker 2: We enjoy competition. 13 00:00:43,280 --> 00:00:46,320 Speaker 1: All eyes are on the electricity industry as dry hydro 14 00:00:46,440 --> 00:00:50,360 Speaker 1: lakes and a gas shortage sent wholesale prices to new highs. 15 00:00:50,960 --> 00:00:54,800 Speaker 1: Industrial users without fixed contracts are hurting the most, but 16 00:00:54,960 --> 00:00:58,880 Speaker 1: all of it keeps upwards pressure on retail prices. Our 17 00:00:58,960 --> 00:01:03,959 Speaker 1: electricity industry is led by four major generation retailers aka 18 00:01:04,240 --> 00:01:08,640 Speaker 1: gent tailors. Meridian is the biggest, producing about eighteen percent 19 00:01:08,720 --> 00:01:12,199 Speaker 1: of the country's electricity. It owns the Manapuri and White 20 00:01:12,240 --> 00:01:16,800 Speaker 1: Tucky dams. As well as wind farms nationwide. Mercury is 21 00:01:16,880 --> 00:01:19,959 Speaker 1: also big on hydro with its main assets along the 22 00:01:20,000 --> 00:01:24,120 Speaker 1: Waikatou River. Genesis is the system's backup with its Huntley 23 00:01:24,200 --> 00:01:29,280 Speaker 1: Power station, and Contact Energy is big on geothermal. Contact 24 00:01:29,319 --> 00:01:32,800 Speaker 1: is the only gentailor not majority owned by the government. 25 00:01:33,440 --> 00:01:36,640 Speaker 1: There used to be a fifth player, Trust Power, but 26 00:01:36,720 --> 00:01:39,320 Speaker 1: it's sold its retail business to Mercury in a four 27 00:01:39,400 --> 00:01:43,640 Speaker 1: hundred and forty million dollar deal. Now it's called Manowa 28 00:01:43,680 --> 00:01:48,240 Speaker 1: and does generation only, with twenty five hydro electricity assets, 29 00:01:48,440 --> 00:01:53,080 Speaker 1: producing nine percent of our total hydro capacity. It's majority 30 00:01:53,120 --> 00:01:57,160 Speaker 1: owned by infrastructure investor Infratil. It's held onto the assets 31 00:01:57,240 --> 00:02:00,880 Speaker 1: since it listed in nineteen ninety four, but now they're 32 00:02:00,920 --> 00:02:04,120 Speaker 1: about to sell it. Contact wants to acquire all of 33 00:02:04,200 --> 00:02:07,840 Speaker 1: Manowah and a deal worth two point three billion dollars 34 00:02:08,120 --> 00:02:11,920 Speaker 1: and a mix of cash, shares and debt. Contact CEO 35 00:02:12,080 --> 00:02:15,600 Speaker 1: Mike Hujin chairman Rob McDonald have been and talks about 36 00:02:15,600 --> 00:02:18,760 Speaker 1: this all year. They told me the merger is all 37 00:02:18,800 --> 00:02:23,280 Speaker 1: about hydro electricity. Contact owns the Clyde Dam on Lake 38 00:02:23,360 --> 00:02:26,880 Speaker 1: Dunstan down South, but aside from that it's failed to 39 00:02:26,880 --> 00:02:30,480 Speaker 1: make a significant mark and hydro generation. It's why it's 40 00:02:30,520 --> 00:02:34,320 Speaker 1: so attracted to acquiring Mnowa's assets. On the day the 41 00:02:34,320 --> 00:02:37,160 Speaker 1: deal went public this week, Mike and Rob took some 42 00:02:37,280 --> 00:02:43,839 Speaker 1: time to talk about the power this historic deal may hold. Mike, Rob, 43 00:02:43,880 --> 00:02:46,160 Speaker 1: thank you so much for doing this together. Appreciate it. 44 00:02:47,200 --> 00:02:50,360 Speaker 1: Let's talk about size of the deal first. This is 45 00:02:50,520 --> 00:02:54,440 Speaker 1: one of the biggest deals I've seen in years. I mean, Rob, 46 00:02:54,480 --> 00:02:56,120 Speaker 1: how historic is this? Yeah? 47 00:02:56,160 --> 00:02:57,720 Speaker 3: I think you have to go all the way back 48 00:02:57,760 --> 00:03:03,320 Speaker 3: to the original programmers of sale. That's some time ago, 49 00:03:03,400 --> 00:03:08,119 Speaker 3: more than ten apps. So the deal itself is when 50 00:03:08,160 --> 00:03:10,280 Speaker 3: you put the script and the cash together, that's one 51 00:03:10,320 --> 00:03:13,800 Speaker 3: point nine billion dollars. When you think about the enterprise value, 52 00:03:14,160 --> 00:03:16,959 Speaker 3: that comes to two point three billion dollars. So yeah, 53 00:03:17,160 --> 00:03:18,359 Speaker 3: quite a sizeable. 54 00:03:18,000 --> 00:03:21,720 Speaker 1: Deal, Quite a sizable deal. Fair to say, who started this, Mike, 55 00:03:21,760 --> 00:03:24,560 Speaker 1: who approached to and when I'm imagining you've been working 56 00:03:24,600 --> 00:03:25,919 Speaker 1: on this behind the scenes for a while. 57 00:03:26,240 --> 00:03:28,800 Speaker 4: Yeah, we have been looking working on this behind the 58 00:03:28,800 --> 00:03:29,480 Speaker 4: scenes for a while. 59 00:03:29,520 --> 00:03:34,040 Speaker 2: We approached Manua some time ago, but we've been thinking 60 00:03:34,080 --> 00:03:36,480 Speaker 2: about it for quite a while before then because we 61 00:03:36,520 --> 00:03:38,760 Speaker 2: could see some of those portfolio benefits. 62 00:03:38,800 --> 00:03:39,920 Speaker 4: They were very clear to us. 63 00:03:40,240 --> 00:03:41,840 Speaker 1: Tell me a bit more about that. What was the 64 00:03:42,200 --> 00:03:44,440 Speaker 1: initial thought where you thought we should go in and 65 00:03:44,440 --> 00:03:46,760 Speaker 1: acquire We feel like we need to slam do balance 66 00:03:46,760 --> 00:03:47,400 Speaker 1: sheets together it. 67 00:03:47,600 --> 00:03:48,920 Speaker 4: Oh, look, there's a couple of things. 68 00:03:49,640 --> 00:03:54,440 Speaker 2: Our hydro portfolio in particular is some are springs, some 69 00:03:54,560 --> 00:03:56,600 Speaker 2: are weighted, and we've always made up for that with 70 00:03:57,040 --> 00:03:58,080 Speaker 2: having thermal peaking. 71 00:03:58,480 --> 00:04:00,240 Speaker 4: Well, obviously we want to face that out. 72 00:04:00,320 --> 00:04:02,080 Speaker 2: And then you have to turn your minds, well, how 73 00:04:02,120 --> 00:04:04,480 Speaker 2: do we make up for that in the winter, And 74 00:04:04,520 --> 00:04:08,240 Speaker 2: you've got manner as hydrogeneration which is both geographically diverse 75 00:04:08,280 --> 00:04:11,840 Speaker 2: but also is weighted towards winter, and that's what makes 76 00:04:11,880 --> 00:04:14,360 Speaker 2: you think, actually, this will help us get to get 77 00:04:14,440 --> 00:04:15,600 Speaker 2: us to our future faster. 78 00:04:16,120 --> 00:04:17,840 Speaker 1: Where does this then rank you if this goes a 79 00:04:17,880 --> 00:04:19,480 Speaker 1: heare we are going to talk about approval a little 80 00:04:19,480 --> 00:04:21,960 Speaker 1: bit later on, but if this does go ahere, where 81 00:04:21,960 --> 00:04:24,520 Speaker 1: would this rank you in terms of generation capacity? Because 82 00:04:24,520 --> 00:04:27,279 Speaker 1: notion that Manawa now hasn't a retail business, but in 83 00:04:27,360 --> 00:04:31,440 Speaker 1: terms of size and scale for your generation megawatt power, 84 00:04:31,720 --> 00:04:33,120 Speaker 1: how big of a powerhouse will you be? 85 00:04:33,520 --> 00:04:35,240 Speaker 2: So we'll have a title of about ten and a 86 00:04:35,279 --> 00:04:38,520 Speaker 2: half ten of what ours as we are today, which 87 00:04:38,760 --> 00:04:42,920 Speaker 2: puts us second in the market behind Meridian, behind Meridian, 88 00:04:43,960 --> 00:04:46,160 Speaker 2: and gives us about twenty four percent of the market, 89 00:04:46,360 --> 00:04:49,960 Speaker 2: which just should settle any anxiety about market dominance or 90 00:04:49,960 --> 00:04:50,680 Speaker 2: anything like that. 91 00:04:51,240 --> 00:04:53,040 Speaker 1: Rob. There will be some people looking at this deal 92 00:04:53,160 --> 00:04:55,359 Speaker 1: thinking that the last thing we need right now is 93 00:04:55,440 --> 00:04:58,840 Speaker 1: less competition in the electricity industry. What would you say 94 00:04:58,880 --> 00:04:59,880 Speaker 1: to people with those thoughts. 95 00:05:00,040 --> 00:05:01,960 Speaker 3: I think the first thing you're going to look at 96 00:05:02,080 --> 00:05:06,000 Speaker 3: is what this actually produces. And putting two sets of 97 00:05:06,200 --> 00:05:12,359 Speaker 3: diverse hydro assets together, one as Mike's described, summer weighted 98 00:05:13,600 --> 00:05:17,080 Speaker 3: and springweighted versus a winter weighted and what that does 99 00:05:17,240 --> 00:05:21,520 Speaker 3: is actually allow us to, through our risk management strategies, 100 00:05:22,080 --> 00:05:26,039 Speaker 3: actually sell more power into the forward market. And the 101 00:05:26,040 --> 00:05:28,280 Speaker 3: importance of that is that means we can give more 102 00:05:28,320 --> 00:05:32,440 Speaker 3: fixed contracts to major industrial users, which we do now 103 00:05:32,520 --> 00:05:36,160 Speaker 3: but sort of supercharges, and also to independent retail it 104 00:05:36,720 --> 00:05:39,920 Speaker 3: as well. So when we look at this, we actually 105 00:05:40,040 --> 00:05:43,080 Speaker 3: think about it increasing competition in the longer. 106 00:05:43,640 --> 00:05:46,640 Speaker 1: So more fixed price contracts at lower prices, that's what 107 00:05:46,680 --> 00:05:49,920 Speaker 1: you're insinuating there. Yes, Mike, do you really expect the 108 00:05:49,920 --> 00:05:52,960 Speaker 1: Comment Commission to approve this given what's happening in the 109 00:05:53,000 --> 00:05:53,480 Speaker 1: sector right. 110 00:05:53,640 --> 00:05:55,679 Speaker 2: We would not be sitting here today if we didn't 111 00:05:55,680 --> 00:05:58,120 Speaker 2: have a high degree of confidence at the Commerce Commission, 112 00:05:58,640 --> 00:05:59,440 Speaker 2: after doing their. 113 00:05:59,400 --> 00:06:00,839 Speaker 4: Job, approves this. 114 00:06:01,800 --> 00:06:05,160 Speaker 2: We believe that the Hearts are competitive of the market. 115 00:06:05,880 --> 00:06:09,240 Speaker 2: The deeper portfolio that we have will enable more renewable 116 00:06:09,240 --> 00:06:11,719 Speaker 2: generation to be built, which will only bring down with 117 00:06:11,760 --> 00:06:14,359 Speaker 2: pressure on prices, and so we see this as a 118 00:06:14,400 --> 00:06:15,800 Speaker 2: real positive for the market. 119 00:06:16,480 --> 00:06:18,240 Speaker 1: No shade on this deal at all, but often when 120 00:06:18,279 --> 00:06:22,240 Speaker 1: there is consolidation between players of this size in any market, 121 00:06:23,000 --> 00:06:25,480 Speaker 1: it can, for lack of a better term, sometimes look 122 00:06:25,560 --> 00:06:28,120 Speaker 1: like a bit of desperation, like a survival tactic, because 123 00:06:28,120 --> 00:06:30,359 Speaker 1: you need to put two balance sheets together to survive. 124 00:06:30,839 --> 00:06:33,360 Speaker 1: Is that what this is? Because the industry's in hard. 125 00:06:33,120 --> 00:06:37,320 Speaker 2: Times, This is about opportunity. Manua has a fantastic set 126 00:06:37,320 --> 00:06:40,080 Speaker 2: of assets, They have a fantastic set of development options, 127 00:06:40,400 --> 00:06:43,080 Speaker 2: They have a fantastic set of people. We believe that 128 00:06:43,160 --> 00:06:46,640 Speaker 2: bringing the two together creates opportunity both for us but 129 00:06:46,680 --> 00:06:47,640 Speaker 2: also for the country. 130 00:06:47,839 --> 00:06:49,719 Speaker 1: Does it allow you to invest more in things like 131 00:06:49,760 --> 00:06:53,720 Speaker 1: renewables which you're already throwing Absolutely absolutely so. 132 00:06:54,760 --> 00:06:56,880 Speaker 2: The one thing that people are discovering the world over 133 00:06:56,920 --> 00:07:03,200 Speaker 2: that intermittence firming and firming is the secret source which 134 00:07:03,240 --> 00:07:05,920 Speaker 2: is going to make the transition happen. And by bringing 135 00:07:05,920 --> 00:07:10,880 Speaker 2: the hydro assets in behind the intermittent renewable development pipeline, 136 00:07:11,040 --> 00:07:14,640 Speaker 2: you're able to boild more renewable energy and thereby firm 137 00:07:14,680 --> 00:07:17,239 Speaker 2: that electricy to provide a very secure supply to ordinary 138 00:07:17,320 --> 00:07:17,560 Speaker 2: key with. 139 00:07:17,960 --> 00:07:20,360 Speaker 1: You've said that this is going to increase resilience in 140 00:07:20,400 --> 00:07:23,600 Speaker 1: the system. If you have more control over generation in 141 00:07:23,800 --> 00:07:26,400 Speaker 1: more locations. Can you used to expand on how that 142 00:07:26,480 --> 00:07:29,560 Speaker 1: actually works outside affirming how does having more control of 143 00:07:29,640 --> 00:07:32,360 Speaker 1: a more generation mean that there will be less dips? 144 00:07:32,600 --> 00:07:36,040 Speaker 2: So if you think of our and Dorin talk to 145 00:07:36,080 --> 00:07:38,360 Speaker 2: this in some detail, but if you think of our 146 00:07:38,760 --> 00:07:43,080 Speaker 2: some awighted Pluther system. So we try and hold the 147 00:07:43,120 --> 00:07:45,640 Speaker 2: water back as much as possible as we go into 148 00:07:45,680 --> 00:07:48,520 Speaker 2: winter to make sure that we're not caught short in winter. 149 00:07:49,280 --> 00:07:51,640 Speaker 2: But if you know which can sometimes lead. If you 150 00:07:51,640 --> 00:07:54,080 Speaker 2: suddenly get one of those May rain storms, you end 151 00:07:54,160 --> 00:07:57,480 Speaker 2: up spilling and energy is wasted. But if you know 152 00:07:57,880 --> 00:08:00,160 Speaker 2: that your other hydro assets are going to be there 153 00:08:00,240 --> 00:08:03,240 Speaker 2: for you in June July, then you can produce the 154 00:08:03,280 --> 00:08:06,800 Speaker 2: power more aggressively over April May and be less conservative 155 00:08:06,840 --> 00:08:10,040 Speaker 2: in holding the water back and that overall in and 156 00:08:10,080 --> 00:08:13,280 Speaker 2: of itself just leads to less spill and more efficient 157 00:08:13,320 --> 00:08:14,560 Speaker 2: generation of energy. 158 00:08:14,680 --> 00:08:16,840 Speaker 1: So bottom line, you're telling me that if say this 159 00:08:16,920 --> 00:08:18,760 Speaker 1: deal went ahead last year, for example, we wouldn't have 160 00:08:18,800 --> 00:08:20,920 Speaker 1: had this year's energy industry situation. 161 00:08:21,000 --> 00:08:23,120 Speaker 2: I'm not saying that we wouldn't have had it. It 162 00:08:23,200 --> 00:08:24,920 Speaker 2: maybe wouldn't have been as dramatic. 163 00:08:25,440 --> 00:08:28,280 Speaker 1: It's a very tidy deal, Rob. Whenever I cover these things, 164 00:08:28,320 --> 00:08:30,040 Speaker 1: I mean, if you look at it's a recent takeover 165 00:08:30,080 --> 00:08:32,640 Speaker 1: offers that we've seen on the market to bring one up. 166 00:08:32,679 --> 00:08:35,920 Speaker 1: Stephen Tindall's offer and bid for the Warehouse Group that 167 00:08:36,080 --> 00:08:38,800 Speaker 1: wasn't all tidied up and sort of neatly seamed up 168 00:08:38,840 --> 00:08:42,120 Speaker 1: behind the scenes. This one is in terms of going 169 00:08:42,120 --> 00:08:45,360 Speaker 1: to Infratill, the majority owner of Manaware, who owned this 170 00:08:45,400 --> 00:08:47,600 Speaker 1: asset for Dare I say it a year longer than 171 00:08:47,600 --> 00:08:50,720 Speaker 1: I've been alive. How hard was it to get this 172 00:08:50,800 --> 00:08:52,840 Speaker 1: deal all so on up behind the scenes and then 173 00:08:52,880 --> 00:08:55,400 Speaker 1: bring it to market with it almost fully approved. 174 00:08:55,800 --> 00:09:01,160 Speaker 3: Yeah, it's been a journey and over several many months. 175 00:09:02,200 --> 00:09:04,640 Speaker 3: It's fair to say, though, I think everyone had the 176 00:09:04,640 --> 00:09:08,600 Speaker 3: same vision that both assets would come together and make 177 00:09:08,640 --> 00:09:12,520 Speaker 3: a better set of hydro assets, and that's a really 178 00:09:12,679 --> 00:09:18,440 Speaker 3: key and important thing, A big voting confidence in contact 179 00:09:18,520 --> 00:09:20,839 Speaker 3: energy by and fratill to say we're willing to be 180 00:09:20,880 --> 00:09:26,439 Speaker 3: a shyholder, and with Dion Campbell coming on the board, 181 00:09:26,720 --> 00:09:32,280 Speaker 3: something we welcome that's got a long history in formerly 182 00:09:32,280 --> 00:09:36,520 Speaker 3: trust out but also obviously Manawa and he brings a 183 00:09:36,640 --> 00:09:41,560 Speaker 3: whole raft of experience in renewable energy of recent times 184 00:09:41,559 --> 00:09:44,400 Speaker 3: as well, so we certainly welcoming as well. 185 00:09:44,880 --> 00:09:47,520 Speaker 1: What would you say to competitors, Mike, the likes of Meridian, 186 00:09:47,559 --> 00:09:49,720 Speaker 1: the likes of Genesis Mercury looking at this, should they 187 00:09:49,760 --> 00:09:52,079 Speaker 1: be a bit scared about how big you're going to be? Now? 188 00:09:52,600 --> 00:09:55,600 Speaker 2: I wouldn't use the term scared. We're always up for competition. 189 00:09:55,679 --> 00:10:00,400 Speaker 2: We enjoy competition. Competition is what keeps us lean. Petition 190 00:10:00,480 --> 00:10:04,160 Speaker 2: is what drives down the cost of development opportunities. And 191 00:10:04,240 --> 00:10:06,840 Speaker 2: so it's going to bring more competition. 192 00:10:06,960 --> 00:10:09,160 Speaker 1: Bring it on twenty twenty five. Do you think it's 193 00:10:09,160 --> 00:10:09,800 Speaker 1: going to go ahead? 194 00:10:09,960 --> 00:10:11,560 Speaker 4: Absolutely confident that we'll go ahead. 195 00:10:11,640 --> 00:10:13,959 Speaker 1: Yes, we'll talk again next year. Thank you by so 196 00:10:14,040 --> 00:10:15,520 Speaker 1: much for your time. Appreciate it. 197 00:10:15,720 --> 00:10:16,280 Speaker 4: Good stuff.