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Speaker 1: News on the power from and Fratilla's putting almost half

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Speaker 1: a billion into Contact Energy, as Andrew alluded to earlier

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Speaker 1: on in the program, Forsyth BARSI a fifteen percent net

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Speaker 1: profit to what was to jump to three hundred and

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Speaker 1: eighty eight million. They think we also have another gas

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Speaker 1: price rise coming. This one's seventeen percent for more than

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Speaker 1: forty thousand homes. So there's a lot to talk about

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Speaker 1: in the world of power and energy. Generally, my fuse

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Speaker 1: as the CEO of Contact Energy and is back with us.

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Speaker 1: Mike Morning to you, Morning, Mike, how are you? I'm well,

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Speaker 1: thank you. Are you sort of in a rock and

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Speaker 1: a hard place. I mean, it's wonderful to talk about profit,

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Speaker 1: except when they come from people who hate you because

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Speaker 1: you're putting the power price up.

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Speaker 2: Look, I think there's two things in that. One is

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Speaker 2: our profits rising because we're investing, and that's a quid

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Speaker 2: pro quote. I think the second thing to understand is

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Speaker 2: that for electricity prices, the primary driver of these price increases.

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Speaker 2: We're seeing other lines charges, which fortunately they are regulated.

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Speaker 2: And the next price part was set when interest fates

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Speaker 2: were almost double what they are today, So that's unfortunately

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Speaker 2: that's the regulated part of the industry in the where

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Speaker 2: the gentators where we're competing hard spot prices that come

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Speaker 2: right off.

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Speaker 1: A Forsyth bar roughly right. They're estimating you're going to

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Speaker 1: have not operating profit of two forty two. That's for

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Speaker 1: the three months to the end of September. That'll rise

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Speaker 1: to three eighty eight in the year to June next year,

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Speaker 1: four seventy five by June twenty seven, to five nine

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Speaker 1: by the year after that. I mean that's big, big money, yes.

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Speaker 2: And that just reflects the amount of investment we've put

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Speaker 2: into geo thermal, but now we're putting into solar batteries

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Speaker 2: and even potentially wins. So the amount that we have

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Speaker 2: invested in both to Harder and Tohoka three is an

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Speaker 2: excess of a billion dollars. And we've got the replacement

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Speaker 2: for Whitaki well underway. That's another six seven hundred million dollars.

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Speaker 2: We've got the battery at Glenbrook, we're thinking about expanding

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Speaker 2: that even further. And we've got the solar farm down

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Speaker 2: at christ At Airport, which will be New Centland's biggest,

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Speaker 2: and we're now looking at one north of Auckland upper Talentsville.

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Speaker 2: So we're busy and all that reflects is high quality investment.

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Speaker 1: Yep, but with returns, which is why and Fratilla involved,

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Speaker 1: because they want the business, they want the cash, they

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Speaker 1: want the dividends. I mean, you are making money. There's

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Speaker 1: no hiding from that. And I'm not saying it.

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Speaker 2: Well, no, we are making money. We are not. We're

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Speaker 2: not embarrassed by that at all. If you make good investments,

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Speaker 2: then you make good money that we are very proud of. That.

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Speaker 1: Explain to it, just really simple terms that the eleven

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Speaker 1: percent plus in the business of inflation, how do you

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Speaker 1: defend that as an industry that.

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Speaker 2: Is primarily coming from the lines charges, the lines and

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Speaker 2: transmission charges, which are the regulated part of the power bill,

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Speaker 2: and they are rising. So they rose by about twenty

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Speaker 2: percent last year. I think the average rise of the

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Speaker 2: line's charge is about sixteen percent this year. That's set.

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Speaker 2: Those price raises are in effect the regulated part of

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Speaker 2: the market, and they're set by the Commerce Commission on

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Speaker 2: the basis of interest rates. And unfortunately, when they were

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Speaker 2: last set, interest rates were at their absolute peak.

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Speaker 1: Okay, do you subscribe generally to the idea that your

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Speaker 1: contribution the industry's contribution to the inflation. Overall inflation picture

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Speaker 1: is going to come down substantially going forward.

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Speaker 2: It has and it already has come down substantially, and

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Speaker 2: it will come down as more and more of this

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Speaker 2: new reviewalful generation comes online and more and more gr

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Speaker 2: thermal comes online. That part of the powerbill will flattened

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Speaker 2: out considerably, and it already has. It's well on line

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Speaker 2: with inflation.

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Speaker 1: Gas is involved, but separate. So what I was reading

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Speaker 1: is the gas Spott price was fourteen bucks on Friday,

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Speaker 1: you're selling it for forty one, suggesting being something like methodics,

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Speaker 1: a big play like method X pays six. Are those

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Speaker 1: figures about right?

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Speaker 2: Look, gas prices have gone you have to have gone

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Speaker 2: up substantially. You have to look at the long term

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Speaker 2: price of gas. So when the Malei reserves crisis hit

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Speaker 2: twenty years ago, it was about four dollars, then rows

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Speaker 2: to eight dollars. As the as we had the last

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Speaker 2: round of drilling and the all in Gaspan it has

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Speaker 2: come up. The long term prices come up again, almost

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Speaker 2: doubling to somewhere between the fifteen to twenty dollars range

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Speaker 2: and the wholesale market sometimes the spot goes a bit lower,

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Speaker 2: and so all that reflects is the scarcity of gas

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Speaker 2: and a declining gas supply, and that's just a market working. Yeah,

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Speaker 2: I get that, but.

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Speaker 1: I understand gas more than I understand power because you

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Speaker 1: can make more power. There seems to me there's no

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Speaker 1: excuse for not having more power in this country because

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Speaker 1: you can investigate and make it, whereas you can't make gas,

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Speaker 1: especially if you're not looking for.

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Speaker 2: It exactly right.

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Speaker 1: So what I mean what literally happens to gas? You

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Speaker 1: just keep charging more and more and more as there's

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Speaker 1: less and less of it, and people what either convert

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Speaker 1: will stop using it, all their business closes.

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Speaker 2: I think the big thing is is Number one, we

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Speaker 2: keep the lights on and we keep houses warm, so

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Speaker 2: we keep the fine gas, and we're stepped into that

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Speaker 2: space with both retail and all of government homes, hospitals,

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Speaker 2: and schools, keep the lights on, keep them warm. I

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Speaker 2: think the second point is that large gal industries, in particular,

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Speaker 2: people who can convert where the time is right, not

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Speaker 2: forcing them, but when the time is right, when the

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Speaker 2: appliances become obsolescent, we encourage the conversion to electricity at

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Speaker 2: that point, and industries We're already actively helping industries convert.

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Speaker 2: We've done that at New Zealand Steel. We're working with

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Speaker 2: Fonterra and other dairy companies to convert. So there is

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Speaker 2: conversion happening. But the important thing is is that it's

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Speaker 2: a well caught out and managed transition and that leads

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Speaker 2: enough gas for the long term for those really hard

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Speaker 2: to convert users.

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Speaker 1: What's the light what's the timeline on the amount of

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Speaker 1: investment for renewables whereby my power bill comes to a

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Speaker 1: level goes down. Do you think it will ever go down?

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Speaker 1: I mean, I'm assuming at some point there's so much

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Speaker 1: generation that either you guys go hang on, we need

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Speaker 1: to stop at this point, otherwise going to start losing money,

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Speaker 1: or the price of power actually comes down becomes more affordable.

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Speaker 2: I think renewable energy is one of New Zealand's secret gifts.

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Speaker 2: And as we build more and prices stabilized, maybe come

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Speaker 2: down a little bit, we will become incredibly attractive to

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Speaker 2: overseas companies to invest here on the basis of a

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Speaker 2: fantastic renewable energy source. It's already creating jobs in the

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Speaker 2: construction of these projects, and as we can attract new

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Speaker 2: industry here on the basis of a very plentiful supply.

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Speaker 2: That's a great outcome for New Zealand.

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Speaker 1: When's that happening?

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Speaker 2: Though, that will be happening over the coming years. We

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Speaker 2: can always already see two or twenty five, five to

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Speaker 2: ten years. I think you will see industries coming here

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Speaker 2: to New Zealand because of our renewable energy supply.

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Speaker 1: And does that include data centers and AI and all

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Speaker 1: that other stuff? Me are we building capacity at that level?

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Speaker 2: It may include data centers. Obviously, a stable, reliable country

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Speaker 2: like New Zealand with a fantastic renewable energy source is

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Speaker 2: very attractive to both sorts of industries. It could well

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Speaker 2: attract other industries as well, So we just keep looking

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Speaker 2: out for those.

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Speaker 1: Okay, the how we are think lake? How we are?

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Speaker 1: You back down a bit on that is that, I mean,

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Speaker 1: how big an issue is nimbiism? Wherever you go?

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Speaker 2: Oh look, all we're looking for Lake Harware is an

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Speaker 2: increased operating range so that we can run the lake

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Speaker 2: a little bit lower and that allows the water to

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Speaker 2: be caught rather than spill down the river around November December.

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Speaker 2: And it's an operating range that prior to the Resource

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Speaker 2: Management Act was well established and we're just seeking a

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Speaker 2: little bit more flexibility on that lake. Look, nimbiasm is

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Speaker 2: always going to be an issue. It's going to be

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Speaker 2: an issue for wind farms, and we just as a nation,

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Speaker 2: we just have to have that ski. But at the

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Speaker 2: end of the day, it's an opportunity and a little

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Speaker 2: bit of more flexibility on our hyd risk scheme goes

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Speaker 2: a long way. Go back to that first question your

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Speaker 2: start at to slowing the guest shortage. The flexibility is

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Speaker 2: so valuable to us as a country and we should

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Speaker 2: be grasping hold of the opportunity.

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Speaker 1: Good stuff. Appreciate your inside as always. Mike Fushu's the

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Speaker 1: chief executive officer at Contact Energy. I think one of

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Speaker 1: the keys there was price is stabilizing. And that's the

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Speaker 1: thing about price. I mean, we're giving you the numbers

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Speaker 1: on construction earlier on this morning. Prices really I mean

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Speaker 1: frint vegetables, they do. But apart from that, price has

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Speaker 1: really ever come down. So what you're dealing with the

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Speaker 1: best you can hope for, it just doesn't keep going up.

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