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 it is not intended to be personalized financial advice.

3
00:00:05,400 --> 00:00:07,760
Speaker 1: We encourage you to seek appropriate advice from a qualified

4
00:00:07,760 --> 00:00:11,680
Speaker 1: professional to suit your individual circumstances. The energy supply squeeze

5
00:00:11,720 --> 00:00:13,720
Speaker 1: is now impacting the bottom line of some of our

6
00:00:13,800 --> 00:00:15,520
Speaker 1: major listed power companies.

7
00:00:16,040 --> 00:00:18,160
Speaker 2: New measures are being brought in every week.

8
00:00:17,960 --> 00:00:21,320
Speaker 1: To try to help, but investors are understandably nervous.

9
00:00:21,640 --> 00:00:27,400
Speaker 3: We are in the business of producing electricity. We should

10
00:00:27,440 --> 00:00:31,600
Speaker 3: own that risk. I'm absolutely sure we should own that risk,

11
00:00:31,680 --> 00:00:35,280
Speaker 3: and we should. We should be responsible for managing that risk.

12
00:00:35,640 --> 00:00:37,560
Speaker 3: And if we do a good job of doing it,

13
00:00:37,840 --> 00:00:40,800
Speaker 3: our investors will be happy, and if they do a

14
00:00:40,840 --> 00:00:48,240
Speaker 3: bad job of owning it, our investors will sack us.

15
00:00:53,760 --> 00:00:57,560
Speaker 1: The squeeze on energy supply is tightening, with hydro Lakes

16
00:00:57,600 --> 00:01:00,240
Speaker 1: Andy record low levels for this time of year. The

17
00:01:00,320 --> 00:01:03,800
Speaker 1: industry is struggling and the flow on effect is worsening.

18
00:01:04,280 --> 00:01:07,360
Speaker 1: Mercury Energy is warning it'll take a ninety million dollar

19
00:01:07,480 --> 00:01:10,840
Speaker 1: hit from the current situation, given about half of the

20
00:01:10,880 --> 00:01:14,840
Speaker 1: power it generates comes from hydro dams, a third is

21
00:01:14,880 --> 00:01:19,119
Speaker 1: from geothermal sites, and the rest from wind. That portion's

22
00:01:19,160 --> 00:01:23,280
Speaker 1: growing rapidly as it expands its wind farms, including one

23
00:01:23,319 --> 00:01:25,920
Speaker 1: net gore, which will be the second largest in the

24
00:01:25,920 --> 00:01:31,040
Speaker 1: country when operational, helping to power the ty Point aluminium smelter.

25
00:01:31,600 --> 00:01:35,160
Speaker 1: But Ty is currently being forced to reduce production, with

26
00:01:35,240 --> 00:01:38,160
Speaker 1: the latest cut enough to power all of the homes

27
00:01:38,200 --> 00:01:41,880
Speaker 1: in Napier. It's one of many major manufacturers turning off

28
00:01:41,920 --> 00:01:46,400
Speaker 1: production to help the constrained energy grid. Method x as

29
00:01:46,440 --> 00:01:50,120
Speaker 1: idling operations in the Central North Island to provide gas

30
00:01:50,160 --> 00:01:53,680
Speaker 1: to Genesis Energy to help power its Huntly power station,

31
00:01:54,320 --> 00:01:58,440
Speaker 1: while the timber and pulp exporter in Napier, Winston Pulp International,

32
00:01:58,840 --> 00:02:03,360
Speaker 1: is considering ditching the country entirely. With energy reportedly making

33
00:02:03,440 --> 00:02:07,520
Speaker 1: up forty percent of its operational costs, the flow on

34
00:02:07,560 --> 00:02:12,120
Speaker 1: effect would impact in Napier ports earnings now. The grid

35
00:02:12,160 --> 00:02:16,160
Speaker 1: operator Transpower is stepping in last week announcing it will

36
00:02:16,160 --> 00:02:20,520
Speaker 1: allow hydrogenerators like Mercury to use back up water to

37
00:02:20,560 --> 00:02:24,360
Speaker 1: alleviate the shortage. The industry is working on its own solution,

38
00:02:25,000 --> 00:02:29,160
Speaker 1: more renewable energy. Mercury is committed to spend seven hundred

39
00:02:29,360 --> 00:02:33,040
Speaker 1: million dollars on more renewables infrastructure.

40
00:02:32,760 --> 00:02:33,799
Speaker 2: Something that's outgoing.

41
00:02:33,880 --> 00:02:37,400
Speaker 1: CEO is bullish on but how much we'll investors and

42
00:02:37,480 --> 00:02:41,400
Speaker 1: consumers have to pay today to back up the system

43
00:02:41,480 --> 00:02:44,000
Speaker 1: in the future. Well, then, thank you so much for

44
00:02:44,040 --> 00:02:45,000
Speaker 1: doing It's great to see.

45
00:02:44,840 --> 00:02:47,320
Speaker 4: You, No, thanks, Madison's great to be here.

46
00:02:47,560 --> 00:02:51,040
Speaker 1: Let's talk about the current energy situation. I guess we

47
00:02:51,080 --> 00:02:53,760
Speaker 1: can call it first, What are you calling it? Is

48
00:02:53,800 --> 00:02:56,239
Speaker 1: it an energy squeeze? Is it a crisis?

49
00:02:56,560 --> 00:02:57,239
Speaker 2: Give me a term.

50
00:02:58,040 --> 00:03:01,560
Speaker 3: Look, I wouldn't resile from crisis personally. I did look

51
00:03:01,600 --> 00:03:04,680
Speaker 3: up in the Collins Dictionary what crisis meant, so it

52
00:03:04,760 --> 00:03:10,519
Speaker 3: means a situation affected by more than one major impact.

53
00:03:10,600 --> 00:03:12,639
Speaker 3: And I think if we sit here today, it's been

54
00:03:12,840 --> 00:03:18,079
Speaker 3: really dry and we've had a gas squeeze that nobody

55
00:03:18,120 --> 00:03:22,600
Speaker 3: could have predicted, given the fact that so much money

56
00:03:22,600 --> 00:03:25,040
Speaker 3: has been spent drilling holes over the last three to

57
00:03:25,120 --> 00:03:28,080
Speaker 3: four years, and yet none of them found the gas

58
00:03:28,080 --> 00:03:28,920
Speaker 3: that we expected.

59
00:03:29,080 --> 00:03:31,799
Speaker 1: You have a lot of hydro lakes, how dry? How

60
00:03:31,840 --> 00:03:33,760
Speaker 1: low are they right now? Give me the scale of

61
00:03:33,760 --> 00:03:34,160
Speaker 1: the issue.

62
00:03:34,440 --> 00:03:39,200
Speaker 3: So Mercury has got the White Cutou River system. So fundamentally,

63
00:03:39,280 --> 00:03:41,600
Speaker 3: topo is.

64
00:03:40,720 --> 00:03:43,840
Speaker 4: Is our storage. Once water comes out of Taupo, it.

65
00:03:43,800 --> 00:03:46,920
Speaker 3: Goes through the cascade of power stations and the last

66
00:03:46,920 --> 00:03:53,560
Speaker 3: one being Carapiro just before you get to Hailton. In

67
00:03:53,600 --> 00:03:57,640
Speaker 3: the Waikato system, our inflows over the last financial year

68
00:03:58,080 --> 00:04:04,600
Speaker 3: were at thirty percent of normal and Lake itself is

69
00:04:04,720 --> 00:04:08,600
Speaker 3: down to it has been down as low as fifteen

70
00:04:08,680 --> 00:04:11,240
Speaker 3: or sixteen percent of full for the time of.

71
00:04:11,280 --> 00:04:13,840
Speaker 4: Year, so it's really really low.

72
00:04:14,040 --> 00:04:16,880
Speaker 3: Now last weekend we had a bit of an inflow

73
00:04:17,880 --> 00:04:21,160
Speaker 3: that's stopped it going down, but we really can't take

74
00:04:21,200 --> 00:04:24,800
Speaker 3: it much lower than it is, and so that has

75
00:04:25,600 --> 00:04:29,240
Speaker 3: that has been really challenging for not just mercury, but

76
00:04:29,240 --> 00:04:32,480
Speaker 3: it's been really challenging because we would expect to be

77
00:04:32,480 --> 00:04:34,520
Speaker 3: producing more from that resource.

78
00:04:35,400 --> 00:04:37,320
Speaker 2: You're basically praying from all rain right now.

79
00:04:37,800 --> 00:04:40,960
Speaker 3: I don't know about praying. I've heard people say praying

80
00:04:41,120 --> 00:04:43,400
Speaker 3: or hoping. We all know it will rain.

81
00:04:44,200 --> 00:04:44,880
Speaker 4: It always does it.

82
00:04:44,960 --> 00:04:45,480
Speaker 2: We're waiting.

83
00:04:45,760 --> 00:04:46,320
Speaker 4: We're waiting.

84
00:04:46,720 --> 00:04:50,080
Speaker 3: And if we go back to the financial year before

85
00:04:50,120 --> 00:04:54,599
Speaker 3: the last one, we had record inflows and in fact

86
00:04:55,160 --> 00:05:00,320
Speaker 3: we had to spill water to stop flooding. So we

87
00:05:01,320 --> 00:05:05,039
Speaker 3: spilt a thousand gig or what hours that year because

88
00:05:05,200 --> 00:05:07,560
Speaker 3: there was nowhere to store it and it turned up.

89
00:05:07,880 --> 00:05:12,320
Speaker 3: So volatility I think is an underlying factor in the

90
00:05:12,360 --> 00:05:15,839
Speaker 3: resource system, and of course that flows through at times,

91
00:05:15,839 --> 00:05:19,440
Speaker 3: at extreme times into prices. Most of the time it

92
00:05:19,480 --> 00:05:20,360
Speaker 3: doesn't affect us.

93
00:05:20,560 --> 00:05:23,120
Speaker 1: You sell guests here at mergery. Where are you sourcing

94
00:05:23,160 --> 00:05:25,160
Speaker 1: that from? And I believe that not all of that

95
00:05:25,240 --> 00:05:27,039
Speaker 1: is on long term contracts. You've had to fill some

96
00:05:27,120 --> 00:05:29,360
Speaker 1: short term supply shoes. Can you talk me through that?

97
00:05:29,560 --> 00:05:30,000
Speaker 4: Yeah? Sure.

98
00:05:30,080 --> 00:05:35,080
Speaker 3: So we supply gas predominantly to households, so we're not

99
00:05:35,680 --> 00:05:39,159
Speaker 3: a supplier to industrials or anything like that because we

100
00:05:39,240 --> 00:05:43,960
Speaker 3: don't actually have any access to upstream gas, so we

101
00:05:44,080 --> 00:05:48,000
Speaker 3: buy that in the market. Historically we've bought contracts off

102
00:05:48,040 --> 00:05:50,560
Speaker 3: of various upstream players.

103
00:05:51,080 --> 00:05:52,719
Speaker 4: Those contracts have drive up.

104
00:05:53,320 --> 00:05:58,320
Speaker 3: So we're much more exposed to the spot market for gas.

105
00:05:59,520 --> 00:06:01,200
Speaker 4: We're going to keep supplying our customers.

106
00:06:01,240 --> 00:06:05,239
Speaker 3: I reassure our customers that you know, gas will still

107
00:06:05,240 --> 00:06:07,440
Speaker 3: turn up and they'll be able to cook dinner and

108
00:06:07,880 --> 00:06:09,520
Speaker 3: heat their homes or whatever.

109
00:06:09,240 --> 00:06:10,320
Speaker 4: Else they use the gas for.

110
00:06:10,880 --> 00:06:13,920
Speaker 3: But effectively we're buying that gas at spot because there

111
00:06:13,920 --> 00:06:17,719
Speaker 3: are no contracts available. And as a consequence of that,

112
00:06:17,960 --> 00:06:20,279
Speaker 3: you know, No, we're going to talk about results and.

113
00:06:20,839 --> 00:06:25,120
Speaker 4: To go forward, we will see we will see our.

114
00:06:25,040 --> 00:06:29,320
Speaker 3: Gas costs going up enormously and that's that's just the

115
00:06:29,320 --> 00:06:30,680
Speaker 3: reality of the current situation.

116
00:06:30,920 --> 00:06:33,960
Speaker 1: So in the interim, major power companies like Mercury are

117
00:06:33,960 --> 00:06:36,640
Speaker 1: having to wear this cost. How much is it costing

118
00:06:36,680 --> 00:06:39,039
Speaker 1: your bottom line that you foresee at the moment, and

119
00:06:39,080 --> 00:06:40,200
Speaker 1: how much could it cost if.

120
00:06:40,160 --> 00:06:47,840
Speaker 3: This well, the gas contracts we had started decaying off

121
00:06:48,320 --> 00:06:52,159
Speaker 3: in the second half of the last financial year through

122
00:06:52,920 --> 00:06:53,560
Speaker 3: through the year.

123
00:06:53,560 --> 00:06:56,400
Speaker 4: We've signaled in the year coming that.

124
00:06:56,120 --> 00:06:58,960
Speaker 3: That will have a negative effect of about eleven million

125
00:06:59,000 --> 00:07:02,080
Speaker 3: dollars to our bottom line.

126
00:07:02,240 --> 00:07:04,600
Speaker 2: But add to that the hydro lake situation, it's a

127
00:07:04,640 --> 00:07:06,080
Speaker 2: lot more than eleven million, isn't it.

128
00:07:06,200 --> 00:07:12,080
Speaker 3: Oh yeah, well, again we have we're strong believers in

129
00:07:12,120 --> 00:07:14,760
Speaker 3: being transparent about what we expect to happen, So we

130
00:07:14,840 --> 00:07:17,520
Speaker 3: always give guidance as to where we think we're ad

131
00:07:17,600 --> 00:07:21,400
Speaker 3: and we always also guide to dividends and things of

132
00:07:21,440 --> 00:07:27,960
Speaker 3: that nature. So we've given guidance to EBIT DARTH earnings

133
00:07:28,000 --> 00:07:32,400
Speaker 3: before interest, tax, depreciation and amultization, etc. Of eight hundred

134
00:07:32,400 --> 00:07:35,080
Speaker 3: and twenty million for they twenty five year, the year

135
00:07:35,120 --> 00:07:38,960
Speaker 3: we're in compared with eight seventy seven last year. So

136
00:07:39,240 --> 00:07:44,680
Speaker 3: down that's driven by the increased gas costs and it's

137
00:07:44,720 --> 00:07:49,000
Speaker 3: also driven by the fact that we're starting the year

138
00:07:49,480 --> 00:07:54,320
Speaker 3: significantly down in the in the hydro lake. We'll still

139
00:07:54,360 --> 00:07:58,600
Speaker 3: generate fully from our geothermal plant, will generate from our

140
00:07:58,720 --> 00:08:01,920
Speaker 3: wind assets, but the hydro lake is down.

141
00:08:02,520 --> 00:08:06,160
Speaker 4: And we're assuming within all of that that we.

142
00:08:06,200 --> 00:08:11,000
Speaker 3: Start to see normal and we call normal fiftieth percentile,

143
00:08:11,080 --> 00:08:13,520
Speaker 3: so there's a fifty to fifty chance of getting it

144
00:08:14,120 --> 00:08:16,840
Speaker 3: hydrology from September onwards.

145
00:08:17,360 --> 00:08:20,440
Speaker 4: And you know, I'm always a half good glass full person.

146
00:08:20,480 --> 00:08:22,960
Speaker 3: I think you know if you're pretty depressing, if you're not,

147
00:08:24,440 --> 00:08:28,400
Speaker 3: we are seeing a weather pattern shift beginning. But we

148
00:08:28,480 --> 00:08:32,760
Speaker 3: will have to rebuild the lake because it's really important

149
00:08:32,840 --> 00:08:35,600
Speaker 3: that Lake Talpa is near the top of its range

150
00:08:35,760 --> 00:08:39,840
Speaker 3: in January, because we all know that the autumn is

151
00:08:39,960 --> 00:08:42,400
Speaker 3: when the physical constraints occur.

152
00:08:43,800 --> 00:08:45,199
Speaker 4: On these complex things called.

153
00:08:45,040 --> 00:08:50,080
Speaker 3: Hydro risk curves that the transpower run and that protects

154
00:08:50,120 --> 00:08:50,880
Speaker 3: next winter.

155
00:08:51,960 --> 00:08:54,160
Speaker 1: On your earnings for the financial you you just reported,

156
00:08:54,160 --> 00:08:56,560
Speaker 1: you gave that eight hundred and seventy seven million dollar figure.

157
00:08:56,559 --> 00:08:58,640
Speaker 1: If we can focus on that figure and the fine

158
00:08:58,640 --> 00:09:00,960
Speaker 1: print of your invest presentation, and it said that that

159
00:09:01,320 --> 00:09:04,560
Speaker 1: increase on the previous year to eight seventy seven was

160
00:09:04,600 --> 00:09:08,679
Speaker 1: partly due to higher wholesale electricity prices. It's very convoluted

161
00:09:08,720 --> 00:09:12,000
Speaker 1: about how not power companies do or do not benefit

162
00:09:12,040 --> 00:09:15,600
Speaker 1: from higher wholesale electricity prices. Can you explain to be

163
00:09:15,880 --> 00:09:19,160
Speaker 1: explain to me how mercury may have in the year just.

164
00:09:19,160 --> 00:09:20,120
Speaker 4: Endeds so.

165
00:09:22,720 --> 00:09:28,880
Speaker 3: Effectively, we have very little exposure in normal years, and

166
00:09:28,960 --> 00:09:31,679
Speaker 3: last year was a normal year to spot prices.

167
00:09:32,280 --> 00:09:34,640
Speaker 4: So of all of all of.

168
00:09:34,559 --> 00:09:43,280
Speaker 3: The sales that we make, less than five percent of

169
00:09:43,320 --> 00:09:47,280
Speaker 3: them are just purely exposed to the spot market. But

170
00:09:47,360 --> 00:09:52,040
Speaker 3: that assumes we get normal influence now, so spot prices

171
00:09:52,040 --> 00:09:54,960
Speaker 3: are volatile, they can be lower high, so that that piece,

172
00:09:55,679 --> 00:09:56,760
Speaker 3: that piece we.

173
00:09:58,480 --> 00:10:00,240
Speaker 4: Did get reasonable return on.

174
00:10:01,520 --> 00:10:04,240
Speaker 3: And then most of our revenue comes from customers either

175
00:10:04,280 --> 00:10:06,680
Speaker 3: comes and they're all fixed prices.

176
00:10:06,720 --> 00:10:09,720
Speaker 4: So ninety eight percent of our actual volume is.

177
00:10:12,040 --> 00:10:17,400
Speaker 3: Sold on fixed prices to families, mums and dads, to

178
00:10:18,280 --> 00:10:20,760
Speaker 3: small businesses, large businesses, and to.

179
00:10:22,840 --> 00:10:23,920
Speaker 4: Very large businesses.

180
00:10:25,360 --> 00:10:30,920
Speaker 3: Now there's a degree of uplift in that, but that

181
00:10:31,000 --> 00:10:35,880
Speaker 3: uplift comes also from the fact that our total generation

182
00:10:36,360 --> 00:10:39,240
Speaker 3: has gone up because we've invested in new.

183
00:10:39,040 --> 00:10:41,960
Speaker 4: Plant So we've built new plants.

184
00:10:41,960 --> 00:10:47,600
Speaker 3: So in the over the last five years, we have

185
00:10:48,240 --> 00:10:52,040
Speaker 3: invested in new plant almost exactly the same amount of

186
00:10:52,040 --> 00:10:57,280
Speaker 3: money as we've paid in dividends, and that's that's been

187
00:10:57,320 --> 00:11:01,199
Speaker 3: the growth story in Mercury. But you add on to

188
00:11:01,320 --> 00:11:03,679
Speaker 3: that the fact that we did a transaction buying till

189
00:11:03,760 --> 00:11:07,240
Speaker 3: renewables and we bought trust Powers retail, so our retail

190
00:11:07,280 --> 00:11:11,880
Speaker 3: business almost doubled in size as well. So it's I

191
00:11:11,920 --> 00:11:14,920
Speaker 3: know this all sounds really complex, Madison, but yeah, there

192
00:11:14,920 --> 00:11:18,240
Speaker 3: are a whole bunch of layers in that, but I

193
00:11:18,240 --> 00:11:21,400
Speaker 3: think it's really important. You know that we were there's

194
00:11:21,400 --> 00:11:25,280
Speaker 3: a narrative that somehow we're not investing. But as I say,

195
00:11:25,520 --> 00:11:30,439
Speaker 3: shareholders deserve dividends. Governments fifty percent of our shareholders, so

196
00:11:30,600 --> 00:11:34,760
Speaker 3: they're getting those dividends, but at the same time investing

197
00:11:34,840 --> 00:11:38,719
Speaker 3: in new plant and making sure our existing plant is

198
00:11:40,120 --> 00:11:45,160
Speaker 3: up to spec because remember our hydro system, our hydro plant,

199
00:11:45,600 --> 00:11:48,880
Speaker 3: some of that is sixty and seventy years old, So

200
00:11:49,120 --> 00:11:51,360
Speaker 3: if we wanted to last another sixty or seventy years,

201
00:11:51,600 --> 00:11:54,120
Speaker 3: we have to invest heavily. So they're about they're about

202
00:11:54,160 --> 00:11:58,120
Speaker 3: the same that reinvestment and dividends.

203
00:11:57,960 --> 00:12:01,439
Speaker 1: Well, who's ultimately paying that reinvestment Because if you look

204
00:12:01,440 --> 00:12:03,960
Speaker 1: at your volume weighted average price for their financial year

205
00:12:04,080 --> 00:12:06,679
Speaker 1: just ended. It increased what nine dollars per mega what

206
00:12:06,760 --> 00:12:09,400
Speaker 1: hour for household mass market you call it, and a

207
00:12:09,440 --> 00:12:11,560
Speaker 1: little bit less eight dollars per mega what hour for

208
00:12:11,720 --> 00:12:14,680
Speaker 1: industrial uses that large business customer base that you talk about.

209
00:12:15,040 --> 00:12:17,120
Speaker 1: Is that ultimately the price that we're going to have

210
00:12:17,160 --> 00:12:21,000
Speaker 1: to pay, especially going forward in this current situation, to

211
00:12:21,120 --> 00:12:24,599
Speaker 1: ensure that we do have security of supply eventually in

212
00:12:24,679 --> 00:12:28,800
Speaker 1: the future and aren't faced with this situation and conversation again, Look.

213
00:12:29,200 --> 00:12:36,280
Speaker 3: I think it is. I think ultimately the new generation

214
00:12:36,400 --> 00:12:40,760
Speaker 3: we want is whatever we build, whether that's solar or

215
00:12:40,760 --> 00:12:46,120
Speaker 3: whether it's renewable, when whether it's battery's or even for

216
00:12:46,160 --> 00:12:53,280
Speaker 3: those who would prefer to see utullar, even now those

217
00:12:53,800 --> 00:12:56,720
Speaker 3: that still say, well that's a worthwhile thing, none of

218
00:12:56,760 --> 00:13:02,840
Speaker 3: those things are getting cheaper to build. Inflation has been significant.

219
00:13:02,960 --> 00:13:06,800
Speaker 3: We in our investor presentation we showed the difference in

220
00:13:07,240 --> 00:13:12,000
Speaker 3: capital price between Cora Downs one, which we completed last year,

221
00:13:12,440 --> 00:13:16,199
Speaker 3: and Caira Downs two, which you're doing now, which we.

222
00:13:16,160 --> 00:13:17,400
Speaker 4: Are currently building.

223
00:13:17,440 --> 00:13:19,720
Speaker 3: You know, the diggers are on there, that we're making

224
00:13:19,840 --> 00:13:21,640
Speaker 3: roads and you know, and that plant.

225
00:13:22,160 --> 00:13:24,520
Speaker 4: You know, we're fully into that what's.

226
00:13:24,360 --> 00:13:26,280
Speaker 2: The increase being in investment costs and.

227
00:13:26,240 --> 00:13:29,600
Speaker 4: The increased work. I've got a number of sort of.

228
00:13:29,720 --> 00:13:33,120
Speaker 3: We're talking millions, right, We're talking we're talking a shift

229
00:13:33,240 --> 00:13:34,559
Speaker 3: on a in a sort of.

230
00:13:36,640 --> 00:13:38,679
Speaker 4: Twenty percent of roughly twenty percent.

231
00:13:38,480 --> 00:13:43,600
Speaker 3: Uplift in the dollars per megawatt capital cost.

232
00:13:43,679 --> 00:13:46,960
Speaker 1: Yeah, we're now seeing a lot of these large manufacturers

233
00:13:47,040 --> 00:13:49,000
Speaker 1: are the cut production books. They're for stool or because

234
00:13:49,000 --> 00:13:51,720
Speaker 1: they've at least been asked to help out the energy

235
00:13:51,760 --> 00:13:54,560
Speaker 1: grid in the situation, some of them are considering ditching

236
00:13:54,679 --> 00:13:57,840
Speaker 1: the country completely because the energy costs are so high.

237
00:13:58,440 --> 00:13:59,920
Speaker 1: How do you see that playing out? Do you want

238
00:14:00,000 --> 00:14:03,040
Speaker 1: worried that you might lose your industrial customer base significantly

239
00:14:03,200 --> 00:14:03,840
Speaker 1: or completely.

240
00:14:04,240 --> 00:14:07,800
Speaker 3: I'm probably firstly worried about the impact on families, and

241
00:14:07,920 --> 00:14:11,959
Speaker 3: you know, we hear, you know, the Central North Island

242
00:14:12,000 --> 00:14:16,320
Speaker 3: being a great example, So that's that's always a worry,

243
00:14:16,400 --> 00:14:18,839
Speaker 3: you know. I mean, we know, as we use the

244
00:14:18,880 --> 00:14:21,280
Speaker 3: crisis word, and you know, we know we're working through

245
00:14:22,000 --> 00:14:24,440
Speaker 3: a cost of living crisis and the crisis for families.

246
00:14:24,480 --> 00:14:29,520
Speaker 3: So I'm definitely definitely worried about that impact in terms

247
00:14:29,560 --> 00:14:31,560
Speaker 3: of how it impacts mercury.

248
00:14:33,640 --> 00:14:34,280
Speaker 4: I got to think.

249
00:14:34,320 --> 00:14:36,520
Speaker 3: I think we've got to look at the different arrangements

250
00:14:36,560 --> 00:14:41,080
Speaker 3: that are in place. So Mercury signed up a part

251
00:14:41,120 --> 00:14:44,760
Speaker 3: of the deal that resulted in t Y smelter stay.

252
00:14:45,440 --> 00:14:48,960
Speaker 3: As a consequence of that signing up to that, we're

253
00:14:49,000 --> 00:14:52,440
Speaker 3: building Chira Downs two. We started within a week of

254
00:14:52,480 --> 00:14:55,280
Speaker 3: that being signed, because that was a huge and huge

255
00:14:55,760 --> 00:15:00,600
Speaker 3: overhang on getting new built done. Obviously, Meridians signed up

256
00:15:00,680 --> 00:15:06,160
Speaker 3: with them, and part of the deal was that built

257
00:15:06,160 --> 00:15:10,480
Speaker 3: in some ability for the Meridian to ask te why

258
00:15:10,920 --> 00:15:13,760
Speaker 3: to shut down. And that's built into what is a

259
00:15:13,840 --> 00:15:17,840
Speaker 3: very long term arrangement now just so happens within weeks

260
00:15:17,840 --> 00:15:23,240
Speaker 3: of the first year that's been called on. T Y

261
00:15:23,480 --> 00:15:26,160
Speaker 3: entered into that knowing that that was likely to happen

262
00:15:26,200 --> 00:15:30,200
Speaker 3: to them as described, and that's how they did the deal.

263
00:15:30,360 --> 00:15:33,960
Speaker 3: So in that sense, I don't think there's much risk

264
00:15:34,080 --> 00:15:35,920
Speaker 3: of them feeling aggrieved about that.

265
00:15:36,280 --> 00:15:40,480
Speaker 4: This is not the first time that we can go back.

266
00:15:40,880 --> 00:15:42,440
Speaker 3: I've been around a while. We can go back to

267
00:15:42,480 --> 00:15:44,040
Speaker 3: two thousand and one, we can go back to two

268
00:15:44,080 --> 00:15:46,120
Speaker 3: thousand and three, two thousand.

269
00:15:45,840 --> 00:15:53,040
Speaker 4: And eight, when the choices made about spot exposure.

270
00:15:53,920 --> 00:15:56,880
Speaker 3: Have resulted in them people saying, well, actually we should

271
00:15:57,000 --> 00:16:00,520
Speaker 3: contract for longer terms, and some of the people that

272
00:16:00,560 --> 00:16:03,680
Speaker 3: we've contracted for ten years plus, we'll be sitting here

273
00:16:03,680 --> 00:16:07,040
Speaker 3: today saying, thank goodness we did that. That's the right

274
00:16:07,080 --> 00:16:09,040
Speaker 3: thing to do, because we're not in the power market.

275
00:16:09,080 --> 00:16:11,800
Speaker 3: We're in the widgets market or whatever it is.

276
00:16:13,000 --> 00:16:16,040
Speaker 4: So that is the reality.

277
00:16:16,440 --> 00:16:20,040
Speaker 3: And I guess Grants Wanting Paul described that really quite

278
00:16:20,160 --> 00:16:22,480
Speaker 3: starkly in your interview with him.

279
00:16:23,240 --> 00:16:25,200
Speaker 1: So if we look at it from that perspective, then

280
00:16:25,280 --> 00:16:28,640
Speaker 1: if you from that answer, I think assume that this

281
00:16:28,720 --> 00:16:32,440
Speaker 1: situation could If it doesn't force industrial users to leave

282
00:16:32,480 --> 00:16:35,680
Speaker 1: the country completely, it will at least encourage them to

283
00:16:35,720 --> 00:16:40,720
Speaker 1: not be exposed to wholesale electricity prices and prefer fixed contracts.

284
00:16:42,200 --> 00:16:45,600
Speaker 1: If more of them do that, then that exposes your

285
00:16:45,600 --> 00:16:49,640
Speaker 1: bottom line mercury the producers to that wholesale cost instead.

286
00:16:49,720 --> 00:16:51,680
Speaker 2: So that's a risk for companies like yours.

287
00:16:51,520 --> 00:16:53,480
Speaker 4: Are that it's the risk we should take.

288
00:16:54,640 --> 00:16:57,360
Speaker 3: We are the business, we are in the business of

289
00:16:58,440 --> 00:16:59,600
Speaker 3: producing electricity.

290
00:17:00,720 --> 00:17:02,360
Speaker 4: We should own that risk.

291
00:17:03,600 --> 00:17:06,800
Speaker 3: I'm absolutely sure we should own that risk, and we should.

292
00:17:07,280 --> 00:17:10,160
Speaker 3: We should be responsible for managing that risk, and if

293
00:17:10,160 --> 00:17:13,000
Speaker 3: we do a good job of doing it, our investors

294
00:17:13,040 --> 00:17:15,640
Speaker 3: will be happy, and if they do a bad job

295
00:17:15,640 --> 00:17:16,480
Speaker 3: of owning it.

296
00:17:16,440 --> 00:17:19,600
Speaker 4: Our investors will sack us. And that's okay.

297
00:17:20,160 --> 00:17:23,840
Speaker 3: And you know the fact that we've had to announce

298
00:17:24,760 --> 00:17:29,239
Speaker 3: guidance that's lower than last year is because when we

299
00:17:29,280 --> 00:17:33,880
Speaker 3: manage that risk, we manage across a distribution of possible outcomes.

300
00:17:34,280 --> 00:17:36,840
Speaker 3: But if you have an outcome that's even further out,

301
00:17:37,240 --> 00:17:39,920
Speaker 3: that's that's going to impact us, and it is impacting us.

302
00:17:41,160 --> 00:17:46,320
Speaker 3: So I because spot market is not about it's not

303
00:17:46,400 --> 00:17:51,639
Speaker 3: a place to be taking risks in if you can't

304
00:17:51,640 --> 00:17:53,600
Speaker 3: own the risk, and we can own the risks. So

305
00:17:53,800 --> 00:17:57,240
Speaker 3: the spot market is about allocating resources. It's about determining

306
00:17:57,280 --> 00:18:00,520
Speaker 3: whether we use water, we use gas unfortunately the gas

307
00:18:00,560 --> 00:18:04,679
Speaker 3: wasn't there when, or we use coal at a time,

308
00:18:05,000 --> 00:18:07,560
Speaker 3: or we go to we go to the market and

309
00:18:07,600 --> 00:18:11,000
Speaker 3: say we're willing to buy back off of users, and

310
00:18:11,000 --> 00:18:13,440
Speaker 3: we have bought back off of some of our customers

311
00:18:13,800 --> 00:18:18,240
Speaker 3: at the prevailing prices in order to manage our risks.

312
00:18:18,280 --> 00:18:21,919
Speaker 4: Now they choose to do that.

313
00:18:22,000 --> 00:18:26,040
Speaker 3: When they choose to do that, we're taking that risk

314
00:18:26,119 --> 00:18:27,320
Speaker 3: back in house as we should.

315
00:18:27,440 --> 00:18:30,960
Speaker 2: In my view, Well, that's very charitable, charitable.

316
00:18:31,000 --> 00:18:32,000
Speaker 4: I think it's a reality.

317
00:18:32,520 --> 00:18:36,040
Speaker 1: But how are you supposed to wear that risk, pay

318
00:18:36,119 --> 00:18:38,600
Speaker 1: for that cost to your bottom line through situations like

319
00:18:38,640 --> 00:18:42,040
Speaker 1: this while also spending, as you wish stated in your

320
00:18:42,040 --> 00:18:45,160
Speaker 1: press release, up to one billion dollars on renewables seven

321
00:18:45,240 --> 00:18:46,560
Speaker 1: hundred million already committed.

322
00:18:47,040 --> 00:18:47,920
Speaker 2: How does that head up?

323
00:18:48,359 --> 00:18:50,040
Speaker 4: Well, it adds up because.

324
00:18:51,880 --> 00:18:57,520
Speaker 3: When we it adds up now because these investments are

325
00:18:57,600 --> 00:19:01,680
Speaker 3: long term investments that you know, oultimately you build a

326
00:19:01,760 --> 00:19:04,600
Speaker 3: new wind farm as we have a Cora Downs having

327
00:19:04,760 --> 00:19:10,240
Speaker 3: just so signed up twenty year contract with ty, and

328
00:19:10,800 --> 00:19:14,040
Speaker 3: that wind farm will operate for the next thirty five years.

329
00:19:14,840 --> 00:19:17,879
Speaker 3: When we reinvest in our hydros, these hydros will still

330
00:19:17,920 --> 00:19:21,679
Speaker 3: be here in fifty years, and so we have to

331
00:19:21,720 --> 00:19:25,840
Speaker 3: take a very long term view of returns in order

332
00:19:26,040 --> 00:19:27,320
Speaker 3: to make those investments.

333
00:19:28,280 --> 00:19:31,840
Speaker 4: That's the business we're in. That's the way we manage

334
00:19:32,160 --> 00:19:36,720
Speaker 4: those risks. And the best way.

335
00:19:36,520 --> 00:19:39,280
Speaker 3: For us to manage those risks is to sign up

336
00:19:39,320 --> 00:19:43,520
Speaker 3: longer term contracts with those that are willing to Spelter

337
00:19:43,640 --> 00:19:47,640
Speaker 3: has done that and with others, and you know can't

338
00:19:47,720 --> 00:19:50,200
Speaker 3: name others that have done that over the last few years.

339
00:19:50,200 --> 00:19:51,920
Speaker 4: When we signed those well I can name one.

340
00:19:51,960 --> 00:19:55,680
Speaker 3: For instance, Amazon Web Services signed up signed up ten

341
00:19:56,400 --> 00:19:57,440
Speaker 3: fifteen year deal.

342
00:19:57,520 --> 00:19:59,920
Speaker 4: I think it was with our turretier south wind Farm.

343
00:20:00,160 --> 00:20:02,199
Speaker 1: Well, that's a great potential demand source for you in

344
00:20:02,200 --> 00:20:04,399
Speaker 1: the future because data centers are chewing up power.

345
00:20:04,480 --> 00:20:08,520
Speaker 3: Yeah, so they signed up for the long term. So

346
00:20:08,600 --> 00:20:12,240
Speaker 3: our job is to manage long term electricity risk and

347
00:20:12,440 --> 00:20:18,760
Speaker 3: the associated risks and then provide provide whatever the customer

348
00:20:18,840 --> 00:20:23,200
Speaker 3: needs in order to run manage risks in their businesses,

349
00:20:23,240 --> 00:20:30,560
Speaker 3: whether that's data censers, making aluminum, doing forestry products, producing

350
00:20:30,640 --> 00:20:34,959
Speaker 3: milk powder, whatever it is. So I think, you know,

351
00:20:36,840 --> 00:20:40,920
Speaker 3: we have to get into that our investments get paid off.

352
00:20:40,720 --> 00:20:42,480
Speaker 4: Over a long long period.

353
00:20:42,160 --> 00:20:44,879
Speaker 2: Of time, you know, coughing up with seven hundred mill

354
00:20:44,960 --> 00:20:45,360
Speaker 2: today for.

355
00:20:45,320 --> 00:20:48,440
Speaker 3: As well, I'm spending the money over the next Well,

356
00:20:48,440 --> 00:20:52,200
Speaker 3: we've spent well, we've spent best part of a billion

357
00:20:52,200 --> 00:20:56,800
Speaker 3: dollars over the last four and a bit years on reinvestment,

358
00:20:57,880 --> 00:21:04,760
Speaker 3: new assets, and like Arrapiro, we're completely replacing the machines

359
00:21:04,800 --> 00:21:07,880
Speaker 3: in the station. That's a ninety million dollar project over

360
00:21:08,119 --> 00:21:10,879
Speaker 3: three and a half years. And we're doing that at

361
00:21:10,920 --> 00:21:13,560
Speaker 3: the moment because those assets will then pay off over

362
00:21:13,600 --> 00:21:18,200
Speaker 3: the next fifty years. But we won't get that straight away.

363
00:21:18,560 --> 00:21:23,240
Speaker 3: So this is a long term infrastructure asset business.

364
00:21:23,520 --> 00:21:27,000
Speaker 1: Investors are understandably nervous about all of this. We've got

365
00:21:27,040 --> 00:21:29,919
Speaker 1: the current situation, all of the multi factors that are

366
00:21:29,960 --> 00:21:34,000
Speaker 1: causing that, how that's impacting companies like Mercury's bottom line.

367
00:21:34,280 --> 00:21:36,960
Speaker 1: While you're also spending hundreds of millions of dollars on

368
00:21:37,040 --> 00:21:39,560
Speaker 1: renewable projects that, as you mentioned, take years to come

369
00:21:39,600 --> 00:21:42,600
Speaker 1: to fruition. What would your message be to them? Stick

370
00:21:42,640 --> 00:21:44,119
Speaker 1: with you, trust you, You've got this.

371
00:21:44,880 --> 00:21:45,000
Speaker 4: Well.

372
00:21:45,040 --> 00:21:49,040
Speaker 3: I've just spent two days talking with the investor's post results.

373
00:21:51,760 --> 00:21:54,800
Speaker 3: I think I think they're all far more sophisticated than

374
00:21:54,920 --> 00:21:58,920
Speaker 3: just trusting a person who happens to go and sit

375
00:21:59,040 --> 00:21:59,880
Speaker 3: and smile.

376
00:21:59,600 --> 00:22:02,360
Speaker 4: At them and say they say.

377
00:22:02,480 --> 00:22:05,280
Speaker 3: The right things. They I think they actually look at

378
00:22:05,400 --> 00:22:10,760
Speaker 3: the environment we're investing into. So for investors, I think

379
00:22:12,560 --> 00:22:17,000
Speaker 3: they have they have viewed positively the clarity that we

380
00:22:17,119 --> 00:22:23,160
Speaker 3: now have around oil and gas bands, clarity around onslow,

381
00:22:23,240 --> 00:22:26,040
Speaker 3: the clarity around where it's happening with t Y, the

382
00:22:26,119 --> 00:22:30,040
Speaker 3: fact that there is a fast track consenting process. Investors

383
00:22:30,119 --> 00:22:34,959
Speaker 3: see that as a more a much more clear environment

384
00:22:35,080 --> 00:22:37,720
Speaker 3: that they look in. Then they decide who they want

385
00:22:37,760 --> 00:22:41,119
Speaker 3: to back, whether they want to back the Mercury team

386
00:22:41,320 --> 00:22:44,960
Speaker 3: and it's pipeline or whether they prefer some other investment

387
00:22:45,400 --> 00:22:48,960
Speaker 3: and not just with the you know, the well known names,

388
00:22:49,000 --> 00:22:54,919
Speaker 3: because there are investors investing into solar who are startups.

389
00:22:55,080 --> 00:22:59,320
Speaker 4: There are small players looking for capital, Black Rock or

390
00:22:59,359 --> 00:23:02,800
Speaker 4: one of them, one of them. So look, this is

391
00:23:02,840 --> 00:23:04,639
Speaker 4: a place where investors have choice.

392
00:23:05,119 --> 00:23:08,240
Speaker 3: I think companies like us we have to give investors

393
00:23:08,280 --> 00:23:10,640
Speaker 3: confidence that when we deploy capital.

394
00:23:10,200 --> 00:23:11,280
Speaker 4: We do it really well.

395
00:23:11,960 --> 00:23:16,280
Speaker 3: Our projects turn out, they turn out on time, they're

396
00:23:16,400 --> 00:23:19,840
Speaker 3: on budget, and they work, and they're going to throw

397
00:23:19,840 --> 00:23:22,119
Speaker 3: the cash off over the thirty years to get the

398
00:23:22,160 --> 00:23:26,000
Speaker 3: return that eventually and turns up in our dividend flow.

399
00:23:26,440 --> 00:23:29,680
Speaker 3: And that's what. Investors have choices, and they can sell

400
00:23:29,720 --> 00:23:33,320
Speaker 3: out or they can buy in. So we never take

401
00:23:33,359 --> 00:23:36,240
Speaker 3: them for granted, and we just try and be really

402
00:23:36,240 --> 00:23:37,680
Speaker 3: transparent about what we're doing.

403
00:23:38,160 --> 00:23:41,600
Speaker 1: Speaking of the Mercury team, you're leaving next week, you're

404
00:23:41,640 --> 00:23:42,240
Speaker 1: on the way out.

405
00:23:42,480 --> 00:23:43,359
Speaker 2: Where are you hitting off to?

406
00:23:44,920 --> 00:23:49,000
Speaker 3: Well Madison, As I've said, I'm actually a little older

407
00:23:49,040 --> 00:23:50,560
Speaker 3: than my boyish good looks.

408
00:23:52,280 --> 00:23:53,200
Speaker 2: Are you saying that not me?

409
00:23:55,400 --> 00:23:55,920
Speaker 4: Correct?

410
00:23:56,359 --> 00:24:00,920
Speaker 3: For someone has to say it, don't they. So I

411
00:24:01,480 --> 00:24:03,320
Speaker 3: got my gold card at the beginning of the year,

412
00:24:04,920 --> 00:24:09,800
Speaker 3: and I promised myself that when I took this job

413
00:24:10,600 --> 00:24:12,560
Speaker 3: i'd do five years maximum.

414
00:24:13,400 --> 00:24:15,080
Speaker 4: I would have done four and a half years.

415
00:24:15,760 --> 00:24:18,240
Speaker 3: Especially a strange time to be leaving because I'm quite

416
00:24:18,280 --> 00:24:19,240
Speaker 3: excited about.

417
00:24:18,960 --> 00:24:19,960
Speaker 4: What's going on at the moment.

418
00:24:20,040 --> 00:24:21,000
Speaker 2: But there's a lot going on.

419
00:24:21,040 --> 00:24:24,160
Speaker 4: There's a lot going on. But no, it's the right time.

420
00:24:24,280 --> 00:24:27,159
Speaker 3: We've got an excellent team, we've got a really smooth

421
00:24:27,160 --> 00:24:32,000
Speaker 3: transition occurring with Stu Hamilton taking over, and just before yeah,

422
00:24:34,200 --> 00:24:37,119
Speaker 3: and I've got you know, we've got a couple of

423
00:24:37,119 --> 00:24:39,760
Speaker 3: grandchildren that I'll spend a bit more time with. I'm

424
00:24:39,800 --> 00:24:42,040
Speaker 3: going to take the summer off and then I'll sort

425
00:24:42,080 --> 00:24:45,400
Speaker 3: of look, I won't be doing any more executive roles.

426
00:24:45,400 --> 00:24:49,000
Speaker 3: I've done three chief executive roles over the last twenty years.

427
00:24:49,480 --> 00:24:53,200
Speaker 3: Everyone's been a pleasure. This has just been super exciting

428
00:24:53,240 --> 00:24:55,960
Speaker 3: at Mercury. I think we've I think we've achieved so

429
00:24:56,080 --> 00:24:59,160
Speaker 3: much with the transactions we've done and the.

430
00:24:59,080 --> 00:25:00,720
Speaker 4: Capital we've DoD Lloyd.

431
00:25:02,600 --> 00:25:05,880
Speaker 3: They are and I understand the frustrations that we create

432
00:25:06,080 --> 00:25:12,360
Speaker 3: because you know, in times like this, it's difficult, it's

433
00:25:12,400 --> 00:25:17,119
Speaker 3: difficult politically, regulatory wise, and but most importantly.

434
00:25:16,560 --> 00:25:18,600
Speaker 4: You know there there are people that suffer.

435
00:25:18,680 --> 00:25:22,639
Speaker 3: So that's that's a bit of a shame at this

436
00:25:22,760 --> 00:25:23,520
Speaker 3: point going.

437
00:25:23,680 --> 00:25:26,880
Speaker 4: But I know it will it will rain. We will

438
00:25:26,880 --> 00:25:27,520
Speaker 4: get through this.

439
00:25:28,160 --> 00:25:31,320
Speaker 3: We will build the stuff, We'll find solutions to gas,

440
00:25:32,480 --> 00:25:36,119
Speaker 3: whether that's LNG or domestic gas. Will accept a little

441
00:25:36,119 --> 00:25:40,359
Speaker 3: bit more coal in generation, but we'll push fossil fuels

442
00:25:40,440 --> 00:25:45,480
Speaker 3: out of industrials so that you know, our milk products

443
00:25:46,080 --> 00:25:48,360
Speaker 3: can be seen as as the cleanest and greenest.

444
00:25:48,920 --> 00:25:51,120
Speaker 1: Well, you are certainly a glass our film man, and

445
00:25:51,160 --> 00:25:53,040
Speaker 1: thank you for doing interviews with me through all of

446
00:25:53,080 --> 00:25:55,880
Speaker 1: your CEO roles over the years. And go well, good

447
00:25:55,880 --> 00:25:58,000
Speaker 1: to see events next our treat Thanks Madison.

448
00:26:00,160 --> 00:26:04,200
Speaker 4: Thats why back? Why back? By stop s