WEBVTT - Contact’s Manawa takeover–who wins? 0:00:05.920 --> 0:00:08.280 Killed it and welcome to Shed Lunch and the short 0:00:08.320 --> 0:00:11.239 bonus episode where we unpack some of the ins and 0:00:11.280 --> 0:00:15.760 outs of Contact Energies proposed takeover of Manua Energy. There's 0:00:15.880 --> 0:00:19.119 lots to digest with this two point three billion dollar deal, 0:00:19.239 --> 0:00:22.079 whether you're an investor in the energy sector or a 0:00:22.120 --> 0:00:25.880 consumer of power or a business hit by recent power hikes. 0:00:26.520 --> 0:00:28.920 To shed some light on why this is a good idea, 0:00:29.080 --> 0:00:32.320 I'm joined by Contact Energy CEO Mike Fuje. 0:00:32.640 --> 0:00:35.239 Investing involves a risk you might lose the money you 0:00:35.280 --> 0:00:38.599 start with. We recommend talking to a licensed financial advisor. 0:00:39.320 --> 0:00:43.120 We also recommend reading product disclosure documents before deciding to invest. 0:00:43.400 --> 0:00:45.800 Everything you're about to see and here is current at 0:00:45.800 --> 0:00:46.639 the time of recording. 0:00:46.800 --> 0:00:49.680 Mike, thanks for coming in to see us today. There's 0:00:49.720 --> 0:00:53.199 been a lot of media about this proposed deal two 0:00:53.280 --> 0:00:55.640 point three billion dollars, and it's one of the biggest 0:00:55.680 --> 0:00:58.800 things that's happened to the power industry in quite some time. Today, 0:00:58.840 --> 0:01:02.320 we're going to look at what it means for investors principally, 0:01:03.080 --> 0:01:05.720 First of all, for listeners and viewers who don't know 0:01:05.760 --> 0:01:08.679 too much about Contact and Manowa, can we kind of 0:01:08.720 --> 0:01:11.119 explain for us what assets you have at the moment 0:01:11.200 --> 0:01:15.040 in generation and how that might change if the steal 0:01:15.120 --> 0:01:15.919 were to go through. 0:01:16.680 --> 0:01:19.000 Yeah, sure, so contact energy. 0:01:19.400 --> 0:01:22.080 Probably what we're best known for in generation assets is 0:01:22.120 --> 0:01:26.600 are geo thermal, and over the last three years we've 0:01:26.640 --> 0:01:29.160 actually invested a lot into building more geothermal with the 0:01:29.160 --> 0:01:30.840 Toharer and talk of three projects. 0:01:31.400 --> 0:01:34.080 In fact, what we've built to date. 0:01:34.200 --> 0:01:36.640 In geo thermal in the last three years is equivalent 0:01:36.920 --> 0:01:39.280 in generation output as a steal. 0:01:39.600 --> 0:01:41.679 And that just give it some perspective. 0:01:41.920 --> 0:01:44.360 And then we have the hydro assets, obviously the iconic 0:01:44.400 --> 0:01:47.960 Clyde and Roxburd dam in the Cluther system, which we'll 0:01:47.960 --> 0:01:51.680 talk about a bit later, but they. 0:01:51.520 --> 0:01:52.640 Were part of the foundation. 0:01:52.960 --> 0:01:56.840 And then with that we have thermal assets Taranaky combined 0:01:56.880 --> 0:02:03.120 cycle plant, the two peakers, and the Foreranaki diesel peaking 0:02:03.280 --> 0:02:04.559 plant over in the Hawks Bay. 0:02:04.800 --> 0:02:07.480 Just on those we're talking oil and gas for those 0:02:07.840 --> 0:02:09.959 gas when you say thermal gas gas. 0:02:09.760 --> 0:02:13.880 Powered apart from Faranaki, which is diesel powered, and that's okay, 0:02:14.280 --> 0:02:17.320 sort of sits to come on in extreme periods of 0:02:17.480 --> 0:02:19.920 periods of extreme shortage, okay, Right. 0:02:19.840 --> 0:02:22.880 So the idea would be that you would phase those 0:02:23.040 --> 0:02:23.799 out is that. 0:02:24.200 --> 0:02:27.760 Yeah, So we're on a plan to phase out thermal 0:02:27.800 --> 0:02:30.880 generation and decarbonize our portfolio, and we've been very clear 0:02:30.919 --> 0:02:34.640 about that. So geothermal is as good, if not better 0:02:34.639 --> 0:02:39.040 than nuclear power. It has asset utilizations of between ninety 0:02:39.040 --> 0:02:41.280 five and ninety eight percent. It just runs twenty four 0:02:41.280 --> 0:02:42.119 by seven. 0:02:42.080 --> 0:02:42.720 All year round. 0:02:43.800 --> 0:02:47.960 And then we have our hydro schemes, which are incredibly valuable, 0:02:48.480 --> 0:02:51.400 but they are spring and summer weighted, and just as 0:02:51.440 --> 0:02:54.320 you get to the end of summer, your water starts 0:02:54.320 --> 0:02:58.240 to come down. It's a long summer and you start 0:02:58.280 --> 0:03:00.200 to get a bit short, which is why we had 0:03:00.200 --> 0:03:03.160 the thermal fleet to kick in at that point and 0:03:03.200 --> 0:03:07.920 provide fuel, which is also why we have the gas 0:03:07.919 --> 0:03:13.000 storage facility. Now we want to decarbonize, so you can't 0:03:13.000 --> 0:03:16.040 decarbonize unless you have a solution to that conundrum. 0:03:16.320 --> 0:03:17.959 And that's what this deal is about. 0:03:18.000 --> 0:03:21.760 Because Manua has about one point eight to tell what 0:03:21.840 --> 0:03:25.519 hours of hydro, but that's winter weighted rather than spring summer. 0:03:25.840 --> 0:03:28.560 So as our water with our existing assets starts to 0:03:28.639 --> 0:03:31.680 run out, you can look forward to winter with the 0:03:31.720 --> 0:03:33.960 Manoa assets and their water starts to come in. 0:03:34.040 --> 0:03:35.760 And there's a very nice hedge in there. 0:03:36.400 --> 0:03:38.840 So is it that hydro is the answer to the 0:03:38.840 --> 0:03:43.400 decarbonization more so than other renewables wind, solar batteries. You're 0:03:43.440 --> 0:03:45.280 in those in development stage anyway. 0:03:45.440 --> 0:03:48.520 Yeah, So the answer is always I've been very strong 0:03:48.520 --> 0:03:50.960 on this, it's all of the above. So obviously wind 0:03:51.000 --> 0:03:53.720 and solar are the lowest costs, but they're intimittent. And 0:03:53.800 --> 0:03:56.680 yet when they're intimittent, when the sun doesn't shine and 0:03:56.720 --> 0:03:59.920 the wind doesn't blow, you have to have a way 0:04:00.600 --> 0:04:01.200 of firming it. 0:04:01.880 --> 0:04:04.960 So, and you mean by firming, so when. 0:04:04.760 --> 0:04:08.839 There's no electricity, you firm it up so that when 0:04:08.840 --> 0:04:11.040 we turn on the lights at home, they actually do 0:04:11.160 --> 0:04:13.280 go on. So the showers are hot and the bear 0:04:13.400 --> 0:04:17.080 is cold. That's the important part, it sure is. 0:04:17.960 --> 0:04:18.679 And so. 0:04:20.040 --> 0:04:23.400 You can get a with different locations of wind and solar. 0:04:23.520 --> 0:04:26.360 You can get what we call a forming, a statistical forming, 0:04:26.400 --> 0:04:29.000 because they know we'll be there. But actually that's not 0:04:29.040 --> 0:04:32.040 good enough for the ordinary consumer. It has to be firmed. 0:04:32.720 --> 0:04:35.560 And so that's where battery. So we're building the battery 0:04:35.600 --> 0:04:38.160 at Glenbrook, but it's also where hydro has an. 0:04:38.120 --> 0:04:40.000 Incredibly important part to play. 0:04:40.560 --> 0:04:44.400 And being able to firm in those periods of scarcity 0:04:44.400 --> 0:04:46.599 when the wind isn't blowing or the sun isn't shining, 0:04:46.800 --> 0:04:49.200 but also to cover the peaks, so you've got the 0:04:49.240 --> 0:04:52.440 geo thermal which is always there. And then as the 0:04:52.480 --> 0:04:56.159 demand goes up and down, you have your wind and solar, 0:04:56.520 --> 0:04:59.440 but for the gaps you need hydro and batteries. 0:05:00.240 --> 0:05:02.760 What about low late levels and the like though, because 0:05:02.800 --> 0:05:05.280 it's not always the best time for hydro, is it? 0:05:06.200 --> 0:05:08.880 No? So, but low late levels. 0:05:08.880 --> 0:05:13.680 What happened specifically this year is July was very low 0:05:13.800 --> 0:05:19.520 rainfall and it also had low wind, and so there 0:05:19.520 --> 0:05:21.640 are a couple of things going on. What you saw 0:05:21.920 --> 0:05:25.160 was extreme prices for a period of about two weeks, 0:05:25.560 --> 0:05:30.400 which was actually Foraranaki being dispatched into the market diesel. 0:05:30.720 --> 0:05:32.280 But what you saw when there was a lot of 0:05:32.360 --> 0:05:36.160 rain that came in is that prices went straight down 0:05:36.200 --> 0:05:39.839 to almost to zero. And that's just supply and demand. 0:05:39.920 --> 0:05:42.920 So the answer to that is actually, as I said, it's. 0:05:42.800 --> 0:05:43.760 A number of solutions. 0:05:43.760 --> 0:05:46.760 One, we need to build more wind and solar and 0:05:46.880 --> 0:05:51.120 more geo thermal, so you raise the base and then 0:05:51.120 --> 0:05:54.719 when you have that period of shortage it's much less dramatic. 0:05:55.360 --> 0:05:59.240 You can dispatch maybe intimate and gas, which we've got, 0:05:59.240 --> 0:06:02.160 we're retaining. You put it in just for those very 0:06:02.160 --> 0:06:06.040 short periods. You have batteries and you have hydro, which 0:06:06.120 --> 0:06:08.559 is weighted more towards winter. 0:06:08.920 --> 0:06:10.440 How long do you think you will have gas? So 0:06:10.520 --> 0:06:12.880 I think twenty thirty five was what you were hoping. 0:06:12.960 --> 0:06:16.120 We've committed to decarbon net zero by twenty thirty five. 0:06:16.240 --> 0:06:19.400 I think gas has a part to play for covering 0:06:19.440 --> 0:06:23.400 those dry year periods. For so even with all the 0:06:24.279 --> 0:06:26.920 out to about twenty forty, I think gas still has 0:06:26.960 --> 0:06:31.080 a role to play. You can turn it on, you 0:06:31.080 --> 0:06:34.840 can store it. It's got much lower carbon intensity than coal, 0:06:36.080 --> 0:06:39.880 and so for that once in five year, once in 0:06:40.000 --> 0:06:44.720 ten year occurrence, it's going to be important as a backup. Meanwhile, 0:06:45.720 --> 0:06:51.360 things like hydro, extended operation of our hydro assets as 0:06:51.360 --> 0:06:56.760 they stand today, investment in different options around storage, around batteries, 0:06:57.440 --> 0:07:01.640 investment in more solar, more wind. The other thing that 0:07:01.839 --> 0:07:04.560 really was brought into play and during the shortage was 0:07:05.240 --> 0:07:08.320 demand response. So both the smelter and another other large 0:07:08.360 --> 0:07:12.040 commercial actually turned down their power demand by over two 0:07:12.160 --> 0:07:17.040 hundred megawatts, which is bigger than Tohara. So they turned 0:07:17.040 --> 0:07:21.400 down the Ty New Zealand Steel, a number of dairy companies. 0:07:21.440 --> 0:07:27.080 So all it's never one solution. It's always a combination. 0:07:27.560 --> 0:07:30.440 And that's part of what even in mass market retail 0:07:30.440 --> 0:07:34.240 we've been talking about. The answer to decarbonization is not 0:07:34.440 --> 0:07:39.040 just building generation. It's also the way we respond to 0:07:39.160 --> 0:07:42.600 periods of scarcity. And if we can delay our shower, 0:07:43.120 --> 0:07:46.640 if industrials can come off for a short period and 0:07:46.680 --> 0:07:50.040 get paid for it, then that's all part of the solution. 0:07:50.440 --> 0:07:52.480 It's always a bit of a dance, isn't it sounds 0:07:52.520 --> 0:07:55.160 like you forever balancing. 0:07:55.880 --> 0:07:59.120 Yeah, that's energy. I mean that's why I came into 0:07:59.240 --> 0:08:00.760 energy many years ago. Yeah. 0:08:00.920 --> 0:08:01.960 It is a challenge. 0:08:02.000 --> 0:08:05.840 It is a challenge. It is fun, it is stimulating. 0:08:05.920 --> 0:08:08.920 These challenges never go away. Sometimes there are periods of 0:08:09.200 --> 0:08:15.120 oversupply and sometimes there are periods of undersupply, and responding 0:08:15.160 --> 0:08:17.400 to those challenges is what gets us up in the 0:08:17.400 --> 0:08:18.680 morning and gets us coming to work. 0:08:18.760 --> 0:08:18.920 Mike. 0:08:19.000 --> 0:08:21.880 If we look at this proposed deal in terms of 0:08:21.920 --> 0:08:25.360 the money with shareholders, I think five ninety five per 0:08:25.440 --> 0:08:27.520 share is what they will end up with. You've got 0:08:28.080 --> 0:08:33.640 a payment which is combined shares, debt, and obviously cash 0:08:34.360 --> 0:08:36.840 in the end, what are they actually getting. 0:08:37.520 --> 0:08:40.400 They're getting they're getting a cash consideration of about a 0:08:40.440 --> 0:08:46.360 dollar sixteen to share, and they're getting they're getting shares 0:08:46.400 --> 0:08:49.840 issued in Contact Energy, So they continue to participate in 0:08:49.880 --> 0:08:53.679 the energy transition, they continue to participate in the building 0:08:53.720 --> 0:08:57.800 of renewable energy assets, they continue to participate in the 0:08:58.000 --> 0:09:00.760 well they get to participate in mass mark retail, so 0:09:01.280 --> 0:09:05.080 they become they're still very much part of the energy 0:09:05.120 --> 0:09:08.320 sector and the renewable energy sector as an investment option, 0:09:08.480 --> 0:09:09.760 which I think is a great outcome. 0:09:10.120 --> 0:09:12.880 So they'll be eighteen point five percent to your register. 0:09:12.679 --> 0:09:15.079 Total, There'll be eighteen point five percent of our register. 0:09:15.200 --> 0:09:21.120 So obviously their major shareholders, TechEd and Infantil form very 0:09:21.160 --> 0:09:24.560 much part of that, which we think is a great outcome. 0:09:25.080 --> 0:09:27.560 Because one of the things about Contact Energy is that 0:09:28.160 --> 0:09:31.280 we have over seventy thousand investors on our base key 0:09:31.360 --> 0:09:36.640 WE investors. We are a KEYWI company, so NOO approval required, 0:09:37.000 --> 0:09:40.800 and having a cornerstone investor at around ten percent like 0:09:40.880 --> 0:09:44.239 Infantile of Infantol's quality is a great vote of confidence 0:09:44.400 --> 0:09:46.360 in our strategic path as well. 0:09:46.840 --> 0:09:49.679 What about Contact sheeholders, are we going to see some dividend. 0:09:49.760 --> 0:09:53.040 Love there, we have announced the divid and loved we 0:09:53.240 --> 0:09:56.040 announced an increased dividen in the beginning of July, and 0:09:56.160 --> 0:09:58.959 we as we said, as part of this deal, we're 0:09:59.000 --> 0:10:01.839 actually prepared put our money where our mouth is in 0:10:01.920 --> 0:10:04.480 terms of increased of it in twenty six and twenty seven. 0:10:05.360 --> 0:10:09.880 Thinking of them again, when will this steal actually pay? When? 0:10:10.000 --> 0:10:11.960 When will you know the costs all the things that 0:10:12.040 --> 0:10:14.280 go around it. There's also a fair bit of approvals, 0:10:14.320 --> 0:10:16.959 lots of lawyers, fees, regulators, fees, you name it. 0:10:18.760 --> 0:10:22.720 So look, we've announced the deal. We've been working on 0:10:22.760 --> 0:10:25.640 the deal for a considerable period, probably since about December. 0:10:25.320 --> 0:10:28.199 Twenty two, that two years nearly. 0:10:28.360 --> 0:10:33.600 Yes, these things always take time, but the important thing 0:10:33.760 --> 0:10:37.000 is is that we expect the Commerce Commission approval to 0:10:37.280 --> 0:10:41.920 take six to nine months, and then there is the 0:10:41.960 --> 0:10:45.400 Independent Appraises report that goes to shareholders who then vote, 0:10:45.480 --> 0:10:47.520 and then there is a day in court and then 0:10:47.559 --> 0:10:53.040 the deal is done. We expect that the benefits will 0:10:53.280 --> 0:10:55.880 be fully realized within eighteen months to two years of that. 0:10:56.000 --> 0:10:59.679 So we've said, look, Manaua has a normalized debit das say, 0:10:59.720 --> 0:11:02.160 about one forty million a year at the moment, and 0:11:02.200 --> 0:11:04.800 we expect to bring that up to about two twenty million, 0:11:05.040 --> 0:11:09.280 if not more, within a two year period and that's 0:11:09.320 --> 0:11:12.600 when the benefits start really start to flow. There's also 0:11:12.840 --> 0:11:15.640 upside in that in terms of the development options that 0:11:15.720 --> 0:11:20.679 Manoa has, which is fantastic, and in terms of what 0:11:20.760 --> 0:11:24.560 I call the micro optimizations about how we integrate the 0:11:24.600 --> 0:11:25.360 assets together. 0:11:25.640 --> 0:11:28.760 Because they've got twenty five hydro stations small to medium, 0:11:28.840 --> 0:11:30.880 I think most of them. I mean, do you see 0:11:30.880 --> 0:11:32.840 any consolidation there. 0:11:32.840 --> 0:11:36.280 Not on the operation The consolidation or the opportunities are 0:11:36.280 --> 0:11:40.320 at the corporate level where we have duplicate systems. We 0:11:40.320 --> 0:11:43.320 have a duplicate maintenance system with dupilate finance system. And 0:11:43.360 --> 0:11:46.800 where there's duplication at the corporate level, what we do 0:11:46.840 --> 0:11:51.240 see optunity and is the operations are very much clustered 0:11:51.240 --> 0:11:54.040 in areas we very much clustered in areas we already are. 0:11:54.080 --> 0:11:56.520 So for instance, Manoa is very strong in the Bay 0:11:56.559 --> 0:11:58.360 of Plenty, central North Island. 0:11:58.760 --> 0:11:59.920 That's where our heart and soul. 0:12:00.320 --> 0:12:03.240 Yes, Manua has significant assets in the Taranaki. 0:12:03.640 --> 0:12:04.720 We're in the Taranaki. 0:12:05.080 --> 0:12:08.480 Manui has significant assets in the Deep South. We have 0:12:08.520 --> 0:12:11.280 significant assets in the Deep South, so there is opportunity 0:12:11.920 --> 0:12:15.160 for the teams to work together and be integrated together. 0:12:16.080 --> 0:12:19.120 But that isn't about cost savings. That's just about working smarter. 0:12:19.840 --> 0:12:22.960 Yeah, And in terms of the development project, so they've 0:12:22.960 --> 0:12:26.200 got at the moment I think around four wind, two 0:12:26.440 --> 0:12:29.000 solar from memory. Will you be keeping. 0:12:28.720 --> 0:12:32.480 Those on absolutely, And that's when you're in development. One 0:12:32.520 --> 0:12:35.520 of the important things that you need to have is 0:12:35.559 --> 0:12:40.920 what I call competition for capital. So what those sites 0:12:40.960 --> 0:12:44.320 will bring is that one of them is already consented. 0:12:44.360 --> 0:12:46.839 I go in the north of the South Island and 0:12:46.880 --> 0:12:49.840 then there are two very advanced development options for wind, 0:12:49.880 --> 0:12:52.080 one in the central North Island and one in the 0:12:52.080 --> 0:12:56.000 lower South Island. And having a development portfolio where the 0:12:56.000 --> 0:12:59.600 teams are working hard to get their project forward, to 0:12:59.640 --> 0:13:03.080 have that competition for capital to get the best return 0:13:03.160 --> 0:13:05.760 for shareholders. And what that means is that you either 0:13:05.800 --> 0:13:09.720 do the best projects first, which means consumers then get 0:13:09.960 --> 0:13:13.640 the lowest cost electricity as soon as possible. If we're 0:13:13.679 --> 0:13:16.400 all operating in different ways and you end up with 0:13:16.440 --> 0:13:21.800 sometimes subeconomic projects going first, and that just ends up 0:13:21.840 --> 0:13:25.240 with a bad outcome for shareholder shareholders and a bad 0:13:25.280 --> 0:13:26.600 outcome for consumers. 0:13:27.000 --> 0:13:30.040 Is there some wind expertise that you're hoping to garner 0:13:30.280 --> 0:13:32.640 from the stealven Absolutely? 0:13:32.720 --> 0:13:37.000 Now, remember we have the relationship with Rawing forties and 0:13:38.080 --> 0:13:43.640 certainly Manua have a natural wind capability already de On 0:13:43.760 --> 0:13:46.200 Campbell their chair is coming on the board now. Dian 0:13:46.280 --> 0:13:50.000 and I have intertwined our careers over many years. Dion 0:13:50.080 --> 0:13:53.600 obviously has some fantastic wind experience from his time with 0:13:53.640 --> 0:13:57.680 TrustPower and then a CEO of TIM and so having 0:13:57.720 --> 0:14:01.040 him on the board with that both energy market and 0:14:01.080 --> 0:14:03.120 development experience and whind will be fantastic. 0:14:03.880 --> 0:14:06.840 Okay, So we could see some interesting things happening with 0:14:06.880 --> 0:14:08.080 wind with contact. 0:14:08.400 --> 0:14:12.040 Absolutely, We're already got some sites, but having these sites 0:14:12.080 --> 0:14:16.040 come in will just add momentum. I talked about bringing 0:14:16.080 --> 0:14:19.240 our future forward faster is very much the theme of 0:14:19.240 --> 0:14:19.680 this deal. 0:14:20.040 --> 0:14:21.880 One thing you did say on our program not so 0:14:21.960 --> 0:14:24.200 long ago, back in February with the half year results, 0:14:24.320 --> 0:14:27.520 was you thought solar was a niche prospect in New Zealand. 0:14:27.600 --> 0:14:28.720 Have you changed your mind? No? 0:14:28.840 --> 0:14:31.960 Absolutely, So we have announced obviously the christ at Chairport 0:14:32.000 --> 0:14:35.200 Cofi Park, Sola. The opportunity there is that solar can 0:14:35.240 --> 0:14:39.040 be built quickly. Yeah, solar doesn't get firmed. You need 0:14:39.080 --> 0:14:42.280 something else to firm solar, so it will have always 0:14:42.320 --> 0:14:43.600 a niche. 0:14:43.640 --> 0:14:46.760 It always look at the weather out there today. 0:14:47.800 --> 0:14:51.680 This is Wellington, it's New Zealand. Doesn't have the same 0:14:51.760 --> 0:14:54.640 resource as say Australia or Chile, but it does have 0:14:54.680 --> 0:14:58.560 that niche application. The wonderful thing about solar, remember is 0:14:59.120 --> 0:15:03.800 it's summer weight and one of our major industries, dairy 0:15:04.400 --> 0:15:07.960 is some are weighted in terms of demand. So there 0:15:08.040 --> 0:15:11.840 is again a niche application I think for solar, but 0:15:11.960 --> 0:15:14.920 it won't be providing the same broad base and it 0:15:14.960 --> 0:15:16.680 doesn't go on at night in. 0:15:16.720 --> 0:15:23.320 Terms of what you're paying forty eight percent premium. There's 0:15:23.320 --> 0:15:26.080 also some red flags with Manawa. I would say at 0:15:26.120 --> 0:15:29.120 the moment, just a little while ago they had earnings 0:15:29.160 --> 0:15:32.200 downgrade about twenty five percent. I think there was a 0:15:32.240 --> 0:15:34.880 bad debt with the retailer involved in that. They've got 0:15:34.920 --> 0:15:37.880 some low lake levels they talked about at the time 0:15:37.920 --> 0:15:41.320 when they did their Q one report. What are you 0:15:41.400 --> 0:15:44.680 thinking in terms of actually is it turning stuff around 0:15:44.800 --> 0:15:46.800 or I mean, are the concerns you You've obviously done 0:15:46.840 --> 0:15:47.600 your due dilidence. 0:15:47.840 --> 0:15:50.400 Yeah, no, we did extensive due diligence. So the very 0:15:50.480 --> 0:15:54.360 reasons for the earnings downgrade are the very reasons why 0:15:54.400 --> 0:15:58.400 Manu it is better together with us, because that broader 0:15:58.440 --> 0:16:03.760 portfolio has a order resilience. Now, remember when that high 0:16:03.840 --> 0:16:07.600 price period, we did the deal with Method X to 0:16:07.640 --> 0:16:11.720 allow us to burn gas, which immediately stabilized the market 0:16:11.720 --> 0:16:15.680 along with Genesis and brought back a degree of rational prices. 0:16:16.040 --> 0:16:18.760 And Manua being part of our portfolio would mean it 0:16:19.320 --> 0:16:23.480 is not exposed to that extreme type of event. In 0:16:23.560 --> 0:16:27.520 terms of the assets themselves twenty five hydro schemes, the 0:16:27.520 --> 0:16:31.280 important thing is is that people remember eight of those 0:16:31.440 --> 0:16:33.960 are of a reasonable size and they will fit perfectly 0:16:34.040 --> 0:16:37.800 within our portfolio and with the remainder with those Runner 0:16:37.880 --> 0:16:40.560 River small hydros, you've just got to have an appropriate 0:16:40.600 --> 0:16:43.560 maintenance and risk management strategy in place so you're not 0:16:43.680 --> 0:16:46.880 over investing, but you're operating them safely and if you 0:16:46.960 --> 0:16:49.320 have a common sense approach. We've seen that common sense 0:16:49.360 --> 0:16:52.000 approach from Manima as we did our due diligence and 0:16:52.040 --> 0:16:54.920 we have a look where IO fifty five thousand are credited. 0:16:54.960 --> 0:16:57.680 In terms of our asset management. We have a rigorous 0:16:57.680 --> 0:17:01.360 approach to risk and investment and stay in business carepex. 0:17:01.440 --> 0:17:04.280 We don't overspend and we have a strong track record. 0:17:04.320 --> 0:17:07.440 Remember why Raki is over sixty years old and we've 0:17:07.520 --> 0:17:10.600 kept it going for thirty years beyond its design life 0:17:10.800 --> 0:17:14.919 without a process safety incident, been operating it very safely. 0:17:15.000 --> 0:17:19.600 And it's that risk management, that rigorous asset management framework 0:17:19.640 --> 0:17:21.280 that we apply that keeps us all safe. 0:17:21.800 --> 0:17:25.480 You talk about looking at the deal over nearly two years. 0:17:26.000 --> 0:17:27.480 Was it a time when you thought you're going to 0:17:27.520 --> 0:17:30.320 have to do something else in order to get those renewables, 0:17:30.440 --> 0:17:32.359 you know, change the portfolio mats. 0:17:32.560 --> 0:17:35.440 Oh, look, we always have a plan B. We had 0:17:35.480 --> 0:17:38.359 a clearly communicated strategy to the whole of market about 0:17:38.359 --> 0:17:41.080 what we were doing, and this. 0:17:41.800 --> 0:17:45.479 Deal just allows us to excelerate that. We always had 0:17:45.480 --> 0:17:45.920 a plan B. 0:17:46.880 --> 0:17:51.160 Okay, Now investors are not just looking at the dollars 0:17:51.200 --> 0:17:53.200 and cents. They are consumers a lot of the time. 0:17:53.280 --> 0:17:57.400 Some of them are businesses. We've had the Windstone Mills clothes. 0:17:58.480 --> 0:18:02.840 I will say, Mercury, was this not you guys? Does 0:18:02.880 --> 0:18:06.560 that mean with the steal that we will have better competitions? 0:18:06.560 --> 0:18:08.879 What I've heard you saying in recent reports, can you 0:18:08.920 --> 0:18:10.280 explain what you mean there? 0:18:10.359 --> 0:18:13.639 So look, the problem at the moment is that there 0:18:13.680 --> 0:18:16.600 is no problem with the electricity market. There is a 0:18:16.640 --> 0:18:20.199 problem with the upstream gas market. And so in that 0:18:20.240 --> 0:18:23.600 period of scarcity, what you saw is a scarcity of water, 0:18:23.680 --> 0:18:26.560 a scarcity of wind. What's the next dispatch gas? There 0:18:26.600 --> 0:18:30.080 is no gas, you go to diesel. The moment that rainfalls, 0:18:30.359 --> 0:18:33.959 prices came straight back down again. And so what this 0:18:34.119 --> 0:18:38.440 enables it releases just through the combination of portfolios, another 0:18:38.920 --> 0:18:41.720 two to three hundred gig what hours a year, and 0:18:41.760 --> 0:18:45.280 then through the ability to exlerate wind and solar options 0:18:45.720 --> 0:18:48.240 that will bring additional supply to market. And if you've 0:18:48.280 --> 0:18:52.160 got a supply demand and balance like that leading to diesel, 0:18:52.520 --> 0:18:55.000 the only way to solve that is to increase supply, 0:18:55.560 --> 0:19:00.000 to build more power stations. And I think it's important 0:19:00.240 --> 0:19:03.520 that people understand that and look on Winston's look, that 0:19:03.680 --> 0:19:06.879 was tragic when people lose their jobs like that, But 0:19:06.960 --> 0:19:11.199 there are systemic issues in pulp at the moment. Not 0:19:11.400 --> 0:19:15.880 many of us are reading a paper newspaper anymore. And 0:19:16.000 --> 0:19:22.159 so they actually had a reasonable power deal with Mercury, 0:19:22.200 --> 0:19:24.840 which was in line with international prices, and Mercury came 0:19:24.840 --> 0:19:27.600 out very strongly on that. The reality is is that 0:19:27.680 --> 0:19:31.160 pulp economics globally are challenged. And the other thing I'll 0:19:31.200 --> 0:19:35.320 say is that other would processes like og Panpak chose 0:19:35.400 --> 0:19:38.800 early days to hedge and they have a very sharply 0:19:38.840 --> 0:19:41.879 priced PPA with us through the MUKE which we participated in, 0:19:42.240 --> 0:19:45.280 and because they were willing to sign up to a 0:19:45.359 --> 0:19:49.200 ten year deal and support the renewable transition, they're still 0:19:49.200 --> 0:19:53.600 in operation today. Okay, so it's not as clear cut 0:19:53.600 --> 0:19:56.760 as a m it's certainly not quite as clear cut 0:19:56.840 --> 0:19:57.680 as what it was made out. 0:19:58.440 --> 0:20:01.800 The Comments Commission has to approve the steel. You're fairly 0:20:01.840 --> 0:20:06.600 confident that will happen. You talk about more competition, perhaps 0:20:07.160 --> 0:20:11.440 better fixed term contracts for industrial Yes, commercial operators tell 0:20:11.520 --> 0:20:12.719 us a little bit more about that. 0:20:13.280 --> 0:20:16.240 So our advocacy is we wouldn't have got to this 0:20:16.359 --> 0:20:20.080 point if we weren't confident of clearing the Commerce Commission. 0:20:20.560 --> 0:20:22.960 But we have to keep telling our story. Yes, that's 0:20:23.160 --> 0:20:27.840 really important. We think the increased supply, both through the 0:20:27.880 --> 0:20:32.240 deal itself and the additional development, will it further increase 0:20:32.280 --> 0:20:34.200 the downward pressure on prices. 0:20:34.720 --> 0:20:34.880 Now. 0:20:34.920 --> 0:20:37.520 The thing is for large gal industrials, we are passionate 0:20:37.560 --> 0:20:40.800 that the decarbonization of New Zealand should not mean the 0:20:40.880 --> 0:20:45.159 de industrialization. And that's why we particularly as Contact, have 0:20:45.280 --> 0:20:48.480 been putting in the place these long term power supply 0:20:48.600 --> 0:20:52.159 deals at very sharp prices with the smelter with New 0:20:52.280 --> 0:20:57.200 Zealand steel, with Ogpampak, with food stuffs, where counterparties who 0:20:57.200 --> 0:20:59.920 are willing to stand up to the mark and invest 0:21:00.080 --> 0:21:04.359 it there in renewable energy, we're prepared to say, hey, 0:21:04.600 --> 0:21:08.880 here's a project which will benefit from that long term 0:21:08.920 --> 0:21:12.840 ppa and do those long term, reasonably priced power deals. 0:21:13.119 --> 0:21:16.400 Do you think it's going to mean businesses won't be closing? 0:21:16.680 --> 0:21:19.040 As you've said, it's not always, you know, it's clear cut. 0:21:19.200 --> 0:21:21.679 It all depends on how fast we can build that 0:21:21.760 --> 0:21:27.000 new generation. If we get lost in the bureaucracy and complication, 0:21:28.119 --> 0:21:31.640 then those new projects will not get built. If we're 0:21:32.600 --> 0:21:36.560 able to clear away some of the bureaucratic tangle and 0:21:36.640 --> 0:21:40.160 get on with building these new renewable energy projects, prices 0:21:40.160 --> 0:21:43.000 will quite naturally get back to what is a fair 0:21:43.040 --> 0:21:43.880 and reasonable level. 0:21:43.960 --> 0:21:46.080 Do you mean fast? Is it a fast traight legislation 0:21:46.200 --> 0:21:46.680 helping with. 0:21:46.680 --> 0:21:48.840 That, or it's all it's. 0:21:50.400 --> 0:21:57.439 Stable market settings, it's Resource Management Act reform, the fast 0:21:57.440 --> 0:21:58.160 Track reform. 0:21:59.160 --> 0:22:03.760 It is being absolutely its counterparties been. 0:22:03.680 --> 0:22:06.840 Willing to invest or sign up to long term PPAs. 0:22:07.320 --> 0:22:11.680 It's all of the above. For our investors, it's the 0:22:11.720 --> 0:22:19.840 more we can uncomplicate, uncomplicate this whole morass that we're 0:22:19.880 --> 0:22:22.919