1 00:00:00,080 --> 00:00:03,120 Speaker 1: Now a second major electricity gen Taylor, in just two 2 00:00:03,200 --> 00:00:05,760 Speaker 1: days has posted a massive profit increase. It was contact 3 00:00:05,800 --> 00:00:09,360 Speaker 1: yet yesterday. Today it's Mercury Energy reporting a net profit 4 00:00:09,440 --> 00:00:11,200 Speaker 1: of two hundred and ninety million dollars for the year 5 00:00:11,200 --> 00:00:13,640 Speaker 1: to June. That is up one hundred and fifty nine 6 00:00:13,640 --> 00:00:18,040 Speaker 1: percent on last year. Vince Hawkesworth is Mercury Energy's chief 7 00:00:18,079 --> 00:00:18,720 Speaker 1: executive and. 8 00:00:18,680 --> 00:00:21,680 Speaker 2: With us now have vins cure Heather. 9 00:00:22,040 --> 00:00:24,319 Speaker 1: You have to admit the timings were awkward, isn't it. 10 00:00:25,920 --> 00:00:29,440 Speaker 2: Look? But the important thing to understand is that net 11 00:00:29,480 --> 00:00:33,920 Speaker 2: profit is an accounting issue about the way you measure 12 00:00:34,479 --> 00:00:39,040 Speaker 2: financial derivatives. If you look at the cash or something closer, 13 00:00:39,080 --> 00:00:44,199 Speaker 2: the cash earnings before interest, appreciation and amortization, that was 14 00:00:44,320 --> 00:00:47,640 Speaker 2: up four percent, which reflects the underlying performance of the business. 15 00:00:47,880 --> 00:00:53,840 Speaker 1: Okay, are you profiteering like showe. You're obviously going to 16 00:00:53,920 --> 00:00:56,160 Speaker 1: say no. But what do you then make of what 17 00:00:56,160 --> 00:00:57,040 Speaker 1: Shane Jones said? 18 00:00:58,720 --> 00:01:01,520 Speaker 2: Oh, look, I'm not a politician. I just run an 19 00:01:02,160 --> 00:01:07,600 Speaker 2: energy company. We are not profiteering. You know if you 20 00:01:07,640 --> 00:01:09,920 Speaker 2: look at today's result, and yes, it was a very 21 00:01:09,959 --> 00:01:12,600 Speaker 2: good result on the back of quite a bit of 22 00:01:12,640 --> 00:01:15,759 Speaker 2: new investment in our business. But at the same time, 23 00:01:15,920 --> 00:01:19,720 Speaker 2: we also signaled that the year that we're in, the 24 00:01:19,800 --> 00:01:22,840 Speaker 2: year that we'll report this time next year. At this stage, 25 00:01:22,840 --> 00:01:28,319 Speaker 2: our guidance is down fifty seven million dollars, and that's 26 00:01:28,440 --> 00:01:32,600 Speaker 2: because we have also seen the effects of very dry 27 00:01:32,640 --> 00:01:37,559 Speaker 2: weather on our hydro system and the prices that come 28 00:01:37,720 --> 00:01:41,759 Speaker 2: from the gas situation we've been in. So those spot 29 00:01:41,840 --> 00:01:48,200 Speaker 2: prices that everyone talks about are really impact generators generally, 30 00:01:48,240 --> 00:01:50,480 Speaker 2: because we buy and sell in the spot in order 31 00:01:50,480 --> 00:01:55,480 Speaker 2: to supply our customers. And over ninety eight percent of 32 00:01:55,520 --> 00:01:59,040 Speaker 2: the volume we sell to customers is at fixed prices 33 00:01:59,480 --> 00:02:02,200 Speaker 2: and not affected by that spot price. 34 00:02:02,840 --> 00:02:03,720 Speaker 1: Is it going to change that. 35 00:02:05,960 --> 00:02:11,119 Speaker 2: Spot prices won't have an impact on our pricing? 36 00:02:11,320 --> 00:02:13,640 Speaker 1: No, no, no, But I mean, are you continuing to offer 37 00:02:13,680 --> 00:02:14,560 Speaker 1: gas contracts? 38 00:02:15,560 --> 00:02:19,600 Speaker 2: We we we actually have gas customers. We continue to supply. 39 00:02:19,680 --> 00:02:23,799 Speaker 2: We can't we can't actually get gas contracts ourselves to 40 00:02:23,919 --> 00:02:27,160 Speaker 2: back that, and so but we continue to supply our 41 00:02:27,320 --> 00:02:31,400 Speaker 2: gas customers and buy off the gas spot market to 42 00:02:31,440 --> 00:02:36,280 Speaker 2: supply them. You know, the gas situation is very troubling 43 00:02:36,320 --> 00:02:40,520 Speaker 2: for everybody, I think, and but we won't be But 44 00:02:40,560 --> 00:02:44,679 Speaker 2: we won't be dropping our customers just because of that 45 00:02:44,680 --> 00:02:46,239 Speaker 2: that's our job to keep supplying them. 46 00:02:46,280 --> 00:02:48,040 Speaker 1: Do you reckon the government has got the appetite to 47 00:02:48,040 --> 00:02:50,079 Speaker 1: break up the generation and retail arms. 48 00:02:52,040 --> 00:02:56,720 Speaker 2: Well, that's a pretty political question. I don't. I'd like 49 00:02:56,800 --> 00:03:00,040 Speaker 2: to understand, like what we think the impact of that 50 00:03:00,160 --> 00:03:05,120 Speaker 2: would be the gen Taylor's as we're called, and certainly 51 00:03:05,200 --> 00:03:10,680 Speaker 2: Mercury have been investing significant amount of money in New Generation, 52 00:03:10,840 --> 00:03:15,880 Speaker 2: will continue to do that. I think. You know, the 53 00:03:15,919 --> 00:03:19,400 Speaker 2: market reforms that led to this have served New Zealand 54 00:03:19,400 --> 00:03:23,280 Speaker 2: incredibly Well, I'm old enough to remember nineteen ninety two 55 00:03:23,360 --> 00:03:28,160 Speaker 2: and when with hydrology like this, we we saw blackouts 56 00:03:28,160 --> 00:03:31,720 Speaker 2: and brown outs. You know, if you want to look 57 00:03:31,760 --> 00:03:35,160 Speaker 2: at the hierarchy of things, clearly, keeping the lights on 58 00:03:35,360 --> 00:03:40,440 Speaker 2: is number one. The price that customers pay has to 59 00:03:40,480 --> 00:03:43,440 Speaker 2: be number two. And we can do both of those 60 00:03:43,480 --> 00:03:46,680 Speaker 2: things and be more renewable. We have to stay the distance. 61 00:03:46,720 --> 00:03:48,680 Speaker 1: How much money of you guys putting into New Generation 62 00:03:48,720 --> 00:03:51,320 Speaker 1: at the moment? Have you got anything that you're building 63 00:03:51,360 --> 00:03:52,279 Speaker 1: at the minute. 64 00:03:52,560 --> 00:03:55,520 Speaker 2: Yes, we have. We've currently I mean, if you look 65 00:03:55,520 --> 00:03:58,200 Speaker 2: at the year just gone, we've put forty two percent 66 00:03:58,240 --> 00:04:03,880 Speaker 2: of that edit but into new projects. Over the past 67 00:04:05,520 --> 00:04:08,160 Speaker 2: few years we spent nearly six hundred million on two 68 00:04:08,200 --> 00:04:12,680 Speaker 2: projects that represented about two point four percent national demand. 69 00:04:12,800 --> 00:04:16,920 Speaker 2: That was and this year we have spent or are 70 00:04:16,960 --> 00:04:20,360 Speaker 2: spending seven hundred million on two more projects, one year 71 00:04:20,440 --> 00:04:24,280 Speaker 2: thermal in the Central North Island, one wind farm in 72 00:04:24,320 --> 00:04:27,600 Speaker 2: the South Island, and we expect to announce another project 73 00:04:27,640 --> 00:04:31,240 Speaker 2: before Christmas that will take that total investment to around 74 00:04:31,279 --> 00:04:32,240 Speaker 2: about a billion dollars. 75 00:04:32,640 --> 00:04:35,039 Speaker 1: The geothermal and the wind farm. Are they online yet? 76 00:04:36,520 --> 00:04:37,760 Speaker 2: No, No, they're under construction. 77 00:04:37,800 --> 00:04:39,600 Speaker 1: When are they going to be online? 78 00:04:40,440 --> 00:04:44,640 Speaker 2: So in the towards the back end of next year 79 00:04:44,720 --> 00:04:48,160 Speaker 2: and then the mid to late of the it just 80 00:04:48,200 --> 00:04:51,120 Speaker 2: takes well, yeah, yeah, I mean there are big they 81 00:04:51,120 --> 00:04:54,840 Speaker 2: are big engineering tasks, but we have brought on six 82 00:04:55,080 --> 00:04:59,640 Speaker 2: six hundred million worth of generation in the last two years. 83 00:05:00,800 --> 00:05:03,840 Speaker 1: Vince, When we roll over the prices that we pay 84 00:05:03,920 --> 00:05:07,159 Speaker 1: as residential customers in April next year, what kind of 85 00:05:07,160 --> 00:05:08,279 Speaker 1: increase should we expect. 86 00:05:10,400 --> 00:05:14,440 Speaker 2: Look, we haven't done the analysis on what we think 87 00:05:14,480 --> 00:05:18,880 Speaker 2: that we will charge customers, but the way we approach 88 00:05:19,000 --> 00:05:22,159 Speaker 2: customer pricing is it's. 89 00:05:21,960 --> 00:05:22,840 Speaker 1: Going to be a lot of way. 90 00:05:23,279 --> 00:05:26,159 Speaker 2: It's going to be a lot well I mean a lot, 91 00:05:27,240 --> 00:05:29,760 Speaker 2: like a big range of a number. But I would 92 00:05:29,839 --> 00:05:34,280 Speaker 2: say that we pass through those direct costs like distribution 93 00:05:34,560 --> 00:05:37,720 Speaker 2: and transmission and all of those things as we receive them, 94 00:05:38,160 --> 00:05:41,680 Speaker 2: and we certainly won't be thinking about the sorts of 95 00:05:41,720 --> 00:05:43,720 Speaker 2: prices we see in the spot market. As I said, 96 00:05:44,279 --> 00:05:48,000 Speaker 2: the spot price is a way of allocating the fuel resources, 97 00:05:48,040 --> 00:05:50,800 Speaker 2: whether that's and it's not faced by customers. 98 00:05:50,920 --> 00:05:52,680 Speaker 1: All right, Vince, thank you very much for talking through 99 00:05:52,880 --> 00:05:54,560 Speaker 1: us through it. I really appreciate its. Vince talks with 100 00:05:54,920 --> 00:05:59,440 Speaker 1: Mercury Energy's chief executive. 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