Contact Energy Limited (CEN) Earnings Call Transcript & Summary

[Foreign Language] Good morning. [Foreign Language] That is as international as the day will get. Because today is about New Zealand, it's about the opportunity here. We have here in this country. It's about the opportunities below you. Right now, it's the opportunities with a group of people in this room. That is what we're excited about. It's about an opportunity that is here and now and it is an opportunity in front of us. So without further ado, let's get underway. Welcome to Capital Markets Day 2021. I'm Mike Fuge. I'm the CEO. I feel incredibly privileged to be here. It is a privilege for all of us to be here, given what's going on in the rest of the world still. So welcome, and let's enjoy the day. One of the feedbacks from the CCI is that you guys felt you didn't know me. We hope to rectify that over the next 24 hours. And you had a sense that I was maybe too grandiose now I've got ambition. I hope to correct that in your underestimation of what we're about. I don't think we're thinking big enough. But the opportunity is here and now, and it is in New Zealand. We'll flick to the next slide side. Sorry. I'm in control as well. Right. What we've got today. You've got me up first, and then James is going to give you a bit of an insight into what we see in the growing demand. It's a question you all fed back to us, you're curious. You are understandably a little agnostic. And by the end of the day, what we hope to give you a confidence that this is a here and now topic. We're going to talk about our renewable development pipeline that we've got. We do regard that as a distinguishing feature of Contact Energy. Over the last decade, in a decade of flat demand, one of the gifts I got was this company managed to keep hold of its development pipeline, and we are very much poised to grow with a fantastic portfolio of some of the lowest LRMC opportunities in the market, let alone for firmed electricity. Jacqui is going to then talk about our announcement earlier the year and what we're doing on decarbonization. And then Matt will talk -- Matt Bolton will talk about the our customer experience and how we intend to grow in that space. Enablers, Catherine, Jacqui and Jan will then talk about the different [ aspects ] about ESG, operational excellence and what we call TWOW, not T-Y, TWOW, which means transformed (sic) [ transformative ] ways of working, which we've already seen to have a huge impact on the company. And again, we regard as a key strategic strength. Then Dorian will wrap it all up. I would ask that you hold your Q&A because there's a couple of opportunities for Q&A as we go through. I would ask because we've got a truckload of stuff to get through. We do -- we are going to make you drink from the fire hydrant as we go through the day. Hold those questions. You have plenty of time at the end. And you'll have plenty of time as we go on the bus to the sites and everything like that, okay? Right. More than anything else today is about you guys getting -- and I say, guys, 1 or 2 females in the room. We'll talk about that later. It's about you getting to know us. Me, James, Jan, Dorian, Jacqui, Catherine and Matt, all seated over here. But beyond that, the broader team because one of the hidden strengths of Contact Energy is the profound talent they have working on this stuff. And I hope you get a sense of that. We've got some other people over here, Jack Ariel, who just joined us, Major Projects Manager. He probably -- some of you know, he delivered to [ Manapouri ] at the refining -- refinery. Karl [ Spinks ] , Western Energy. Welcome. We're very proud of that acquisition. Andy Sibley, Simply Energy, to name a few. So take the opportunity, get to know these people over the coming days as these people, much more than myself that will give you the confidence that we are truly able to seize the opportunities in front of us. Just recap 2021 and give you a bit of an inkling of where the strategy is heading. So let's just go to 2021. Despite COVID, we have not been idle. We took 100% ownership of Simply Energy in July. We took FID on to Tauhara, New Zealand's largest private investment post-COVID, which the government we're very, very thankful for. We have introduced the transformed (sic) [ transformative ] ways of working, and Jan will talk about that, both the hard benefits but the soft benefits. I feel slightly embarrassed, the $480 million clearly when I came into the company, we were sitting around $450 million. We thought we'd take a couple of years to get back to the mythical $480 million. We have got back and, as you're all probably aware, we'll go past that number. This quarter over 1,000 households on energy hardship support. Our NPS, our customers have fallen from being extremely agnostic about us to absolutely falling in love with us. And to Matt in his predecessor [ Vennor ], we owe a debt of thanks. Western Energy, as a former oil and gas guy, I'm very proud of this acquisition. They talk a language that I understand, which is great, and we see profound opportunity. We are actually the owner of New Zealand's largest number of well penetrations. We have over 300, and we see the opportunity in getting more out of the existing business with maximizing the enthalpy we get out of the steam. And if you don't understand that phrase now, you will by the end of the day. We have reduced our carbon emission 7% year-on-year. And we have got into a partnership with the best wind development experts in the country, Roaring40s, over the last year and the year is not up yet. So we have been busy. What we do want to introduce today because one of the things we roundly get criticized for, well, what is the path ahead? So if we think about the path, and this is what I inherited, and the company should be extremely proud of this, we have had an incredible focus on efficient operations and use of capital for the last 10 years. And we've got ourselves to a position where our operating cash flows per megawatt hour are the best in the business. We have had got a strong record of cash conversion, and we do have a very strong record of reducing both our operating costs and our stay in business CapEx, which we're extremely proud of. And that has positioned the company incredibly well. One of the things, the passions I have, there's no point in talking about growth if you do not have a solid foundation and track record to demonstrate that you're not going to grow at all costs. You're going to grow prudently, sensibly with the most capable people. And this track record is incredibly important in that regard. Now I know you guys and ladies in the room, you live and die by your spreadsheets. This is my innovation and time liberation for you all. You don't need them. You can see our cash conversion over the last 4 years with our 12-month rolling EBITDAF, and you don't need sort of the 700 line spreadsheet to get there. We have been remarkably consistent in our delivery, despite the volatile wholesale markets and rising fuel costs. You can also see it ticking up. For those of you who haven't been bothered to update your forecast for year end, you can take the opportunity to do so now without going back to your spreadsheet. We have been remarkably consistent and reliable in that regard, and you can see that this year is heading to a strong year. At the same time, we have acquired some distinctive capabilities. Today, in particular, we'll be showing you our geothermal capability where one, Jacqui and the team have a strong track record of year-on-year cost reduction, which puts us well ahead of our peer and peers in this country. We do -- we have acquired strategically the partnerships over the last 12 months. Those partnerships, quite frankly, have been in existence for a very, very long time before we acquired full ownership. They are the fruition of a long, long relationship. And you see that NPS score, which I talked about earlier, how that has been turned around over the last 6 years, where customers genuinely value the service they get from Contact Energy. But given all that, it's not about what's behind us, it's what's in front of us that counts. And there are 2 fundamental shifts in the electricity market ahead of us. One is New Zealand, possibly more than any other Pacific Rim country, is getting on the journey of decarbonizing the economy, and they're getting on it at pace. I think if as you -- for those visiting the country, as you go around and listen to the conversations, whether you're at the stakeholder event, you will get an overwhelming sense that this is not a debate anymore. The pure question now is pace. The country is very much behind us, and the country is very much going to do it. I use the analogy of our response to COVID. There was a little bit of debate about the response prior to. But once the country, to use the infamous phrase, team of 5 million decided that was the way it was going to happen, it happened. And I suspect or my sensing is the country has taken a very similar view of decarbonization. If we're going to do it, let's get on with it. The second thing which is going to happen at some point, we don't know when, is that New Zealand aluminum smelters will come to the end of its life or to the agreement. At the moment, that's 2024. Obviously, it caused a bit of a debate around the time. And as we go through this today, I think that is a thing of opportunity and James will talk further on that. But those 2 events are big and they're in front of us. It's not about the game behind us, it's what's in front of us. So decarbonization, incredibly important. We are going to see, and the Climate Change Commission have been absolutely clear that electricity will become the fuel of choice. There is an increased focus on climate change globally, as you're well aware. And you've seen the passion of the New Zealand government. And strangely, particularly the labor government have decided to occupy the space. Yes. You see increasing carbon and gas prices. It's an interesting winter to say the least. Yes. You see our electricity costs, the cost of, particularly solar and wind have come down, and they are now very much competitive against any alternatives, and that's a global trend. And you've seen the technology costs, particularly for -- you've already seen it in wind, you're now seeing it in solar, geothermal is already there. But you see it in the other innovations ahead of us, electric boilers, EVs, batteries, electrolyzers. All those what we regard as new technologies, are very much on what I call technology curve, and I think we can only stand back, and we're not going to stand back but watch the space. They are on the curve and the costs of those will drop faster than we think. The Climate Change Commission expects electricity demand to grow by about 1.3% per annum. Some of that's going to be quite naturally driven by EVs. Industry is a big one. We think we can get industry there faster. We're going to talk a bit about that, and about 20% of it from buildings. That graph changes slightly of NZAS exits in 2024 with no mitigation or no extension, but the trend is still the same. So our imperative is to deliver on our commitment to decarbonization and to make sure that, that dip doesn't happen quite like that or is much improved. And for that reason, rather than being a passive supplier, one of the changes in direction is that we're going to get alongside our customers and help New Zealand decarbonize. And that is very much the focus of the team in the room that you'll talk to over the coming 24 hours. So 2030. What it's going to look like? We're pretty sure that NZAS will be gone by then. I think that plant has -- its life is about 2030. You'll see baseload thermal gone. And you'll see very low utilization for the remaining thermal assets, which Jacqui is going to talk to you about later. You'll see interment renewables dominating generation mix. You'll see far more wind and solar. We get that. Yes. You'll see geothermal as the only effective baseload in the country. That's great. Geothermal, I was talking to a couple of people before, is effectively New Zealand's nuclear power of the future. It gives us that 100% or near to 100% uptime baseload and allows us to decarbonize without having to take on unpalatable alternatives that other nations may have to. You'll see batteries and large-scale demand flexibility supplementing existing hydro reservoirs and the remaining thermal peaking plant. And you will see a change in the way the industry funds itself with emphasis on longer-term PPAs to make sure that those -- that heavy capital investment gets an appropriate return. And for those of you who were at the stakeholder event late the other night, you'll recall that final challenge I gave to industry. It's going to be bumpy. You're going to see increased volatility. And the winner is, quite frankly, of those who can attract new demand with those long-term PPAs securing a long term income to now the recovery of that heavy investment. Quite frankly, Contact Energy are best positioned to enable that decarbonization. We have a proven decarbonization growth platform, combining Simply Energy, and you see some of the toys that Andy has brought along today. Our deep market knowledge and I'll pay credit to the team, the position we are in today is a credit to their anticipation of events. And again, Steven, some fairly significant challenge they made a decision to drop [ CNO ] load over 1.5 years ago because they saw what was coming. You'll see a strong retail brand and that improved customer experience. And you'll see our capability to lead the energy transition. I've alluded before, New Zealand -- we have New Zealand's best renewable development pipeline that's sitting beneath you now. Yes? We have the best part of 3 terawatt hours of high-quality, low carbon geothermal ready to be developed. And we -- our intent is to develop that over the coming decade. We will lead New Zealand's thermal decarbon generation transition. We've led or replaced almost 3 terawatt hours over the last 15 years closing the New Plymouth and the Otahuhu power stations. We intend to continue with that leadership position as we work out what we do with the thermal assets that we have to ensure a smoother transition for New Zealand. And I say that -- I use that term of leadership because that is our track record. And quite frankly, with our place in the market as an intermediary, it's something that we can do, yes? We do have low-cost innovative operations, I've already talk to that. We do have New Zealand's largest electricity brand. We have well and truly gone past genesis now. We're very proud of that. That was done through sheer hard work and a credit to the team. And we do have future-focused capabilities. And over the last year, in particular, the acquisitions that you've seen and James' own efforts and building up a Brain's Trust to help with that demand growth and renewal of the development. And hopefully, you'll meet some of those over the coming 24 hours. We are ready for that. So that is quite simply where we are today: Contact Energy, Contact 26. And I think by the end of the day, you'll be truly excited about what we have in front of you. So what is the strategy? 4 strategic themes: one, grow demand, to attract new industrial demand through our New Zealand's unique endowment of globally competitive renewables. We believe that is a here and now. It is not something to be done passively. We have to get alongside industry and government to make it happen. We passionately believe that. Number two, grow renewable development. We have New Zealand's best development pipeline. We're proud of it, and we're going to build it. Number three, decarbonize our portfolio. We have to do this sensibly to ensure a smoother transition as possible to protect the interests of our stakeholders, our shareholders, and New Zealand Inc. And number four, we're going to create outstanding customer experience, whether it's mass market, with [ Met ] or Simply Energy. We want to help New Zealand, ordinary Kiwis, decarbonize. Sitting below that are the enablers. You will see the increasing focus on ESG, which will create long-term value. Yes? You will see our focus on operational excellence. You will actually get to touch it over the next 24 hours, with a continuous business improvement end-to-end. It is a unique capability, both here in New Zealand but globally. And you'll see transformative ways of working. We're quite frankly -- we're happy to use my cheers phrase, lean in to the opportunities that this presents. We won't get it right all the time. But the key what distinguishes us from our competition is that if we make mistakes, we learn from them and we move on. And so that is the way we've approached transformed ways of working. COVID gave us an opportunity. We've taken it. We've run with it. Jan will talk about the lessons we've learned on the way and what are some of the things we see ahead. What you'll see, you'll see growth. Yes. You will see growth of this company. You'll see resilience, you'll see us delivering sustainable shareholder returns. You will see demonstrable commitment to our ESG principles, and you will see a step change in performance with materially growing EBITDAF through these strategic investments. So here are some of the ambitious measures of success, and you can test us by it. You'll see the building of in-house capability for attracting industry support for industry demand. You will see 100 megawatts of new commercial and industrial demand by 2025, and you'll see the market backed demand opportunities maturing to replace NZAS. In renewable development, you'll see Tauhara online by 2023. Thank you, Jack. You will see us taking FID on new renewable build, whether it's Wairakei, and/or solar and/or wind. We recognize competition. We see competitions between these technologies as incredibly healthy for our own portfolio. You're to see a decision on the North Island battery by '23, early '24, and you'll see 100 megawatts of demand response capacity by '25. I asked in earlier, we're at 11 as we sit today. You'll see the thermal review completed, TCC, decommissioned by the end of '23, as you see Tauhara come on. You'll see our Scope 1 and Scope 2 emissions reduce from the 2018 baseline by 45%. In Customer, we want to be in the top 10 most trusted brand by 2025, moving from Simply Energy retailing to being a retailer. We're very proud of the platform we've created, both with our people and the IT platforms. We think we can go further. That will mean we're over 650,000 customer connections by 2025. We will continue to lead the market on cost to serve, getting below NZD 120 per connection and 75% of our customer interactions will be digital by that stage. The 3 key enablers, you will see our commitment to ESG play out in real life. You will see continued operational excellence, where we use innovation to improve our business efficiently. You will see our continued prudent management of our capital. We realize it is a privilege and we will continue to manage it carefully with the utmost prudence, and you will see us driving towards economies of scale and further digitization across the whole business, not just Customer but in our Generation space as well. You will see us transform the way we work, where we continue to use technology to modernize our operating model. We will redesign the way we work. We will increase our employee engagement. This will become, if it is not already, the workplace of choice for Kiwis, for our youngest and brightest in particular. Right. And on that note and spot on time, I'll hand over to James.

Remarkable. Mike finished on time. None of us had that. We run a poll. No one had that. Okay. [Foreign Language] Good morning, and welcome. My name is James Kilty. I am the Deputy CE here at Contact. Welcome to everyone dialed in online. What I just said there was a very, very short mihi, welcoming everyone to this region. Acknowledging [Foreign Language] they are the indigenous, mighty people of this area. This is [Foreign Language]. We are in their part of the world, and it's important we acknowledge that every time we come together here in Taupo in the beautiful Central North Island of New Zealand. In these parts, I'm known as Hemi Pup. My name is James Kelly. Hemi Pupu is the grass skirt that Maori wear [ kilties ]. So I get called hemi pupu around these parts. And when I do this is, I also get told on these days, [Foreign Language] which is an old face because I've been around so long and well-known around here. It's really nice to be here to talk with you today. Thank you all for making the effort. Particularly on budget day coming to see us instead of listening in to the budget, perhaps a little scheduling error, I'm not sure { I ] would have done that math. Too soon? For those who don't get that little end joke. Our wonderful, Mr. Matt Forbes, our Investor Relations head, was up for an award earlier in the week as Investor Relations Manager of the year and came, obviously, an extremely close second. And I think that's not because of anything he's done, but more that we haven't given them the material to win the price. So hopefully, today, we can resolve that. Thanks for organizing today, Matt. Look, it is fantastic at this time to talk to you. I want to talk to you, of course, about our strategy, the 2 pillars of our strategy that I'll focus on, our growing demand and the pipeline of renewables that will bring forward to meet that demand as we grow it. There are a couple of themes I want to plant with you. Mike's already mentioned them and they are long-term deals. The market will change to enable the decarbonization of our energy sector in New Zealand. We will have to see customers working more closely with us to create long-term deals that underwrite the investments that are needed. We are seeing some interest in that. We are seeing some changes, and I can talk about those as we go and take some questions towards the end. The other element and theme that I think is really important is around partnerships, partnering without ego. Partnering in a way, and we call it our Tikanga in a way where you leave your ego at the door and you do what's right and what's necessary to get things done with an open mind. So the capacity, the ability to build partnerships is a really important capability and something we have focused on in the last few years, and some of the acquisitions, Mike mentioned, are the outcome of that sort of capability we have built. The last theme is one of integrated thinking. A lot of the things we talk about, I will talk about as individual slices, I guess, of how we are looking at the market going forward. It is all connected. There is a butterfly effect in this market and this industry, and we are very, very mindful of that. It's why we value so highly the deep market expertise that we have. We do perceive that as a difference. Our ability to connect the dots and put ourselves and our resources in the right place at the right time. And the way we do that through our Tikanga gives us an edge. That partnership approach is one, as Marty phrased, [Foreign Language] moving forward together. And we think as we decarbonize energy, we are going to have to be -- all be very conscious of how we work together and partner because no one entity can do it alone. The entities that when they do the best, will be the ones who are willing to work with the right people who can attract the right capability to get things done, and that's Contact. Okay. There are a lot of predictions of demand growth, accelerated demand growth. You'll have seen the chart on the left, probably in publications from the Climate Change Commission's draft report. And you'll have seen the numbers on the right-hand side of this chart, as a consequence of the estimation of the acceleration of electricity uptake required to meet the draft Climate Change Commission report. That is a very material growth, as Mike said, 3 terawatt hours out of buildings and space heat, 5 terawatt hours from industry and heat and 6 terawatt hours out of transport by 2035. Now the trick here, as Mike alluded to, is that 5 terawatt hours of industry, we do assume NZAS replacement. And that's why we talk about down the bottom of that slide, the emergence of a new industry. New industry to New Zealand to replace NZAS as it exits. We also see a material opportunity in data centers, and I'm going to talk about all of these opportunities this morning. Go out on a limb here, and the draft Climate Change Commission report does reflect a continuing deindustrialization of our country as we meet our Paris targets through large-scale industry over time, exiting New Zealand. It seems completely at odds with a global push to decarbonize supply chains. In a nation with an abundance of renewable resources available for development, it seems completely at odds to hit goals by shrinking. The opportunity set for New Zealand is to attract business to our green fuel, to attract foreign investment into New Zealand to secure access to a green supply chain. And we are seeing very real interest in that as a consequence of NZAS's recent announcements of exit. And then I think, as the message to land with you, this is demand led. We are hearing from people here and oversees, a strong desire to come to New Zealand and utilize our clean green supply chain. As Mike alluded to, we have positioned ourselves extremely well to be ready for this moment. We launched our decarbonization strategy internally 3 or 4 years ago. It's from that strategy that we started gathering to us, the capabilities that we thought we would need to be able to execute because we knew decarbonization would come. It was a matter of when, not if. And so we have been out in market creating partnerships, securing the capabilities really for this moment in time where we see an inflection point, possibly and actually stimulated by NZAS's announcements of last year that has stimulated the interest that we were trying to stimulate ourselves. We, of course, have a wonderful existing renewable asset base. We have New Zealand's best renewable development pipeline. I'll talk about that later in the piece. We have developed electrification partnership with Simply Energy, and we have demonstrated again our willingness to partner in our partnership with Meridian to look at the hydrogen opportunity for New Zealand. And the other point near that other theme, long term partnerships, long-term relationships that enable customers to decarbonize over time and underwrite new investment. So here's the 5 things that I'll run you through for the next half hour or so, and then we'll stop and have some questions. We were going to have a panel for Q&A of myself, James Flannery, Andy Sibley, who is here, and Murray Dyer. James is very busy working on the hydrogen project, and so he hasn't made the trip. And Murray got a call yesterday from a customer wanting some help with some decarbonization thinking. And so Murray is elsewhere in the country, talking to both the network and a customer on how they make a change. So the panel will be myself and Andy. But I'm not sure but [ you've got ] a duo -- a dynamic duo. So I'll take you through our hydrogen thinking. There's a limit to how much I'm going to talk to you about hydrogen. We are working in a partnership with Meridian, and we will release together our joint report in due course, but I'm happy to field some questions on that in the Q&A. Talked to you about process heat and the conditions we think that are emerging that enable growth in our electricity consumption from process heat, space heating, the data center opportunity. I have a short video from a business we've been working with who are bringing a data center to New Zealand. We've just got a couple of conditions left to tick off before that gets underway. And of course, our capacity here in New Zealand to decarbonized road transport, a well-known and yet still challenging opportunity. I think we'll start with why hydrogen. Why would we be looking at something that a few years ago, we were all saying, and I think 2018, we had a conversation about our decarbonization strategy up at the Te Mihi Power Station. And at the time I was asked about hydrogen, and I said it looks distant at this time. That has changed. There is no doubt that context has changed on hydrogen. And again, a big thanks to our friends in the deep South for announcing their exit because it has stimulated unprecedented demand. I spoke 2 or 3 weeks ago, Zoomed into Japan to the -- at the New Zealand Japanese Business Council (sic) [ The Japan New Zealand Business Council ] on a joint study we're undertaking with Meridian, and we have been swamped with contacts since then from potential customers, from potential suppliers. So this is something that's real. There are many countries out there who do not have our abundance of renewable resources, Japan is the obvious one. I'll talk about that a lot in this discussion today. They need to find solutions to the importation of fossil fuels. They are enormous electricity consumers, Japan and South Korea, both, and both have struck on hydrogen as a key part of the solution for them. And countries around the world are [ intrigued ] into this. So the investment going into hydrogen is phenomenal, billions of dollars around the world. At the moment [ that old school attack ], there's a lot of technology hurdles to jump through. A lot of challenges in the way. But the only question I can't get an answer to from anyone who starts saying, Oh, it's not going to be hydrogen. Well, if not hydrogen, then what? The answer is we have to solve the technology problems. We have to solve the commercial issues and make it work because actually there's no other alternative for many of these nations. And if you're a country with abundant renewable resources, shrinking to meet your national climate change goals, shrinking your economy rather than bringing investment in and growing your economy and exporting your renewables in whatever shape or form seems an unusual step to take. Those other nations are crying out for the opportunity set that we have here. They do not have the natural physical advantages that we have. And so we are an obvious target for [ beer ] thinking. And we don't know whether it will be hydrogen -- liquid hydrogen that is exported or whether it will initially start out as ammonia. Ammonia, of course, has the advantage of having existing supply chains, existing shipping technology, ports and infrastructure around the world. Over time, though, we think in the fullness of time, liquid hydrogen technology will advance to the point in the shipping where we will be shipping liquid hydrogen around the world. We are undertaking a $2 million study with Meridian into this opportunity. We've appointed an advisory board from people around the world. We've got strong hydrogen engineering capabilities, strong markets capability, shipping capability, advising us and guiding us on how we take our study forward. The study is being undertaken in 3 parts. The first of which has been largely completed. It's an editing mode, trying to demystify some of the language. It's fairly dense. A wonderful piece of McKinsey-isms. We went with McKinsey and Meridian and as guided by our advisory board to examine the market. How will the hydrogen market evolve? One of the observations I would make is that it looks very similar to the initial stages of the LNG market. If you can get to market first, and if you can secure an offtake, we wouldn't invest our money unless there was an offtake, then you will get an initial premium. And if you can secure that offtake for term, then you can hold that premium, and that can underwrite a facility. There's still plenty of work to do to get our heads around all of that. But the market scan as demand is there, and it will grow. Supply is short and countries have announced targets that suggest they have no choice but to follow this path. The second part is the technology and engineering assessment. That is scoped and underway. We have secured, Mike mentioned the Brains Trust. We have secured some of New Zealand's leading talent into the business in hydrogen, and they are now examining this in conjunction with their workmates at Meridian and advised by the Advisory Board. So by August, we will have done a -- I guess a brief technical feasibility study to identify the challenges that need to be worked through before making any form of decision on an investment. And finally, part three, the dry year role. The benefit of hydrogen, I'm going to talk to you a bit about demand flexibility, both from Simply Energy and other forms of demand flexibility like data centers. The benefit of hydrogen is there is a degree flexibility, potentially quite a significant degree of flexibility. Our large-scale hydrogen facility could act as a structural relief [ shelf ] for a highly renewable industry. Peaking when there's more supply than is being consumed in New Zealand and interrupting when we have our dry years, which we, of course, do have from time to time. So the next stage in that process is actually a really important moment in our market. We will issue in early June, registration of interest process. It will go far and wide around the world. People are already registering their interest in receiving that document. It will be accompanied by the McKinsey report so that the participants can see how we're thinking about the market. And they will stimulate interest, we believe, from customers, from potential purchasers of hydrogen, purchasers of ammonia, purchasers of electricity. They may be existing participants in our market. They may even be thermal generates, who knows. But it will be far and wide, enabling us to understand what the best use of all of that renewable electricity in the lower South Island is post-NZAS. Here are a few of the initial findings from the McKinsey report. I am permitted to reveal some of this. The high points are, there is a developing international market for hydrogen, and it's going to grow very rapidly. There are announced about 50 gigawatts -- I think on the next slide, I've got 50 gigawatts of projects announced to supply. It's nowhere near the required demand. Japan alone, earlier on, I think, 2 or 3 slides ago, I had an Asian demand by 2030, that's the 2019 target. And in the next month or 2, that 2 million tonnes of imported hydrogen will go to 10 million tonnes. The Japanese government will announce that within the next month to 6 weeks, a significant increase. To give you some context, if all of the electricity that currently gets consumed by the smelter went into a hydrogen facility, traded liquid hydrogen and shipped it, that would be 70,000 tonnes. Japan alone wants 10 million tonnes by 2030. So the market is going to grow. The Japanese Business Council -- the other day, I said this market is set to explode which created the same stir among those there. Not the term. It's going to be exponential growth, not explosive growth. Hydrogen is, of course, very safe and a known technology and able to be managed. There is the opportunity for New Zealand to take a place in the supply chain. The water that comes free of NZAS in the Lower South island from the first of January 2025 is an extremely scarce resource globally. Over time, the deserts in Saudi Arabia and Chile will be covered in solar panels, and they'll create their own version of -- the challenge for them will be their version of low-cost electricity supply will be intermitted. The supply at Manapouri is 1 available from the first of January 2025, there's nothing else at that scale in the globe that comes free at that time. And this baseload [ will have a ] very, very high capacity factor, electricity. It is a single unique element that other nations do not have. So there is the opportunity for something quite transformation. There is the opportunity to continue our own path to decarbonize our sector here and grow a new industry in New Zealand as opposed to following a path of shrinking in order to hit our decarbonization targets. It's an opportunity we believe we should take. The utilization of that electricity as NZAS leaves, down in the lower South Island, where it is produced as the most efficient use of it rather than transporting it north. We have a pipeline of renewable development up here in the North Island that Mike's alluded to, and I'll talk to you about later, that can play its part in displacing baseload thermal, where we can bring that to market and displace the baseload thermal in the North Island as well as utilize the green electricity in the lower South Island to create a new industry, whether it's hydrogen, data centers, some other green [ metal ]. We will find out in our ROI process what interest is out there formally. Our hydrogen facility can offer a dry year solution. I think in the Meridian Investor Day, Grant Telfer took you through some fairly dense analysis on dry years, I read that with a great deal of interest. We've got a study out -- a joint study out being -- and some of that which has been peer-reviewed to make sure that we are comfortable with it. We are comfortable with it. It's getting peer-reviewed now to be ready to be inputted into the final report. We think the uptake of a hydrogen future is going to require a solutions focus. There are plenty of technical challenges. There are plenty of economic challenges. The thing that gives us a little bit of comfort, and I don't want to get too evangelical here. There are a lot of challenges to jump through. But the thing that gives us comfort is, if not hydrogen or a derivation thereof on ammonia, then what? Green energy needs to be exported from some countries and imported by others or the globe can't hit its targets and countries can't hit their targets. So if not hydrogen, then what? No one has been able to answer that for me. And government support will bridge gaps. The Japanese government has acknowledged that the importation of liquid hydrogen will come at a cost 126% higher than the current cost of importing LNG, and that it will play its part in enabling business in Japan to adopt that as a fuel. So not 126% off but 126% higher, more than twice the cost in its initial stages. That will fall as electrolyzer technology improves and as more renewables come to market around the world, that cost difference will fall. And in the interim governments appear to be aware that they're going to have to play their part to bridge that economic gap if they're to hit their targets. This is what I referred to earlier. This is the supply side. And you can see between June '19, June '20 and March '21, the announced projects just seem to be exponentially growing. These are announced, some are in development, some aren't. There just announcements. But this is a global stock take, if you like, of what people said they're going to do in terms of [ developed ] electrolyzer supply to produce hydrogen, and that's not enough to meet the projected demand. We are 572 megawatts of that, a tiny portion way down at the bottom there, readily available. So on hydrogen, we are cautiously optimistic. We think there's something to it so far. We've got a lot to learn and the study is designed to enable us to learn that. The market scan will be far better informed by the registration of interest process that I talked about earlier. That will be far better informed by the technical assessment that's still underway, and it will be far better informed and the economics will be better informed by the conclusions on the dry year risk analysis that is out for peer review at the moment. And all of that will come together in time for our full year results in August, a somewhat false time frame. It's one we've created to put some pressure on ourselves to deliver and to put Mike in a position and Dorian when they're doing their rounds with you with our full year results to talk to you about what was learned. And to talk to you about what, if anything, we're thinking of doing going forward with it. Next steps, complete the study, seek the expressions of interest for offtake and other partnerships, and then make a call on what, if anything we will do going forward. At this stage, as I said, we're cautiously optimistic, we believe there's something in it. And I'm sure you'll have questions on that in Q&A time. We are seeing more interest from forward-thinking industry in New Zealand, looking at managing near-future carbon exposure by decarbonizing this flood chain. Electrification of boilers is starting to become more and more real. We've done one, of course, with Open Country Dairy, 13-megawatt boiler, large-scale boiler. We've done a few much smaller ones. And we have a pipeline at the moment, we're in discussions on another 39 megawatts of potential boiler electrification over the next wee while. The economics remain challenging. There's no doubt about that. But as companies start to see the life of going towards the end of the life of an existing coal boiler or want to expand the facility, they only have to look ahead at the potential rising cost of carbon to make a decision to invest in a 20-year asset based on a future carbon price as opposed to today's. And so we are seeing continuing interest from many, many customers. This is the New Zealand's heat and process heat industry in the terawatt hours. Look at the top end of that stack. There's prime use, things like metals, petroleum and chemicals refining, those hard to abate sectors are actually prime targets for a hydrogen facility. Prime targets. That's where hydrogen fits in this industry. It doesn't fit down the bottom of that stack, which is prime for electro boilers, lower heat utilizations. That's really where electro boilers fit and will thrive. So we believe that there are 5 terawatt hours of additional targets to go after in the electro boiler space, largely in food processing. 5 terawatt hours, of course, a significant, significant amount of new demand for our country. On its own, could replace the smelter's exit. And that's the assumption that the draft Climate Change Commission report makes. The difference between what I'm talking to you about today and the draft Climate Change Commission report is simply that. Their view is the 5 terawatt hours that comes free from NZAS gets replaced over time as boilers electrify. We think that happens as well. We agree with that. We also see an opportunity for something quite transformational down there in the Lower South Island. And here's the economics. I think [ Grant ] and them were up at Te Mihi a few years ago, you asked me what the point is at which people will start to electrify their boilers when they are developing new boilers, I said at the time, $70 to $80 carbon. That has been borne out. The economics still remain in that region. You can see here the zone where we think large-scale uptake will start to occur as that carbon price increases. The difference now that we're seeing is that as people come to their decision points on either extending the life of an existing boiler or expanding a facility, they're looking ahead at where they think the carbon price will go because they're making a 20, 25-year investment. And so they're doing a trade-off. That's how Open Country Dairy came about. They can see a carbon price rising. We worked in complete open book partnership with them on the economics, and they elected to go with an electro boiler. We're seeing that the opportunity for more of that as more and more people become aware of their significant carbon exposure. It's only -- not so long ago, carbon was $2, then it was $20, now it's nearing $40 with a cost containment reserve at $50, which we assume will increase through time. So we are seeing our customers, and we can probably talk to you a little bit more about this in Q&A. We are seeing our customers seeing this risk to their business and wanting to do something about it. Space heating. Not that exciting, to be honest. It's a bit boring. Heaters. But actually, switching out coal and gas boilers and small to medium enterprise and hospitals and schools and switching in electrical heat pumps is a significant opportunity. This is real and is happening now through government funds that are starting through hospitals and schools, and we are seeing, again, SMEs start to think about their future and starting to look at electrical heat pumps. I had a lunch a couple of weeks ago with ECA and some fairly interesting and influential consultants who advise customers, and they are pushing hard on heap pumps. They told me they're swamped with people seeking their advice on when and how they can install electrical heat pumps to heat their space. As I say, not very exciting, but a significant opportunity. And the team at Simply are working quite closely with some of the property groups around the country on the opportunity in new buildings. On not just this, but on demand flexibility and sapient load optimization plugs, which Andy can take you through, all sorts of tech that enables the efficient uptake of increased electrical consumption for space heating. And same story on switching point. The economics say you wouldn't do it immediately, but if your old boiler starts to rattle or if you're looking ahead, 10 to 20 years, and you can see a rising carbon price pretty soon, the switching point will come. And if you're making an investment now, you're probably minded to install an electrical heat pump, and that's what we are genuinely seeing out there in the market. One of the reasons, we -- Mike mentioned our acquisition approach. And I go back to our partnering approach. We look for the best capability in whatever we're doing. We don't here bring an ego to it if it means we partner with someone rather than bring it in-house. That's all good. And out of our work in this space, starting 3 or 4 years ago, we identified Simply Energy as the best in the business. We initially invested as a minority holder and then the last year, we've taken the business 100% because we believe it has a particular capability set and a series of relationships with large industry, with property businesses that we can leverage to accelerate this uptake. Dash, are you pressing the play button on this? Just before you do, we are in discussions on data centers. And here's a little clip. It's got Murray, who is not on our panel but will be in the video. Introducing this topic, and then you'll hear from a business called Lake Parime, a high-performance data center business on their objectives. And we are working with them right now on their options here in New Zealand. So Dash, you go on. Thank you. [Presentation]

So that's a really exciting project. There are some conditions still to fulfill, a resort content being a fairly crucial one. The first stage is small, but these guys are fairly serious. They're very well funded. And they are looking at expansion well beyond the scale mentioned here. The thing that they can offer -- so the thing that they can offer us is an industry in this because again, to partnering with the people who can help solve their problems is interruptability. Our arrangements enable many times a year. I won't give you the number, many times a year to interrupt them for 4-hour blocks, so to manage peaks, 75% interruption. The relationship also enables us to do once every 3 years, a 6-week block, 75% interruption. As we look ahead at New Zealand's dry year risks, we need to be thinking of demand response, demand flexibility, be it a hydrogen facility that can back off large-scale data centers, that can back off demand participation, is critical in -- at a low-cost, getting to close to or at 100% renewable electricity. It has to be an integrated system of participants. And these guys are an early sign of what we think is needed. Data processing has gone explosive. It's another exponential growth here. Data processing around the world is growing rapidly. That's a look back at that chart, a little bit of the forecast of it. But you can see us continuing, [ creating with ] then Microsoft announced that it is bringing data centers to New Zealand, cloud storage. New Zealand has some of the characteristics for these data centers, not all, not all, but we have some of the most important ones. And in particular, latency. So the sort of data centers that will come here will be those that are looking for deep storage, high-powered processing but deep storage. It doesn't need to be instantaneously accessible in the U.S. or Asia or Australia. And that's what we're seeing. And we, of course, can offer up reliable green electricity supply that's gone well beyond the hygiene factor for these businesses. It's a must. They're looking for it around the world. And we have a lovely cold climate in the Lower South Island to reduce cooling costs. The other point I would make there is that this load is summer-weighted because it's cooling load. So it suits New Zealand's hydrological makeup very well. And in particular, our hydro catch flow -- catchment catch flow. Okay. So we see this as a real opportunity. And I'm looking forward to being able to make an announcement of having met the conditions and get that project underway. That's stage 1. We will move quickly beyond that to stage 2, finding another place on the grid where there is capacity to install large-scale data center, high-performance data center. Electric vehicles. Look, this is a curve that comes out of the Climate Change Commission's report. We know there's a supply issue, so we're not kidding ourselves here. There is a global supply issue, which I think tells you something, people are starting to buy them. It's not the fact that the manufacturing system is failing, it's the manufacturing system currently can't keep up with demand and so it's being expanded. Be it Tesla, Hyundai, anywhere else in the world, Vital, they are all expanding their manufacturing facilities for EVs. And over the next few years, we expect many, many more models to come to market. The challenge in talking to the vehicle companies here in New Zealand is actually getting -- it's not demand. It's getting hold of the vehicles and getting them into New Zealand. Down here at the bottom of the world, we're not as an attractive market as North America, fondly enough. So we do tend to have to wait our place in the queue for supply to come down to the car yards down here. But again, we are seeing more demand than supply. So it's a great place for this story. So to close out the section on demand and open up for questions. This is what we're working on. We do see the opportunity now with NZAS's announced exit to take the momentum from the inquiries we've had from around the world and look at what options there are for New Zealand. What new industry can come here and green its supply chain? The scale opportunity is along the lines I've touched on, hydrogen, boiler electrification and data centers. We're seeing good progress. And from all of those relationships, we are seeking to capture the value of flexibility and demand response. That integrated systems thinking is crucial going forward to avoid high cost solutions. We've also invested in the capability we need to be able to bring all this together for customers with our investment in Simply Energy, some other capability we've brought into Contact. We have a very, very strong team looking at all of these opportunities for New Zealand and for Contact. And so we are increasingly confident, while still cautious, we're not about to wildly invest in a large hydrogen facility if it doesn't make sense. But we are increasingly confident that some of these opportunities are or will become very real in the near future. Okay. Now we've got about 7 minutes until morning tea. And so here's the panel that's whittled from 4 to 2. Andy, would you like to -- I think we'll sit over here for the -- we'll move across, and you can fire some questions. This is Andy Sibley. Andy is the Chief Business Officer at Simply Energy, not Sibley Energy. And here, we're talking to you over lunch about some of the tech, but Andy is out there real-time with customers, hearing their stories, hearing what they want to achieve and helping them to chart a path to a lower carbon future. So he's a good man to be talking to about these topics. So with that said, we'll take some questions.

So if you just want to any specific questions around decarbonization. How are we going to get there? What customers are saying? Feel free to fire away.

All right. I'll open. Everyone seems reluctant. Maybe just start with the carbon price view that you're dealing with customers. Can you give us your view of what carbon price you think we'll see mid decade, end of decade?

Yes. Look, we have a view. We don't know if we're right, of course, but we have a view that it will climb through $70 to $80 in the middle of the decade. The Climate Change Commission's estimation or requirements to follow that path was $140 by 2035. We think it will climb a fair bit over the next 5 years or so. And we'll get into that gray zone, very comfortable into the gray zone is the most important point. And customers have the same view, don't they?

Yes. Generally, if we're looking at these investments around electrification, we allow the customers to do their own analysis around the carbon price so that they feel comfortable that it's not something we've modeled to get the deal over the line. And what we're finding is, in some cases, is a lot higher than what we believe will be in working together around getting that. So it's very much the customer-driven view of the carbon price and what the risk they're dealing with for their own internal processes.

I sense from that answer that you actually have customers who are getting close to commitments or looking at reasonably sizing commitments in the decade?

Yes. That's right.

Yes.

And just 1 more for me, I'll leave the floor after that. The lesson of TWOW is that a large, single buyer, no matter how long the contract you've got, there's not really a contract with a fixed price. Do you have a mechanism? Is that in place? And you're thinking around the hydrogen study and data centers to make sure you've got more than 1 counterparty for the load here.

Look, the diversifying net risk is top of mind for the team that are working on the hydrogen ROI. I talked a lot about the opportunity of a large-scale single point facility. That may or may not be the right outcome to manage that particular risk. We are absolutely open-minded, and we are very, very conscious of that. Our expectation, to be honest, from that ROI is that we will be absolutely swamped. We know we will. Go back to the point I made earlier. The scarce thing in the creation of a hydrogen market that is immediately available, baseload renewable electricity. That's the scarce thing. And New Zealand is in the fortunate position, thanks to NZAS of having met.

Just a couple of follow-up questions. I guess, on hydrogen, and to be honest, could probably talk all day on it. But if all goes according to plan, what would you see as actually the first time we would actually be producing hydrogen? And you said, and when would you have a supply contract actually started? This is obviously not...

Yes. If every -- all of the technical hurdles and commercial hurdles and risk management hurdles get ticked off. I would refer you to a wonderful slide in the Meridian investor pack. Whoever wrote that slide is a genius. So we agree with that time line about 2027 first production, an investment decision around about the time that the NZAS contract concludes on its current time frame. A 2-year build. That actually feels -- the 2-year build feels quite solid at the moment from the technical advice we're getting because it's modular. So you wouldn't commission all on day 1, you commission it over time. The world is starting to narrow down on the right modular scale of an electrolyzer. It's not 10 megawatts, it's bigger than that, but it's probably not 100 megawatts either, it's somewhere in the middle. And so 2027 production and shipping is tough but achievable.

I guess, in a couple of follow-on questions in. So one is, there's obviously a 3-year gap between when the smelter closes in 2027. What was your thinking over that period?

Well, I think, as always, the market will solve that and this ROI process is really critical. If there are people out there who see a need for some renewable electricity between the end of 2024 and the start of 2027, they should participate fulsomely in that process.

And lastly from me, you alluded to in terms of what capital Contact might be putting and it, sort of sounded like you might be prepared to go into a hydrogen plant. Is that correct? Or are you just looking at supplying electricity and maybe building some extra generation if that was required?

Yes. Look, our starting position is we're in the electricity business and we supply electricity. However, we are open-minded if there is what we -- if we can see a commercial opportunity to enter into a global energy market with secure cash flows to underwrite the investment, we will look at it. So we're open minded. Sorry, just 1 clarification on that, apologies. It's not something we could do alone. It would require a consortium, and we think that's best for New Zealand. A consortium of investors, partners, Meridian, I'm sure, would be curious about the same thing. Some other schemes around the country, maybe thinking about long-term investment. [ Transpower ] may have a desire for long-term investment. And we think it's probably an important role for a customer, the person who's going to underwrite the investment and their involvement. So again, we're open minded. Our starting position is we're an electricity company, but we're open minded.

James?

Hello.

So the elephant in the room seems to be LNG affordability. So how do you -- your projections are quite bullish with industrial load looking away from EVs and what's happening down South. How do you sort of calibrate what's going on at the moment with the likes of the refinery, [ Foktai, soy papacy, Osasco, ] Tesma, how do you sort of calibrate all that together and draw a review on the structure and on the way to growth.

Yes. Look, the short-term conditions are unhelpful. No one electrifies at $200 a megawatt hour. So the short-term conditions are not conducive to decarbonization, but I emphasize the short-term. The life cycle of the investments that we're talking about here are '20, 30, 40, 50-year investments. In the case of geothermal, it's a 60-year investment on the supply side. So we think the investment we've made in Tauhara, the pipeline we have, other windmill business. I'll talk about this a little bit later in the renewables piece. We'll see the market revert to tight, as it were. What is tight? The long run cost of renewables firmed. The cost of firming going forward as it goes from thermal to renewable or other sources of flex. That's the bit that's an interesting puzzle, and we're still working on our view on that. Jacqui will talk a bit later about our ideas for the thermal fleet for the nation, our own thermal fleet in the nation and how you get the lowest cost transition. But through the cycle, it's always the same. The long run cost of the next renewable project plus the cost of firming so that the electricity is reliable. So we think it will -- it's a long answer, but the short point is, it will revert and over the long-term and become vital. And I think the other point is that -- go back to the long-term partnerships. If we can get a long-term transaction in place, then those arrangements at that long-term price become available now. And we have already PPA conversations, long-term PPA conversations underway, some nearing conclusion for large-scale offtake at that -- based on that kind of thought process, the firmed cost of renewables over the long term. You can't do them for 2 to 3 years, you have to price off the ASX. But if people are willing to commit long term, then we can think differently, and we are thinking differently here. So you'll see, I hope, some news on that in the not-too-distant future. Apologies, long answer again.

James, just staying on the hydrogen. Is this, in your view, similar to what [ Rudy ] was saying last week, around about a 750-megawatt opportunity, $2 billion of CapEx? Nodding head. So on that in their numbers, it did look like it was some sort of solution for Onslow. Is this the way you're thinking of hydrogen? Or is it just to stack up the TUI demand?

No, I think we're thinking about hydrogen and in a more optimistic way than that. We see it as a potential growth project for New Zealand. That will also suck up the NZAS demand if we can make it work, and it will also enable more demand site participation in our market. So here's those other benefits, but we want the -- if we were to invest in it, we want the investment to make sense as an export investment, not for those other purposes. It does have those other benefits.

And then with just, I think, the biggest one that's ever been built to date is a 20-megawatt for us distance from market, construction shortage skills. Is this really something Contact should be walking into when you consider Mercury's debacle with offshore geothermal?

I think that's a good question. Look, I want to emphasize, when we talk about open mindedness. Our starting point is we're an electricity provider. That's what we do. That's what our core is. We're really good at it. Anything beyond that will require a significant amount of risk management and understanding on our part before we go there. So the starting point, we're an electricity provider. We'll be taking an extremely robust risk management approach to any move outside that scope of business. I can see that you're going to hold on to that platform.

Now there you go. Yes. And it sounds like your hell-bent on TOI getting out of here. How much South island demand do you think you need to stimulate to actually encourage that exit where they can't come back and hold the country for ransom?

I didn't want to leave you with the impression we're hell-bent on their immediate exit. There's an ROI process, and they could participate should they choose to for an extension. That's their choice. What we've been doing is making sure we've got other options available at or better than the price of the old TWOW deal, not the transitional dealers in place. And the data centers that we've been talking to, the boiler electrifications are at or better than the old TWOW deal. There is no more transitional electricity for TWOW smelter. So we will be pushing ahead with alternative customers to diversify that risk as [ Neville ] asked earlier. So that when we approach 2024, if there's a conversation, there's a different commercial position.

So last question. That first, second slide that Mike put up of that 100 megawatts of industrial demand stimulation. Can I take that, that's your South Island target by 2025 which helps mitigate?

Yes. That's what we're going after. Yes, yes. And I think we're very confident. Yes. Yes.

Thanks, all. We might just stop for tea. We've got 10 minutes for tea, and then we're back to it. And sure there will be some ability to ask questions over tea for those that are still left. Thank you very much. Thank you. [Foreign Language] [Break]

Okay. Everybody, can you please take your seat. We need to restart. Sorry, everyone. We've got people dialed in from around the world. So let's sit down and continue our discussion. Good to see that our earlier conversation has stimulated a fair amount of chat over morning tea, and I'm sure that will continue throughout the day. Just give you a moment all to retake your seats. Welcome back to the people who are dialed in from around the world, welcome back to Aotearoa, New Zealand. Great to have you with us. For the next 15 minutes or so, I'll have a chat with you about our renewable development pipeline and our capability set. And then Jacqui will step up and take you through our thinking on thermal transition, fascinating piece of work, really, really interesting. We've been thinking about it for a long time now. So one of those ideas whose time has come and delighted that we can talk about it today. After that, you will hear from Matt, talk to us about our outstanding customer experiences and then our neighbors, as Mike mentioned earlier. And end of that, we will do Q&A. So please hold your questions because we're going to rattle through these subjects with -- a little more quickly, so that there's time to talk about everything together at the end. And I think we might have more than 2 of us on the panel at the end. No surprises on this slide. I'm sure this is a story you're very familiar with, falling renewable technology costs. While we do see an acceleration of demand growth. We see it coming soon as we've just discussed, and it's important we're ready to meet that opportunity. We see the national -- the government's focus on its renewable electricity aspiration. And we think the solution, of course, is the new renewables and low-carbon flexibility sources are required. That integrated thinking is really very, very important to enable a low-cost transition. And in terms of a thesis of the market, I mentioned earlier, through time, the market reverts to the long run cost of renewables firmed by whatever the firm in cost is we think that, that is potentially quite a bouncy transition. And so the way we're doing in the thermal flexibility or thermal review that Jacqui will talk about is really important. Our capability set. You're going to have to suffer through me bragging about this a little bit. We have 3 terawatt hours of geothermal development. It is the only baseload form of renewable generation. We're very lucky at Tauhara and at Wairakei, in particular, that the carbon footprint on those sites is very, very low, very low. And so a wonderful opportunity to bring baseload, very low carbon renewable electricity to market to displace baseload, high-carbon fossil fuel generation. We have world-class geothermal operators, end-to-end capability, quite real globally. I was digging out a pick for our conversation from 2008 where we articulated the capabilities we would gather and retain. And pleasingly, we have achieved that in the low-growth period. We're coming out of -- we turned that expertise, that reservoir and well-maintenance expertise that's critical to creation of value in geothermal. We turned it to continuous improvement. We turned it to working with Western Energy and developing new technology and Karl from Western Energy is here. The acquisition we completed about 6 weeks ago. Because we see not only the improvements we've seen to date in our geothermal business, a huge cost reduction and the extension of well life and well maintenance. We see an opportunity for that to go further and faster. And so we're delighted to have you here, Karl, you and the whole Western team to join the Contact family. We've also recognized that other technology costs are falling. We don't actually expect them to fall below the cost of geothermal. It is affirmed renewable, but there is the potential for that to happen. And so we need to restart our wind development pipeline. We looked around the market, recognized we didn't have all of that capability in-house. So we found the best in Roaring 40s. And they are out there doing their thing right now. We also have a conversation underway with a very credible large-scale international solar development expert business. So we are looking at what capability we can leverage from there. Again, recognizing without ego that we are not solar experts or solar developers, but that in due course, if New Zealand is to meet its decarbonization targets, there will be solar as part of the mix. So here's what we'll talk about. We'll talk about Tauhara. We'll talk about the other resources that we're looking at. We'll talk about batteries. If prices will revert to the long run cost of renewables firmed, then we need to understand firm it, and we need to find low carbon. Visions of firming through time, and we'll talk to you about demand flexibility as part of that firming. We have broken ground on Tauhara. You will all have the joy. I hope you all bought jackets and jerseys. It's an extremely cold part of this region. You will have the benefit of a trip up there. Those of you who are here with us physically today, to the site this afternoon, you'll also see the rig and the rig is operating and drilling the well right now. And I think Dr. Mike Dunstall will take you through the drilling program and how we're thinking about that and some of the results so far, which are simply outstanding. And I think probably [indiscernible] Jack himself, Jack Ariel will be able to take us through a discussion -- a useful discussion on the power station construction project at Tauhara site. The difficult hydro conditions in this part of the world have not been helpful for hydro generation, they have created an unbelievably good construction season. And so that picture there demonstrates, you can't tell because you don't know the schedule, but it's well advanced. We really have thrown everything at it. When you get the unbelievably settled and dry conditions that have persisted here for some time. You can see that from the amount of beach down the Moana. We have thrown everything at it and taken advantage of it wholesomely to get the project off to a great start. I think you'll be quite surprised at just how advanced all the youth works and enabling works are when you hit up there. So the project is off to a great start. Lots still to do, and we expect completion in mid-2023. These slides always worry me because we never -- we can't see inside other people's projects. And so we take external resources, other people's views, put them together and try and create a comparison. And so I want to call, at start, that comparisons are challenging. We cannot see inside other people's businesses. But this is our assessment of the relative economics of recently announced and recommitted projects with our own Tauhara, Wairakei opportunities. And I think it demonstrates really the capacity factor that geothermal brings. The benefit of that long, long life and that much, much higher capacity factor when you look at the economics. It is a very unique resource. We are -- I say we are lucky. We are privileged to have access to it. It's not like our team up here in Wairakei and Turitea, work very, very hard to -- have worked very, very hard over the years to get access to this wonderful resource that's world leading, that's world scale. And we get contacted from people around the world very regularly to talk to us about the projects and what they can learn from what we're doing here. And this is that capability that's incredibly important and very unique to contact. We do have a very long-standing operational capability in the business. We said that the other day. We don't have anyone who was here in 1958 when the plant was commissioned, but we do have someone who has been with us for 50 years. At that sort of deep capability and experience, learning from the mistakes of the past, knowing how to solve things is fairly unmatched in the operational space in geothermal. And Jacqui may talk a little bit about that during the operational excellence session later in the day. That work we did in 2008 on the capability we would gather. We wanted to bring in-house all of the IP on resource management itself on the reservoir understanding on -- the understanding of where target wells, on the understanding of how to optimize fluid once it comes out of the ground and send it to the right kit, we operate a very complex steamfield system. Optimization is critical to the maximization of every drop of fluid we have access to. That's the capability that we really put our time and effort into developing and maintaining, at least so, construction itself. We've built capability to manage construction, but we outsource and pass off the risk of construction to expert EPC contractors. And that's how we've approached Tauhara. We do believe we are Zealand's lowest cost geothermal operator, and we're confident in that. And some of our recent developments, you might be seeing these today because we will stay on the Tauhara side of the river. But many of you have seen these projects in the past, with Te Huka we made drive past on our way out to the Tauhara. Here what I mentioned earlier around the flexibility in the geothermal development pipeline. We have options that enable us to do things at different time, bring projects to market at different times, to meet market conditions. It's a very well risk-managed investment opportunity. We're obviously pushing for the high demand growth scenario. We've just spent time talking about that. That will enable us to bring to market another round of several investments, to be honest, to bring more geothermal fluid -- more geothermal energy to market, a significant growth path on the right-hand side of that chart. But if market conditions change, if some of the conditions we've discussed so far don't eventuate, there are other parts available. As always, we'll be looking at long-term partnerships to help us support new build. If we can't secure those long-term partnerships, then we may moderate our investment expectations. What's important to note is that geothermal is the only baseload source of renewable electricity. It's the only thing that can reliably replace baseload thermal generation. There is nothing else. Wind. A great deal more wind will have to come to market over the next 15 years, if we are to follow that climate change commission path. If we throw -- add in a hydrogen facility or large industrial user in the lower South Island, even more so. And so we are delighted to have partnered with Roaring 40s. They are well underway. We have one site secured so far. They brought 6 sites with them that are being accessed and filtered, and along with 15 sites they're filtering at the moment to decide which are the best wind resources to secure. That timing in mid -- early to mid-2024 is really important. It's about that time that we'll be making a call on what we're going to do at Wairakei. If I go back here, you should see in this chart here, there's Wairakei A&B color. You start to see the end of the consent for the Wairakei plant, and we will have a decision to make in about early 2024 as to what we do at Wairakei. Do we build and extend -- and extend it to Te Mihi site up at the top end of the steamfield there? Do we extend the life of the existing plant? Do we do nothing? And we want to be in a position to compete with a consented wind site so that we're doing the most optimal project available. So that puts a bit of pressure on the geothermal team here to make sure they continue to drive down costs. Western Energy is now part of that process, good luck, Karl, it's that cost down. It is something of a race against what is the best -- what will be the best project in 2024 for us to apply our capital to. Flexibility. We've talked a lot about the need to find sources of flexibility that are green and low cost or as low cost as possible. And we do believe that thermals go through timing at the market, Jacqui will talk about that shortly. And we believe there's an optimized path for that, but Jacqui will talk you through. We do see volatility increasing it. It can't help but increase. As more intermittent generation comes to market. We expect a peak year market. And so the value of flexibility will increase. Likewise, falling technology costs are telling us that batteries will, in the near future, become viable. The battery, we were talking about a year or so ago that we thought we may invest in this calendar year, was benefiting at that point from the potential sudden exit of TY and the associated group support earnings that would come with that scenario. We've pushed that out to '23, '24, again, aligned with the potential smelter exit. However, over the next 5 or 6 years and possibly sooner, we do think a battery that grid support revenue may actually make sense in a more volatile market. So we're watching it very closely. We are engaged heavily with the world's large battery manufacturers, doesn't take rocket science for you to work out who did this, who they are and we continue to monitor the improvements they are making and the technology and how we might bring that to market in New Zealand. And here's some rough estimates of the trajectory of where we see volatility going. You can see an increase in volatility in recent years. We think through time, again, without the benefit of large chunks of baseload thermal generation. We will -- as it gets displaced by intimate renewables, we will see a peaky market. And you can see roughly there our estimates of the CapEx for a battery. That's still evolving. Those are very much big round numbers as opposed to something you should insert immediately into your models. In the demand flexibility space and before we first go on this one, we've been working with customers for some time. I think as Mike mentioned, Andy and the team at Simply Energy got 11 megawatts signed up so far. And more demand currently than we can meet. So -- and he's trying to beef up the team to grab more of this more quickly. We do want to have that 100 megawatts of interruptible demand on Board by 2025, and we are well and truly on track for that. And one of our demand flexibility customers is going to talk to you about that now. [Presentation]

So that demand flexibility platform is connecting with customers at both a commercial level, hard-nosed commercial level and which Andy confronts, and also at a level of doing the right thing. Every gigawatt we can get and demand flexibility is a megawatt of fossil fuel that doesn't burn in a peak. And that's actually the sales pitch that works. Believe me, we're at 11 megawatts, and we have more demand than we can supply at the moment. Andy and the team have already taken Version 1.0 and taken the cost of that down per installed unit. It's now 10% of what Version 1.0 was. So Version 2.0, 10% of the cost of installation. Next challenge is make a Version 3.0, get a 10% of that. And then it probably works in residential houses. So there's a really interesting opportunity here to create that integrated system, enabling the transition to a lower-carbon future. And here is the -- here are the targets. Looking at building that. We've got line of sight on FY '21. We will likely hit that target FY '22. Andy will hit that target and That's -- to be honest, in the next couple of years, there's a genuine pipeline that those targets will be met. So that draws us to the end of the renewable development pipeline conversation. I'll now ask Jacqui to come up and take the reins and take you through how we will decarbonize our own portfolio and support the nation to transition off thermal plant.

[Foreign Language] Good morning. My name is Jacqui Nelson. I'm the Chief Generation Officer of Contact Energy. And I'm here to talk us through our strategy to decarbonize our portfolio. But before I start, I would like to take this opportunity to call out Mr. Matthew Cleland at the back of the room, I'm eyeballing him here, who is our General Manager of Wholesale Markets, and I have to acknowledge he is doing a large proportion of the heavy lifting in this work stream. So just acknowledging that. Thank you, Matt. Right. So the role of thermal generation is changing in New Zealand and orderly transition to 100% renewable grid will benefit all stakeholders. So this role of all thermal is changing very quickly and is driven by 3 particular aspects. The first chart that we have here clearly demonstrates the cost of -- the increase in cost of gas and carbon. And if you look over the last 5 years here, very significant imapcts to fueling your thermal plant. And the middle picture -- and I'm sorry, there's a bit of repetition on previous presentations here. But as more renewables come online to the market, gas forming assets are likely to be required in the short to medium-term, due to the very intermittent nature of those renewable -- new renewables. And that is driving -- also will drive price volatility and possibly security of supply. The third driver that we've got is a government that is ambitiously pursuing 100% renewable grid. And alongside that, we also have a significant societal shift where New Zealand does want exactly the same thing. So what does that mean for us? Basically, an orderly transition is required to achieve that renewable goal without jeopardizing security of supply or the cost of electricity. Now we've got a pretty good track record in the space. We've lead the decarbonization in the sector. And you can see our yellow line, there is some pretty clear about that. Mike mentioned this in his opening speech. In 2009, we closed a New Plymouth's 300 megawatt baseload thermal plant. In '15 Otahuhu, 400 megawatt, again, baseload thermal. So we've got a track record, and that also -- that graph picks or represents a reduction of our emissions liability from around 2.5 million tonnes to where we are currently 1 million tonnes. So when we talk about decarbonizing our portfolio, we think of it from 2 different perspectives. The first one is the decommissioning of TCC, and we expect to see scheduled operations of TCC as soon as, Jack, down the back, delivers me a wonderful Tauhara project. So that is the play there. But B is a bit more complex. Our objective is to find the optimal operating model for the remaining thermal assets we have in our portfolio to meet the market requirements, to facilitate that orderly transition to 100% renewable and also to capture value for our shareholders and that is basically the premise that's behind our thermal review. What does success look like? 2026 TCC as well decommissioned. We've reduced the regulatory risk in the market. And we've also reduced our own emissions, meeting our science-based target, as I mentioned before, of 25% reduction in carbon emissions by 2026 of a 2018 base. So to the first point around the decommissioning. Here's some economics that are pretty compelling. On the left-hand side, we've got the long-run marginal cost of TCC. We've assumed a gas price of $10 per capital, carbon $40 a tonne. And on the right, you can see a much more compelling case for renewables. And that is what we're experiencing at the moment is that pushing of the baseload thermals off the cost curve by new cheaper renewables coming online. We've been pretty clear publicly that we will not be spending the $80 million that's required to keep TCC running beyond 2023. So that's a significant capital investment. And when you look at that compared to the low-cost option that we have in our Tauhara investment, it really doesn't stack up at all, so hits the clarity around that decision. We currently are exposed to both fuel price and supply risk. And that has been very apparent this year with a curtailment of gas supply contracts. And in combination with the current dry hydrology sequence we're seeing increased prices significantly. And that really underpins that need for an orderly transition to derisk the New Zealand energy supply. So the displacement of TCC baseload thermal was Tauhara's baseload, geothermal will approve our earnings, deliver a better return on capital, reduce that fuel supply, price and supply risk and offer New Zealand -- the New Zealand energy market, a low-cost renewable baseload electricity supply. Let me come to that second strength of our strategy. Things are a little bit more complex. There is definitely a role -- an important role for flexible thermal generation to keep the lights on basically. And on the left-hand side, we've got Transpower's forward-looking, North Island went to capacity margin, looking forward. And you can see there as TCC and the Huntly Rankines units retire. That line comes down. And I -- it's not catastrophic at all. We certainly have sufficient energy in the grid to meet demand, but we could experience some periods of suboptimal levels of capacity to meet intraday peaks, again, as we've got that renewable energy coming online. So there will be a need for several peaking and to link back to James' point that he's just made, there's also a place as the technology evolves for large-scale demand flex and batteries to remedy their issue. I think the middle graph is far more interesting for us. It's thousands of thermal assets, It depicts the actual gas asset utilization, that is for path going forward. And there's a bit of coverage there. So it means the holders of low gas of thermal assets fall, will struggle to cover their costs, cover the FX running costs. And as such, we expect that the experience is far higher and higher prices as they attempt to recover those type of costs. So what does all that mean? I think it basically reinforces the need -- a very real need to reassess the role of thermal in New Zealand electricity market. And we strongly believe the need for an orderly transition to minimize the negative impacts on security of supply and customer pricing. So again, on that second tranche of our strategy. We've thought about the 5 pillars that underpin our approach, if you like or we've come up with 5 pillars that underpin our approach. It will start off basically, we must act on our ESG commitment, helping New Zealand to decarbonize and ensuring that New Zealanders have access to affordable energy. Second one, we've been pretty clear about the security of supply and for the New Zealand market and also for our Contact's customers. Third point, as we actually want to be capturing the value and importance of the thermal -- that thermal flexibility offers to the market, as we transition around in maintaining that security of supply. Our fourth point and that's pretty integral, I think, is that we'd like to come up with the solution that will provide risk cover for a broader market base, including all retailers to reduce that price volatility and with the appropriate investment in renewables also reduce the risk. Finally, there's a piece around synergies. So that's around operating assets efficiently and also where there is fuel, making sure it's going through the most efficient caps. The big reveal. So what are we doing in this space? We are engaging with stakeholders to explore the establishment of what we're calling ThermalCo to achieve a return on assets and facilitate the energy transition. And here, we've sort of got a bit of a strawman of what things could look like. And the ownership piece, we're pretty open-minded about that possibility. That could include our peers, private equity, upstream fuel providers, I think, basically, what we're saying is anything is open, all options will be considered. What exits would we put in ThermalCo? Again, pretty broad, thinking peaking plant, plant that provides reserve, gas storage, existing and future gas supply agreements, upstream assets. So again, quite wide ranging. And a really pivotal piece in this whole concept is we think for that indeed to be successful, it would have to have a very clear -- clearly defined mandates. And in regards to that, we're thinking along the lines of providing risk management products which has been discussed previously in the previous presentation, long-term PPAs that drives value for both providers and suppliers as well as it's probably the midterm risk mitigation agreements as well. Then the entity would have the mandate to operate to meet those risk management contracts only. And to that final point, we'd operate collaboratively to achieve the most efficient outcomes of the fuel and plant that is available. On the right-hand side, we've got a bit of a rough sketch of what the process looks like. I'll skip through that. But we -- it involves engaging with key stakeholders achieving buy-in and agreeing some high-level design concept principles. Then we think it's a pretty compelling issue to bring in an independent third-party to provide advice on the actual structure -- ownership structure and operating model for ThermalCo as an entity. That then would be agreed, had to be agreed by both owners and regulators. And finally, you would be spilling off your assets into ThermalCo and purchasing PPAs off a back of it to manage your risk. So that's a thought process at this stage. I'll finish just with a point that we feel pretty strongly about. And that is we're advocating a market-led approach to this. As we believe a competitive market delivers sustainable outcomes and will benefit in the cost of firming. Well now, I'm going to pass on to Matt Bolton, who is our Acting Chief Customer Officer.

Good morning. Thank you, Jacqui. We might just take a way bit of a pivot from hydrogen and thermal supply to something a bit more interesting, which is the customer business. Look, my name is Matt Bolton. It says up there I am the Acting Chief Customer Officer. I'm not acting. I'm truly here. It is My day job. Mike will remove the acting sometime soon, hopefully. Look you've got to pitch for it, when you get a chance. The reality is, look, I've got -- they only given me 10 minutes. So look, over the next 10 minutes or so, I really just wanted to step you through how the team and I are thinking through the opportunities and the challenges of what is a pretty competitive retail market. I think the first question or observation, anyone gives me when I say about retail, they goes, geez, that must be tough right now. It's been tough all the time. But certainly, if you look ahead, it's not getting any easier. But before we get into the opportunities, I think it's always useful to understand the attributes that we have today. And if you're going to think about growth and success, you sort of have to wonder what the foundations you're going to build that on. So behind me is sort of 3 key attributes of what would make a successful business in our hits. And then the first is our footprint. We hold market share of about 20% in just about every one of the key regions that we want to operate in. That market share has grown over the last 5 years, and we're looking to grow that further into the future. The second one and probably the most important, again, if you remember, it's cost-to-serve. When I stood up here, not very well, probably 5 years ago, our cost-to-serve was probably last in market. We were overweight, we hadn't focused on that as an attribute to be a successful retailer. Pleasingly, over the last 5 years, we believe we now have the preeminent cost-to-serve in the market. Now that's a reflection of a deliberate action and to operational excellence. It's a deliberate action into digitization. More importantly, it's a deliberate action via culture. We want to be a successful retail business, but we know a clear attribute of that is managing our cost-to-serve. And thirdly, is our NPS, and is probably the one that the team and I are probably the most proud of to shift the NPS by about 5 points in any 1 year as a success. So to move at 43 points over 5 years and double in a year is just an outstanding result. And for those that don't know, NPS is a simple question, would do you recommend such a product or a company to a friend or a neighbor a colleague, give it a score of 0 to 10. So it's ubiquitous across any industry, any retailer. And for us, to have a score of 30 or 36 right now is just an outstanding result. Well, with all the success, you still need to look forward into the challenges. And as we think about the challenges ahead of us, we've tried to distill them down to 3 key themes. The first is, you'll all appreciate, is the margins aren't great. And they getting tighter. We had a great question before around energy affordability. We've touched on the tariff price of the wholesale market. That will put sustained pressure on near-term retail pricing. So we have to respond to that. And we've got a couple of levers that we can actively use beyond talking to our customers around passing that through. And the first is to be more functional and more deliberate around our cost-to-serve journey. I just talked about operational excellence. We can't step away from that challenge. We have to do our 50% for our customers by reducing our cost base where we can. Secondly, we are an active bundler of services. So we need to continue to innovate away from energy into more bundled services, more value-adding services for consumers in both their homes and small medium businesses. And then thirdly, we need to choose data to target the right customer at the right time through the right channel to get the most value for us and for them. Those things will set us -- or push us into the headwinds of the high wholesale prices today. Secondly is sustainability. I think James and Jacqui have both talked about the impending -- while it's here today, the challenge of sustainability and being a sustainable retailer, all retailers and all categories are facing their plastic-bag moment. What are you going to do to shift the dial for sustainability for me as a consumer? And as Contact, we have some work to do in this space when it comes to serving up new products and services into the home. James has outlined the fantastic work we've done and are continuing to do to decarbonize New Zealand ink. That decarbonization journey needs to go from large enterprise and government, all the way down to us in our households. And then finally, it's experiences. We need to manage and give amazing experiences to our customers. Internally, we talk about liquid expectations. And for you all in this room, your expectations for us as an energy retailer or as a broadband provider is really driven by your engagement with your bank. It's driven by your engagement, what's your EAR line. It's driven by your engagement when you go to the warehouse. Those products and services give you a feeling of how you want to engage with a supplier, and we need to be at the forefront of that if we want to be a successful retailer. So if you take our footprint and then you take the challenges, you got to go where can we be in the next 5 years. So by 2026, where would we like to be. And again, we'd like to focus on 3 things. They are the ones at the bottom. The first is to build more trust. We're a nationwide provider of services. We're in most communities, whether it be through our assets or through our electricity supply. And what we need to focus on is building trust with our stakeholders, with our partners and our customers. Right now, we do well, but we need to do even better. So our aspiration is to get to a top 10 most trusted company by 2026. Now we've got some work to do because as of last year, we were number 38. But you have to set your aspirations high to move the dial. Secondly, we're looking for growth. Mike touched right at the start of this morning on we're a company that has an ambition for growth. Now we're very mindful with the margins we've got about sensible growth in our retail business, and I'll come to a little bit more of that later on. But we're categorically looking for growth more likely from adjacencies rather than our energy business, but how do we couple on products and services to create value for our customers and ourselves between now and 2026. And then finally, we will continue to focus on operational excellence. Our cost to serve can come down further. We will get some synergies as we scale from a large fixed cost base, but we need to focus on further automation, further digitization and just getting rid of the wrong stuff as of today. So if you're going to grow, I guess you've got to look at your business and say, do we have the DNA and the capability for growth. And again, 3 or 4 years ago, if we presented to you, you would have seen the chart on the left-hand side and said, probably not Contact. You're sort of flat lining your energy business. In fact, at that point, if it had gone back, it would've gone negative on our energy business. And we had sort of started to talk to the market about growing our broadband connections. Forward 4 years, we're growing our energy business in the spaces that we want to. We're managing our gas book with the gas supply and gas pricing. But more importantly, we've now grown our broadband business to 50,000 connections. By our maths, it would sort of set us towards the top of a Tier 2 supplier and knocking on the door of the Tier 1s or the incumbent big 5 when it comes to supplying broadband services into the homes of New Zealanders. Now that hasn't come without challenge. We've made a few mistakes along the way, but they'll be hugely valuable to build a DNA about how you would grow into the next vertical and next adjacency. So we can stand here and get our cost-to-service come down as we've added about 60,000 connections, and we're also building a DNA about how to work into new verticals. So we think that's a really important attribute, as we step into the next part of our growth journey. And then if you think about growth, you go, where would you go to next? Well, clearly, we're in energy. We an energy supplier, as James touched on earlier. We have great capability from Simply that we can take commercial ideas into the home. So that's a natural vertical for us to continue to pay in. Secondly, we're in telecommunications. Let's be honest, we've been there for some time, but let's embrace that, that we are truly into the telecommunications space. And we think there's more growth to come in there when we think about extending our broadband offering, when we think about plays into content and we think about plays into MVNO. Those are still all being having a look at, but that is a sensible vertical for us to look at. Green homes. I've touched on sustainability a few times now. We think there's more work for us to do in that space. Now they may -- that may be an asset play through a partner or it may be a data play to provide more information to the household. And then finally, transportation. James touched on the 6-terawatt hours of transportation coming to market via EVs between now and 2030. To state the obvious, we need to be at the table when consumers make those decisions, and that is a great growth opportunity for us. And in fact, as we think about those new verticals, the team are busily working away on 2 concepts between now and the end of the year, which will take us into wireless broadband. Our expectations and understanding of the market is that you can see Vodafone and Spark quite clearly wanting to agitate in that space and Contact needs to be there. Our customers will expect that we can provide an offer in the wireless space for them in the very near term. We're also looking at how we can use smart tariffs to help support our customers through peak energy, how we can help our customers minimize their peak consumption. As James and Jacqui have touched on to help reduce the need for thermal and also how do we use smart tariffs to help EV owners lower the full cost of ownership of an EV to lower the overall share of wallet and spend in that space. I've touched a few times on cost-to-serve because that is important, but it's also embodied through our digitization program. And digital will become worse, the frontier on which the battling -- the battling for retail will be run -- won, sorry. We know that the customer expectation, as we've touch on, will be driven by others. So what are we doing about it? We spent in the last 12 to 18 months basically deconstructing and in reconstructing a lot of our customer journeys. It's fair to say we're an analog business, playing in a digital world and the digital front end our customers were experiencing wasn't replicated at a back-end systems. So over the last 12 to 18 months, we've systematically pulled apart our high-touch point journeys or high-friction journeys with the idea of basically removing cost-to-serve, improving the customer experience and then improving our staff experience through those journeys. And one such example, just to make this candidly obvious or real for you is an onboarding journey for our frontline staff, our CSRS, up until 4 months ago, used to take 42 screens for them to work through to onboard a customer. So if you can imagine, as we are talking to someone and you're punching your way through 42 screens to tell them, please sign up to a commodity, which should be relatively straightforward, it takes a hell of a lot of time as the average handle time is quite high. It's pretty frustrating for you as a consumer to see NPS is pretty low. And that's not a great onboarding experience. Following the digitization work, we've now been able to crush that down to 1 screen. So CSR can now polish all of that work, have a far more engaging conversation, hopefully, shorten the time on the phone, give a better experience, lower the cost-to-serve. And that program will carry on through until 2022 and '23, as we think about technologies like voice-to-text, where we can take the 600-odd thousand calls we get today, crush it through an algorithm, pick out the true themes and friction points for our customers and then go back and redesign the journey so that, that doesn't happen again. And we're seeing a really good yield as a result of nearly 60% of our customers now engaging with us via digital means, which means, over the last 5 years, we've gone from about 1.1 million phone calls to about 600,000 calls a year, at the same time, remember, it's adding 60,000 connections. So we know we're getting this equation right and now our customers are engaging with us. And then finally, our sales funnel, we've moved from about 10% online sales, 50% of our sales come in through an online channel. And again, if you're standing here a few years ago, we would have said it was about 10%. The rest was filled with legacy channels like door-to-door, quite expensive to run, quite a lot of risk, we've now been able to move out of door-to-door and truly embrace a truly digital journey. So look, I think that's no on my time. But if I leave you with 3 thoughts or 3 concepts of which we are working hard to prove in the coming months and years, is that we will continue to focus to grow. Growth will be our friend. We really want to be -- really clear, growth will be our friend where it provides mutual value for Contact and for our customers. Those decisions will grow, will clearly hold up against our investment decisions we have across the company. We'll continue to focus on cost out through automation, digitization and a culture of excellence, with that aspiration to get to under $120 of cost-to-serve per customer by 2026. And then finally, we want to be a trusted brand. We are a trusted brand today, but we need to do some more work in that space. So if we want to be a partner of choice for both our customers and large-scale providers and our stakeholders, we've got more work to come, but it will see us being a top 10 trusted brand by 2026. Thank you for that. I will now move on to Catherine, who's going to come down and talk to us about an enabling our strategy. Thank you.

[Foreign Language] Catherine Thompson I'm the Chief Corporates Affairs Officer and General Counsel at Contact and I'm just leading a funless and probably a bit of a shorter section that we're going to do about our enabling services. So I'll be followed by Jacqui, who will be up again, and then Jan. I'm sure you're all familiar with environmental, social and governance factors. But before I head into the detail, I just wanted to give a bit of context. So Contact, as you know, is a significant New Zealand company, and there's a huge expectation for us to pull our weight. So I know that many of you in this room have children. I've got 3 children. I've got 3 teenagers in fact. And they have high expectations of companies like ours, as they should. Our families, our teams and communities expect us to be actively demonstrating that we're a good corporate citizen, who cares about New Zealand. We need to live and breathe these things and contribute to making, Aotearoa, a better place. We know that these days, many investors are looking at nonfinancial metrics right alongside the traditional financial measures that you plug into your models every day. But although ESG factors can be labeled as nonfinancial, how they're managed or if they're not managed, as undoubtedly has measurable financial consequences you see this in how reputation is managed, risk is managed and access to capital. So I'm going to talk about this shortly. For Contact, the rising tide of ESG expectation is important because we know being good at it will help us create long-term value. It will also ensure we're focused, and we're not spread too thin. We need to be deliberately pursuing some things and deliberately not pursuing everything. There has been a renewed effort on ESG at Contact over the last 12 months, and it's been fantastic to be part of it. To be clear, though, we're in a really good place. We've got many ESG factors already built into our DNA. It starts with our Tikanga which has been mentioned earlier today, it's our commitment to being a responsible organization. But it also includes tangible activity. And you're just going to have to bear with me. I'm going to real off a few things that we've done pretty well, but we maybe haven't talked about enough is our decarbonization strategy, which isn't new today, is integrated reporting, NZDX recognized us as being a leader in this space. We have trailblazer on science-based targets, and we've got early adoption on carbon disclosure. There's been thoughtful work on inclusion and diversity. I might make a couple of comments about diversity today, which I'm going to enjoy. But one of the things that's really important, and I'm sure you've all noticed is our Board, one measure of diversity is the women on board, and we've got more women than men on our Board, just fairly unusual in the NZDX. And there's our Green finance program. You will recall when we launched that back in 2017, we were the first, and then we're still kicking along with our sustainability-linked loans. So when I say there's a renewed effort, it's been around adding rigor and resources to the things that we've been doing for many years. It's being clearer, more deliberate and has seen ESG factors integrated into context priorities. That's why I'm standing here today. You wouldn't have seen me before, alongside operational excellence in the way we work. So we want to continue being a leader and recognize as a leader. So what are the things we're focused on? You've heard our strategy is grounded and sustained conscious effort to lead decarbonization. For Aotearoa, New Zealand, it means we're acting as good stewards for our environment in helping Kiwi communities to thrive. We do this by being a responsible asset manager, lowering our carbon emissions and investing in our communities. In practical terms, it means we make good things happen. I'm going to give a recent example, which is the opening up of the Central Otago bike trail. I'm not sure if many know, but we've given access to the -- what's called the true right of the river apparently to the public for the first time, so people can cycle from Clyde through the Bannockburn. And not so recent example, when you saw a photo earlier on James' slides is the bioreactor at Wairakei. That was innovation from our people that's reduced our environmental impact on the river. And sometimes it means making tough calls as we embrace the shift to renewable energy. I was at Contact a few years ago when we closed down Otahuhu. That was our gas-fired power plant. It was the right thing to do, but there's no question that impacted our people, their families and their community. And sometimes, we actually don't get it right. Some people in our communities feel let down. It's not far away from here that the incident at Karapiti happened a couple of years ago. We are perfect, but we do commit to listening and seeking to understand. We're doing this right now in Cromwell, if anyone was listening to Radio New Zealand yesterday morning. For our customers, a focus on ESG means giving them access to affordable, clean and reliable electricity to power their homes and businesses. It means we'll work to ensure their need are met and they'll be treated fairly. A real-life application of this is the development of our customer pricing principles. When that team make a decision about price changes, one of the factors they consider is making sure that the gap between what our loyal existing customers play and what our new customers pay is reasonable. For our Contact people, they want to be part of a successful organization. And no matter where they live and work, they want to feel proud that they can say they work at Contact Energy. Our strategy is to decarbonize New Zealand, and that provides a really exciting challenge for us all on that front. And for our investors and shareholders, it means significantly growing shareholder value by aligning with long-term sustainable resources of value and reducing risks inherent in our business. There's 5 ways we think about that, about ESG creating value for our shareholders. On the right-hand side of this chart, we talk about growing our revenues. We do that by improving reputation with customers, as Matt said, and creating a platform for growth by providing clean electricity. We reduce our costs by our sustainability-linked loans and our lower-cost generation. We're maintaining our license to operate in reducing risk through strong governance and contributing to New Zealand's future. We're engaging our employees and enhancing their productivity through a sense of purpose, and we're optimizing our capital allocation to ensure our investments produce sustainable returns. We're currently working up a comprehensive set of metrics, which we'll use to track our ESG performance. So you'll see more from us on this. There's lots of people at Contact at the moment, head down, completing the very extensive Dow Jones Sustainability Index questionnaire, as we look to get into the agent Pacific Index over the next couple of years. We only missed out by a few points last year, but the bar keeps rising. I want to highlight a couple of goals we've set ourselves. You've heard a few of these today, so I'm not going to repeat our emissions reduction targets. But on the left-hand side here, under the environment pillar, you'll see that by 2025, 95% of our generation will be renewable if, Jack, delivers. We will reduce our impact on the Waikato river system, and we're electrifying our vehicle fleet. It's -- 50% of the passenger fleet is already electric. By 2023, it will be 100%, and the total fleet should be 0 emissions by the end of the decade. Examples of our commitments under the social pillar, we've got a commitment to support 100 community initiatives a year. Currently, for this financial year, we're only at 37. But we've looked at ourselves and we noticed we are not good at recording what our people do in their community. So we're going to get better at that. We've committed to understanding modern slavery and from -- we're removing it from our supply chains, and we're embedding our sustainable supply chain processes throughout the organization. And finally, I'm going to move on to governance. Shifting the dial on inclusion and diversity is why I come to work every day. The irony of talking about Contact's being invitation on inclusion and diversity is not lost, even when I look around this room. But diversity has many aspects, and James is going to detail some of the initiatives that we're doing across the broader diversity set. But to be honest, we still have a lot of work to do on basic gender metrics. You can see here that we're working towards a minimum 40% to 60% gender split through the organization. And actually, if I gave you the data, we're at 46 to 54, great work. However, it's in clumps. So depending on your role, there's some really good results and depending on -- and not so good results. So elevating the proportion of women in engineering and leadership is on our radar. We're going to move -- remove bias in our recruiting procedures and continue to seek out diverse talent. And we're going to work to maintain our Rainbow Tick accreditation as an inclusive workplace for LGBT+ people. Visual signals are very important. So one small thing separate from the wider program of work we do in that space, is to have the Rainbow Tick flag flying at our sites. When the team at Clyde noticed that at Central Otago, weather was playing havoc with the polyester Rainbow flag, they've decided to go one better and they are going to give the transformers the rainbow treatment. So over the next few years as you drive past Clyde, you will notice a bit more color. And we will convert all our bilateral lending facilities to sustainability-linked loans and certify all dealers green. We're targeting the end of the financial year, which is not very far away for the team on it. So I look forward to talking more about what we're doing and answering your questions today and over the years ahead. It's exciting to see us build on our ESG activity. We've formalized it and seen it become more integrated into what we do. It isn't a job of one person. It's a job of many, and it's my privilege to be part of this work and hopefully make my children proud. Making a genuine difference to our environment, communities and the way we run our business is why the Contact team come to work. [Foreign Language]

I'm going to briefly talk about the operational excellence effect as an enabler of our strategy. Now operational excellence is basically about people, and we have some awesome people that we work with in the company. Hopefully, you'll meet some of them this afternoon. And it is, to Catherine's point, what gets me out of bed in the morning. Operational excellence is also about our culture, and we have a culture that is safe, innovative and brave. And it's around fostering an environment where it's safe to challenge, safe to innovate and safe to fail. Evolve and learn and move on to the next challenge. And as part of that, we've really embedded a continuous improvement focus across the business in the last 5 years. And I think those metrics that have been up several times point to the delivery of that piece. And now I think we're now at the stage where everyone's wilting and again I -- we're at risk of death by 100 slides. So I haven't got any slides apart from this one. I just thought I might talk about some little anecdotes of -- examples of operational improvement that we've done in the last 12 months and what we're looking at moving forward. And I know Dorian has got another 50 slides. It's a joke. So in the thermal space, we had a bit of a thermal theme going. The guys, the engineers and the maintenance teams up at Taranaki working on a baseload plant are doing some awesome work. We are flexing that machine like you would not believe, however, it's not meant to be flexed, but in a very safe way, I might add, to the extent that we've got its minimum load down to 160 megawatts, maximum load 330 megawatts. And it's a feat that doesn't happen with baseload thermal plant. So something that adds considerable value to us and their portfolio management. Also in the thermal space, Matt has done a fabulous job in securing third-party tolling arrangements for gas, which we've announced those. And that is around ensuring that whatever gas is available is being used in the most efficient way and freeing up the gains that we make in that space to industrials. So -- and the geothermal side of things. This year, you will have noticed our volumes are down, but we've had a whole year of back-to-back planned geothermal outages, as things follow on. And we've developed the technology in digital space, we're just sort of dipping our toe in there following along behind Matt's great examples on customer. We've developed a real-time outage dashboard with a focus on quality assurance. Now I think anyone who knows anything about operating plant, generating plant as they're coming back into service, that reliability piece, as you come back up, is a real issue. And so we're focused on that with an objective to improve reliability and availability. And that has seen us bring back Te Mihi, which is a big, big station, several days early, we think nearly a week early, from its planned outage, and one of our 30-megawatt plants at Wairakei, so both returned to service well ahead of time. So as I say, better revenue and awesome work. I'm going to touch into James' faith on the transformative ways of working. At Wairakei, we are piloting a different type of working with the geothermal people up there. It's really busy view, with 150 people on site, 5 power stations, 2 steam fields. Busy being busy and preparing for Tauhara. So we've sort of split ourselves up into outcome-based teams with an agile approach. We're a delivery model as one who work as visible, prioritized and the system of work is fit for purpose. And we've taken that from direct feedback, some really good analysis that we've done. I think we did something like 72 interviews of people. And that model, if successful, really sets us that well to drop a Tauhara team to operate that new station. In the fueling space, Carl is giving a lot of highlight today. We've been working really closely with Western Energy over a long period of time and developing mechanical and chemical well cleanouts using different technologies. And that we've really improved the reliability in that space. And again, today, Mike Dunstall might talk about that this afternoon, to the extent that we've made savings of around 60% compared to our prior methodology of using [ brain over a gun]. So that's a huge amount of savings. We've also experimented in the robotics space. Again, we've seldom met people from the customer side of business to do that, where we've automated processes that are very manual and repetitive. Tracer flow testing is measuring well outputs of mass flow and enthalpy. And we've just managed to facilitate that data and optimize the data to our steam field performance, if you like, and we even have an app, so it's quite groundbreaking. Going -- looking forward, we've set ourselves a really, really ambitious target for next year and achieving the first zero-emission geothermal plant at Te Huka. So we have got a whole initiative going on there around carbon capture. So that's very exciting. And then -- so I think the next step change in our efficiency and operational excellence is in the technology and digital space on the Generation side of the business. That's where we're heading. To optimize, again, a reasonable outperformance and asset performance, we've done some experiments with voice-to-text in both -- actually in customer end Generation, which delivered huge operational efficiencies and time. So instead of relying on people with paper and then coming and entering them, it's all done in a mobile way within the field. We're looking to expand upon our actually COVID experiences with virtual reality. And we were forced to use -- to go down that way when we couldn't get global experts in country. We went to Hamilton, spent $2,500 on [ Hit Fit ] and off we went with real-time rotor inspections and whatnot. So we're building upon that to use for our competency in training and also some of our safety risk reduction work. Tauhara is a new build, offers a plethora of digital opportunities to reduce operating costs, so it's sitting there. And then this is a normal building upon what we're already doing and condition monitoring, productive maintenance, all that excited stuff to just improve our performance. And the trading side of things, we have something like, Matt will be able to correct me, 80 years of hydrological data that we can put into models and get some pretty cool hydrology outputs and projections coming in that space, market simulations, portfolio optimization and really looking at improving our demand predictions on that trading space as well, which would be helpful. And yes, there's a little sample. And I'm going to hand to Jan, who's going to talk about transformative ways of working.

Everyone, my name is Jan Bibby, and I am extremely proud to be the Chief People Experience Officer at Contact. It's a role I've been in for about 18 months, which is considered to be pretty short tenure in this organization, that would be fair to say. So I think James referred to being an old face. I consider I'm an old face, but a new face. There's a reason I chose People Experience, it's my job title. It's the reason I get out of bed every day. You've heard a few people talk about that, but creating a great experience for our Contact Family is really important to us. Our tikanga and our [indiscernible], you've heard talked about today is what guides all of us at Contact. Having a culture that's based on respect and deep trust is part of our DNA and that's part of what drives the human kindness I see our people demonstrate multiple times every day. They demonstrate it to each other. They demonstrate it to our customers, our communities and our stakeholders. And that deep trust is also the key ingredient that allows us to embark on our transforming ways of working journey. Having highly engaged people and productive people, having a sense of commitment to delivering our strategy is critical to our success. As we all know so well, the world has changed. The way in which we live and work today is fundamentally different to what it was just 12 or 18 months ago. And rather than gravitate back to that pre-COVID world, and I don't know about you, but I can barely remember what that was, our aspiration now is to become an organization that constantly reimagines and redesigns itself and attempt to deliberately go towards the next normal. For us, though, it's not just about working from home versus working from the office. At Contact, we have the choice. We can choose whether we work from home, from the office or from anywhere else, so long as we can do so safely and securely. I, about 2 weeks ago, just returned from spending a month in Melbourne, where I've worked full-time but also provided an extra set of arms and legs to my daughter and son-in-law, who just gave birth to their first child. But I was able to continue to work for Contact whilst doing that. We realize though it doesn't work for all jobs, and there are just some jobs that you have to be on site for, and that's the reality. But we try and allow those people to have choices as well. So for some of those people, they are working a 9-day fortnight, or they may be working from home every now and again because they just need a quiet place to do some work or they may be working different hours. So for us, it is about allowing our people as much as possible to make choices. It's not just about fixable location though. [ T Well ], as we call it, from a -- for us, is as much about redesigning what we work on, who we work with, how we work as much as it is where we work or what the workplace is. It's about having the right people with the right capabilities working in the most optimal way possible. In order to achieve our strategy, we know we're going to need some new capabilities. So we're focusing on what those capabilities are, whether we can build them from within and where and when we might need to go, should we need to find those capabilities elsewhere. Research indicated to us that embracing flexible work practices are likely to be well because that companies do that are likely to be well positioned to sustain their operations, attract a more diverse talent pool, future-proof the culture, create competitive advantage and succeed into the future. And so far, we've founding that's been our experience too. We've hired people to come and work for Contact who do not live where we have a presence today. We've had people inside Contact choose to go and live and work somewhere else in New Zealand and continue to work for us. And they've gone for a range of reasons either because they simply couldn't afford to buy their own home in a major city, and they've been able to do so in another city in New Zealand. We think that's great for New Zealand Inc. In essence, we've moved from having 2 Contact centers, one in Levin and 1 in Dunedin, to almost 300 Contact centers as our CSRs choose to work more from home. So we still have a hub in Levin and Dunedin, but we have a number of other hubs around New Zealand as well. By becoming location agnostic, we believe we open a bigger pool of talent from which to draw from. It doesn't matter anymore where in New Zealand you choose to live. Our March engagement survey are telling us we're doing the right things. So our engagement score is 7.7 out of 10. We use Peakon, so it's not a percentage. And we're using this tool. Our eNPS is at plus 29, and one of the drivers we scored most highly in was our people having the ability to work in a more flexible way, where we scored 8.6 out of 10. So we think we're moving in the right direction. But we're constantly watching out for unattended consequences. And one of those can be the lack of connection people sometimes feel and we as humans need to connect. So we've established contact communities where people can come together in a geographic location, either just for a coffee or whether they want to collaborate on a piece of work. And people tell us that meet people at Contact that they've worked for the organization about the same time, but they never met them before, maybe because they were just on a different floor. We know technology and digitalization underpins what we're trying to do, and we've recently completed a highly successful upgrade of our platform moving to Windows 10 and in many cases, providing new equipment that allows our people to work more efficiently. Leadership is also a critical ingredient. We have launched a new leadership framework called Shaping our Contact Community. And one of the areas we're focusing on is helping our leaders to connect and lead their people even if they don't see them every day. For those of you who like hard facts and numbers, let's not shy away from the fact that this is delivering us some financial benefits. During the course of the last 12 months, we are delivering or have delivered recurring benefits, giving us up to $4.9 million in cash benefit. We've reduced NOI, reducing our property footprint in Auckland and in Wellington and our Dunedin and Levin hubs are smaller. We know that people, though, still want to come to a place to connect and collaborate. And for some of our people, they just simply like coming to the office every day. So we will continue to have those locations. We just don't need the space we used to have. And we see [ T Well ] as leading decarbonization from within. So we are focusing on reducing the amount of business travel that we need to do in order to retain -- to reduce, sorry, our carbon emissions. This isn't a social experiment for us. This is our new way of working. Diversity is the what and inclusion is the how. So diversity focuses on the makeup of your organization to ensure that you have a balance of gender, race, ethnicity, sexual orientation, age, physical location of where you live, but inclusion is the measure of the culture that enables that diversity to thrive. And in my view, this is one of the biggest symbolic things we can do to demonstrate inclusion. This allows our people to bring their wholesales to work and to make choices that work for them, for their families, for their communities, for Contact and for their pets. [Foreign Language] I'll hand over to you, Dorian.

Just looking at the timing. I'm probably just going to have to introduce myself and then say goodbye if we're going to stick to the agenda. So we are going to overrun a little bit. So I hope that's okay with everyone. I think -- so I'm Dorian Davis, I'm the CFO. It's great to see everyone here today, actually including a few of representatives from the Capital Markets in Australia. So I think it's the first time I've physically met some of our Australian shareholders since about March last year. So it's great to have everyone here. First up, we've actually presented this slide a few times, and it's pretty deliberate. We've got a 20% upstream market shares. So maintaining that supply and demand balance is incredibly important to us. But we do realize there's a bit of a tension there because also having access to fuel and then being able to invest into generation to bring that to the market as electricity is the biggest path to value, but you got to be able to see a use for that electricity, either the way that we've done in the past, where you turn off less efficient plants like what we did at Otahuhu, like what we're going to do with TCC or you can see that the market is growing. If you can't see either of those 2 things, then you shouldn't be bringing new electricity to market. But you can oversupply the market, and that's going to destroy value for shareholders. So that's not something we're interested in. And that's actually why we spend a long time at Contact analyzing the market before we make big investment decisions like we recently did with Tauhara. We have been challenged a little bit on this as to whether or not we are too conservative because on the other end of that scale, if you are too conservative, you do run the risk that others will just come in front of you while you're procrastinating and build wind farms in this instance. So you'll have seen a bit of a change in posture from us. And that's because, as we said a number of times, we have got the best quality renewable development pipeline with the lowest firm, lower on marginal costs. We've now got into a position where we can fund that. So we want to ensure we feel there's an obligation on us to actually ensure that these do get brought to market first, but they get brought to market when the market needs them. So I'll just probably -- just high spot some of the things that my colleagues have already talked about today, but the -- on this slide, but the whole point of our sort of business model and strategy is how do we get the market into a position where we can actually bring those renewable projects to the market. So -- and that is why we've spent the sort of lion's share of today talking about new demand because growing the market is going to be the biggest driver of us being able to do that. So we've talked a bit about Simply Energy and the skill set that, that has brought into Contact. So that deep market intelligence that Simply Energy have got, coupled with those very innovative commercial constructs, which will allow us to lock in PPAs with customers in those sectors and actually build generation into that. We think you'll see a bit of a change in how the market operates, that you will see simultaneously new demand and new generation announced at the same time, and we see that as being very positive for us. In terms of growing renewable development, we are very privileged. I think James and Jacqui have talked about it a few times in our geothermal position. James showed a slide and they've put a lot of caveats on that slide. I really like that slide, being a financial person. But it did show that our estimation and it was [indiscernible] that Andrew has also referenced on that slide as well. It was that Tauhara is delivering returns significantly higher than what we see wind being able to deliver. And if you actually think about that, it makes a lot of sense. What we've got in terms of geothermal is very, very difficult to replicate. Unlike wind and solar, which is a bit more -- a bit easier, which is why we have so many more people actually doing it. So -- and the good news in that space is, as we've said a few times, we've got 3 terawatt hours of this geothermal that we are looking to bring to market and the first part of that is Tauhara, which more pressure -- mid 2023, when we expect that to come to market. In terms of decarbonizing our portfolio, which Jacqui talked about, the interesting thing here is we have to demonstrate this core leadership. We are talking to customers and potential customers about them shifting out of more carbon-intensive energies into renewable electricity. So we have to make sure our own backyard is in order. And Jacqui had a fantastic slide that showed over the last 15 years, we've reduced our carbon emissions from electricity generation by more than twice what the rest of our market has done added together. And we have the -- what we will do with Tauhara coming to market, we will then bring the whole of our industry down another 10%, so that's 450,000 tonnes of carbon. So we have no issue. We are definitely demonstrating visible leadership in this area. So I guess we're not going to get on our high horse about renewables, going up to 95% renewables when the rest of the market is going to be operating below that because we do recognize thermal has a key part to play. It doesn't matter whether you're a 0% renewable or 100% renewable, you're guilty by association. The market can't actually operate without it. And that's the whole point of our strategic thermal review. We actually want to get the best outcomes here for the industry. With -- as renewable generation is going up, we're going to see thermal assets dispatch less. So you need to make sure you're able to rationalize and deliver those fixed-cost savings. Also, it's really good for reputation because you want to make sure that firming that's got the lowest carbon footprint possible. That will be good. The EA will like that. The government will like that. And it's good for consumers because we want to ensure that, that cost of firming is as low as possible because that will ensure the cost of firming is low, which will fly through to consumers. So we have already started to make inroads into this. If you actually think about our bilateral agreement we've got in place with Nova, that is akin to a thermal sort of consolidation because we're leveraging the heat rate benefits and the carbon efficiency of TCC relative to [indiscernible]. And then in terms of creating outstanding customer experience, I mean this is in our retail area. I think it's fair to say and everyone would agree the fixed cost for retailing electricity are very high relative to profit. So there's a great opportunity here to actually get scale to create value. And we see that as being a particular opportunity for Contact because, as Matt showed, the cost to serve per ICP for Contact is lower than all of the other gentailers. So profitable growth. It's a real opportunity for us. And the broadband pilot, we call it a pilot, but the fact that it took 2% market share in just 12 months means it's probably a bit bigger than a pilot these days. It has really demonstrated that value that you can get from scale, leveraging our existing fixed costs and leveraging our platforms in order to get good profitable outcomes. So on to a bit more of the financial stuff. We see ourselves as having a unique combination of capability, but also great renewable development opportunities, which we think puts us in one of the best positions to lead decarbonization and demand growth, but also, therefore, to get the value from it. In terms of deploying strategic capital, that's a key thing. You've actually got to be able to attract the capital as well. Our recent equity raise that we did, I think some of our peers were looking at us a little bit enviously based on market structures and shareholdings. And that -- but that's a serious point because if we're going to do what the Climate Change Commission are saying and build significant amounts of renewable generation, that is going to require a significant amount of capital and a lot of that will have to be equity as well. So that's a key point. We then need to be able to deploy it. And I've talked already a little bit about supply and demand. That's important because when you're deploying that capital, you want to ensure that you're getting returns for your shareholders. One thing that we've got, which James mentioned, is our Wairakei option. So there is a little bit of potential discretion around the timing as to when we reinvest in Wairakei. And there's certainly discretion around the size of that plant and that means we can use that potentially as a bit of a lever to ensure the market does remain a supply and demand balance, which is obviously important for shareholder returns. Operational excellence. Jacqui has talked about that, very, very important, making sure that we maintain that really -- we got quite a large gap at the moment, but our positive gap in terms of geothermal -- our geothermal versus wind. We know wind technology costs are going to continue to come down. So we need to continue to innovate within geothermal. So the Western Energy acquisition that we've done will continue to help in that area, but more broadly, around operational excellence. Some companies will pivot for growth. And they forget about all of the good work that they've done around productivity and efficiency. That's not what we want to do at Contact. The best companies in the world are able to run growth programs and productivity programs in parallel. You got a doubling down on the cash flow effect there because cash flows are growing through a combination of growth and productivity. And as you all know, our dividend policy is linked to operating free cash flow. So if our operating free cash flow is going up, the dividend is going up as well. So it all ties neatly. It's very easy to say all of those things, but we actually think we've got the foundations in place to deliver on it. And then clearly, with our dividend reinvestment plan that we've recently launched, it does mean that if you like what you see, you have the ability to seamlessly reinvest those dividends back into Contact without incurring any transactional costs. I won't run through this in detail because I sort of talked about it already, but I will just touch on that point around attracting capital. We're in a capital-intensive industry. And in particular, when you think about a geothermal investment, it's about 8x the amount of EBITDAF that it flows off. When you think about our borrowing capacity, if we're maintaining our S&P investment-grade credit rating, we've got about 3x debt-to-EBITDAF that we're allowed. So there is a gap there that has to be made up and it has to be made up by the support of shareholders and equity. So that relationship with the capital markets is super important. It's a bit of a virtuous circle. We deliver, and I'm sure the capital markets will then deliver for us. And on our commitment, we've listed the 4 of them there, but you can sum it up into 1, we will deliver on our promises. And if we do that, I think everything else sort of resolves itself. I should just highlight one thing on this slide. Because we're in a high wholesale priced environment, risk tolerance for actually losing production has dropped drastically. So we are looking at some investments in hydro and some strategic spares around geothermal to sort of reinforce our production. We're working through that at the moment through our 5-year plans. But at the moment, it's looking like about $100 million cumulatively over the next 5 years to $20 million a year. As I said, we are doing that in response to the high wholesale prices at the moment. We've talked before about the $1.4 billion and what we're looking to spend it on. What we haven't spent as much time is actually how we're going to fund that. Clearly, the $400 million equity raise will play a big part in that. And thank you for those of you who participated in that. It was heavily oversubscribed, which is great because it means our investors can see what we can see, which is a fantastic opportunity to invest in some great projects. But clearly, that's not going to cover all of the funding. We will be gearing up our balance sheet. We will expect to be able to get off our balance sheet more because when Tauhara comes online in 2023, that will uplift our EBITDAF, as we save on fuel costs -- thermal fuel costs of TCC. There is a bit of a balance there, which you probably -- your eyes are drawn to, and that is an assumption around capital coming in via the dividend reinvestment plan. We benchmarked that by looking at other companies who've got dividend reinvestment plans with 0% discount and what percentage of those dividends got reinvested. And also, as you're aware, our dividend policy isn't to pay out 100% of our operating free cash flow, so some of that operating free cash flow can be reinvested. Obviously, if we're in an upside case and we need more capital because we're seeing more demand than expected, clearly, if we're living up to our promises, I don't think accessing that will be a problem. So this slide, we've had a lot of -- I've mentioned supply and demand a few times. This is our view of where the sort of net supply and demand for the market is going to go over the next 5 years starting from really today. The capital markets have been asking for someone to present this for quite some time. I think we're the only one who's brave enough to actually put something down on paper. But bear in mind, it's a competitive marketplace, so there is a lot of stuff moving here that's not fully within our control. We do think it's prudent to plan for the worst. So we're planning for a Tiwai exit and then not all of that South Island demand immediately being replaced. But the good thing, as you can see it from the chart, is the market does remain in balance because that Tiwai exit provides a decarbonization opportunity for generation with thermal generation being switched off. So -- but that's not our ambition. Our ambition is actually -- lower South Island demand is at least maintained at the level it is now. And that means that you don't incur those location losses of all that electricity in the lower South Island having to flow north. So if we start off at the top, as you'll all be very aware, there is issues around availability of natural gas. There's not enough natural gas at the moment to service the market in the way that there has been historically. And not only is that putting risk and uncertainty, which you can see in the wholesale prices, it's also meaning that a more expensive mix of imported fuels with higher carbon intensity such as diesel and coal are being used for firming. So we actually think if hydro storage levels were actually back at mean, you would still see elevated pricing. Obvious, you'd need about 1.5 terawatt hours of increased generation coming to market to bring those risk settings back to normal levels and ensure that firming costs came back down to normal using sort of lower costs and lower-carbon intensity fuels. That gets resolved because you've got 3.1 terawatt hours of new generation coming to market or recently come to market with Waipipi. Then you've got the 1.5 terawatt hours of new demand growth to the lower South Island that the market is going after. We've talked about today. I think Meridian had a similar number in their presentation as well. So based on all the pipeline of opportunities that we see in front of us, we think that, that's achievable from the market perspective. You then have Tiwai exiting. That's a 5 terawatt hours there leaving the market. We have been prudent and actually assumed another industrial leaves as well. That's the 0.6. Obviously, we hope that doesn't happen, but we're planning for one. And then what happens is you see the thermal generation in the North Island turn off, so TCC and Huntly, and 4 terawatt hours of generation comes out of the market and is replaced by that water flowing north. You can see the line loss sit in there as well, the 0.8. That's the location losses as all that electricity flows from the lower South Island into the North Island. You then have underlying demand growth, which is 1.5 terawatt hours, that's 0.75% per annum. The Climate Exchange Commission is assuming 2% per annum. So we've taken a little bit of a haircut on that to being prudent. And then as the market doesn't quite balance, we replaced Wairakei and we have to expand it, and that's 600 gigawatt hours of increased supply coming back to the market there to assume it stays in balance. And the assumption is it would be Wairakei that would get built because that would have the lowest long run marginal cost of all the projects around New Zealand, which are in the development pipeline at the moment. So that's our sort of base case. We -- that's not our ambition. Our ambition is that there's 3.5 terawatt hours of additional demand in the lower South Island, which means to add to the 1.5 that we're already planning for to fully offset Tauhara -- sorry, Tiwai -- too many Ts. That in its simplest from coincidently is a 400-megawatt smelter. So that's potline of 1 or 2, but it could be anything. It could be new demand. But that then keeps you going until 2027 when that's the expectation of hydrogen coming in and starting to consume electricity. So if you do those things, what happens -- and maintain lower South Island demand, the water isn't available anymore to substitute thermal generation on the north line -- North Island, and you've got 3.5 terawatt hours of new renewables that has to come to market to economically substitute out that thermal. And that's good for us because, as I said, we've got the best quality pipeline of renewable development opportunities. So we would be expecting to get our unfair share of those opportunities. So this is the financial. We couldn't present that we're looking to invest $1.4 billion of capital, but not give any indication as to what we thought we were going to get for that. So this is showing the EBITDAF that we expect to get from that -- deploying that capital in FY '24 and FY '26. FY '26 is on a run rate basis because we want to show the full year impact of Wairakei, we've been there. Remember, this is assuming that sort of base case, which has Tiwai exiting and then not being fully offset by increased demand in the lower South Island. The ambition case that I talked about. If that happens, the numbers will be slightly higher because there will be a bit more tension in the price in the lower South Island. And obviously, there will be additional income streams flowing in there as we build more renewables to cover that 3.5 terawatt hours of retirement of thermal in the North Island. So you can see the FY '24 number, the last year thermal there is Tauhara coming to market. And then in FY '26, you got Wairakei coming in. That's the full Wairakei plant, the 1.4 terawatt hours. We thought it's appropriate to show that because that's what the capital is -- the $1.4 billion is actually buying. But remember, 60% of that is actually replacement of the existing plant. And so it wouldn't be incremental EBITDAF. You can see M&A. That's not new M&A. That's us delivering on our business cases around the Simply Energy and the Western Energy acquisitions. We've got productivity in there. That number is a little less ambitious than what others have announced. But remember, we've already done a lot of hard work in terms of getting our OpEx down and improving our capital efficiency. A lot of that is just about offsetting cost inflation and through complementary products that's building within our retail space on our broadband offering and maybe offering a couple of extra products in there as well. And the last slide, which I won't go through into detail in the interest of time. But I'll just explain the purpose of it. We wanted to be able to set out exactly what's going to be happening as we operationalize our strategy going forward based on certain time periods across our 4 strategic themes. And we wanted to share that with this audience so you can hold us accountable for it because you now know what we're planning on doing and when. And clearly, if you'll notice that we're going off course, then you know that you can hold us accountable for that during investor meetings and the like. So with that, I've covered a lot of the stuff that my colleagues have already talked about today, but summarized it a bit more and try to provide a bit more of a financial lens on that for you. So I'll finish there in the interest of time and hand back to Mike, who will close out, and then we'll do Q&A. Thank you.

So I'll be very quick. As I -- I'll end as I started. New Zealand faces a point of inflection. You've seen that in the numbers and the graphs you've been presented today. And there are 4 things I want to get across. Number one, we'll do our bit. We will decarbonize our portfolio, and we have a track record of doing that, and we will continue. Secondly, we will help New Zealand decarbonize. We have the renewable pipeline that is quite frankly unique in this country and unique in the world. And we are ready and able to build it as and when market conditions allow and we will continue to keep a very close watch on that. We have off ramps on the growth strategy as has been outlined today. The third thing is that we will help New Zealanders decarbonize. The electricity industry in this country has been very much its own talk shop. They have their own price giving. They have had their own dinners. We have to learn to look outside to get alongside industry to understand industry, and that's been very much the focus of James over the last 12 months, building a capability beyond ourselves. And the third (sic) [ fourth ] thing is that we will help New Zealand's renewable generation resource that goes to wind and solar, geothermal to help decarbonize globally to establish an industry in New Zealand that will provide investment opportunities and jobs well beyond the generation and working lives of the people in this room. And with that, I'll end. I apologize for going slightly over time. We'll take a bit of time for Q&A. So no doubt that -- knowing you guys in the room that you'll have a few, and then we'll break for lunch. So on that, we'll get Dorian, James, why don't you come up, and we'll take some questions.

Just thinking about part of your decarbonization in the ThermalCo, what -- how should we be thinking about retirement of TCC as a part of a ThermalCo, as TCC retired, it's gone and then ThermalCo will simply do gas storage and then other peaking or...

The intent is that TCC retires. ThermalCo is a concept that would be pan-industry, so the assets that get in there would be -- well, we obviously have our peaking plant. We have our storage contracts. We don't own the storage anymore. Others have other assets. The fundamental premise is that New Zealand has the gas reserves and resources to ensure an orderly capacity. It has the assets to ensure an orderly capacity. And what we need is for the human beings, who operate that, to have an outbreak of common sense to ensure an orderly transition.

Yes. We don't want to be in a situation with what happened in Australia yesterday where the government is intervening, building peaking plants, for example, so.

So Mike, will ThermalCo be a capacity market? Or is this still an unregulated market?

[indiscernible] working capacity markets, I see -- I'm not a big fan of them. I see the potential for overbuild. As I said, the premise is we've got enough resources and reserves. We have enough kit and equipment, and it's a sensible way for the current market structure to efficiently and effectively deliver reserves and security of supply into the market. Dorian?

Yes. I think it would be likely a contracted market bilateral to underwrite the fixed costs and following fixed costs, those plant closures occur through time as renewables come to market and other forms of flexibility come to market. But I would expect ThermalCo to think about, for example, listing a capacity product on the ASX. The costs need to be recovered from all retailers, not just a few. And so I would expect ThermalCo to have a real focus on that, ensuring there are products available for all participants.

And the elephant in the room, Genesis, you said you've started discussions. Are they inside the circle?

Can't comment.

Yes. But obviously, there are a number of thermal operators we'd like to have discussions with all thermal operators about it.

And then in terms of your demand growth assumption in the South Island, you put 1.5 terawatt hours there. That was what Meridian was trying to do on their own. You guys seem to have about 860 megawatts. Is that additive or is that included in the 1.5?

1.5 terawatt hours is roughly 200 megawatts, right, new demand. We're targeting 100. We're confident of that. If Meridian achieves more than that, then it's additive, it will be 2.3 terawatts thereabout.

And then final one before I pass on. You show your mid -- I mean your low road, pushing out Wairakei. Have you guys got approval to do that yet? And is that still at the CapEx of $100 million because I see you only put $480 million into your CapEx program to add $100 million to that new low road?

So you can answer the CapEx question, Dorian, but we don't have approval yet for that option. We will lodge resource consent for that at the end of this year, I believe. We're still doing the scientific work on the river to be able to measure our impacts and demonstrate a massive improvement as a consequence of the bioreactor investor -- investment, sorry.

And in the CapEx program, we've got the $700 million as part of our growth program for Wairakei. We were able to extend it out to 5 years. That would mean the $700 million would come down to $100 million or whatever it happens to be to get our 5-year extension.

Okay. Just to your low road had just the Tauhara 1 spend, not the extra $100 million that you're assuming Wairakei stays around. Is that correct?

Yes.

I mean, globally, some of the largest energy companies are pursuing these decarbonization projects in solar, wind, offshore wind, with ROIs of 3%, 3.5%. Surely, it makes sense for you to pursue what you put up here pretty aggressively. What sort of ROI do you think we'll get out of a hydrogen project, a? b, as you look at geothermal, getting a 10% IRR, why are you pursuing it even more aggressively now?

Well, I think it's the -- it's important to ensure we maintain balance within the market. And obviously, an oversupply has a material impact on new incumbent business as well. So we do need to manage that. But the -- as soon as we see that we're comfortable that demand is coming to market, we're ready to go. And there probably is a timing thing there as well because you may not be wanting to wait for the demand to be 100% there. This goes to that positive change that we talked about before you invest. But remember, I think we're in the best position because we're involved with a lot of conversations with industries around demand growth to make that judgment call as to when to invest as opposed to other counterparties who are looking to build but weren't involved so much with those conversations.

It's a really important part of the rationale for the investment in Simply. They can see when these things are coming and Dorian and I sit on the Board, we can see them coming and be lined up and ready and invest just that margin ahead of where others might. On hydrogen, it's too early to give any sort of indication of an ROI. We've got technical work to do. Electrolyzer scale is going to have to increase over the next couple of years to get a large scale one off the ground. Hence, the time frame we talked about earlier. Probably through the next 18 months, we will have stemmed the technical feasibility in working with people who have responded to the ROI and understand the economics a great deal better and also work more with customers. I would hope that in 18 months' time, we have a far better view for you.

I used to work in the sector in industrial gases, which obviously has a big high spend component to it. And I'm getting calls from people I used to work with and people within the industry around, don't remember how good we are at these things, and we are making decisions about who to evolve in the process. So that actually gives us some comfort that you've got incumbents within that sector and are looking at what we've got to offer and they're ringing up to make sure that we're considering them and that they could be part of the solution. So we take that to be quite positive as well.

I have too many questions. I'll try and hold myself to 3. Just the first one, segue perhaps from a previous question. If you sort of can generate 10% IRR on something you're investing in now, there are others who are willing to put capital into the projects of that ilk at 2%. Have you considered the idea of capital recycling that all these things are stand-alone, can perhaps be financed through other sources...

Project finance?

Yes.

Which we're very comfortable, so we obviously hold that as consideration. The equity raise was a first step. It was an obvious step. If you've got a quality project like that on your balance sheet, why not? As we get to tougher decisions, you may want to bring in partners who are more willing to accept the 3% ROI. And you stand back and provide the electricity to them. It's horses for courses. So absolutely, because of the balance sheet flexibility that Dorian talked to, we can make choices.

Yes. The other thing, I'm sorry, add on that, it's the type of project as well. Stand-alone projects like wind farms with PPAs and batteries and things work, I think, quite well with [indiscernible] as well. Geothermal, I think is a little bit more tricky because it's so integrated within us. And it's a core part of our operations. It's difficult to convince the bank that we've been prepared to walk away from that if this things went pear-shaped.

That's great. Second one on ThermalCo, and perhaps you could call it waiting-to-die-co. Your demand/supply charts there, it's useful to see how that stacks up. But I mean one of the key determinants in our market really is how much spare capacity and the cost of that capacity is available because of the underlying hydrology. So how would ThermalCo work in terms of deciding when it does? And how it removes assets, which is key to really sustaining high prices? Particularly, on the supply/demand you've got there, no thermals retire even though the baseload has gone. If no thermals retire, you are looking at a crashing prices. On flip side, the outfit perhaps creating is a monopoly with a very important segment of the market. I'm just wondering how your thinking is navigating through those issues?

Okay. So I'll answer the second part of the question. And I'll let James maybe give some of the deeper thinking and even Jacqui may have some deeper thinking on that. Second part of the question is -- and it's unique to New Zealand. When you've got a challenge ahead of you like that, I think, rural broadband, where the parties came together to create a monopoly, the key things that they were, one, may collaborate; two, they were totally transparent and they got Commerce Commission. So given the challenge ahead of us, not the competition behind us, I think the conditions are right to indeed create a monopoly that behaves and operates in a totally transparent fashion. And I think outside the industry, the analogy I get to is the way broadband was very successfully introduced to this country and rolled out because the industry players did collaborate. As to how decisions are made in retirement of plant, James, speculation, where you go to take stand?

Look, there's a lot of work to do to understand how to set that up. And there are obviously core competition issues to address to be able to have those conversations. We think it needs to be an independent business and it needs an investor -- or a set of investors who understand that they'll get a return on their capital over a reasonably well-defined period. And so it will need to be created with our mandate to get smaller, which is an unusual investment proposition. But one, it is the only way that it will work. So investors will need to understand they've got a 10- to 15-year window to make a return on that capital and whether it's an ASX product, a bilateral cap product or other PPAs will need to be shaped to deliver that return or it will not work.

I mean you wouldn't restrict it to 9 years so that you hit 2030 decarbonization target that the government set it up?

No, no.

That's very clear. Last question then. And really just looking on to retail and your calls there. I mean what's your view on build versus buy? Are you talking about organic competition for those targets? Or are you including some potential acquisitions in your view?

That was an organic growth target that we put out there and was based off the very successful entry into broadband that we've achieved.

You're doing very well, still had questions after such a long session. I thought we really tired you out.

Just a couple of questions. First about the -- just on that hydrogen thinking. So when you're sending out information, are you looking -- obviously, there's demand for hydrogen. So you're looking for hydrogen buyers? Are you looking for a hydrogen expert to develop hydrogen and you provide the capital? Or are you signing both builders and can you provide the capital because if you [indiscernible] capital for geothermal is different from coming to me and asking for capital for a hydrogen plant [indiscernible]

Yes. We'll be looking at all elements of the supply and demand chain. The ROI has a generic description of what is available in the lower South Island and then participants will sort of delineate which part of the supply chain they want to respond in. And there'll be a schedule to fill in a set of information about -- for participants about their level of interest in each part of the supply chain. So many participants will only be in one part, some may be in several. We're trying to keep it as open as possible, recognizing it will create -- we will get overwhelmed with responses to create a fair bit of work, but we need to see the lay of the land. It is a very scarce thing, readily available from one day to the next, a large amount of baseload renewable electricity. And so the process needs to be sufficient to cash the best possible outcome.

Just one for me around the dividend policy. Clearly, you guys have done a bit of modeling, which suggests the balance sheets can continuously manage the $1.4 billion worth of spend, assuming there's enough DRP. But if you decide to do something else, obviously, there's strategic reviews on -- at the moment. But what -- do you think you'd keep changing the dividend policy? Would that be the best protocol or...

No, definitely not.

Just to reiterate?

No.

Question on line?

Question from Jason Familton. What carbon price is assumed in the estimated IRR for Tauhara? What about the wholesale electricity price?

It will be ramping up over the 35- to 40-year project evaluation period.

And the wholesale electricity price reflects the base case scenario that we laid out in terms of the supply/demand balance. So you can think through how those various bars moved through time and the pace at which wholesale prices return to the long-run cost of renewals.

So not one price.

Okay. And that's all the questions for the former part of the session. So thank you everyone for attending. We'll break for a quick lunch break. It's a working lunch. So going to take -- take a couple extra -- take a couple of minutes to stretch your legs, sit back down a little and have a bit of interesting show and tell from the 2 strategic acquisitions that we've made over the Viva. Thank you.