Contact Energy Limited (CEN) Earnings Call Transcript & Summary

[Foreign Language] Welcome, everyone. Just by way of quick translation. We acknowledge [Foreign Language] of this area. To all of our shareholders, those of you here today and our guests, we welcome you. May our meeting today benefit our community, our people and all those we serve. May our work together, bring positive outcomes and may we treat each other with respect and understanding. Thank you all for being here today. I'll now pass over to our Chairman, Rob McDonald [Foreign Language]. My apologies. We are going to brighten up your day with a waiata. [Presentation]

Good morning, everyone, and welcome to Contact's Annual Shareholder Meeting. My name is Rob McDonald, and I'm Chair of the Contact Board. On behalf of the Contact Board and all our people across Aotearoa New Zealand, I would like to welcome you to the 2024 Annual Shareholder Meeting held today at Maritime Room in Auckland. This meeting is being webcast live for shareholders who have not been able to attend in-person. And I also extend a warm welcome to those who are watching online. For those guests who are here in person, in the unlikely event of an emergency, if the alarm sounds, the duty manager of the venue will announce over the PA that our guests should leave through the marked exits. Venue staff will help evacuate guests through the front main entrance. There is an alternative exit through the loading bay at the rear. The assembly point is outside, the Wildfire Restaurant, and is accessed by to the left of the building or below Saint Alice directly across the street or the Viaduct Car Park, which is a 5-minute walk on the lower Hobson Street away from the wall. As a quorum is present and due notice of this meeting has been given, I declare the meeting duly constituted and open for business. I'd like to introduce others with me on the stage. Firstly, to my left is our Chief Executive, Mike Fuge. Next to Mike is our General Counsel and Company Secretary, Kirsten Clayton; and my fellow Board Directors, Sandra Dodds, Jon Macdonald, David Gibson, Rukumoana Schaafhausen, Elena Trout and David Smol. Other members of Contact's senior leadership team are also here today as well as representatives of our auditors, EY. As you will have noted, today's meeting started with a greeting from a greeting from Rukumoana, followed by Contact's waiata maranga, which is customarily sign to support the greeting. We do this because it is important we acknowledge our relationship with iwi stakeholders and the fact that we use New Zealand's natural resources to generate energy of which our iwi partners have an interest in. Today's meeting will commence with addresses from me as Chair and from Mike Fuge as Chief Executive. Following this, we will consider the financial statements and there will be an opportunity for shareholders to ask questions they may have on the financial statements. Then we will move on to the resolutions that are outlined in the notice of meeting. We have 4 resolutions to put to the meeting today, and these resolutions will be decided by taking a poll. There will be an opportunity for shareholders and proxy holders to ask questions relating to these resolutions and to raise any additional matters they may wish to discuss. Only shareholders and proxy holders can ask questions. Please state your name before asking the question. All shareholders participating online can ask questions during the meeting, and I would encourage you to send through your questions as soon as you can. This will allow us to answer these questions at an appropriate time in the meeting. To ask a question, click on the box that says Ask a Question and follow the instructions on stream. Please note, questions may be moderated, or if we receive multiple questions on the same topic, they may be amalgamated together. If we can't answer a question in this meeting, we'll answer it in due course by e-mail. I'll provide you with further instructions in relation to voting as we progress through the meeting. For those joining online, if you encounter any issues, please refer to the virtual online meeting portal guide or you can phone the helpline on 0800-200-220. Now with the housekeeping done, let's get underway. [Foreign Language] On behalf of the Contact Energy Board of Directors, I would like to begin by thanking our people, our customers and you, our shareholders, for what has been a successful year characterized by growth, delivery and performance. As I share my reflections of the past year, I want to acknowledge the energy sector opportunities and challenges and talk about how Contact continues to play a leading role in the electrification transition. For Contact, 2024 has been a year of strong financial performance, significant investment and growth and a granular focus on project delivery as we see our world-class geothermal power station at Tauhara and soon our other geothermal power station down the road, Te Huka 3,, come online. I'm also very pleased that we have progressing -- we are progressing well against our strategy to be a leader in the decarbonization of Aotearoa New Zealand. Our main priorities remain: grow demand of renewable electricity; develop new, flexible, renewable energy; decarbonize our portfolio; and create outstanding customer experiences. The Board is pleased to see the business executing and delivering on our Contact26 strategy. I'm particularly proud to tell you that our new geothermal power station at Tauhara is now fully operational and delivering 160 megawatts of renewable energy to the New Zealand electricity system. It is a fantastic long-term asset for New Zealand, and we can confirm it as the country's largest capital project started, and delivered, since the pandemic. We look forward to the official opening next week with the Prime Minister. Te Huka 3 will be fully operational by the end of this year. Together, these new geothermal stations will deliver enough renewable energy to power the equivalent of 260,000 Kiwi homes. We have operated on the Wairakei geothermal steamfield for generations with our power plants there producing close to 3 terawatt hours of renewable energy. In May, we announced our refreshed approach to the long-term sustainable development of the steamfield. Today, I am pleased to announce the Board has approved a final investment decision on the first stage of replacing Wairakei over the coming 5 years with a new 100-megawatt binary plant to be built at Te Mihi. It will be referred to as Te Mihi Stage 2. Mike will talk in for detail in his address about the significant new geothermal project. Our retail business continued to focus on innovation for our customers with growth in customer connections and numbers, as well as an increase in the popularity of our time of use plans that support and reward customers to use energy off peak. However, I do want to acknowledge retail prices. It has been well documented in the country -- the country is going through a period of increased transmission and lines charges; charges forecast to step up in the next year and beyond. The result will be rising price for consumers as we pass these costs on. Somewhat ironic that a portion of these price increases are due to higher interest rates, rates that were implemented to reduce inflation. There are 2 things I want to touch on today. First, there has been significant commentary on whether the energy market is delivering for New Zealand after a highly -- after the highly volatile spot prices we saw in August. It is important to acknowledge this. These unprecedented market conditions were a direct result of a shortage of gas and dry hydrological year. I want to assure you that Contact is playing its part in our commitment to support the security of energy while simultaneously focusing on increasing renewable generation and the resilience of the electrical network. Having said that, we also recognize the very public impact the situation has had on certain businesses and communities, and while elevated electricity prices did not affect most as they were appropriately hedged, it did impact some. It is interesting to note that wholesale prices have now fallen well below the marginal cost -- sorry, the long-run marginal cost, yet there has been a deafening silence by those advocating change. As we transition to a renewable energy future, there will be periods of high prices and very low prices. That is the market and the market is functioning. And we are preparing the company to be well positioned for this. The government has an important role in providing stable market settings and an environment that supports investment and long-term infrastructure competition. This will support the significant investments in the transition to electrification we all will make. At Contact, we have invested significantly. To continue investments and to grow, the market needs certainty that allows companies like Contact to invest in renewable energy to support the decarbonization of New Zealand. Deindustrialization helps no one. We are working hard on the opportunities that come from abundant natural resources that can support New Zealand industry in the electrification transition. We are committed to growing and supporting New Zealand's economic prosperity and global competitiveness. And so to the second thing, I want to briefly touch on Contact's September announcement of our attention to bring our company together with Manawa Energy. For the past 18 months, we have been working hard on this acquisition. It is now pending regulatory review and Commerce Commission clearance, which we would hope to be completed by the middle of next year. While it is a long process, our view is the combination of Contact and Manawa will allow our 2 companies to accelerate investment further. The team is particularly focused on the opportunities offered by bringing 2 companies together and how it can help the market more generally in managing hydro flows and our complementary assets. We believe the acquisition will bring more competition to the energy market and support more independent energy generators and retailers to enter and compete in the market. The investment and growth of the last year would not be possible without the hard work of my fellow directors, our CEO Mike Fuge and the entire Contact team. To you, I say thank you. In the coming year, we remain committed to the Contact26 vision. We will continue collaborating with our stakeholders exploring new technologies and advocating for policies that accelerate electrification. Together, we can build a more sustainable, prosperous New Zealand. Over to you, Mike. [Foreign Language]

[Foreign Language] Thank you, Rob, for your kind opening words and setting the context for what has been an exciting year of delivery. My pleasure to be with you here today and to share my insights for -- on a significant past year for Contact. It is a year marked by major achievements, and I also want to share my highlights of the exciting opportunities we have ahead of us. Our strategy to help build a better Aotearoa New Zealand by being a leader in the decarbonization continues to serve us and the company well. As we continue to invest and grow, I'm pleased to report that in FY '24, we have both delivered and maintained a relentless focus on bringing our Contact strategy, Contact26 strategy, to life. With significant investment of $1.2 billion in renewable geothermal generation at Tauhara and Te Huka 3, work on diverse new energy projects underway and our own continuing transformation, Contact is well set up to manage and play its part in the energy transition. I will later touch on the Manawa Energy opportunity. Suffice to say, we believe the combination of our 2 companies will add further resilience and diversification to our portfolio and support New Zealand's energy security over the long term. I also want to acknowledge our people. I am incredibly proud of our 1,250-strong Contact team and what they have achieved. They are a group of passionate, dedicated professionals who come to work every day focused on delivering our strategy, the part they play as individuals to support the energy transition and to reach our goal of being net zero in our generation operations by 2035. We have delivered a strong 2024 financial performance with an EBITDAF of $663 million and a profit after tax of $230 million on an underlying basis. These results are before recognizing the net movement on the onerous contract provision relating to the Ahuroa Gas Storage facility of $12 million within EBITDAF and $5 million within profit after tax. Our financial performance demonstrates our underlying strength, strength that is absolutely necessary to support our significant investment program. It is this profit and performance that enables us to maintain momentum in delivering existing and renewable energy developments to support the energy transition and the wider New Zealand economy. It is worth noting that we invested double our profit into renewable development in this last financial year alone. The wholesale generation market was characterized this past financial year by hydro volatility that impacted operating conditions at the same time as gas supplies tightened rapidly. This impacted wholesale prices as a result of more thermal generation. In anticipation of the Tauhara geothermal station coming online, we have increased contracted sales volumes. FY '24 delivered $0.37 per share annual dividend to shareholders, up 6% from FY '23. Normalized and expected EBITDAF for FY '25 is $770 million, an expected increase that reflects our $1.2 billion investment in new geothermal plants. We believe decarbonizing New Zealand does not require the deindustrialization of this country. It means working alongside New Zealand's leading industries and businesses as they move to renewable and flexible energy use. Securing a long-term flexible demand agreement with New Zealand Aluminium Smelters in May was not only an important step forward for Contact, but for the nation. We are 1 of 3 generators supplying electricity to the aluminium smelter in Tiwai. In August, the benefit of this flexible demand agreement was realized when for a brief period, electricity supply was constrained. The agreement with New Zealand Aluminium Smelters derisks investment in renewable generation a minimum of 10 years, up to 20. It contributes to energy security and helps preserve an important export industry, while at the same time, supporting both the growth and decarbonization of the New Zealand economy. Contact's legacy will be investment and building renewable energy generation and is a demonstration of our commitment to New Zealanders of both today and tomorrow. Next week, as Rob alluded to, we will be officially opening our new geothermal power station at Tauhara, which at full capacity will operate at 174 megawatts. It is a standout renewable energy project that will provide secure baseload reliable power to Kiwi homes and businesses and is an outstanding long-term asset for the country. Soon after this, Te Huka 3, one of the world's largest single unit binary power stations, is expected to come online for its 30-day reliability run. Both new geothermal power stations will produce clean, low or no-carbon renewable electricity and operate around the clock, unaffected by weather or fossil fuel supply. Together, Tauhara and Te Huka 3 will generate enough renewable power to -- energy to power the equivalent of 260,000 New Zealand homes. Geothermal energy is an important renewable energy source and will provide and provides today invaluable baseload generation. It is New Zealand and Aotearoa's alternative to nuclear power, which has relied upon in many other countries without geothermal as an option. As Rob has announced, construction will soon begin on Te Mihi Stage 2. The new binary plant of 101 megawatts is expected to come online around the middle of 2027. This first stage of replacing Wairakei will ensure the muscle that we have built up these last 4 years constructing Tauhara and Te Huka 3 is deployed straightaway and without interruption to ensure that this new project is also successfully delivered. This development will be phased with a further plant, Te Mihi Stage 3, which is expected to come online before June 2031, when the resource consent to operate Wairakei A and B geothermal stations will come to an end. Meanwhile, in the South Island work on our first solar farm with our joint venture partner, Lightsource bp, is underway at Kowhai Park precinct next to Christchurch Airport. This $273 million solar farm spans 230 hectares and features close to 300,000 panels. It is expected to generate 275 gigawatt hours a year, enough renewable energy demand for 36,000 homes. Contact will buy 80% of the electricity generated under a 15-year power purchase agreement. In addition to this, late this winter, construction also started on our first grid-scale battery at Glenbrook, on land leased from New Zealand Steel. This 100-megawatt battery will store excess electricity often generated by wind or sun in off-peak periods when demand is low, and which may otherwise go to waste. The Tesla Energy storage system will store up to 2 hours' worth of power, which will help meet peak demand over the winter and other periods of high demand, and we expect it to be operational by March 2026. What's more, it will contribute to our transition away from fossil fuels in a constrained gas market, not to mention also support solar and wind generation development. As we recognize the importance of addressing public concerns over New Zealand's security of supply experienced this winter, we have decided to keep the Taranaki Combined Cycle thermal plant available as a backstop. This decision to extend TCC's availability will support Contact's Stratford peaker units in the event of an unplanned outage as well as provide further backup to thermal units in the market. Operating TCC next year, however, remains subject to scheduled inspection and maintenance work to meet regulatory requirements as well as securing gas supply and operation within its remaining 3,000 operating hours. Currently, we do not intend to contract gas for the plant unless market participants express a demand for it linked to a gas purchase agreement. Long term, the Stratford site remains of strategic importance to us and the local community. This is not only for the operation of our remaining thermal units, but importantly, as we look to transition it from a traditional fossil fuel site to our renewable energy hub of the future. We have secured resource consent to build a grid-scale battery at Stratford, and we're exploring the feasibility of a 170-megawatt solar farm alongside that extra battery storage. In September, we announced we are accelerating our renewable energy strategy with our proposed acquisition of Manawa Energy. A significant milestone, the agreement to acquire 100% of the electricity generated is subject to Commerce Commission approval. This deal is about 2 independent energy companies coming together. It is a combination that will enable us to accelerate investment and innovation in renewable energy for the benefit of all New Zealand. With our diversified and complementary portfolios across the North and South Islands, this proposal will enable Contact to sell larger volumes of fixed price electricity contracts over longer periods into the wholesale market. Contact and Manawa's hydropower stations generate higher amounts of electricity at different times of the year. Our South Island hydro stations at Roxborough and Clyde produced more in the summer following the snow melt, while Manawa hydro assets in the North Island catch more rainfall in the winter. This combination will add resilience and support for New Zealand's large energy users as well as independent retailers. Manawa's complementary power stations will help enable a smoother transition away from thermal fossil fuels and enable Contact to better manage dry year risks such as we saw this winter, which Rob and I have both talked about. Rob has already talked about how the market is likely to evolve in this energy transition with increasing volatility being a hallmark of which some in New Zealand experienced this August, particularly the first half. This transaction allows us to meet this emergent market challenge head on. While subject to Commerce Commission clearance and Manawa shareholder approval, the acquisition to acquire the Tauranga-headquartered generator is made by a mix of Contact shares and cash. The deal has a support of Manawa's with majority shareholders, Infratil and TECT. And overall, Manawa shareholders will own at the end of it 18% of Contact Energy once the transaction is complete. Which brings me now to our retail business. We work hard to ensure we find ways to make home better for New Zealanders whose homes we keep warm. We have seen significant growth and delivery in the past financial year. More than 410,000 New Zealanders now choose Contact to connect their homes and businesses with electricity, gas, broadband mobile or combination of all 4. We have grown 36,000 connections in the last year and indications are that continues to increase. Through our Time of Use plans when New Zealanders can get free power and return for off-peak use, we've helped more than 100,000 Kiwi households do good for their wallet while at the same time reducing their carbon footprint and lessening peak time demand. Since we launched our Good Plans in August 2021, our customers have benefited from 151 million hours of free power. In May, we started a stage rollout of Hot Water Sorter, a program to switch off hot water cylinders when there is high demand for electricity and thermal generation is most likely required to be -- required. With this innovation -- innovative program, our customers do not need to do anything. We make data-driven decisions based on each customer's actual energy usage. During a 3-month trial, most customers found no difference in their hot water supply. And we have seen around 9-megawatt hours of energy usage a day move off peak. We're now underway with our national rollout. We remain acutely aware of the cost-of-living pressures on New Zealanders, and we believe everyone should have a warm, dry, safe home, and we're working hard to support New Zealanders' energy well-being. We have removed disconnection and reconnection fees for those in our credit cycle, irrespective of their payment method. Our energy well-being team continues to work alongside customers and need to support their individual circumstances. We have recently appointed a customer well-being manager and we'll continue to work with social agencies, including Women's Refuge and Good Shepherd, to help us target meaningful support to those who need it most. Before I finish, I do want to specifically acknowledge the upcoming retirements of 2 of my leadership team. Jack Ariel, our Major Projects Director; and Jacqui Nelson, our Chief Development Officer. Jack and Jacqui, thank you both for your leadership, intelligence, dedication and drive. To me, you both have exemplified the very best characteristics of the wider Contact team. The past year has shown Contact is well on the path of delivering to our strategy and building significant renewable energy infrastructure that will benefit all as well as investing in our renewable pipeline and helping industries and New Zealanders to decarbonize. We're excited about the future. We have a clear strategy, supportive shareholders and investors. We stand, therefore, ready to deliver on the opportunities ahead to help us be a leader in the decarbonization of the country. And finally, to our people. Thank you. I am proud of you and all that you have delivered in this last year. [Foreign Language]. Thank you.

Thank you, Mike. We now move to a discussion of Contact's financial statements. Financial statements of Contact for the year ended June 2024 were released to the market on the 19th of August and are set out in the integrated report, which is available on our website. I'd now like to open the floor for any questions you may have specifically on Contact's financial statements. EY audit partners are present at today's meeting should the shareholders have any questions to put to them. There will be plenty of time later for any questions you may have that are of a more general nature. We have some microphones available. If you wish to speak, please put up your hand and wait for a microphone to be brought to you so that we can hear your question. Are there any questions on the financial statements?

Thank you, Mr. Chairman. [ Jon Rundle ], I've been a shareholder here for many years and have expressed today, which is the first time I've spoken at an AGM, considerable concern over the track record of capital allocation and management of these assets in recent years. Some legacy Ahuroa Gas Storage, complete, not a financial disaster. We move on to Te Huka 3. First question, $300 million, Mercury bought enormous identical geothermal stream online earlier this year for $220 million. Why did our project cost $80 million more for a near-identical project, please?

So that latter question, I'll refer to the CEO who understands well the cost of building new geothermal fields.

Firstly, to acknowledge that I think all of us over the last 4 years have had to deal with some incredible inflationary pressures in the construction. The specific benchmark of Te Huka 3 with the Mercury development, our development obviously has drilling costs and greenfield development costs when the Mercury development was on an existing field with an existing pad and supply. So it's not a true benchmark. And we obviously take our competitive performance very seriously, and we did a fair amount of work benchmarking. What we are confident of is that Te Huka 3, Tauhara and the announced when you correct for inflation are benchmarkable with the developments we execute Te Huka 1 and 2 and Te Mihi early days with an appropriate correction for inflation on PPI over the last, that doesn't mean that we don't continue to strive to challenge, to value engineer and to make sure we keep these costs low because that is the only way that we can deliver affordable energy to ordinary Kiwi homes.

The elephant in the room, of course, is Tauhara, which you never mentioned, was approved. I got notes here, $580 million. And today, if you read the very fine print well hidden in the notes at the latest annual report, the cumulative costs have blown out to $1,088 million, a more than $500 million overrun on a project that was approved at $580 million. To put that in perspective, Meridian's new Harapaki wind farm came online, 175 megawatts, $450 million on budget. We could have built the Harapaki wind farm with the overrun of Tauhara. Could you explain why a project of this nature has nearly 100% overrun a year late?

Mike?

Yes, very happy to address that. So just to make sure that we've got the numbers correct is that, that $1,088 million includes capitalized interest. And at the time of the announcement of the $580 million, that was the go forward with, I think, the best part of $100 million or $110 million already sunk into the project. It's fair to say that on the steamfield element of the plant, we did insufficient front-end engineering. And we have very much learned that lesson, and you've seen that applied in Te Huka 3, where we're very close to budget and on schedule, and you'll certainly see in the projects going ahead. The comparison with wind is a little unfair. Wind generation only operates when does power would they...

Look, I'm was well aware of that. I'm comparing the capital costs. I said we could have built have Harapaki with the overrun from Tauhara.

Yes. So just to let me finish, the important thing to remember is that on the $7 million per megawatt with an LRMC basis, generating 1.2 to 1.4 terawatt hours a year, it's actually lower cost than wind, very comparable to win on a long-run marginal cost basis. And the benefit of that is it's already firmed. If you want a like-for-like comparison, you have to bring the firming element required for wind to get to an equivalent number. And so we do work very hard on the long-run marginal cost comparisons. But your point is very well made. The cost escalations that we have seen in the industry over the last 5 years, I think, across New Zealand, we continue to challenge and we don't see as acceptable. We also have taken on board the internal learnings about doing our homework in Harapaki upfront before you go to investors with a decision.

And I'll just add a few comments that Mike has added because the cost of wind and the cost of geothermal, as Mike's pointing out, is very different because of what the energy is actually produced. So we're very confident that geothermal is very competitive in the market. But I do want to make a few other comments because rightly or wrongly, Tauhara was started in beginning of the pandemic that we then went through a very strong inflationary period as well as quite challenging supply chain difficulties. But I think there's a number of good things in there. And one is that originally, we set out to produce 150 megawatts off the field, it will produce 174. So that effectively per megawatt has made it more efficient. We had some setbacks as well last year on it in commissioning. While it's not unexpected, that was very disappointing. When we look at Tauhara, though, I will be frank, is there has been many lessons learned in that and lessons that we -- or difficulties we would not repeat or hopefully not repeat. And so when we look at -- forward at the investments we're making now, the programs that we implement to ensure those investments are made and executed on time and budget as best as we can are much different from when we started.

Thank you for that. If we go to the annual report, we see the return on invested capital, that's profit after tax over shareholders' funds and interest-bearing debt, 3% this year. You commented that these were good results. I have to struggle a little with that because if you read down the page, you'll find the borrowing cost 6.1%. So in effect, we're borrowing money at 6.1% to invest in projects which post-tax are about averaging 3.5%. If we add in the invitation credits, probably in the low 4s. And I would think that defined shareholder value destruction. Would you care to comment on that? I accept that some of those numbers are very much driven by legacy Ahuroas and things like that, that have sort of finally been cleaned off the balance sheet. But that return is not good. And that translates a comment Mike made about the dividend going up to $0.37. You never mentioned that it actually came down from $0.39 5 years ago. So here we are in a situation that our dividend probably going up again luckily to $0.39 will have had no real increase -- no ordinary increase in 5 years and probably no more for the next couple, which translates to a real cut in dividend of about maybe 15% over 5, 6, 7 years. If you go to the Mercury report, they've just reported 16 consecutive years of dividend increases. So probably a far more favorable outcome from a shareholder's perspective. And my parting shot at Manawa, if you go to Trustpower, you can smile, Mike, keeps you entertained. Trustpower sold the customers to Mercury for about $500 million. Market value of Manawa today, $1.7 billion. You add that together, you get $2.2 billion, which is exactly equal to the value of Genesis. Genesis has a very large hydro base, which most people ignore, Tekapo, Tongariro, Waikaremoana. They also own 3 250-megawatt rankings, a 380-megawatt combined cycle, a 50-megawatt open cycle and 46% of the Kupe gas fields with long-term gas contracts. I struggle to think that Manawa, with no customers, is being valued fairly. It's a great company, but you're paying a hell of a premium for it. And when the announcement was made as to the acquisition, Infratil's share price shot up, Manawa's share price shot up, Contact's shut down, all indicative of the old traders saying overpriced acquisition. How can you sort of give me some confidence that you're not paying too much for Manawa?

Okay. There's a lot of questions in there. I'll just address them one by one. Firstly, there's comment about how can we invest if the returns we get on the existing balance sheet, every investment we look forward to and analyze and execute has an expected return greater than our weighted average cost of capital. And what we expect is that we'll grow returns over time. So all forward investment is done on that basis. Just in terms of the what you've described as the returns from effective returns when using the balance sheet, Contact has historical costs. That includes acquisitions we make as well as investments we make. It also includes the Clyde Dam. And I would say that those, as you point out, the market looks at those very differently than what's shown on our balance sheet. We quite intentionally keep historical costs. We don't go and revalue each year. But the returns that we have are -- they're pretty normal in the industry. So I'm not sure the balance sheet is necessarily the place you'd look for returns. In the dividend, I want to be really clear about that because you're actually absolutely right, and we quite intentionally did that. New Zealand had a period of very low energy prices through the 2010s. And what that meant is there was no investment. And then when there was no investment, people paid out their cash flows, and we certainly did that. When we got to 2020, we clearly could see positive investments in front of us, but they would need equity. And there was no point paying out equity when we had good projects to go forward on. And so what you're seeing now is the realization of those projects starting to pay off. The alternative is we just don't do any investments and we pay out as much as we can. And that largely was what was occurring in the 2010s. That actually means we don't participate in the energy transition and people may have a view on that. But we're very much of the view that we should be a leader in that and so that's why you see what we're doing and what the strategy is. Just on Manawa, I'll let Mike talk a bit about Manawa. The one thing I would say is the Contact share price is back where it started. There's lots of reasons in the very near term that share price has moved around, but the share price has actually been pretty stable since the acquisition was announced. But Mike, you go into a bit of the logic of Manawa, I think.

So as I said in my speech is the logic of the Manawa acquisition is the complementary nature of the 2 portfolios, which is a strategic benefit that exists only for us. We've taken a very conservative approach to the other synergy benefits in terms of trading portfolios and cost benefits as well. And so on balance, we do think it is incredibly good value for shareholders. In an international context, the EBITDAF multiple paying for 100% pure hydro at 16x, you wouldn't build hydro for that and that's modern day and age. And certainly, the deals that you've seen internationally, where on renewable energy companies with development pipeline is very similar to Manawa, up to 32x has been paid. And so the benchmark, yes, I know Genesis assets wells from a former life, but the benchmark with thermal and oil and gas operators, which often trade at a 5 to 7x EBITDAF multiple is not appropriate in this instance. And certainly, on a very fundamental basis, we came up with a good valuation, which was independently verified and the share price performance since, I think, has fully justified.

If there are no more questions, we'll move on to the formal resolutions for meeting. These are outlined in the Notice of Meeting sent to all shareholders in October. Voting on the resolutions will be by poll. Each resolution will be put to the meeting with the proxy voting results displayed on the screens. For those of you here with us in Auckland, you'll be able to cast your vote by filling out the voting card you received at the registration desk on the way in and which will be collected at the end of the formal part of the meeting. If you're a shareholder or a proxy holder and did not register on arrival and wish to vote, please make your way to the registration desk just outside the room and the staff of it. Our share registry will assist you. If you are both a shareholder and a proxy holder or a shareholder company representative or have more than one holding, you will have received separate voting cards for each holding. When you vote on the resolutions, please complete all the voting cards given to you at registration. For those attending the meeting online, to vote, you will need to click Get Voting Card within the online meeting platform. You'll be asked to enter your shareholder or proxy number to validate. Please then mark your voting card in a way you wish to vote by clicking For, Against or Abstain on the voting card. Once you have made your selection, please click Submit Vote on the bottom of the card to lodge your vote. Please refer to the virtual meeting online portal guide or use the helpline specified if you require assistance. Voting will remain open until 5 minutes after the conclusion of the meeting. Each resolution set out in the Notice of Meeting is to be considered as an ordinary resolution, and as such, must be approved by a simple majority of the votes cast by the shareholders entitled to vote and voting in the resolution. For the information of shareholders, there are proxy votes received for the 4 resolutions. Our first resolution today relates to the reelection of an existing Director, Sandra Dodds. It's my pleasure to move that Sandra Dodds be reelected as a Director of Contact. Sandra was first appointed to the chair -- sorry, was first appointed to the Contact Board in September 2021 and is the Chair of the Audit and Risk Committee. A brief biography for Sandra set out in the Notice of Meeting. The Board unanimously recommends that shareholders vote in favor of her reelection. I'd now like to invite Sandra to speak in support of her reelection.

Thanks, Rob. [Foreign Language] My name is Sandra Dodds. Thank you for the opportunity to speak to you today. I'd like to take this time to share a few reflections. It's been my privilege since September 2021 to serve on the Board of Directors for Contact Energy. I am proud that Contact holds a significant leadership role in the decarbonization of New Zealand. Whilst executing the decarbonization strategy, it's vital that Contact is supported by strong governance, led by its Board of Directors. I believe that my skills and experience have and will add value to Contact's future ambitions. With more than 30 years' senior leadership experience and complex infrastructure businesses in Australia, New Zealand and Asia, I'm well placed to help Contact navigate this time of expansion and development against a backdrop of growing environment and climate-related risks. My roles on the Boards of Snowy Hydro Limited, OceanaGold, Fletcher Building Limited, and past leadership of businesses in the infrastructure sector, all contribute to the experience and strategy, risk, people and governments that I bring to the Contact board. I'm currently the Chair of the Audit and Risk Committee for Contact, where it is my role to oversee financial reporting and the management of risk. It is essential that our business has appropriate systems in place to identify, assist, treat, monitor and report on material risks. Risks are managed by the Board and potential consequences are key consideration when making decisions and agreeing the company's strategy. I am proud to have served on the Contact Board for the past 3 years. I would be honored to be reelected to the Board as I look forward to contributing to the long-term vision of the organization, the energy sector's future and the communities in New Zealand where we operate. Thank you for considering my reelection to the Contact Board today. [Foreign Language]

Are there any questions in respect of Sandra's reelection?

We have 1 question here from Stephen Mayne. Sandra, you're appointed to the Snowy Hydro Board in July 2019 and you also chaired the Audit Committee. In October 2023, the ABC Four Corners program produced a TV show on the blowouts and delays and it's $12 billion Snowy project. Four Corners contended that Snowy Hydro failed to inform the Australian public about problems as they emerged. What is your response in terms of what we know at Snowy Hydro and any lessons learned? And exactly what did you try to do to set things straight?

Thank you for the question. Just for clarification, Snowy Hydro is owned by the federal government of Australia. It would not be appropriate for me to make any comment on any of my Boards in this firm other than to say that I report directly to the Minister of Finance and the Minister of Energy. So I'm sorry, I can't comment any further.

Thank you, Sandra, iterate Mr. Mayne's question for those proponents of [indiscernible]. Okay, let's keep moving. Please now complete your voting card beside Resolution 1. Please select for any of For, Against or Abstain in the appropriate place of the voting card. [Voting]

Our second resolution today relates to the reelection of another existing Director. It is now my pleasure to move that Jon Macdonald be reelected as a Director of Contact. Jon joined the Board in November 2018 and as Chair of the People Committee. A brief biography of Jon is set out in the Notice of Meeting. The Board unanimously recommends that shareholders vote in favor of his reelection. I will now -- we will now hear from Jon.

[Foreign Language] Thank you, Rob. Good morning, everyone. My name is Jon Macdonald, and I'm very pleased to have this opportunity to stand for reelection as a Director of Contact Energy. It's clear to me that Contact's job is an important one and that affordable and reliable electricity generated with low or no emissions is fundamental to the quality of life of New Zealanders. I believe that Contact is in good shape and making good progress, as Rob and Mike have already covered. I'm particularly excited with the announcement today for the redevelopment of our Wairakei operations and the construction of another Te Mihi power station. But I know there is a lot more to do, including building more renewable generation, expanding our retail offering to our customers, managing in an increasingly digital world and ensuring our business is responsive to the challenges and opportunities ahead. As part of my current Director responsibilities, I am Chair of Contact's People Committee. People are key to our success, particularly during such an eventful period for our business, where we are growing into a host of new areas like wind and solar generation, along with grid-scale batteries. We are continuously looking for ways to improve as part of our commitment to being a good employer to attract and retain great people and to ultimately deliver shareholder value. With all this to do, I believe I have a lot to contribute to Contact Energy. I am a technologist and engineer by background. And earlier in my career, I worked for Deloitte and HSBC. I then spent 16 years with Trade Me, including 11 years as its CEO. For the last 5 years, I've been a professional company director, and I hold Board roles across a range of businesses, from a high-growth fintech called Sharesies through to Mitre 10, Kiwibank and Contact Energy at the more established game. All these roles have provided me with an extensive corporate and strategic toolkit. In particular, I've developed good experience in digital businesses, technology and the changing expectations of Kiwi consumers. I believe that my prior experience as the CEO of a public company equips me to support and at times appropriately challenge Mike and the team. Finally, I have a good grounding in the technical and engineering concepts behind electricity generation, transmission and consumption, having completed an honors degree in electrical engineering. I have the capacity to continue to give this role the time and attention it deserves. I plan to keep working hard for Contact Energy and I believe that we are well equipped to deliver on our strategy to help decarbonize New Zealand and to deliver great returns for shareholders. Thank you for your consideration. And if you choose to have me continue as a Director, thank you in advance for your support looking ahead.

Thank you, Jon. I now invite discussion on the resolution. Are there any questions that shareholders present or online would like to ask Jon? Okay, doesn't appear to have any questions. Please now complete your voting card beside Resolution 2. Please indicate your vote by marking any of For, Against or Abstain in the appropriate place in the voting card. [Voting]

Our third resolution today relates to the election of a director who was appointed to the Board since our last annual meeting. It is now my pleasure to move that David Gibson be elected as a Director of Contact. David joined the Board in February 2024 to fill a casual vacancy. He is a member of the Audit and Risk Committee. A brief biography for David as set out in the Notice of Meeting. The Board unanimously recommends that the shareholders vote in favor of his election. I'll now invite David to speak in support of his election.

[Foreign Language] My name is David Gibson. I'm grateful for the opportunity today to put myself up for election for the Contact Energy Board. I've been on the Board since February. In terms of my background, my career was in investment banking where I had over 20 years' experience, mostly at Deutsche Bank. I did lots of transactions across many sectors, including being Crown adviser to the mixed ownership model that included the IPOs of Meridian, Mighty River Power and Genesis. Since 2017, I've had a career in governance. I'm Deputy Chair of Goodman New Zealand, also on the Boards of Freightways, NZME and investment company Rangatira. I've previously been Director of Trustpower, which is now Manawa Energy. The skills and experience I believe I can bring to Contact Energy are mainly in strategy and finance. I've also a strong background experience in the New Zealand energy sector. As we all know, the energy sector is critical to New Zealand and Contact plays an important part in shaping the industry. Contact Energy has a highly respected Board and management team. I'd be honored to be elected to the Board. And if elected, I will work hard to maintain the high standards of governance with a strong focus on increasing shareholder value.

Thank you, David. I now invite discussion on the resolution. Are there any questions that shareholders present or online would like to ask David?

We have one question from online from Stephen Mayne. Could the new Director, David Gibson, and the Chair comment on the recruitment process that led to his appointment to the Board to fill a casual vacancy after last year's AGM? Which recruitment firm was involved? And did the Board interviewed -- did the full Board interview David? And did they interview any other candidates? Did David know any of our directors before engaging with the recruitment process?

Yes, we ran a full recruitment process that included the use of an external recruitment adviser that was SEQEL Partners. Interviews were undertaken by a subcommittee of directors following meetings with all directors -- sorry, followed by all meetings with directors. There were other candidates who were interviewed as well. New Zealand is a small country, and as David mentioned, his career as an investment banker was widespread. So it would be unusual if some directors didn't know David. But what I can say is David is not on the same Board as any -- was not from a previous Board, so we have no cross-Boards with other directors.

Okay. There are no other questions. Please now complete your voting card beside resolution 3, please indicate your vote by marking any of the For, Against or Abstain in the appropriate place on the voting card. [Voting]

The last resolution to be considered relates to the auditor. I now move that the Directors be authorized to fix the fees and expenses of the auditor. EY is Contact's auditor. This resolution proposes that the Board be authorized to fix the remuneration of the auditor, which is the conventional practice for New Zealand-listed companies. It reflects the fact that the level of the auditor workload, and therefore, fee mainly to vary from time to time to take into account changes in the company's size or complexity or changes in the law. I now invite discussion of the resolution. Are there any questions?

We have 1 question. This is a question from Stephen Mayne. What would happen if shareholders voted down the resolution that pop up at every NZ-listed company to give the authority to the Board to approve payments to the external auditor? Has it ever been voted down? And why does the government make us bother with this? And then staying with the issues around the auditor, how long have Ernst & Young had to go? And when did it last go to a competitive tender? And when is the next scheduled -- when is it next schedule to go to a competitive tender?

I don't think we've ever had a question on this resolution before, but this is simply a requirement of the Companies Act. And I do note the government is undertaking a review of the act and the review, hopefully, will look at the workability of this provision. But it doesn't generally present an issue. Just a question on EY. EY was appointed 2 years ago following a competitive tender. The audit partner is rotated every 5 years. And our policy is the auditor serves a maximum term of 15 years.

Any other questions? Okay. Please now complete your voting card beside Resolution 4. Please indicate your vote by marking any of For and Against or Abstain in the appropriate place on the voting card. [Voting]

Start on our share registry, we'll now collect your voting papers. Please place your voting paper in the ballot boxes as they are passed around. Shareholders participating via the virtual meeting should now submit their votes online. Voting will remain open until 5 minutes after the conclusion of the meeting. Votes will be counted and the results announced on the NZX and ASX this afternoon. I'll just give a minute so that can occur. Okay. We now move on to general business part of the meeting. This is your opportunity to discuss anything we have not already covered and ask questions of the Board or management team.

Before I open the floor to questions from those present and online, we have one question submitted prior to this meeting. Question relates to our stance on climate change and how this impacts on our business operations. The impacts of climate change as borne out by the extreme weather events and rising global temperatures affect us all. As a leading New Zealand energy generator and retailer, we have the responsibility to communicate to our shareholders, our stakeholders and the communities in which we operate about the steps we are taking to manage and mitigate climate-related changes alongside leveraging opportunities that arise. This year, we produced our first climate statement, which you can find on our website. It outlines how we are addressing and planning for a sustainable future. Does anyone present or online have a question?

We do have a couple of questions online that we could start with.

I think we've got some questions in the media we'll start with.

Thank you, everybody. [ Peter Musburger ], small shareholder. Some years ago, I think if my memory serves me right, Mercury set up a situation where we could visit 1 of the geothermal fields. Does Contact have a similar policy for shareholders to visit? Is it Tauhara, which is opening with Mr. Luxon next week? And would shareholders be able to visit at opening?

It is Tauhara that is opening next week. As you can imagine, geothermal sites are large industrial units and there are material health and safety issues. But Mike, I'll get you to...

Yes. So unfortunately, next week, with the combination of commissioning activity and the opening, the attendance is relatively restrictive, and indeed, we've had to turn people away. But noting that, with open days have been -- I think that Contact Energy has done in the past, both at Clyde or some of our geothermal sites, and we certainly would welcome the opportunity to put the planning together for something in the future. But as Rob alluded to, there are significant health and safety matters to be taken care of, but we, by all means, are open to that possibility.

My name is [ Elvin Crosby ]. I'm involved in hydrogen technology since the '80s. It tells me that New Zealand is so far behind the eight ball. Where does Contact stand with hydrogen economy? The rest of the world is moving. Why isn't New Zealand?

Contact undertook with Meridian and others a significant study in recent years around the potential for export hydrogen. As that evolved, it was quite clear there were better uses for electricity that might become available in the South Island. Contact's position is we do see hydrogen as part of the New Zealand economy, particularly for heavy transport and potentially storage and peaking and electricity in subsequent decades, but it's got some distance to go. Mike, I'll let you also comment.

Yes. Just to reiterate, I always argue that hydrogen is part of the solution, but it's not the solution. It's never A, B or C. It's always D, all of the above. And so the role of hydrogen in the New Zealand economy as a solution for heavy transport and hard-to-sell process heat is obviously a real opportunity for the future. That being said, look, for green hydrogen, it's fair to say that the share volume that's been considered, to your very point, most likely will come from blue hydrogen produced from fossil fuels with subsequent carbon capture. And so our ability is New Zealand to compete with that. In an export market, it's going to be severely constrained. For the domestic market, we have the [ tourney of depth ] distance, which works the other way for us. And so there is the possibility in the medium to longer term that a top in hydrogen market does emerge. And we are participating also with the likes of Richardson Group and trialing some of their heavy transport option.

[ Lynn Weaver ], shareholder. There's a lot of press with the gentailers being both generators and retailers. How do you think this would impact Contact if you had to remove retailing and with the fact of having Manawa and that extra boost in the complementary generation be something that would sort of future proof in case gentailers had to split?

Let me address that because structural separation won't produce 1 more electron for the transition, and I think that's quite important. If you look at the past year of these, particularly in August, very volatile energy prices, retail customers didn't really see that at all. And that was largely the strong retail base produced by gentailers was able to protect against that. If you look at overseas where structural separation has occurred, it actually hasn't turned out well at all. And as Mike mentioned, there are a number of things we're now doing with our retail business as we head towards transition that we think actually make the current model more compelling. This virtual demand that we're talking about with hot water and other things in the house, I think it's -- that's going to be a source of how we manage our way through the transition and dry years and things like that. So gentailers having a retail arm, I think, will become more important, not less important as we go forward.

First, I'd like to apologize for not having turned my phone off.Terrible mistake, very embarrassing. My name is [ Kathy Keys ]. Some of you may remember that I asked to speak about 2 or 3 years ago at the end of the year. I was extremely angry about what was happening and -- did you hear me so far? That's good. I want to have to tell you again. We have been shareholders in our family for more decades than I'd care to admit to. And I am really, really delighted with what's been happening in the wider scheme of things. But I think that the problem with Contact, and it is a big problem with Contact, is that they're ignoring the little people through our residential users of electricity. When I spoke at the last AGM that I spoke at, I highlighted that there have been mistakes made in accounts. In our accounts, we have a number of properties that we source electricity for. And there have been confusion, overcharges, mistakes, that have been impossible to sort out with your staff. They strung us along. And the reason I'm going over that now is because they are a result of that. They strung us along for months and months and months. Eventually, I had written to Mr. McDonald to relay all of this because it was getting to a stage where I was going to have to go to the media. And as a result of me having contacted Mr. McDonald, someone telephoned me and -- I beg your pardon. First, they wrote me a letter that they'd like to engage with me and I responded and the -- all the continuation communication said he's away, he's not available, end of story. At a later communication, when I spoke out here, same young man contacted me and made some promises. The promises were not -- the result of the promises were not exactly as I've been asking for. There was a resolution to some of the issues, but not all of the issues. I contacted customer care support and nothing happened. In the end, long story short, we're away on holiday and we have received the call to say something along the lines that we'll meet with you and mediate with you and that, that was sort of thing. That was fine, very welcome. But then about a week later, I'm going from memory here, we received a phone call from someone at Contact to say we've cut your electricity off at one of the properties. Happened to be the one we were living in, we were away, and I said that you can't do that because we're in the middle of talking about it. You should awaited. And she said, "Well, what about going home?" We're away in a holiday, they cut off the electricity, and they would like us to go home so that they can return the electricity.

Kathy, I'm going to ask, if you would stop there. This is a customer issue. Bryan Middleton, who's our Head of -- part of the retail team, he's available with others and the team that you can talk to. I do recall at the last Auckland meeting where you spoke, I then, after that, went and talked to the team about it. The issues between ourselves, Contact and yourself, are very complex and I can't go into that in the meeting. So I really would ask you if you could sit down now and...

Can I make 1 more statement, please? I'm a shareholder. Contact is not providing the service they need to provide in 1 area. And I think that you need to listen to the rest. So I would like to ask you to allow me to finish.

Again, I reiterate it is a retail matter and this is not a forum for it.

I think these people know that the only opportunity I have now is to go to the FMA and the media.

Well, that is your prerogative.

Okay. I'll take it.

So the 1 point I would make because you saw this year that we have removed disconnection fees and reinstallment fees, so we do care about the small people. I can assure you. Mike, can you go over just on that more about what we do for small energy consumers.

Yes. Look, number one is, look, when we don't think get things right, we do our utmost to get them right. We are human beings. We make mistakes, but what really matters in that is the commitment to rectify those mistakes. And we'll get Bryan to have a chat straight after this to see what we can do to this sorted, but we do take passionately. We believe passionately that ordinary kiwi should be able to participate in the transition. The introduction of the good plans, which started with the 3 hours of free power gave people control over their energy bills where they could actually step into that space and take control of their energy bills and other innovations around that, particularly around hardship, removing the disconnection fees, putting in place the well-being are all part of making sure that we do the right things by ordinary kiwis. Because these last 3 years in terms of high inflation have been tough on ordinary kiwi households and we acknowledge that. And so it's not all -- we're not absolutely right 100% of the time, but that is how we strive to do our very best each and every day. I do give credit to the team. So Bryan and the team will have a chat afterwards to see what we can do to help you and get this resolved once and for all. Thank you.

Bryan is just there. Okay, any other questions in the room? Okay. Let's have a question online.

Okay. This is a question from Stephen Mayne. New Zealand is becoming a governance backwater as it continues resisting mandating annual voting on remuneration reports, which is standard in many countries. Will the Chair undertake to consult with major shareholders and lead a Board discussion on the issue of whether you will voluntarily put up remuneration report resolution for an advisory vote at next year's AGM?

Thank you. Well, it's a little disappointing that Mr. Mayne thinks one of the least corrupt countries in the world is becoming a governance backwater, but we consider the remuneration disclosure carefully each year and in response to feedback have enhanced our remuneration report this year. In fact, I've received really positive feedback from shareholders and other investors. New Zealand law does not require a shareholder vote on a remuneration report, and we don't currently have plans to propose this. Are there other questions online?

This is a question online from Stephen Mayne. The ASX is currently in the midst of an unprecedented due diligence takeovers that's contributed to listed entities falling by 176 to 2,118 after 21 straight months of decline. There have been 27 major takeovers above $200 million completed so far in 2024. Why are public markets not valuing ASX in New Zealand-listed companies like ours more highly? And what special protections do we have to avoid being taken over? If AGL, Origin Energy or Snowy Hydro live for Contact, what regulatory or legislative approvals would be required?

So the regulatory system is not designed to prevent takeovers. And so the Board is very focused on what we think is delivering long-term value as our best protection against takeovers. But also we consider that we're very transparent. We put information out there about investments. We have one of the best Investor Relations teams and disclosure and have won awards for that. In terms of Mr. Mayne has referenced a number of Australian companies as potential takeover -- takeover people, I would say that foreign investment in New Zealand is not particularly easy. We have the Overseas Investment Act so people would have to get through that. It would be a long and convoluted thing. But as I say, the regulations are not designed to prevent shareholders. The biggest protection is a strong share price. Any other questions online?

We have one last one online. This is a question from Stephen Mayne. I must feel quite strange having the former CEO of a public company, Christopher Luxon, suddenly become Prime Minister and it's great. He'll join us at next week's big opening. Did any of our directors or senior executives know Mr. Luxon before he went into politics? And are there any early signs that the new government is more pro business than the previous government? If there is 1 policy change or investment the Luxon government could do to assist our business, what would it be? And then finally, also, any thoughts on what Trump's election could mean for us?

Okay. It's probably the first question. So I did obviously know Mr. Luxon. We worked together for 5 years when I was the CFO of Air New Zealand, and other directors have meet him as well. Is this government business focused? I think it's very focused on growing the economy for the benefit of all New Zealanders. They understand that business is a key part of that as well. If there's 1 policy change, it would be the speed and ease of consenting renewables would be the 1 thing we would be looking for. And so we are hopeful that a new [indiscernible] will facilitate that. I'm really not going to comment on the Trump elections. Any other questions?

Firstly, a comment about Stephe Mayne. I've been to several shareholder meetings. He has the same questions and it takes up time. One of the directors at one point seek can we limit it to 2 questions and that was a way of moderating that. It is good that you were so civil in your response. And the thing about small shareholders, I did wonder when you look at electricity bills, often a huge proportion is a fixed charge. And if that could be reduced, then people truly would be able to work out how they can save electricity. Water is the same thing. It's a fixed charge, can often be about 40% of your belts so it can be very large.

Yes, I couldn't agree more. And sadly, as you heard from both Mike and I, that is the part of a bill that will be increasing as we go forward with the recent Commerce Commission for lines and transmission. So in respect to Mr. Mayne, he's, I guess, clocked up another AGM on his journey to 1,000 AGMs. So here we go. Right. As there are no further questions, I will now declare the meeting closed. For those present in the room, I'd like to invite you to stay and join us for morning tea. Please feel free to talk with my fellow directors and members of the Contact senior management team, who would be wearing name badges and very much look forward to the opportunity to talk with you. If you have any customer service queries or would like to sign up as a customer, some members of our retail team are also here and more than happy to help. Thank you very much for your attendance and continued support of Contact. I wish you a safe journey home.