Manawa Energy Limited (MNW) Earnings Call Transcript & Summary

Welcome to Trustpower's 2021 Annual Meeting. I'm Paul Ridley-Smith, the Chair of Trustpower. I'm pleased to confirm that we have a quorum online, and the meeting is properly constituted. Because of the COVID-19 issues, Trustpower originally proposed a hybrid meeting to give shareholders the option to join us in person in Tauranga or online. For reasons only too well known to you, we aren't able to have an in-person meeting when limited to 50 people, including staff. And 3 of our current directors and one prospective director are in Auckland to attend the event. But just because we're 100% virtual, there's no reason why you -- why we can't engage with you just as much. It would be disappointing to us if you don't use the online platform to ask us questions. Within limits, there's no such thing as a silly question so please send us your questions at any time and, at the appropriate time, we will address them. You don't need to wait until the particular resolution or matter is before the meeting. So here to help you with that are some slides to remind you how to ask your questions. [Operator Instructions] Similarly, this slide gives instructions on how to vote. You can vote on any resolution at any time. If you have already submitted a proxy form and given authority to someone else to vote for you, perhaps to me as Chair or the New Zealand Shareholders Association, then you don't need to do anything more. Your shares will be voted in accordance with your instructions. But if you intend to vote online today, then we will need your shareholder number, known as your CSN. This is on your notice of meeting and each dividend statement. I'm figuring that because you're already on and listening, you've been able to do that. But if not, now is the chance to properly register so that your votes can be counted. But then in a COVID world or the rather tedious formalities of how we hold meetings these days, let me now introduce the participants in today's meeting. We have Trustpower's directors, CEO and senior staff, and these are Keith Turner; Susan Peterson; David Gibson; Kevin Baker; Peter Coman; David Prentice, who is also CEO; and our senior staff, Fiona Smith, Matt van Deventer, Stephen Fraser, Paul Bacon, Kevin Palmer, Peter Calderwood and Sara Broadhurst. And I'm sure that also online will be a wider group of Trustpower people. We also have with us today joining Joanna Breare and Sheridan Broadbent, who are prospective directors who are up for election later in the meeting. The Board has confirmed that the minutes of the last annual meeting held virtually on 20 August 2020 are correct and true record of that meeting. Copies of the minutes of that meeting are available to shareholders. Given that we have the formalities and introductions, let me talk a bit from the point of view of the Chair about the strategic issues facing Trustpower and the wider energy sector. These are as interesting and as challenging as ever. Broadly, we look at them as follows. Firstly, the impacts of COVID. From a generation point of view, the effects have been relatively modest. We've maintained our operations and aggregate electricity demand has not been materially affected. But at the consumer level, the effects have been severe and adverse for some customers, fortunately not a huge number but certainly some. And we and the industry overall have worked as hard as we can to help those customers most adversely affected, and we will continue to do so. Secondly, electrification and the climate change response. These are, of course, issues well familiar to you. Our core assumptions are that the current policy direction will continue, and we support that direction. That is that carbon will be priced at ever higher levels. Carbon prices have risen quite substantially recently, industries and consumers will seek to decarbonize their activities and lives and aggregate demand for electricity will increase. David Prentice speaks more of this later. Exactly how, and at what pace are more difficult to predict. And our government, as most do around the world, will struggle to consistently implement equitable and effective policies to support the process. We have some good features. The emissions trading schemes is a powerful tool that can do more lifting to reduce net carbon. But ad hoc policies like the clean car discount or the ute tax are not. The intent of vehicle electrification is good, but we need better designed schemes to help. Strategically, at Trustpower, what this means is that we keep our focus on safe and efficient operation of our hydropower schemes, and we actively seek out new renewable developments. Our focus is on wind, utility scale solar and geothermal. The economics of these are all changing, mostly favorably, as technology advances and global scale manufacturing efficiencies are achieved. Much of what is being sought in the policy direction will come through technology and innovation, where New Zealand is an importer and follower of overseas technologies predominantly still, of course, with geothermal, we have significant domestic expertise. And planning law changes that we control ourselves and planning what is critical if we're going to continue to build out our renewable energy. Our final strategic focus is regulatory and market structure. Governments of all types, [indiscernible] part of the political spectrum feel the pressure to intervene and change existing structures, it's just the nature of government. And our government has made some good decisions, for example, not materially increasing regulation in the retail electricity market but tidying up some historic anomalies or changing the operation of the wholesale electricity market. But has also made some other decisions that are not so strong. If the target is aggregate carbon reduction across the economy, as it should be, targeting 100% renewable electricity generation is the wrong target. Natural gas should be in the mix, and, if it is, then greater renewable electricity production will be achieved, and carbon emissions will come down faster and stay down. Likewise, with respect to the NZ Battery and Lake Onslow projects, there are smart things that New Zealand can do to ensure security of supply and provide a supportive environment for the build of new renewable schemes, but that isn't spending billions of dollars, an amount literally impossible to estimate with any precision, given the size of the scheme on the largest civil works project in New Zealand. We're optimistic that these smarter solutions will come out of the current government work stream, and we are developing renewable growth options on that assumption. Related, along with our generator peers, we recently made strong submissions on the Natural and Built Environments Act, the proposed successor to the RMA and how it should change to encourage the build of new renewable generation. We're in the early stages of this process, and I'm sure there will be some positive responses from the government. But absent changes to that bill, we're concerned that the new build of renewable generation will get harder. But like I said, I think we're optimistic that appropriate changes will be made. Now turning to the major strategic issue for Trustpower today, which is shareholder approval for the sale of the retail business to Mercury Energy. The proposed sale of the retail business represents a significant change in strategic direction, but one which your directors unanimously support and which we believe better positions Trustpower for the future. As I've already said, we're convicted about greater electrification of New Zealand, and we believe we can play a bigger role as a generation company with an enhanced development capability and wholesale and commercial and industrial channels to market. I'll come back more to the merits of the retail sale transaction when we consider resolution 7 later in the meeting. But assuming the resolution passes, the transaction completes, and 1 February 2022 is the most likely date, I do wish to share with shareholders what I will say to our retail team closer to completion. And that is thanks very much for, over a long period of time, creating such an excellent business. We're only achieving such a good result for shareholders because of the value that you've helped to create. The directors wish all the people leaving Trustpower the very best in their new roles at Mercury Energy and look forward to watching the combined Mercury Energy and Trustpower retail business thrive, which I have already explained. Later in the meeting, we will vote on director appointments. There are also other Board changes. Retiring today as directors are Susan Peterson and David Prentice. David, however, is not leaving us, as you know. We were very happy to confirm him the CEO earlier in the year, so he's with us for quite a bit longer. But nonetheless, David, thank you for your services as a director. Susan Peterson joined the Board in 2016 and has been a huge help to us as we've undergone significant change repositioning Trustpower, obviously still subject to the resolution to be passed. Repositioning it as Manawa Energy, a renewable energy generation and development company. So thank you, Susan. And also announced today is that Keith Turner will retire effective 31 October 2021. He, too, has been an excellent resource for us with his energy sector experience and expertise that goes right back to the days of the New Zealand Electricity Department, NZED. There are a few as knowledgeable as Keith. So we wish you both well. You've added insight and intellect and contributed to a strong Board and management culture. And then finally, an exciting part of at least my presentation is to introduce Manawa Energy. This is the name that we've chosen for Trustpower once that name and brand will pass to Mercury. I'm delighted with that choice of Manawa Energy and the provenance behind the name. Manawa, meaning heart, was suggested and gifted to us by Ngati Hangarau hapu who hold mana whenua where our Kaimai scheme is situated, not far from Trustpower's head office. The name acknowledges our shared whakapapa in the Tararua region and our shared interest in sustainability of our generation in the rivers on which we operate, particularly, in this case, the Omanawa River. It is a privilege to have been gifted the Manawa name by Ngati Hangarau hapu, and we will do our best to honor it. [Foreign Language], a gift for us all for which we are most thankful. And now I would like to hand over to David Prentice to present the chief executive report. Following David's presentation, we will take questions that are on any matters that either he or I have raised or other matters of general interest to shareholders. Please, as I said before, feel free to put your questions through at any time. That will certainly make it easier for us to give you a good and comprehensive answer. So, David, over to you now for the 2021 Chief Executive Review.

Thank you very much, Paul. [Foreign Language] Kia ora and I'd really like to just extend Paul's welcome and thank you all for joining us here today, albeit virtually. I've got a few slides to go through where I'll provide some detail on the operational highlights over the last year. I'll then finish off with some thoughts on the future as we plan for a potential transition to Manawa Energy. But before I do that, I just want to echo some of Paul's comments earlier and take this opportunity to thank my colleagues on the senior leadership team. There have been a lot of changes over the past year, which can be challenging at the best of times, as we all know. Clearly, we have been operating in a fairly complex environment with the COVID-19 pandemic and the strategic review of the retail business, but we could not have gone through this as successfully as we have without the commitment, without the teamwork and the leadership from the senior leadership team. So I'd like to thank them all for that. I'd also like to acknowledge and thank another long-standing member of the leadership team, Craig Neustroski, who left earlier this year, for all his support and influence over the last year or so as well. So, moving on, this slide provides a brief snapshot of some key performance metrics. After a fairly challenging 2020, we were really pleased to have recorded a positive result last year with EBITDAF of $200.2 million, up 7.3% on the prior year. And this was despite unprecedented dry sequences across New Zealand, Tiwai point uncertainty, reduced gas supplies and, of course, the ongoing impacts of the COVID pandemic. Our net profit after tax of $30.7 million was below last year's NPAT of $97.6 million, but this was mainly due to an increase in net fair value losses. However, these noncash losses will reverse in future years as the underlying generation they support is actually produced. And when you look at underlying profit after tax, which excludes fair value losses and one-off gains, we were approximately 20% above last year, which, as I said, is a great result. The improved financial performance occurred mainly in our retail division from solid gains in electricity, our telecommunication product margins and lower operating costs, mainly driven by the COVID lockdowns having the effect of reduced customer acquisition activity. So in terms of operating highlights, both our generation and retail divisions contributed to our positive result, as I said earlier. We delivered on planned maintenance activity across our generation fleet and continue to drive our asset investment pipeline through enhancements at a number of our key schemes. We also saw an increase in our retail customers for fiber and mobile services due to the continued development of our retail strategy and customer offerings. And I think the graph on this slide really highlights the extended dry weather sequences that we experienced and how these actually impacted inflows nationwide. However, because of our quite unique geographically dispersed portfolio of run of river and high-storage volume generation assets, we were able to manage this risk through astute placement of product and thus minimize any downside impacts. From a generation standpoint, despite the record low inflow last year, as I just mentioned, our generation division produced a solid result and an EBITDAF contribution of $134 million. We continue to develop our understanding of asset criticality and health using digital technology to enable more data-informed decisions and drive improvements in the reliability and availability of our higher production volume assets. Another key area of focus over the last year has been on growing our asset management maturity. Now our asset management goal is simple: to maximize the life cycle value of our assets. And this means we need to move away from a reactive maintenance approach to more of a proactive long-term mindset. Now we're nearing the complete of the first year of a 2-year major program of works to improve our systems and processes for managing our assets with the aim of accelerating clearly identified work to increase the performance and the value of our assets. So it's a significant piece of work, and we'll make sure that we provide regular updates as we work through this major transformational project. We're actively responding to increased demand for renewable January -- sorry, renewable energy as New Zealand pursues greater electrification to meet its climate change goals. And this will come from the development of new generation and also through enhancements of our existing schemes. Pleasingly, again, despite the COVID-19 restrictions last year, we improved our portfolio of hydro assets and added additional generation of 9.5-gigawatt hours per year through enhancements at our Waipori, Cobb and Kumara power schemes. Going forward, we have an unprecedented level of material upgrades to our existing assets, which will add close to 70-gigawatt hours per year within 5 years. And this slide shows the extent of the work either planned or underway. From a health and safety perspective, we -- obviously, we continue to celebrate proactive safety actions right across business, and were really pleased last year to see a continued reduction in our total recordable injury frequency rate, or TRIFR, as well as having another year of 0 lost time injuries, which is a fantastic result. The wellness of our people has been a major consideration for us, especially over the last year, as we've negotiated the complexities of the pandemic. And I would just like to take this opportunity to acknowledge the ongoing commitment made by all our people during this time to support -- to continue to support our customers on sites all around the country as well as looking after themselves and their [ families, ] which required many staff going above and beyond their usual duties. Now, as mentioned earlier, the retail performance was very pleasing. We saw a lift in retail EBITDAF of 32.9% over the prior year with big improvements at a gross profit level across both electricity and telecommunications. Further gains resulted from our continued focus on reducing cost to acquire and serve. In May last year, we launched our new mobile services, complementing our existing product set of electricity, gas, phone and broadband, as I'm sure you're all aware. Today, we now have over 10,000 customers with customer satisfaction amongst our early mobile adopters very high. We continue to develop customer experience with new technologies implemented that have enabled our people to support our customer needs seamlessly from any work setting now and new working-from-home options that have had the added benefit of increasing our people's work satisfaction ratings. We pride ourselves on being a positive contributor to New Zealand's climate change effort and proactively engage at many levels and intend to play our part in meeting New Zealand's climate change goals. For this year, we refreshed our greenhouse gas data collection methodology, we set new emission reduction targets for ourselves and we further embedded climate change risk and sustainability across the business. We're now actively and proactively reporting against some of the requirements of the Task Force on Climate-related Financial Disclosures, which will be mandatory for a publicly listed companies by 2023. And in practical terms, what this means is that we publicly now share more information on how our Board gains oversight of, and addresses, climate change risks. In terms of community care, caring for our people and place, Tiaki, is part of our organizational values and business aspirations and affirms our commitment to make a difference for a sustainable future. We demonstrate our care for people and place through many different initiatives. But we do put particular focus on the local communities around New Zealand where our people reside in relation to our generation assets. We are proud to partner with people and their communities, providing funding to support, among other things, educational scholarships, community group sponsorships and environmental funds and trusts. So now looking ahead, I just want to make a few brief comments around future outlook. Clearly until the transaction with Mercury has gone unconditional, it is business as usual. But on the assumption this does proceed, then as Paul mentioned earlier, Trustpower will be known as Manawa Energy. We will provide a lot more information on the strategy for Manawa in due course, but in the interim, this slide provides some high-level information on the proposed new business with progress going very well on the many activities underway to set this up. So while Trustpower has clearly been very successful over the years, we really want to challenge the status quo in terms of how we set up the organizational model and the cultural framework to drive even greater success for Manawa Energy. We believe we will have a unique business model in our sector, and we want to take the time to really investigate and define our point of difference and develop new and exciting ways of thinking and doing things. From a generation operations perspective, we will focus on optimizing our operations and driving efficiency gains to improve our performance and make us stand out from our competitors. Now core to this is technology, and we will continue to drive digital transformation through more effective use of data and AI. We'll focus on ensuring our commercial and industrial customers continue to have a great experience, but also look for ways where we can partner with them to provide more bespoke solutions to their needs in what is as an ever changing and dynamic environment. And we will deliver on our significant growth agenda, not just through continued enhancements of our existing asset base, as mentioned earlier, but through the development of new renewable generation through a variety of channels. As I'm sure most of you listening in will know, it's estimated that New Zealand will need to grow its generation capacity by as much as 70% by 2050 to enable the electrification of the economy and to meet New Zealand's climate change commitments. Over the last year, we have expanded our generation development capability and are now actively creating both near-term and long-term options for new generation. We've increased our activity in getting new renewable projects to investment decision and will continue to deploy capital in growth projects. And we're not limited to greenfield projects and indeed actually believe that more strategic partnerships will be necessary between interested parties, for instance, Iwi, local government, lines companies, et cetera, if we're to deliver the scale of new generation required right across New Zealand. However, we do note that if New Zealand is to achieve its ambitious climate change goals, then we need a more stable and balanced regulatory environment, which allows appropriate prioritization of conflicting issues and government policy and which ultimately encourages new development. And on that point, there is no doubt that we are facing a period of increasing regulatory uncertainty with key upcoming changes, including the proposed new Transmission Pricing Methodology, the resource management and freshwater reforms. As I said, to enable widespread decarbonization, we believe a considerably more supportive environmental regulatory framework will be required with clear and coherent policy direction and imperative if we are to meet our carbon reduction targets. We'll continue to work with industry and sector groups to help the government appreciate the need to ensure appropriate balance is achieved such that no unintended negative impacts felt by customers, the industry or the economy in general from any of the proposed reforms. So in summary, the future for Trustpower will be dependent on the outcome of the strategic review, regardless. We will find ourselves in a new era of living and working in a post-COVID environment and on a fast track to decarbonization. And both these big macro levers will continue to bring both challenge and opportunity as people works -- as people's work habits and electricity usage change. As mentioned earlier, we have a unique opportunity to leverage off the success that Trustpower has gained over the years. And whether we remain as Trustpower or we transition to Manawa Energy, we intend to play our part in helping New Zealand meet its climate change stated goals. Thank you very much. I'll now hand back to Paul. Kia ora.

Kia ora to you, David, as well. Thank you very much for that pretty extensive presentation, all of which, by the way, is online and also available through the NZX. Look, as I said before, we absolutely invite questions on any of the issues that David and I have raised or any indeed that we didn't raise. As it happens, there's a delay between when I ask you that question, and we you hear it altogether by about a few seconds. So please get your questions in as soon as possible.

And I see that our first question has come in, which I will pass to you, David. Are you seeing that question there? I'll read it to you, if you like. Do you have a preferred size for new generation development projects?

Let me just check. Have I got -- you can hear me, yes. That's a good question. Thank you. Not -- in simple terms, not really. I mean we're taking a very open and flexible approach and really looking at a wide variety of options. I think as I mentioned, I mean we're not limited to greenfield sites as we see a lot of opportunity and strategic partnerships in the development of new renewable generation. And really, we assess each option on individual matter through a number of different lens and are certainly not limiting ourselves to size. But I guess I do note that often -- scale often does drive efficiencies and, therefore, potentially better returns. But no, we're taking a very flexible approach.

Very good. I've got nothing to add to that at all, except to say that, of course, we will always make sure that the returns to shareholders are sufficient for the risk that we're taking. But we're optimistic that those projects still exist. Looking now to see if any other questions come up. David, if you see that one, why don't you take that question as well. A preference for generation development in any particular part of the country.

A preference. Look, it's again another good question. Look, again, I would say I mean we assess each option on its own merits through a number of different considerations of which location is one. I mean, clearly, proximity to demand is an advantage, as is proximity to distribution and transmission infrastructure. And most forecasts are showing, I guess, unsurprisingly, that the highest demand growth will be in the North Island. So clearly, that is a consideration, but it's not the only one as if the other forecasts predict that, as I said earlier, we'll need 70% more generation over the next 20, 25 years. Then I personally believe that, that will also change the dynamics of the sector and will drive advancement in new transmission infrastructure, potentially making location far less of a factor.

I'd add to that. I mean it's always an interesting question about the price separation between the South Island and the North Island. Again, we have no insight as to what will happen with the Tiwai point, but we can observe that aluminum prices are at some very, very strong levels. So in some respects, you might say it's now more likely than it has been for quite a period of time that the aluminum shortage will stay, and therefore, the demand equation is different. But look, from a planning point of view, you have to always take -- you have to consider all scenarios. Maybe it will shut down as previous indicators have been replaced with the hydrogen plant. Maybe it's replaced with nothing. All of those are just factors that you take the best advice you can on the relevant time indeed that can or might affect the prices of the different regional markets in New Zealand. But it certainly would be helpful if we had 100% foresight on those sorts of issues. All right. Do we have any other questions coming through? I'm just looking now. I think someone might be refreshing up on my screen. Okay. Again, I think, David, perhaps a bit one for you. Will any further lockdowns be a risk to the sale -- well, I guess I'll take this one. Will any further lockdowns be a risk to the sale of the retail business? The answer to the question is no. There isn't a condition in the agreement with Mercury on that issue. Clearly, lockdowns have a -- as it happens, a relatively modest adverse impact on our business, but not a material level. And it's simply not relevant to the deal we've signed with Mercury Energy. Let's see if we get any more questions. Would Manawa Energy consider investing in new generation offshore? The answer to that is potentially yes, but that we're not resourcing that at this time. So in -- as a potential, that could happen, but it's not a priority work stream. And let's see. If I just give a couple of seconds to see if any more come in. Look, none are coming up on my screen at the moment. But look, keep putting them through, and we will -- we'll happily address them at the end of the meeting if they could come through if not by no means too late.

Okay. So now let's move to the resolutions for the meeting. We've got quite an extensive list today just as it happens more than usual. But I previously gave you the guide on how to vote, which is now back there on your screen. Like I said, if you've lodged a proxy form, there's nothing more for you to do. I and my fellow directors will vote all discretionary proxies we have received in favor of the resolutions. And each of these resolutions is just an ordinary resolution, so will pass on a simple majority of votes. Voting will remain open for 5 minutes after the completion of the meeting, and we will announce the results of the polls through the market later today or tomorrow. So the first set of resolutions for shareholders is to consider the election of directors. All directors are supported for election by all other directors. So they have your valued [indiscernible] support. The listing rules require that a director must not hold office without reelection past the third annual meeting following the director's appointment or 3 years, whichever is longer. For that reason, Kevin Baker retires and, being eligible, offers himself for reelection. In addition, directors appointed by the Board since the last annual meeting are required to retire and stand for election at this meeting. That covers Peter Coman and David Gibson. And finally, as I indicated earlier, we have 2 new director candidates today, Joanna Breare and Sheridan Broadbent, who offer themselves for election for the first time. So moving to the first resolution, which is in respect of the reelection of Kevin Baker. I invite Kevin to say a few words. Kevin, over to you.

Yes. Thank you, Paul, and kia ora. Good afternoon to all shareholders, other attendees and staff and management at Trustpower who are also on this call. [indiscernible] today. And obviously, we're in this COVID world, where we're benefiting from this technology that allows us to all be online and have this Annual General Meeting. I won't add much more to what's set out in the notice of meeting. As stated, I've been on the Board since 2018 and have been on a wide number of other boards over the last 20 years with a particular focus on energy and infrastructure. What I will add is that I'm tremendously excited and really look forward to contributing to the next phase of Trustpower's development as Manawa Energy. As Paul and David have both set out earlier in this presentation, it's a ton of fundamental change in terms of the development of energy and the role of generation and how we build sustainability and environmental issues into the way that we all do business. And I'm really excited about working with the management team and staff of Trustpower and to represent shareholders in the next phase. Thank you very much for your support.

Thank you, Kevin. Like I say, for any questions for Kevin, please put them into the Q&A, and indeed, just to help us if there's any questions for any of the other directors coming up, please put those into the Q&A. I'm not seeing any questions in respect for you, Kevin, this time, but if they come through, we will certainly make sure that you get a chance to answer. And you see on your screen there, the votes that have already been cast in advance of the meeting [indiscernible], which looks reasonably compellingly in favor. All right. We'll move to resolution 2, which is in respect of the election of Peter Coman. As I said, Peter was appointed to the Board late last year. Peter, I invite you to say a few words in respect of your election.

Thank you, Paul, and good afternoon, everybody. Thanks for the opportunity to address today's meeting and to put myself forward for election to the Board of Directors of Trustpower. Like Kevin, I'm excited to be seeking the opportunity to join the Board and participate in Trustpower's current and future success. I thought a brief overview of my background would be useful. Over the last 25 years, I've been involved in the acquisition and management of numerous assets and asset-backed businesses across many sectors in the infrastructure space. These businesses have included social infrastructure, retirement living investments, airports, health care infrastructure, public-private partnerships and commercial real estate. The previous 12 years, I have worked for Morrison & Co, the Manager of Infratil. As a result of these investment activities, I have sat on many investee company boards and have helped drive the value-creation initiatives and overall investment strategies with the focus on ultimately creating significant value for our investors and shareholders. The breadth and depth of that experience, combined with my broad commercial skills and attributes, I can contribute to my role as a director of Trustpower. Should it be your wish, I would be very pleased to act as a director of your company. Thank you, Paul.

Thank you, Peter. Again, I'm looking on my screen. I don't see any questions coming in for you. But look, if they do, then, of course, we will make sure they're answered. And just to remind everybody, you can cast your votes at any point in time in respect of any of the resolutions. All right. Let's move to resolution 3, which is in respect to the election of David Gibson. David, would you like to say a few words?

Thank you, Paul. [Foreign Language], and thank you, shareholders, for the opportunity to address you today as I put myself forward as reelection as a director. My background is in strategy and finance. I co-headed the corporate finance team at Deutsche Bank in New Zealand with over 20 years of M&A and capital markets experience. I had several years of electricity experience as crowd advisor on the mixed ownership model of IPOs. And over the last 4 years, I've started a government career, and I'm currently on the board of Goodman New Zealand, NZME and Rangatira. Outside of governance line, business interests are helping high-growth companies. I'm a strong believer in the strategy that Manawa Energy will pursue as a generation business going forward, and I think we have an exciting future. I believe that my experience is relevant to Trustpower. And if you choose to reelect me as a director, my focus will be on adding value to you as shareholders. Thank you.

Thank you, David. Again, no questions are coming through on my screen for you. And as you see there on the screen, as was given. And Peter, the voting situation is looking promising. All right. Now the fourth resolution is in respect to the election of Joanna Breare. Joanna would like to address the meeting, please? Joanna, have we got you off mute. It's just come up to me that Joanna has lost her Internet connection. I got a message from the meeting host. So what we will do is we will pass on to the next resolution, and when Joanna rejoins us, we'll give her a chance to pursue this. So we'll just defer Resolution 4 until I've got a message back that Joanna is back. So the fifth resolution is in respect to Sheridan Broadbent. Sheridan, I hope you're still there and we haven't lost you?

Thank you, Paul. [Foreign Language] It's a real privilege to be before you today. I'm an Auckland-based independent director and Board adviser. I'm a former executive and chief executive, having worked in senior roles across the electricity, telecommunications, ICT and contracting sectors in New Zealand, the South Pacific and in Australia for many years with organizations such as Spark, Downer EDI, Genesis Energy and Counties Energy. I've had board positions with organizations such, as most recently, Transpower where I was also the Chair of the Risk Committee in addition to Timberlands and [indiscernible] where I was an interim [indiscernible]. My professional sweet spot is in growth and development, technology shift and also in creating sustainable value chain ecosystems. I'm currently the Chair of Australasian Technology Company, Kordia Group. I'm the Deputy Chair of the New Zealand business leaders, Capital Safety Forum. And I'm a nonexecutive Director of the New Zealand early-stage developer of global software house called SaferMe. I put myself to you today as an experienced and contemporary director with relevant skills in the sector, along with the background in growth, technology and in risk and opportunity management. So I'm very much here to support Trustpower and Manawa's exciting next chapter. Thank you.

Thank you, Sheridan. So any questions coming through for Sheridan? There are none showing on my screen at the moment, but I'll just wait for a second to give a chance. And in front of you, again, you can see the proxy voting that says it matures a strong endorsement of Sheridan's election. Now I'm just checking on screen to see whether -- Joanna, she is dialing in from New Plymouth. And I don't think, unfortunately, she hasn't been able to rejoin the call, so we would just, again, just hold off on that for a moment. So let's go to Resolution 6, which is the audit fees. This authorizes directors to set the fees and expenses of the auditor. In this case, it's PricewaterhouseCoopers, PwC. You can see the voting there. And I now invite questions on that issue. I'll just pause there for a moment to allow those to come through. All right. And not unexpectedly, there's no questions on that one. So we'll now move on to Resolution 7, which is the special business of the meeting, the disposal of Trustpower's retail business. We call it a special business, but it's still actually just an ordinary resolution. It just needs [indiscernible] in favor. In the interest of brevity, I won't read all the rationale for the proposal or the transaction summary, but the key reasons are included in the slides and are on the screen and even for explanations in the notice of meeting. Suffice to say that Trustpower believes that the wholesale electricity market functions sufficiently well to our regeneration business without a retail customer base to be successful. And a stand-alone generation business with a strong commercial and industrial and unity trading team positions Trustpower, or Manawa, is of course going forward, in the right part of the New Zealand energy market. Also, the retail market for both electricity and broadband are competitive. You as shareholders and as consumers know that. We believe that margins will stay under pressure and that going forward, the successful retailers will be those that achieve scale and make significant investments in technology and systems to reduce cost to serve and cost to acquire and retain. We expect we'll succeed with that because it will be a business probably twice the size that it currently is and exercise what Trustpower is today. And importantly, we believe the sale price is a fair reflection of what the businesses today and where it might grow. We believe the sale price of $441 million, backed by a power purchase agreement with the key terms shown on these slides, is attractive to Trustpower shareholders. When all this is weighed up, the decision to sell a retail business and make room is reasonably straightforward and supported by all directors. We're optimistic about the future what is for the continuing amount of energy and for the customers and staff who will move to mercury. So look, that's the introduction. There's a lot of material there and a lot of material in the notice of meeting, but we certainly welcome any questions on the sale before we put it to the vote.

And I see a question that has come in now. And I think I'll pass this to you, David. Are you seeing this question about adding talent to Trustpower -- Manawa post the demerger with Tilt Renewables?

Yes. Do you want to deal with that? Because there's 3 or 4 questions in there, Paul.

Okay. All right. Well, [indiscernible]. The question is, "Are you looking at renewable energy generation -- you are looking at renewability generation. Considering that a lot of expertise was lost in the Tilt Renewables [indiscernible] or demerger, are you looking at attracting back personnel? Effectively, how are we going to pursue the strategy of generation growth posit the Tilt transaction? Why don't you take that question?

Yes. Yes. Happy to. Look, there's a couple of things in there. First off, just to kind of debunk that idea that we lost a lot of personnel. Yes, while some went to Tilt, not all, and we've actually retained a core group of key individuals with a deep capability within Trustpower that remain in that development team. So we certainly haven't lost that capability, but you -- whoever asked the question, you're absolutely correct in that we are seeking to significantly increase and augment our capability. And indeed, I mentioned earlier in my address that we've actually done that over the last year. And I also mentioned the fact that we're actually out looking for new and senior-level exit positions within Trustpower and -- sorry, in Manawa, and I guess it won't come as any surprise that we've had a significant amount of interest from people wanting to join Manawa going forward for all the reasons that we just described to you today. So in simple terms, yes, of course, we are looking to take onboard anybody's capability and skill set to grow Manawa going forward. But I certainly very pleased with the existing skill set that we have at present on the significant momentum that we've got underway.

Yes. There's nothing that I would add to that. All right. I've got another question -- another question is, If retail is being sold off, then where is Manawa Energy's office going to be? Have we found it yet? It's a very -- I'm sure we talked about it before.

We absolutely did. There was a line in one of our slides earlier just confirming that the head office for Manawa will remain in Tararua. There's some noise on the line.

Yes. There's a bit of background noise, David. I'm not sure if it's from you or somebody else. Might just want to answer that again.

Okay.

Could you ask that question again?

Yes. So just as a reminder to everybody, the question is, If retail is being sold off, then where is Manawa Energy office going to be? Have you found it yet? And I was saying that as I mentioned in my presentation earlier, the head office for Manawa will remain in Tararua. And in the interim, once the deal goes unconditional, we will, for a short period of time, stay in our main offices in Down Street, but we are actively looking at new premises. And indeed, as Paul just said earlier, there were people that went to the Board immediately prior to the ASM here today where we have indeed found a favorite option, and the Board approved us proceeding with that, which is great news. So hopefully, we'll be able to share where that is in due course.

Very good. All right. I'll just wait -- I'll just give another maybe 20 seconds or so to see if any further questions come in on Resolution 7. And if not, in the meantime, we can observe on the slide there the votes in favor, which, again, is a strong endorsement of the transaction. If no more questions come in on Resolution 7, then we will go back to Resolution 4, the election of Joanna Breare.

And I do see that a mobile number has joined the call. Is that Joanna? Have you dialed in again?

I have. It's Joanna Breare here, and apologies for the bad connection.

Yes. Probably we lost you the -- one way. But look, we -- all right. Let's go back now to Resolution 4, which is the election of Joanna Breare. And look, I'm glad you're able to rejoin us. There's always likely to be at least one technology issue in doing this sort of thing. If you'd like to say a few words in respect of your election.

Thank you, Paul. And unfortunately, for everyone else, you won't be able to see me. I'm on my mobile now. So good afternoon. And I'm honored and delighted that the Trustpower Board has proposed me to become an independent director of the Board after what I can call a rigorous interview process over several weeks by the Board and some senior executives. I have extensive experience in the energy generation sector in New Zealand and internationally. A significant part of my career has been running complex operations; leading projects, including divestments and acquisitions of assets; managing large organizations; being responsible for compliance to health, safety, environmental standards and regulations; and finally, working with local communities, [indiscernible] and [indiscernible], ensuring a license to operate. All these skills will be invaluable in ensuring the governance of Trustpower in maintaining the high levels you expect from the Board. More recently, I was the Chair of the Taranaki 2050 Leadership Group, working to develop a transition to a low-emissions economy, in particular, finding and developing alternative forms of energy in Taranaki for New Zealand. And similar to what David was talking about, these are ranging from wind, solar, wave, tidal and hydrogen energy sources. There are many out there that we could be considering. I'm a member of the Institute of Directors and an active member of the Taranaki Branch Committee, ensuring directors are abreast of changing governance issues in New Zealand. The most recent engagement that I've been involved in has been working with the Climate Change Commissioner, Dr. [indiscernible], to understand the impact of the final climate change commission recommendations and the potential impact on companies such as Trustpower. Thank you for allowing me to briefly talk about my professional career and how I can assist the governance of Trustpower. I hope you'll vote favorably on the proposal of the Trustpower Board to appoint me as an independent director. I thank you, and apologies for not being there for you to be able to see me.

Very good. Well, well done for getting back. And again, slide in front of the meeting now shows overwhelming support for your election. But let's just give people a chance to type any questions through the platform. There is none that I've seen that have come through. So look, just for the record, we have now -- not in the order of the meeting we have now presented and voted on all 7 resolutions. Voting will stay open for another 5 minutes or so. So what that brings me to close out the meeting. I do see that another question has -- a couple of other questions have come in, which is good.

The first question is, Are you investigating some form of battery technology, given the intermittency of wind? David, would you like to answer that? Or I can have a go.

You go ahead, Paul.

Yes. The answer is absolutely yes. There's no question that intermittency of all renewables, not just wind, it's also solar, is going to require deployment of more sophisticated battery technology. And you've already seen that abroad, much more than you are in New Zealand. So yes, batteries are underway. The scale of them and the economics of them, well, we'll have to wait and see how that goes. But they undoubtedly will play a part. The converse of that, which is an important point, is load management. I mean batteries are one side of the coin, and load management is the other. But when intermittent generation is at lower levels, then we will certainly see more sophisticated tools to moderate the demand side, whether that's just turning off the freezers of the [indiscernible] down stores for 30 minutes or so, wouldn't make any difference. But there's lots of opportunities, and many other electricity markets have more sophisticated demand management towards New Zealand currently. So I.. expect that to happen along with the batteries. Next question. Are you able to implement a shares in lieu of dividend scheme? No, we're not -- we don't have one of those, and we don't have a present intention to introduce such a scheme. It's somewhat complicated by the share of Trustpower, but it's not a current priority for the Board. Next question, perhaps for you, David. You've seen that one there on -- we're replacing turbines. What sort of efficacy increase do you see?

Yes. So the question is, I see that a number of sites you're replacing turbines. What sort of increased efficiency do you see? There was a slide I presented earlier in the slides part. We listed a number of fairly material capital works projects we've got underway around enhancing our existing schemes. And I mentioned in that, that we're increasing our total production volume by around close on 70 gigawatt hours per year within the next 5 years. But in terms of an efficiency perspective, it's slightly different depending on what scheme that we are looking at. But essentially, it's somewhere between an increase in 5% and 10% in terms of efficiency at each of those schemes.

You were able to give the indication of how old some of our equipment is, that we're replacing. I mean these are long-life assets, but there is...

Yes. Yes. I mean it goes without saying, I mean, Paul, again, as I mentioned earlier, we've got a few extensive asset base around the country, which requires significant work and ongoing investment to maintain that asset base, and some of it is fairly old. I'm not quite sure what our older scheme is, but it's probably close on 80 years, and I've probably got that wrong as well. But certainly, that -- but certainly, there's an ongoing asset management program. I also did mention earlier that we are trying to move from a reactive maintenance program to more of a proactive asset management program, which is absolutely critical to actually then continue to maximize the life cycle we've got and all our [indiscernible] around the country.

And just related to that was a topic that I alluded to in my talk as well about technology and innovation in the generation sector. I mean obviously, solar is the particular one where you've seen significant improvements in the efficacy of the panels, but also wind technology. The leading manufacturers are getting smarter and smarter with the turbines they're producing for the different wind conditions and the efficiency of operations. So we definitely consider to see improvements in that. You certainly won't see like sort of 2-blade winds -- 2-blade, 300 or 400 machines like you do with the Tararua that were built 15, 20 years ago. Okay. I'm not seeing any more questions come through. So I'll just really now bring the meeting to a close. Thank you, everybody, for their attendance. Apologies again for not being able to hold it in a regular format. We will try and do that next year, COVID willing. I'm optimistic we will be able to do that. But look, otherwise, to answer your questions about the operations of Trustpower, please feel free to send them through, and we're happy to engage with shareholders and stakeholders and we tell them about the things that we're doing. So thank you for attendance. We'll be announcing the results of the polls today or really early tomorrow morning. So goodbye. [Foreign Language]. Goodbye from us, and we'll see you again next year.