Mercury NZ Limited (MCY) Earnings Call Transcript & Summary

Good morning, everybody. To our owners, investors, Mercury people and others joining us today, welcome to Mercury's Annual Shareholders' Meeting for 2020. My name is Howard Thomas, and I'm Mercury's Company Secretary. I hope you're all safe and well as you join us today online. It's fair to say that we continue to adapt to some rather unique circumstances. So it's within that context that we seek to effectively, efficiently and above all, safely conduct matters of formal business in an online format this year. So today's meeting is being held on the Lumi platform. So this allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. And in addition, shareholders and proxies can ask questions and vote on resolutions. So I'd like to briefly explain the process. So votes can be cast, and questions can be submitted at any time from the start of this meeting. And we have a facilitator who will read your questions to our Chair, Prue; or to Vince, our Chief Executive. Now a facilitator will try to faithfully present all questions asked. The facilitator is not going to change questions, except to correct obvious errors that can occur in typing. However, if there are several questions on the same or similar topic, then these might be grouped together into one representative question so the answers aren't duplicated just as we would avoid that duplication in face-to-face meetings. Now your question should be relevant to proceedings, and please make them succinct and clear so that we can answer them, hopefully, in the same way. If we are unable to address all questions because of time today, we will respond directly to the shareholders after the meeting. Now here is some guidance for voting or questions via the online platform. [Operator Instructions] Now I should point out that while you can submit questions from now on, they will be addressed only at the relevant time in the meeting. So voting today will be conducted by way of a poll on all items of business. To provide you with ample time to vote, voting will open shortly for all resolutions. So how to vote. When voting opens, if you are eligible to vote at this particular meeting, a new polling icon will appear. It looks like a small bar graph. Selecting this icon will bring up a list of resolutions, there are 4 today, and give you voting options. To cast your vote, simply select one of those options. You'll know it's been selected because it will change color. Believe me, you will see that happen. I'm profoundly colorblind, and it does work. There's no need to hit submit or enter or anything like that as the vote is automatically recorded. You can, however, change your vote up until the time Mercury's Chair declares voting closed. Simply make another selection in the manner I have just described. So having provided that background, I now invite your Chair, Prue Flacks, to open our 2020 Annual Shareholders' Meeting. Prue?

Thank you, Howard. [Foreign Language]. Good morning, ladies and gentlemen, and thank you for joining us. My name is Prue Flacks, and I am Chair of Mercury NZD Limited. On behalf of your directors, Chief Executive, our leadership team and all of our people at Mercury, I extend a very warm welcome to those of you who have been able to join us online. I am pleased to confirm that we have a quorum represented here today, and therefore, declare open the 2020 Annual Shareholders' Meeting of Mercury NZ Limited. Howard has just given you instructions on asking questions of us during this virtual meeting and also on how to cast votes. I now declare voting open on all items of business. The polling icon will soon appear. Please submit your votes at any time. I will give you notice before I move to close voting. So outlining our agenda for today. I'll first briefly introduce our Board to you. I'll then give you some reflections on the past year before summarizing our capital structure, dividends, total shareholder return and also update you on our earnings guidance. I'll then hand you over to Vince, our Chief Executive. And as I noted in our annual report, your Board was extremely pleased to announce at the end of last year that Vince would join Mercury following Fraser Whineray's move to Fonterra. Vince joined us at the end of March in the midst of New Zealand's first lockdown prompted by the COVID-19 pandemic. And although this was a challenging time to step into the role, particularly into a chief executive role, Vince's skills and deep experience in the industry have ensured a smooth transition and strong leadership through this period. But in this context, I would also like to acknowledge the contribution of William Meek, our CFO, who stepped in as acting Chief Executive between Fraser's departure and Vince's arrival, a period which obviously covered the initial stages of lockdown. Vince will update you on our business initiatives and the operating environment, where Mercury's integrated approach to creating sustainable value intersects with critically important long-term national outcomes. In terms of formal business, we have 4 resolutions to put to the meeting. These are resolutions for the election of one Board member, Hannah Hamling, who joined us earlier this year; and for the reelection of 3 other directors who retire by rotation and are eligible and available for reelection. I will outline the process for discussion and voting on the resolutions at that point in the agenda. After the resolutions are presented and voting is closed, we will take questions from you on our financial and operational performance or other questions relating to the company. So now for the introductions. All of your Board are present for this meeting. Those of us who can be are here at our office in Auckland. And as I mention them, hopefully, you can see them, and I invite them to say hello to you all. So around the table, we have Mike Taitoko, who joined the Board in 2015.

[Foreign Language]

Hannah Hamling, our newest director. Hannah joined us during the year to fill the vacancy presented by Joan Withers' retirement from the Board.

Good morning.

Scott St John, who joined the Board in 2017 and who chairs our People and Performance Committee. Scott?

Good morning.

Patrick Strange, probably well known to many of you. Patrick joined the Board in 2014. Patrick?

Good morning.

James Miller, who joined us in 2012.

Hi.

And finally, in the room, Keith Smith, who chairs our Risk Assurance and Audit Committee and joined us as a director in May 2009.

Good morning, everyone.

And joining us from Sydney is Andy Lark. Andy joined the Board in 2014. Andy?

Hi. Good morning.

I encourage you to familiarize yourselves with your directors' professional experience and skills, which are outlined in our annual report's Corporate Governance section and also on Mercury's website. I note that Anna Lissaman, who sat with the Board and contributed strongly as part of the Future Directors Programme, finished her 18 months with us at the end of December 2019. We are progressing our consideration of another appointment as part of that very worthy program, which aims to build a pipeline of talent for governance roles in New Zealand businesses. We are also joined in Auckland by Vince, our Chief Executive; William, William Meek, our Chief Financial Officer; and of course, our Company Secretary, Howard Thomas, who has already spoken to you. Also present are representatives of our auditors, Ernst & Young; representatives of our legal advisers, Chapman Tripp; and all members of Mercury's executive team. So I'll move now to the year in review. As outlined in our annual report and as reflected in our returns to shareholders, Mercury performed strongly in FY '20 despite very testing circumstances. From last September, we faced what became drought conditions across the Waikato catchment. These conditions directly impacted hydro generation, which was approximately 300 gigawatt hours down against our long-term average. However, careful management of Lake Taupo's storage levels and prudent hedging helped lessen the financial impact of the extremely low inflows. Geothermal production was only modestly down on the prior year's record generation. This was a good result as we managed a robust program of scheduled maintenance activity through the year. Like everyone, we also had to respond to the COVID-19 pandemic. Now I acknowledge that the impact so far on Mercury have been modest compared to many businesses as we continued operating as an essential service. We are a lifeline utility during the initial lockdown period. However, we are part of an environment in which we are all connected in different ways to the significant disruption caused by COVID-19. Vince is going to talk more about operational elements of this in his update, and I will make a few comments later in my address. From a governance perspective, these unprecedented events created by the pandemic have accelerated the transition to digital ways of working, both within the Board and with management. During the first lockdown and also in subsequent periods, including the second raising of alert levels, the governance of the business has continued seamlessly using digital platforms and other technology. As uncertainties related to the pandemic continue, our focus is on supporting Vince and his management team to support our customers and keep our people safe and -- so that they can continue with the great work they do to deliver on our strategy. And I'll talk a little more about this shortly, but this will be an ongoing area for your Board through FY '21 and possibly beyond. So moving to our financial results. Mercury's operating earnings or EBITDA of $494 million was a strong result given FY '20 was the first full year without earnings from the Metrix smart metering business, which we sold in FY '19. Capital expenditure of $279 million during FY '20 represented a high level of activity across our generation assets and technology platforms, all part of ensuring the core of our business is strong. A significant component of this increased capital expenditure relates to the $184 million we have spent up to the end of June 2020 towards the construction of the Turitea wind farm. This wind farm, which will be New Zealand's largest, contributes to the growth trajectory that underpins our approach to increases in shareholder dividends. And while on the subject of wind energy, I will note that our investment in Tilt Renewables has enabled us, as intended, to participate in renewable energy growth opportunities in Australia as well as growth in New Zealand. Mercury held its operating costs broadly flat for the seventh year in a row after normalizing for changes to International Financial Reporting Standards and the sale of Metrix. This continues to evidence Mercury's disciplined and focused approach to its core activities. Elevated spot prices during FY '20 put pressure on margins, which remained challenged across all segments. Our focus on customer value and loyalty as opposed to customer numbers saw decreases in customer acquisitions and also saw customer losses. However, overall, overall customer numbers reduced between FY '19 and FY '20. However, reflecting this strategy, the average mass market yields increased 3.2% over the prior period. Market repricing across the commercial and industrial segment saw average C&I yields increase by 8.8% during the financial year. Our profit in FY '20 was lower than last year's record, which benefited from $177 million from the sale of Metrix. Normalizing for this gain on sale, however, net profit after tax for FY '20 was up $27 million. In our reporting, we refer to underlying earnings, which enables an assessment and comparison of earnings after removing one-off and/or infrequently occurring events, impairments and changes in the fair value of derivative financial instruments. Underlying earnings after tax increased by $3 million for the financial year, reflecting continued focus on careful portfolio management, customer value and a disciplined approach to costs. Mercury's gearing level of 2x debt-to-EBITDA was up marginally on the previous year due to the capital expenditure in relation to construction of the Turitea wind farm. The gearing ratio remained at the strong end of our target credit range, which supports our S&P Global credit rating of BBB plus. Your Board was pleased to announce with our annual results a final ordinary dividend of $0.094 per share, fully imputed. This lifted our total FY '20 ordinary dividend to $0.158 per share, making FY '20 the 12th year of ordinary dividend increases. Our total shareholder return during FY '20, which included -- which includes changes in share price plus dividends paid during the year, was 4.5%. Since the end of the 2020 financial year, there have been some occurrences to highlight and which are also noted on Page 69 of our annual report. On the 9th of July, New Zealand Aluminium Smelters announced its intention to wind down its operations at Tiwai Point, which it expects to complete in August 2021. The smelter accounts for around 13% of New Zealand's electricity consumption. And if it closes, it is likely to have a material impact on the country's electricity demand/supply balance and on wholesale electricity prices. Vince will talk more about Tiwai shortly. Then at the end of August, Mercury announced an offer to institutional and retail investors of 7-year unsecured, unsubordinated fixed rate green bonds. The offer closed on 4 September, and $200 million of green bonds was allocated to the participants or their clients in the book build process. This includes oversubscriptions of $50 million. This is a great milestone for the company. It has been enabled by our heritage in renewable energy, and it supports our renewable energy growth strategy and Mercury's mission of energy freedom. The proceeds of the green bonds are intended to finance or refinance new or existing projects that have been identified by Mercury as eligible projects. For us, that means primarily to finance the construction of the Turitea wind farm. I would now like to comment briefly on 2 areas which have been and will continue to be important to us from a governance perspective. First, COVID-19. For our business, as for everyone, the response to the pandemic has made this a particularly challenging year. Mercury has an important role as part of the energy sector to ensure that the economy can function. The business maintained a joint focus on supporting our customers and keeping our people safe to continue the operation and maintenance of our assets to ensure security of supply. We swiftly became aware that some customers were particularly vulnerable at this time, and significant effort was made to deal sensitively with them. Processes were implemented to support our customers, specifically those who choose GLOBUG, our prepaid product that allows customers to manage their energy costs in real time by topping up their account as required. Initially, energy management, which can, in certain circumstances, involve halting power supply to manage the buildup of debt, was paused. We consulted with community groups and budgeting advisers, and with their input, made a number of changes. For our prepaid GLOBUG customers, we increased communications and checks on customers' well-being. We eliminated top-up fees and reduced minimum top-up amounts. However, the majority of our residential customers are on post-pay with monthly bills. For those who identified that they were facing new financial pressures, we put in place extended payment arrangements. We have been working closely with our business customers, discussing flexible payment terms where possible. This included supporting the SOS Business initiative that helped participating businesses access cash flow when trading was halted due to pandemic restrictions. We will continue to remain sensitive and responsive to customers' needs. I would also like to acknowledge the resilience shown by Mercury employees during the pandemic. During the lockdowns, the majority of our people worked from their homes and adapted to new ways to remain connected and productive. In addition, key essential staff were supported to continue to carry out their roles on our sites safely. The Board's approach to remuneration outcomes for FY '20 and to setting remuneration for FY '21 has been to balance the need to be fair to and to maintain the goodwill of our people in the context of the overall economic and social environment. A decision was made by the Board to not review remuneration for any Mercury employee earning a base salary of $100,000 or more in 2020. This includes all executives. Directors' fees remain unchanged from their last review in 2015. You can read more in the remuneration report in our annual report starting on Page 79. The other area I'd like to talk briefly about is climate change. Climate change has been identified as a material issue for Mercury, and it's a focus area for our business. We acknowledge that Mercury has a kaitiakitanga or guardianship role to play its part in helping New Zealand reduce its greenhouse gas emissions. We also take responsibility for our own climate change impacts as a business. Our annual report this year describes how we are preparing for climate change and reporting against the framework produced by the Task Force on Climate-related Financial Disclosures. The annual report goes into some detail on Page 35. And this year, Mercury produced a specific climate change management plan, and the 5-point strategy is available to be read on our website. Hannah Hamling, who was appointed to the Board this year and is to be considered for election later in this meeting, brings strong environmental science credentials and experience in water management issues to support our Board in this area of growing importance. Now I will conclude my overview by sharing your Board's financial guidance for the 2021 financial year. Mercury's earnings or EBITDAF guidance for FY '21 has been revised as of this morning due to continued dry weather in the Taupo catchment. An update has been provided to shareholders via the NZX and ASX, where we note we have lowered guidance from $515 million to $505 million for FY '21. This is to reflect an expected 200 gigawatt hour decrease in full year hydro generation to 3,700 gigawatt hours related to the dry conditions that have been experienced. Mercury will continue to provide updates of its midpoint estimate of full year hydro generation with its quarterly operating statistics. Our stay-in-business capital expenditure guidance is $80 million. FY '21 ordinary dividend guidance is unchanged at $0.17 per share, fully imputed. This represents a 7.6% increase on FY '20, and it will be the 13th consecutive year of ordinary dividend increases. This guidance is subject to any material events, significant one-off expenses or other unforeseeable circumstances, including hydrological conditions. Guiding our approach to maintaining incremental dividend increases, we recognize that we have a large share register of retail shareholders who appreciate our efforts to sustain dividend increases in what is a low interest rate environment. And this has been enabled by a robust and consistent strategy that has guided decisions made over time to ensure a strong platform for delivering on what we say we will do. I now have great pleasure in handing over to our new Chief Executive, Vince Hawksworth. Vince?

[Foreign Language] Thank you, Chair. Firstly, I would like to add my welcome to shareholders. This is my first ASM as Chief Executive. I commenced the role in late March at the start of the Level 4 lockdown. It's been an unusual way to enter the business. It is disappointing for me that I'm unable to meet shareholders in person. However, as in everything we do, health and safety is job #1. I would also acknowledge our executive team and all of our Mercury team who have enabled a seamless transition as I joined the company. In my opinion, your company is in good hands and has excellent prospects. In this presentation, I will address the macro context for the Mercury business. I will discuss the market outlook, our aspirations for the Waikato River catchment, our wind investments, the customer business, our key activities and our focus on performance. Finally, I will share our unique competitive advantage. Our mission of Energy Freedom remains relevant, and the 5 pillars of our business model are important. They create the balance in the way we approach everything we do. The pillars of customer, people, kaitiakitanga, partnerships and commercial provided a framework for decision-making. This framework came to life as we responded to COVID-19 and will help us navigate an uncertain future. In that vein, I now turn to the world around us. The transition to a low emissions economy remains a huge opportunity for New Zealand. The challenge is to develop a pathway to the 2050 net carbon neutral goal at the lowest economic cost of abatement. It is our view that the largest opportunities for New Zealand to decarbonize are electrification of the transport fleet with 5x the emissions of electricity, conversion of industrial process heat with 2x the emissions of electricity and electrification of hospital and school boilers. In New Zealand, the Trilemma of sustainable, reliable and affordable energy is within reach. The electricity and carbon market price signals are leading to significant efficient investment, our Turitea wind farm being 1 of the 2 new wind farm projects in New Zealand. Turitea will produce 2% of New Zealand demand. We should not confuse carbon emissions reduction with a 100% renewable electricity target. Both the Productivity Commission and the Interim Climate Change Committee pointed out that such a target is prohibitively expensive and that decarbonization of the energy system as a whole is a better goal. In recent weeks, the possibility of a large pumped storage scheme at Lake Onslow has been suggested to manage the dry year risks of transition. We welcome robust investigation of such alternatives. However, it is critical that the scope of any investigation focuses on the best economic options to manage the transition to a higher percentage of renewable generation that facilitates decarbonization. Two of our current challenges are the fallout from COVID-19 and the uncertainty around the Tiwai Point aluminum smelter. In dealing with the impact of COVID-19, our people ensured that the assets operated, keeping the lights on and that our customers were supported. However, Alert Level 4 lockdown did mean that Turitea construction was put on hold. I will discuss this further shortly. During lockdown, we observed a 14% decrease in demand. Though subsequent to lockdown, that has recovered. However, there remains uncertainty about the medium-term future of industrial load and electricity demand more generally. Like so many businesses, COVID-19 has caused us to think about our resilience to unexpected events. It has caused us to look internally at the opportunity to be more efficient, more resilient and create a step change in performance. Our team is focused on increasing shareholder value, staff engagement and company resilience. I now want to turn to the Tiwai Point aluminum smelter. Our working assumption is the smelter will close by 31 August 2021. We are aware of reports of a possible extension to this date, and current forward electricity futures prices appear to reflect this. We note that a closure will likely cause retirement of some thermal generation and will mean hydro generation will be trapped in the lower South Island. To alleviate this, significant investment has been proposed in transmission upgrades over the next 5 to 8 years. We believe it will be important this investment is subject to a robust business case. Looking forward, our view of the market outlook is that we will be impacted by headwinds: demand growth constrained by economic activity, the exit of Tiwai and the potential for further deindustrialization, leading to market uncertainty and volatility. Mercury is well placed in these circumstances. Your company produces 100% renewable generation, and the assets are entirely North Island-based, close to major customer demand centers and largely unconstrained by the transmission system. Mercury is well positioned for future growth. I will now update shareholders on some of our key activities. The 222-megawatt Turitea wind farm being constructed by Vestas under a fixed-price contract for Mercury has suffered some delays due to both COVID-19 and contractor delivery challenges across design and construction. However, physical erection of turbines has begun, and we look forward to commissioning the northern 33 turbines in mid-2021 and the southern 27 turbines in late 2021. The image you see on this slide is of a turbine base being erected. We will now play a video that gives you a sense of scale of the turbine blades being transported to Turitea. [Presentation]

I think you'll agree that that's a pretty impressive piece of equipment. So turning to Tilt Renewables. Our investment in Tilt Renewables provides an important exposure to the Australian transition to a low carbon energy sector. Whilst the investment performance has been impressive, importantly, the growth prospects are also positive as Australia currently has only 20% of its electricity produced by renewable sources. Tilt Renewables has a good pipeline of projects and the capability to manage the risks associated with the Australian market. A critical part of our business is the relationship with the Waikato River and all of its stakeholders associated with the river. By listening to our iwi partners, we have learned that the Awa is a sacred Tupuna and a living Taonga, that we have a duty to nurture its health and look after its well-being. Our aspiration is that all interested parties are able to regard the Waikato as the world's best catchment. Mercury has a powerful retail brand, and it's well recognized. Our current Kiss Oil Goodbye advertising campaign resonates with customers, and the message is consistent with our view that transport electrification is the best form of emissions reduction. Our challenge is to convert the brand story to increase customer loyalty and acquisition. Digitization and data-driven initiatives will be a key theme. We have a number of ideas in test and are committed to improving our customer experience and creating value for shareholders. Mercury has a distinct competitive advantage. We are aware of the challenges facing New Zealand and the energy sector in the post-COVID-19 world. We are a resilient business. The combination of quality assets located close to demand, our focus on strong partnerships and customer engagement give us a strong competitive platform. It is our people who are passionately aligned to our mission that give me confidence about our ability to execute. Thank you for your attention. [Foreign Language] I will now hand back to the Chair.

Thank you, Vince. We now move on to the formal business of the day. The items of business comprise 4 resolutions. These are all ordinary resolutions, meaning that they can be approved by a simple majority, being more than 50% of the eligible votes cast. The resolutions are to elect Hannah Hamling and to reelect Andy Lark, Scott St John and Patrick Strange as directors of your company. As stated in the voting proxy form, all voting at today's meeting will be by way of online poll. And accordingly, in my capacity as Chair, I require that a poll be held for each of the resolutions. Shareholders who are entitled to vote and proxies who have discretion as to how they vote can vote online. If you completed a postal vote, you do not need to vote today. We have been accepting votes throughout this meeting. As Chair, and together with other directors, the Board holds undirected proxies. With respect to resolution 1, election of Hannah Hamling as a director, 1,077,135 shares; with respect to resolution 2, reelection of Andy Lark as a director, 1,085,123 shares; with respect to resolution 3, reelection of Scott St John as a director, 1,075,679 shares; and with respect to resolution 4, reelection of Patrick Strange as a director, 1,049,855 shares. As described in the notice of meeting and the voting proxy form, the directors intend to vote all of those shares in favor of those resolutions. There is the opportunity to ask questions on the resolutions via the online platform, which was introduced at the start of the meeting. If you are typing in a question, could you please identify the resolution it pertains to? We will seek to address this within the question time that follows. Resolution 1 relates to the election of Hannah Hamling as a director. Hannah Hamling joined the Mercury Board in February 2020 and is a member of our Risk Assurance and Audit Committee. She is an environmental scientist with a particular interest in sustainable development and resilience. Until January this year, she was President of the Asia Pacific region and Global Sustainable Development Leader for Golder. Golder is a Canadian global ground engineering and environmental science company. Prior to joining Golder, Hannah was Managing Director of New Zealand environmental consultancy firm Kingett Mitchell. Hannah has an extensive background in consulting, management and Board roles across various sectors, including electricity, construction and water management. The Board recommends Hannah to you as a Mercury director and unanimously supports her election. I invite Hannah, being eligible for election, to address the meeting.

Thank you, Prue. Hello, everyone. As Prue says, my name is Hannah Hamling. It's an honor to be given the opportunity to attend the meeting and address you. By way of background, my education, as Prue said, is in science, specializing in biological sciences, accumulating and achieving a Master of Science with First Class Honours from the University of Auckland. I started work in a merchant bank in the 1980s, undertaking assessment of investment opportunities in aquaculture and fisheries. I moved into professional services consulting to industry and local government and environmental management, both in New Zealand and Southeast Asia. At 30, with 4 colleagues, I purchased a consultancy company, which I was a director of. In 2006, I negotiated and managed the sale of the company to a global environmental and ground engineering company based in Canada, and as Prue said, Golder Associates. I was appointed to the global Board of that company in 2010 and remained there until 2015, when I took up a role in the executive team as the President of Asia Pacific, responsible for over 900 staff and revenues of over USD 200 million. In 2015, the Australian and Asian operations were making a loss. I increased the efficiency of the operations, changed the culture around, and the operations had their most profitable year ever in 2016 and again in 2019. I was instrumental in developing and holding Golder's first diversity inclusion workshop, which created significant engagement and a cultural shift in the region. And in 2019, under my leadership at Golder Australasia won the Beaton Best Professional Services Firm in Australasia, an Australasian award, and also won the Best Engineering Firm. I am a member of the New Zealand Institute of Directors. This is my first year of working solely in governance, and I focus my energy on my Board role at Mercury. Next year, we will look to expand my directorship. In the meantime, I'm mentoring young women and men leaders from New Zealand and around the world. The energy sector has been of interest to me since consulting to ECNZ in the 1990s and working in Asia to help permit a number of power stations. Mercury's renewable energy assets and its approach to kaitiakitanga dovetails with my passion for creating an environmentally sustainable future for the young people of New Zealand and their children. I believe the sustainable, efficient delivery of electricity in New Zealand will grow the economy in wonderful new ways, and Mercury has the imagination and innovative potential to contribute to this. I consider that with the current state of the world, the global pandemic and climate change, we are on a fast track to new ways of living and working, and this opens new markets for renewable energy. With my global and Australian experience, I am confident I can make valuable contributions to Mercury and its shareholders. I have significant experience in navigating the success of companies in difficult economic times. I also understand the value of brand and differentiation in a competitive market to increase market share. With my background in environmental management and resilience and my interest in sustainable water management, I will be able to contribute to Mercury's continued advancement as an innovative engineering company by helping Mercury's executives achieve its strategic objectives. My focus is to help continue to grow returns to shareholders, while at the same time, maintaining Mercury's status and environmentally sound ethical investment for the shareholders and New Zealanders. Thank you for your time. And as you're aware, I'm seeking election as a director and as your representative on the Board of Mercury.

Thank you, Hannah. I now move, as an ordinary resolution, that Hannah Hamling be elected as a director. And just a reminder, voting will close at the conclusion of questions relating to the resolutions. Resolution 2 relates to the reelection of Andy Lark as director. Andy Lark joined the Mercury Board in July 2014. He has background on entrepreneurship, marketing and digital technologies. Andy is currently the Chair of Group Lark, an accelerant for brand and digital transformations. Prior roles include Chief Marketing and Online Officer for the Commonwealth Bank of Australia, Chief Marketing Officer for Dell's Large Enterprise & Public Group, Chief Marketing and Digital Officer for Foxtel and Chief Business Officer for Xero. The Board recommends Andy to you as a Mercury director and unanimously supports his reelection. I invite Andy, being eligible for reelection, to address the meeting.

Thanks, Prue, and thanks also to the other Board members and shareholders for the opportunity to work with you, both as a member of the Board and also as a member of the People and Performance Committee. Sorry, I can't be there today, and look forward to seeing you all again soon. I enjoy attending shareholder meetings in person. I'm actually today currently sitting in Melbourne, Australia and looking into New Zealand with pride and envy at how you've dealt with the challenge of COVID. And today, it's a privilege to stand for reelection on a Board that I'm very, very proud to be part of. Let me start with a few brief comments on Mercury. Mercury remains one of New Zealand's most important companies and has grown importance over the past years as we've executed across a new -- a range of new and exciting opportunities, from wind to electrical vehicles, to reimagining how customers can drive energy efficiency and savings through digital applications. A lot of the success can be attributed to both the effectiveness of the Board. The stability of which in guiding Mercury through known transitions as well as the news such as COVID has never been more important. But I think it's also more driven by the fact of how well this Board works and functions with the leadership teams across the business. I believe our future remains as vibrant and rich with opportunity as it was when I first joined the Board. I believe diversity of both experience and view is critical to high-performing Boards and companies. And I bring significant experience on Boards and enterprises of every size and scale with a deep background across technology, business-to-business and consumer sectors. Through my tenure on the Mercury Board, I've developed a deep understanding of the electricity market, both here in New Zealand and abroad. And I continue to be very active in New Zealand, splitting my time between here, Australia and the United States. So I bring a global view to the Board and close to many of the important shifts occurring that will shape our future. I combine experience across high-growth ventures, including Xero and large enterprises, as Prue referenced, such as Dell, Commonwealth Bank, Foxtel, Sun Microsystems and more, where I've had a broad range of roles ranging from Chief Marketing and Digital Officer to revenue responsibility for multibillion-dollar businesses. I've led customer and service and success functions and had the opportunity to build multiple digital offerings, including the #1 mobile banking application in the world. One of the many consequences of COVID is the rapid acceleration of technology transformation, something I'm proud of the fact that Mercury continues to lead at. This spans new ways of working to the need to create new ways of engaging with customers and some that I look forward to contributing to as a Board member. Today, I'm involved with a range of early and mid-stage ventures right the way through to very, very large brands across the world. I believe these skills position me well to help guide Mercury in all aspects of its business to a new world that will be transformed by technology.

Thank you, Andy.

All right. I'm back. Sorry about that. Yes, I'm sorry about that, Prue. So I believe these skills position me well to help guide Mercury in all aspects of its business to a new world that will be transformed by what we read every day, artificial intelligence, data and more. As a resident of Australia, I look with both pride and envy at the effectiveness and innovation occurring in New Zealand's energy sector. The situation faced here and other countries around the world is quite different. And a clear reminder of the importance of Mercury in New Zealand's success for reliable and vibrant industry is vital not just to the energy security but the economic and social security of the nation as well. Through our investment in Tilt, we're positioned to participate in energy changes occurring here in Australia, and having a director close to the market on a day-to-day basis is of importance. So there's never been, I believe, a time where it's more critical for us to realize our vision for both an independent and sustainable energy vision for New Zealand. And I believe Mercury is well positioned to lead the realization of that vision. I'm also proud of the ways in which we've been able to lean in and assist customers during what has been an unprecedented period of disruption. You heard Prue reference many of the steps we've taken. And this is a result of having, as a Board, a balanced view of our business that starts with a passion for our customers and communities. I'd like to thank all of the team at Mercury, from the leadership through to our call center teams and those on the front line, generating energy every day for every New Zealander, for their work and flexibility in adapting to this new environment. I'd also like to acknowledge the importance of the work our People and Performance Committee does under the leadership of Scott in ensuring your teams at Mercury are safe and thriving in this new world. Everything starts with people and guiding them to achieve the outcomes we all desire. One of the many things I enjoy and look forward to continuing at Mercury is working with the teams, both leadership, spending time on sites, meeting customers and stakeholders in our local communities and engaging with teams as they create new thinking to create value for you. This commitment to go above and beyond the formal Board role is something I willingly offer. I'm fully committed to the Mercury Board, one that I believe is both vibrant and effective and I enjoy serving on. Shareholders, ladies and gentlemen, it's an honor to attend this meeting. I do it with great pride, and seeking reelection as director and reappointment as your representative on the Board of Mercury, ask for your support. Thanks, Prue.

Thank you, Andy. I now move as an ordinary resolution that Andy Lark be reelected as a director. Resolution 3 relates to the reelection of Scott St John as director. Scott St John joined the Mercury Board in September 2017 and is Chair of the People and Performance Committee. He has an extensive background in investment advisory and capital markets. Scott is Chancellor of University of Auckland, Director of Fisher & Paykel Healthcare and Fonterra. He is also a Board member of Next Foundation and a former member of the Capital Markets Development Taskforce and the Financial Markets Authority Establishment Board. He was Chief Executive of First New Zealand Capital from 2002 to 2017. The Board recommends Scott to you as a Mercury Director and unanimously supports his reelection. I invite Scott, being eligible for reelection, to address the meeting.

[Foreign Language] My name is Scott St John. My background is principally in finance, as Prue said. I stepped down as CEO of the business now known as Jarden's in 2017, after 15 years as CEO. Since then, I have taken on a number of governance roles. These include as a Director of Next Foundation, a philanthropic enterprise targeting education and environmental outcomes; a Director of Fonterra; Chancellor of the University of Auckland; and Chair of Fisher & Paykel Healthcare. I also have various levels of membership with the Institute of Financial Advisers New Zealand, the Institute of Directors and Chartered Accountants Australia and New Zealand. For shareholders, I would tender that I bring skills and experience in being a CEO, finance, large enterprise governance, innovation, sustainability and amongst other things. For the Mercury Board, I chair the People and Performance committee. I acknowledge the responsibility that goes with being your representative. I am a shareholder, and in that regard, share alignment with you. In that context, I ask for your support of my reelection.

Thank you, Scott. I now move, as an ordinary resolution, that Scott St John be reelected as a director. Resolution 4 relates to the reelection of Patrick Strange as director. Patrick joined the Mercury Board in February 2014 and is a member of the Nominations Committee and the Risk Assurance and Audit Committee. He was previously a director of our company in 2006, 2007 before being appointed Chief Executive of New Zealand's transmission owner and operator, Transpower New Zealand Limited, a position he held for more than 6 years before returning to the Mercury Board. Patrick is currently Chair of Chorus and Chair of Auckland International Airport and was previously a director of Essential Energy Australia and NZX Limited. The Board recommends Patrick to you as a Mercury director and unanimously supports his election -- his reelection. I invite Patrick, being eligible for reelection, to address the meeting.

Thank you, Prue. And thank you, shareholders, for the chance to represent you. I won't revisit my background. A lot has changed since I joined New Zealand electricity industry. Demand is flat, competition is very strong, and New Zealand gas supply is frankly dying. However, the New Zealand electricity industry has performed superbly over the past decade, particularly since the government sold down its stake. New Zealand has a difficult system, long distances, small storage, lakes and very variable climate and weather. But we have very, very strong private investment with all the disciplines that government ownership completely lacks: higher renewables without subsidies, excellent reliability, strong retail competition and competitive pricing, which is really a credit to the settings established by first Helen Clark's government and then by John Key's government. As Prue mentioned, until recently, I was a director of New South Wales energy companies in Australia. My exposure to Australia demonstrated to me just what a shambles, poorly thought out policy settings and government interventions can create. And they look on the current New Zealand electricity system with envy, particularly the effectiveness of our market and the lack of political intervention. So the recent interest in direct government investment in the South Island pumped storage project is a disturbing blast from the past. We do need more winter capability and storage, but to invest up to $100 million of government money just to investigate this endeavor is, to my mind, mind-boggling, as are statements that spending what would probably end up being between $5 million and $10 million would result in lower electricity prices, that is dreamland. Hopefully, when we have passed the upcoming election, sanity will prevail. The industry has other challenges apart from politics: flat demand, meaning growth must be earned. However, your core generation assets are long-lived, of very high quality, and most importantly, they are located in the right end of our country. They're also very well-run, as Mercury's financial performance over the recent period of very low inflows demonstrates. So should I get your support, I look forward to continuing to work with Prue and with my fellow directors to ensure your company continues to deliver excellent outcomes for New Zealand and for you, our shareholders. Thank you.