Mercury NZ Limited (MCY) Earnings Call Transcript & Summary

We're going to get started now, everybody. [Foreign Language] to all our owners, investors and guests. I welcome you to Mercury's Annual Shareholders Meeting for 2023. And my name is Howard Thomas, and I'm the Company Secretary. It's an absolute pleasure to welcome you here today in person and online. Spring is definitely sprung, which is beautiful. I'll quickly run through some housekeeping before we get started. So this is a nonsmoking, non-vaping venue. So if you'd like to do either of those, please go as far away from the building as possible in the car park. Toilets are located on this floor. So they passed the stairs where you came in just now as well as downstairs by the Akarana Eatery. If there's an emergency, please follow the instructions of the venue staff, who will be wearing Hi Vis jackets. Now there are emergency exits on the balcony. So they're left and right of me. Left and right over there. Please exit promptly through these doors and down the external staircases. These will take you to an evacuation point, which is in the car park. So if you have any mobility issues, please just see a member of the venue staff. So following today's meeting, we hope you join us downstairs in the Akarana Eatery for afternoon tea with your Directors, with management and the rest of the wonderful Mercury team. We really do welcome these opportunities to meet up with you and speak with our shareholders and friends. So do join us there. Now continuous improvement to way of life for us at Mercury. So for those of you here in person, feedback forms were placed on your seats. Please let us know what you think, then place the form in the box, which is near the exit on your way out or alternatively leave them on your chairs or just hand them to one of the Mercury guys in the yellow T-shirts. For those of you online, a survey link will appear on the online platform, underneath the broadcast box near the end of the meeting. Now before handing over to our Chair, I'll outline a few procedural matters. For those here in person, we have roving microphones. So if you want to ask a question during Q&A, please just raise your hand and we'll bring you a microphone. Please state your name and whether you are a shareholder or a proxy holder. For our online attendees, you can watch a live webcast of the meeting and read digital copies of the meeting documents and shareholders and proxies can also ask questions and vote online. So online Q&A. If you're online and have a question during the live meeting, please use the Q&A tab on the right half of your screen to submit your question. You can do that at any time. Your question will be submitted immediately once you press send, it's a warning. If you need help, you can type your query, and one of the Computershare team will assist you using the chat function. Alternatively, you can call Computershare on 0800-650-034. And we do have a moderator who will do their best to faithfully represent the questions that are asked online. Now the moderator is not going to change any online questions, except to sort of tidy up any typos or anything like that. But if there are several questions on the same topic, those questions may be grouped together in one representative question. Now please note that while you can submit questions from now, these will not be addressed until the relevant time in the meeting. So please keep your questions relevant to the proceedings and make sure there is synced clear as possible. So online voting. The chair will shortly open online voting for all resolutions to provide online attendees with enough time to vote. If you're eligible to vote, you'll be able to cast your vote under the Vote Tab by selecting your voting directions from the options that are shown on the tab. You can vote for all resolutions at once or by a resolution. And you know that you've voted when the tick appears in the box. Now you can change your vote up until the time we declare voting closed by selecting change of vote. The Directors hold undirected proxies. So with respect to Resolution 1, which is the reelection of Hannah Hamling, 468,893 shares. With respect to Resolution 2, the reelection of Scott St John, as a director, 467,023 shares. Resolution 3, the election of Adrian Littlewood as a Director, 536,287 shares. And with respect to Resolution 4, the election of Mark Binns as a Director, 549,161 shares. Directors intend to vote all of those shares in favor of each of the resolutions. The Chair will warn you before she moves to closing -- for voting. Please -- voting instructions for those in-person will be provided when we get to that part of the meeting. And I now invite our Chair, Prue Flacks to open our 2023 Annual Shareholders Meeting. Prue?

Thank you, Howard. [Foreign Language] Good afternoon, and thank you all for joining us today at this Annual Shareholders Meeting. My name is Prue Flacks, and I'm the Chair of Mercury NZ Limited. So on behalf of your Directors, the Chief Executive, and who is with us virtually, unfortunately, Vince tested positive for COVID a couple of days ago, and so made the decision that it was better to attend virtually, but you will shortly see him on the screen. He's feeling fine, he tells me, but he's just not physically in the room with us. But for everyone who is with us online or in Auckland on what has to be a beautiful day, you're very welcome. I'm pleased to confirm that we have a quorum and, therefore, I declare Mercury's 2023 Annual Shareholders Meeting open. And voting is now open on all items of business. So the agenda for today: First, I will introduce our Board and all the Board are here in person. I'll make a few brief comments on our financial results for FY '23 and on the broader environment in which we're operating; then Vince will talk to you about how Mercury is delivering on our strategy. And then this year, we had some feedback last year that you would like to hear more from some of our executives. So Stewart Hamilton and Craig Neustroski, 2 of our executives, are going to talk very briefly about some key business activities in the areas. In terms of formal business, we've got 4 resolutions to put to the meeting: The reelection of Hannah Hamling and Scott St John, and the election of 2 new directors, Adrian Littlewood and Mark Binns. After the resolutions are presented and voting is closed, we'll take general questions relating to the company and Howard's talked about the process for that. But before I move to the introductions, I just want to acknowledge that this is the last time that I will address this meeting as Chair of Mercury. You may have seen the announcement a couple of weeks ago that I intend to retire from the Board at the end of this calendar year. I've been on the Mercury Board for -- well, at that point, have been on the Board for nearly 14 years and the last 4 years as Chair. The Board has elected Scott St John, sitting to my right, to succeed me as Chair. And I just want to say it has been an absolute privilege to be part of the Mercury journey from a state-owned enterprise because I was obviously on the Board before listing to what is now a highly successful listed company. And I thank you all for your support for the Board and the company along the way. And I know that under Scott's leadership, Mercury will continue to thrive and will play a leading role in the transition to a decarbonized world. And now for the introductions, we have on the side, we have Mark Binns. If you could just maybe give a wave. Mark's probably familiar to many of you of few. Adrian Littlewood. Hannah Hamling. Where's James, James Miller? I'm going left from, James, chairs our Risk Assurance and Audit Committee; Susan Peterson, down there. Scott, we've mentioned Scott. Scott currently chairs our People and Performance Committee. At the far in Dr. Patrick Strange. Mike Taitoko down this end, and next to Mike, we have Lorraine Witten. Now I just want to say something about Patrick. Patrick is retiring at the conclusion of this meeting after a total of 11 years on the Mercury Board. Patrick has -- I think we would acknowledge unique perspectives from nearly 4 decades in the New Zealand electricity industry in a range of roles. And his contribution at Mercury to our strategy, to our large projects, health and safety, and the development of robust risk management strategies have been hugely valuable both to the Board and to management. And Patrick, you will be missed. We keep telling you this and he smiles politely and says, I don't think so. But on behalf of everyone here, I do want to thank you for your long service to Mercury. Now as I said, unfortunately, Vince isn't able to be here in person, but he will be presenting virtually. We do have, next to Howard, we have William Meek, our Chief Financial Officer; and Howard, Company Secretary, you've already met. We also have representatives of Ernst & Young, who undertake the audit of Mercury on behalf of the Auditor General. We have representatives from Chapman Tripp, our lawyers, and we have members of Mercury's executive team down in front of me. So I'll now turn to our financial results, which I think they're going to review a slide. So our financial results for FY '23 reflects the benefits of the large-scale investments that we've made over the last couple of years, which we've talked about at the last couple of AGMs. And their investments that have grown our renewable generation business and our retail business. Also impacting this year's result has been the record generation. So with our hydro generation, we've been 28% higher than average. And we've also had a 16% increase in wind generation. And those 2 things in particular, have contributed to the good result. Net profit after tax was $103 million, which was down $366 million on the previous year. But you will remember that last year's result included the gain made on sale of our shareholding in Tilt Renewables. EBITDAF was $841 million, up $260 million on the previous year. Our operational expenditure was $346 million, which again was up $116 million on the prior year. And again, this is reflecting the increase in scale of our business. Our total stay-in business capital expenditure was $119 million, which was up $51 million on FY '22. The Board was pleased to declare a fully imputed final dividend of $0.131 per share, which was a 9% increase on FY '22. And this took our total FY '23 ordinary dividend to $0.218 per share. And this is the 15th consecutive year of ordinary dividend growth. The total shareholder return for FY '23 was 18.7%. Looking forward, guidance for FY '24 for EBITDAF has been set at $835 million. Ordinary dividend guidance is $0.233 per share, which again is a 6.9% increase on this past year. But achieving these results has required a disciplined focus on the things that really matter. Mercury has faced the same headwinds as other organizations, including supply chain issues, inflation, access to skilled labor, and increasing project costs. And so on behalf of the Board, I just want to acknowledge Vince and the executive team for the leadership that they have provided to the whole of the organization and all our people to produce a result, which I hope you can be as proud of as we are. I just want to talk -- make a few comments about the operating environment. And I think that the world we're now living in is more complex, and it's changing very quickly. And I see -- I think we all see this in different aspects of our lives. And organizations like Mercury must deal with issues such as climate change, dramatic advances in technology and the demand for a more inclusive and equitable society. And as a country, one of our biggest challenges and also one of our biggest opportunities is the transition to a decarbonized economy. And at last year's Annual Shareholders Meeting, I noted that together with many of our sector peers, we commissioned the Boston Consulting Group to provide an independent report on how best to decarbonize New Zealand's energy system. And the report that has been delivered, provides a very helpful whole-of-system view, which shows the key challenges and how the solutions to those challenges are interrelated. And importantly, the report found a pathway to achieve a reduction in emissions, which is faster and deeper than the current government plan. And Vince is going to talk about some of the actions Mercury is taking to help the country get there. But achieving net zero by 2050 in Aotearoa New Zealand, will require collaboration between the public and private sectors with a stable regulatory environment, long-term policy settings to ensure that existing and new sector participants have the confidence to invest the significant amounts of capital required. A whole of system approach is vital to ensure the lights stay on for consumers through the transition to a more renewable future. And the BCG report suggests that keeping a small amount of gas in the electricity system could fill the gap during the droughts and demand peaks that inevitably happen and could also reduce the cost of the transition. And affordability is an important consideration because while residential electricity prices have tracked lower than inflation over the past 10 years, significant investment is required across all parts of the sector. And we anticipate that this will see electricity prices increase in the short to medium term. But this investment is critical not only to enable the transition, but also to ensure the resilience of the network to the more extreme weather events, for example, that we're increasingly experiencing. But over the longer term, total household energy bills are expected to reduce, and that's largely because the electrification of transport will deliver significant fuel savings for consumers. Our sector is united on supporting consumers through this transition. And Craig Neustroski will speak to some of the actions we're taking now, which should set us up to better support our customers. As I'm sure you know, Mercury's assets have been here for more than 100 years. We want to be here for another 100 years. So we need to continue to work hard for our communities. We take our social license very seriously. It is a critical part of our continued operation. And this needs to be reflected in who we are and how we act. So before I hand over to Vince, we're just going to watch a short video on Mercury's new purpose. And our new purpose helps bring our people together across the business and guides how our people work together. And in this world, which, as I said at the beginning, is increasingly complex, fast paced, it's really important that our business is unified. So, [Foreign Language] thank you very much. And we'll just watch the short video before Vince zooms in and addresses you all. Thank you. [Presentation]

Thank you, Chair. [Foreign Language] Welcome, everybody. Apologies for not being in the room in person. I guess, it's kind of safer for everyone as I'm currently still testing positive for COVID. You've heard from Prue about the importance of having a purpose that reflects the opportunity for Mercury to make a real difference in the country's transition to a lower carbon world. The video introduced our new purpose, taking care of tomorrow, connecting people and place today. I will speak to how we will deliver on our purpose. Building on the growth that Mercury has achieved over the past few years, our 2035 long-term aspirations were updated to better reflect the business opportunities and what we aspire to achieve. These aspirations provide direction. They revolve around the assets that we operate, the communities that we serve, the customers that we value, our people who make a difference, and our focus on sustainable commercial growth and leadership in renewable energy. Before the end of this financial year, we will also reset our objectives for FY '25 to FY '27, providing a clear medium-term ambition. One of the largest impacts Mercury can make to help take care of tomorrow is through continuing to deliver new renewable generation for New Zealand. Our Turitea wind farm, New Zealand's largest, is now fully operational, equivalent to 2% renewable generation to the grid. Our $115 million 43-megawatt Kaiwera Downs 1 wind farm near Gore is currently commissioning and remains on track to be fully operational next month. Our Kaiwera Downs 2 and Kaiwaikawe wind farms are also both nearing final investment decision development stages. But today, I'm also pleased to announce that we will be undertaking a $220 million expansion of the Nga Tamariki geothermal station. Stewart Hamilton will further talk to the expansion of Nga Tamariki and how we are also ensuring the long-term performance of our existing assets. Building renewable generation is one of the key actions in our recently released climate transition action plan. This important document, transparently lays out our emissions reduction targets and sets out actions we plan to take to support a net 0 future. Reducing emissions at our geothermal stations is key, and we continue to trial carbon reinjection technology at our Nga Tamariki station. In 1 year, emissions at this station have reduced by about 25%, a really pleasing result. When we think of taking care of tomorrow, we also think of our retail business, and how having scale enables us to deliver value for customers into the future. Significant progress has been made to bring Mercury and Trustpower together following our acquisition of the Trustpower retail business 18 months ago. And we'll hear more about that from Craig. So the connecting people and place today. We are working to become a more adaptive organization to enable our people to more effectively navigate new and complex challenges and opportunities that may arise. To become more adaptive in the ways we think and work, we are focusing on aspects such as embracing transparency, continuous learning and setting ourselves up to collaborate and deliver the highest value. Embracing the many backgrounds, views and capabilities of our people makes us stronger and better as an organization. And so we continue our focus on building a more diverse, equitable and inclusive workforce. Supporting this, we have shifted our health and safety focus to be more holistic, including taking into consideration both physical and mental well-being. As Prue noted, we think deeply about the world around us in everything we do, and we enjoy any opportunity such as today's meeting to connect with our stakeholders and communities. Finally, I would like to acknowledge Prue and the enormous contribution she has made to Mercury's transition to one of New Zealand's largest generators and multiproduct utility retailers. Prue has overseen fundamental change at Mercury. This change is helping Aotearoa New Zealand transition to a low carbon future through our renewable generation, our pipeline, our scale retail business, our partners and our people. I've gained a lot working with Prue and wish her well for the future. To you, our owners, thank you. Thank you for your ongoing support. [Foreign Language] I will now hand over to Stewart to share more about how we're taking care of tomorrow and connecting people in place today in our generation business.

[Foreign Language]. We wish you a speedy recovery. [Foreign Language]. I am proud to be the General Manager for Generation, for Mercury. I'm leading the team of operators, maintainers, engineers that are sustaining and enhancing our 20 assets throughout Aotearoa New Zealand. At Mercury, we have over $8 billion worth of assets, spread amongst 20 locations, 3 fuel types, and these are carefully managed by 300 very committed people. Our people connect nature's energy of water, wind and steam to the assets that generate the electricity and send it to our homes, our businesses and communities. They know the operations intimately and identify how we best invest and how we operate those assets to protect them for the generations to come and enhance for the performance of today. The team made significant progress in setting our assets up for future in FY '23. Part of that saw us complete the rehabilitation of the first turbine and generator unit at our Karapiro station. This station has operated for over 77 years, and the project underway will set that asset up to operate for 50 years and beyond. At the same time, it will also lift the output by nearly 20%. That's enough hydropower to supply an additional 17,000 homes during peak periods of power use, peaking capacity that is vital to support our transition to net zero. We also completed our largest, most complex and extensive geothermal station shutdown and turnaround during the year. The investment of $37 million in Kawerau to replace the turbine, the generator and the control system will set that station up to be resilient and to continue to supply renewable baseload electricity for many years to come. As we look forward to the needs of the future, and as Vince just mentioned, we are very pleased to announce today that we will be expanding the Nga Tamariki geothermal site. This includes the addition of our fifth generating unit at that site. It's an investment of $220 million and will add an additional 46 megawatts of baseload energy generation to New Zealand's grid. That will thereby support the diversity of our pipeline of other wind projects and prospects. Nga Tamariki has operated for 10 years and we have worked closely with our iwi partners, Ngati Tahu Ngati Whaoa, and our commercial partner, Tauhara North No. 2 Trust to develop this project whilst ensuring we manage sustainability, the reservoir and the surrounding environment. It's a very exciting project with first power due to come on late in 2025. To further build the resilience of our Waikato River hydro scheme, we also continue to develop a rehabilitation program for our dams and our power stations. This also is now expected to include investment into the Taupo Control Gates, the Maraetai power station and the Atiamuri power station over the next decade. This further shows our commitment to taking care of tomorrow and sustaining and growing value. [Foreign Language] I will now hand over to Craig to share how we are going to take care of tomorrow and connect people in place in our retail business. Craig?

Thank you, Stewart. [Foreign Language] As the General Manager of our Commercial Operations at Mercury, I'm responsible for driving the commercial strategy of our retail business, including our telecommunications and energy offerings and the smooth running of our day-to-day commercial operations. It's been a big year for our retail business. We've made significant progress in our goal to bring Trustpower and Mercury, employees, customers, brands, processes and systems together. All Trustpower customers were welcomed onto the Mercury brand in June. This enabled them to access Mercury's rewards program, our new app, our refreshed website. And much to our delight, they've really embraced these with the Mercury app rocketing to #1 on the New Zealand app store for a short period. After reaching this milestone, our focus turned to migrating all of our customers onto the refresh technology step. Once this work is complete in coming months, all of our customers will be able to access all of our products, including our popular Samsung deals. While the integration of Mercury and Trustpower has been a significant focus of our time and energy, we have also continued to focus on running our core retail business in parallel. This year, we limited average electricity price increases to between 3% and 5% and recognition of the cost pressures many households are facing. We also continued to phase out the low fixed charge. Nearly 20 years ago, the low fixed charge was introduced with the intention of reducing bills for household with lower electricity consumption. But unfortunately, this resulted in many large, low-income households who cannot afford energy-saving measures subsidizing the smaller households. So last year, the government, together with the industry, began a phase out -- a 5-year phase out of the low fixed charge, which is ultimately designed to ensure fair pricing for all consumers. This means if you're on the low use plan, gradually more of your bill will come under your fixed charge. And I welcome further questions on this at afternoon tea. The industry has developed a package to support customers most affected by this change. Financial aid like this should only ever be a short-term measure. That's why we're committed to finding longer-term holistic solutions for customers that need our support. For example, we're participating in an Electricity Retailers Association trial to help connect customers with poor credit ratings to post-pay power. And we're also undertaking a 2-year winter energy study with Kainga Ora - Homes and Communities. This enables us to trial how capped bills could benefit customers over winter. Further, we've been collaborating on joint research into energy hardship with Genesis Energy and working on potential solutions with community groups. When we look into the future, we think how we can design innovative solutions to meet our customers' changing needs. And we know customers value having multiple services in one place, and we know energy needs to go into change. Some of the things we're looking at are new solutions for EV owners, smart solutions for the home, and how we can help customers become more energy efficient. We believe we can use our scale, customer insights, smart technology, including automation and AI to deliver better outcomes for our customers and staff well into the future. Thank you. [Foreign Language]. And I'll now hand back to Prue.

Thanks, Craig, and I hope you found hearing directly from a couple of our executives more informative than hearing more from me all the time. So we now move to the formal business of the day, and today's resolutions relate to director appointments. All 4 resolutions will be presented before we pause for questions on those resolutions. So all 4 resolutions relate to succession planning for the Board. And it is important that we effectively manage the transfer of institutional knowledge and experience and that we look to the future as well as providing for our immediate current governance needs. The reelection of Hannah Hamling and Scott St John, and the election of Adrian Littlewood and Mark Binns will facilitate effective transfer of knowledge, will ensure continuity and retention of key skills within the Board. All voting at today's meeting will be by way of poll, and accordingly, in my capacity as Chair, I require that the poll be held for each of the resolutions. For those here in person, shareholders who are entitled to vote and proxies who have discretion as to how they vote, should either have the voting form that was sent with the notice of meeting or a form given to them by Computershare when they registered upon arrival. If you completed a postal vote, you do not need to complete another voting form. If you haven't got a voting form, please go to the Computershare desk just outside this room and the representatives there will be able to assist you. I will invite you to vote after all resolutions have been introduced to the meeting, and voting will close at the conclusion of questions. So Resolution 1 relates to the reelection of Hannah Hamling as a Director. Hannah was appointed as a Director of Mercury in February 2020, and she's a member of the Risk Assurance and Audit Committee. Hannah has an extensive background in consulting, management and board roles about various sectors, including electricity, construction and water management. The Board recommends Hannah to you as a Mercury Director and unanimously supports her reelection. I now invite Hannah, being eligible for reelection, to address the meeting.

Thank you, Prue. So tall, I'm going to have to adjust the speakers. [Foreign Language] It's an honor to be given the opportunity to attend this meeting and address you all. By way of background, as Prue said, my education is in science and culminating and in achieving a Master of Science with first-class honors at the University of Auckland. I started work at a merchant bank in the '80s. I then moved into professional services, consulting and geotechnical engineering, environmental science, to both industry and local government in New Zealand, Australia and in Southeast Asia. As appointed to the Global Board of Golder Associates in 2010 and remain there until 2015, when I took up a role in the executive team as President of Asia Pacific, responsible for 900 staff and a revenue of USD 200 million. While at Golder as instrumental in developing and holding Golder's first diversity and inclusion workshop, which created significant engagement and a cultural shift in the region. In 2019, under my leadership, Golder Australasia won the Beaton best professional services firm in Australasia and the best consulting engineering firm. I am a member of the New Zealand Institute of Directors. I finished my first term on the Board of Mercury as Prue has pointed out, and I am also on the Board of a Morgan Stanley Company, which is Morgan Stanley Infrastructure Partners, Burgundy Holdco, which specializes in transport and logistics. Over the past 3 years on the Board and the Risk and Insurance and Audit Committee, I've helped to foster a culture of safety that permeates every aspect of the operation within Mercury and its contractors. And while this culture is still evolving, I am committed to continual enhancement of it. In my role of governance, one of my key contributions has been to help Mercury at a high level, navigate its geothermal drilling program in order to maximize success -- as much success as possible and minimize risk from failure of wealth, health and safety and achieve cost management. Through the lens of governance, I've encouraged the executive team involved in operations to embark on a hazard inoperability program, utilizing the skills of the critical risk team and therefore, amplifying the proactive maintenance procedures, which will, in the medium term, reduce unplanned outages and reduce safety risk to our people working with our assets. Finally and most importantly, one of my many wonderful and humbling experiences I've been fortunate to have, have been included in representing Mercury at numerous events and functions with our [ multi-JV ] partners, who have [ Nga Awa Purua, Rotokawa ] and [indiscernible] on which Mercury operates. I'm proud of Mercury's commitment and passion to decarbonize New Zealand's energy sector. We have embarked on a journey of not just increasing generation but generating change for our future and future generations. I believe that New Zealand as a result of this approach, will attract more for investment into our country and increase the wealth of New Zealanders. With my background in 3 years in the energy sector, I'm confident they will be able to continue to contribute to Mercury's advancement as an innovative energy company, helping Mercury execute -- executive teams achieve its strategic objective. My focus is to help continue to grow returns to shareholders, while at the same time, maintaining Mercury's state as an environmentally sound and ethical investment for shareholders and New Zealanders. So ladies and gentlemen, it's my honor to attend this meeting today, seeking reelection as a Director and as your representative on the Mercury Board. I ask for your support. Thank you for your time today.

Thank you, Hannah. I now move as an ordinary resolution that Hannah be reelected as a Director. Resolution 2 relates to the reelection of Scott St John as Director. Scott was appointed a Director of Mercury in September 2017 and is currently the Chair of the People and Performance Committee and a member of the Nominations Committee. Scott is Chair of Fisher & Paykel Healthcare Corporation and a Director of Fonterra Cooperative Group, ANZ Bank New Zealand and Next Foundation. He has an extensive background in investment advisory and capital markets. The Board recommends Scott St John to you as a Mercury director and unanimously supports his election. I invite Scott, being eligible for reelection, to address the meeting.

Thank you, Prue, and good afternoon. My name is Scott St John. As Prue mentioned, my background is in financial services. I started as an analyst and worked my way through to running a business now known as Jarden's for about 15 years. So for 30 years, I worked on a commercial classroom of sorts, observing businesses, markets and practitioners learning every day. In fact, as time has gone on, my enthusiasm for role-related learning has increased, and I spent a good part of most days learning and reading. During this career, I also got the opportunity to lean into a number of industry forums and regulatory enhancement situations such as the establishment of the FMA. I stepped down from my full-time job early in 2017. And since then, I've been a full-time governance practitioner or director across a wide range of industries, which is, as Prue mentioned, includes being Chair of Fisher & Paykel Healthcare, a Director of Fonterra and ANZ. I'm a former charter of the University of Auckland, and I'm also a Director of Next Foundation, which is a philanthropic enterprise involved in predator eradication and education. In my financial markets role, I was involved in the mixed ownership model program of listing New Zealand's Jim Taylor, something that has, in my opinion, been a success for all stakeholders. The broader industry is delivering on decarbonization outcomes for New Zealand at an efficient clip with billions of dollars of investment in wind and solar and battery scheduled. At Mercury, we have worked hard to craft an exciting pipeline of opportunities to develop renewable assets. That said, it's not quite as simple as build them, and they will come. Committing owners' capital to such projects is a matter taken very seriously by your Board than the context of our strategic plan. I believe my background serves owners well in deliberations around these capital commitments and complements the rest of the Board. I acknowledge the great responsibility that goes with being a director. I am a shareholder, so I am aligned, and I ask for your support in my candidacy.

Thank you, Scott. I now move as an ordinary resolution that Scott St John be reelected as a Director. Resolution 3 relates to the election of Adrian Littlewood as a Director. Adrian is an experienced business leader, his executive career included 12 years at Auckland International Airport including 9 years as the Chief Executive. Adrian will bring to the Mercury Board commercial business experience, extensive large organization and cultural leadership experience and experience in major project investments and stakeholder relationships. The Board recommends Adrian to you as a Mercury Director and unanimously supports his election. And I now invite Adrian, being eligible for election, to address the meeting.

Thank you, Prue. Good afternoon. [Foreign Language]. It's great to see some familiar faces in the audience here today. My name is Adrian Littlewood, and I'm pleased to be putting my name forward for election to the Board of Mercury. Because I knew this is my first ASM, I might just spend a little bit more time on my background. I originally qualified many moons ago as a lawyer here in Auckland, practiced commercial and corporate law here in Auckland and then into the U.K. I then worked as a management consultant in the U.K. before returning to New Zealand to Workforce, what is now Spark New Zealand in a variety of senior management roles. From there, I joined Auckland Airport, firstly, as the executive in charge of the retail and commercial business before becoming the CEO, as Prue mentioned. Outside of those executive roles, I've also held a range of governance roles over the past few years, including a Director of North Queensland Airports in Australia. I was Chair of the New Zealand Airport Association for many years, and I'm currently sitting on the government's Cyclone Recovery Taskforce and the Board of Craigs Investment Partners. My previous roles have given me a chance to work with some very talented management teams and boards, dealing with some very complex business issues, including major technology change-outs, large-scale infrastructure development, business model transformation, regulatory change. So after taking an extended break from the airport and growing a beard, as you can see, I've decided to start a career in governance. And I had to think carefully about the kinds of companies that I might like to put myself forward for. And I really had a simple criteria about which companies I'd like to work with. And it went like this, the company is important for New Zealand and our future prosperity as a country. It's a truly New Zealand company where the decisions -- the hard decisions are made here in New Zealand, not offshore. And the company itself is facing some real challenges, some opportunities as well, but some challenges in the years ahead, and that I could actually offer something of use to the company. And for me, Mercury easily meets that criteria. To me, there are very few things that matter more to our country's long-term success and the safe, stable provision of affordable energy. At the same time, our industry here is going through some major changes, probably some of the most dramatic changes in the industry's history with the decarbonization of energy generation, major asset renewal and the electrification of just about everything and all at the same time. And while these challenges common around the world, I think we will recognize that. Every country will face that differently and New Zealand needs its own response. And in my short time with the company so far, I can already see how this Board and Vince and the management team are determined to be leaders of that change. And not only to be leaders, but to do it really well, while taking care of Mercury's customers and, of course, you, the shareholders. So I believe my experience for working with some of New Zealand's biggest companies on some of their most challenging issues is directly relevant and useful to, I think, the challenges and opportunities at Mercury has ahead. And I hope with your support, I can offer my experience the team at Mercury. So it's my honor to attend my first ASM for Mercury, and I ask for your support to be elected as a Director of the Board. Thank you.

Thank you, Adrian. I now move as an ordinary resolution that Adrian Littlewood be appointed as a Director. Resolution 4 relates to the election of Mark Binns as a Director. Mark is an experienced business leader and Director, and I'm sure he will be well known to many of you. His executive career included 5 years as Chief Executive of Meridian Energy in 22 years with Fletcher Building, including 15 years as CEO of the Construction and Infrastructure division. He currently Chairs Crown Infrastructure Partners and Hynds Limited, and as a Director of Auckland International Airport. Mark will bring to the Mercury Board's strong commercial experience, including in the energy industry, wholesale markets trading experience and obviously experience in major project investment, which is particularly relevant as we embark on a lot of development. The Board unanimously supports Mark's election as a Director and recommends him to you. So I now invite Mark, being eligible for election, to address the meeting.

Thank you, Prue, [Foreign Language] everybody. And it is great to see so many familiar faces from [ Meridian ] and a few years ago in Auckland Airport. So I hope I'm not repeating myself. I'll try to keep it very brief. First, a brief overview of my background. I mean, as Prue mentioned, I started as a lawyer and lift that partnership in my early 30s to go to what was in Fletcher challenge and moved into Fletcher Building. During that time, most of my time was spent in the construction and heavy building materials area, and I finished off as being CEO of the Infrastructure division, which at the time was the largest and most profitable part of Fletcher Building. In 2011, I went to Meridian in contemplation of the company being floated by the national government. That occurred in 2013 and probably 5 years or 6 years at Meridian and I retired in 2017. Since then, I've been involved in a number of enterprises, largely involved in governance in both private and public companies, Prue has mentioned what those companies -- for the major companies actually are. So I believe I have got the skills and experience to add value to the Mercury Board. Clearly, I've got a lot of senior management experience from my time at Fletcher Building and at Meridian. And I have a deep understanding of the electricity industry in New Zealand, it's players and the challenges that it has from those 6 years at Meridian. And finally, I think my experience in construction because I was involved in construction for a large part of those 22 years, gives me a unique contribution to make to Meridian -- Meridian -- sorry, they both begin with him. I knew I was going to make the mistake by the way, to Mercury and when it looks at the opportunities it has in the development pipeline because decarbonization of New Zealand is a very, very important issue for this country and Mercury is going to pay a vital role in that decarbonization. So with that, I'd like to thank you all for listening to me, and I'd ask if you could support my election to the Board. Thank you very much.

Thanks, Mark. I now move as an ordinary resolution that Mark Binns be elected as a Director. Voting on all resolutions will close at the conclusion of questions. So I'll now pause to allow time for any questions to be asked on the resolutions for the election or reelection of your directors. So this is -- we'll save the general questions for later. So these are just questions relating to the resolutions. And we'll take questions from the floor first. There are some people with roving microphones, if required. So just raise your hand if you have a question. Don't appear to be any questions on the resolutions. Moderator, are there any questions online?

Prue, there are no questions online.

Thank you, moderator. That concludes our discussion on the resolutions. So for those in the room who wish to vote on these motions, please tick 1 box to select for, against or abstain alongside each resolution in the section marked on your voting form. If you hold a proxy on behalf of a shareholder, you will need to cast that shareholder's vote in order for them to be counted. Where there are undirected votes, proxy holders may vote these as they see fit by ticking the appropriate box. It is just worth clarifying that all directed votes are treated as postal votes and proxies need not complete a voting form in respect of directed votes. Finally, in all cases, please ensure that the voting form is signed. After voting, please place your form in one of the ballot boxes, which will be passed around the room. And if anyone is unsure how to complete the voting form or if you haven't got a form, please go to the registration desk outside the room and somebody will be able to help you. Once all votes have been cast, they will be counted by Computershare and the results of today's meeting will be released to the NZX and the ASX on the completion of verification of voting. So please prepare your forms and cast your votes now. And in a minute, I will close the voting system. And just please make sure that you've cast your vote on all resolutions. [Voting]

Voting is now closed and Computershare will collect the voting papers in the room. So at this point, we'll open the meeting to questions of general business either from the floor or which have been submitted online during the course of the meeting. So we'll take questions from the floor first. And again, there are some people with microphones. So if you'd like to raise your hand and please state your name and whether you're a shareholder before you ask a question. Gentleman here.

My name is Ken Fisher. I'm a shareholder and a loyal customer. This is the first time I've been to a meeting like this. My question is to do with loyalty. Now over the past few years, when my contract with Mercury has come to a close, the first time was when the early payment finished. And just recently, when the low -- was it the...

Low fixed charge tariffs.

Low fixed charge to finish. So in both cases, I like to ring up and ask Mercury, what they could do for me. And I think that being a loyal customer be much better if you received a letter from Mercury saying, senior or a loyal customer, we can offer you this, which mean I wouldn't have to ring up and find out what they could do for me. So that was my question.

That's a very good point you're making, but I don't actually think it's a question. So I mean, I'm very happy to take the feedback. And in fact, you've got the executives sitting here in the front row that are hearing it. So we should try to do better because you're absolutely right. Thank you very much. There's a gentleman on the front raw. Coming this way.

Good afternoon. My name is Bayer, and we are -- my wife and I were both individual shareholders. My question is about wind farms. The accurate capital intense, and I would like to know what length of time before we get a return on the capital outlay? How long was it operating like the substation, the coaxial cables, and the turbines before we get a return -- the company gets return on the capital.

Well, so you don't mean the life of the wind farm, you mean...

No. Well, before we start getting $1 return.

Where we start generating immediately. But I might just -- so that's quite a technical question. So either -- William, do you want to take that one?

Yes, happy to take that question. So yes, renewable generation investments are capital intensive. The Turitea wind farm, for example, just over $2 million at [ Manawatu ]. Payback periods are probably in the sort of 15-year period. The company makes these investments on a net present value perspective. So we assess the capital cost of construction, the ongoing operating costs for the wind farm and then its revenues through time based on generating into essentially New Zealand's electricity markets. We have a pretty clear cost of capital hurdle. The wind farms exceed that. And we certainly can see that you can see in the accounts this year and in the previous year as we progressively commissioned Turitea and actually uplift in asset values. That's essentially reflecting that the value of those assets exceeds the cost of construction. So we're very confident that the projects we're investing into are decarbonizing New Zealand, but at the same time, earning economic profits for shareholders.

Thank you. Good question. Do we have any -- another one, gentleman on the front.

Thanks. I'm Bruce, shareholder and proxy holder for the Shareholder Association. Picking up on Ms. Prue's comments about customer care. The electricity authority is currently consulting on updating their consumer care guidelines. Is Mercury part of that conversation? And which of the options do we prefer?

Yes, the answer, Mercury is. We are compliant with the consumer care guidelines. The original report that came out suggested that we weren't, and it was incorrect, and they subsequently corrected and apologized, I might add, which was nice. But we are perfectly comfortable with those guidelines being mandatory, that's our position, and we are currently working with that EA process on those guidelines.

Thank you. Certainly, the -- I think the key we has complained the Commerce Commission about -- [indiscernible] to get hedging for peak load. Is there a Mercury view on that?

Yes, there is. And you may have read comments from William and the media, and I might ask William to comment, but we absolutely refute those allegations. I mean Mercury has a policy of providing pricing to anyone who asks, and we do provide those contracts. But William, do you want to provide just a little bit more detail on that because it is quite topical?

Yes, certainly, Prue. So the complaint made to the ComCom by Electric Kiwi is smartly faceted. I'll address a couple of features of it. One, there were statements made that essentially generators weren't offering peaking products to help independent retailers cover their wholesale price exposures in their business. I was quoted and provide -- was happy to provide a response from Mercury in that respect. So while I can't talk for other generators, certainly, Mercury has a process where essentially we do. We accept all offers from customers, independent retailers, other generators for pricing and reprice those hedges accordingly. So the types of products that Electric Kiwi we were alleging went available, certainly from Mercury, we have undertaken some of those with Electric Kiwi, and with other independent retailers and customers within New Zealand. So that's the first point. Second point really just deals with the market wholesale costs are elevated at the moment. So thermal fuel prices, which often set the marginal price for power are still relatively expensive, particularly if we're running on coal and add the cost of carbon on top of that. And so that is creating challenges in New Zealand for all retailers, and you'll see certainly in our segment reports that the retail businesses are finding profitability quite challenging, and that applies to ourselves as it does to the independent retailers. And again, that's one of the feature -- it's a feature that's quite common. If you go to U.K., you will see lots of bankruptcies. If you go to Australia, you've seen also retailers step back from the businesses. So it's not unique feature to New Zealand, but your energy costs are expensive, which is why we're looking to commit $1 billion over FY '24 into 3 new power stations to bring those wholesale costs down, so that essentially consumers in New Zealand can enjoy from affordable power.

Thanks, Bruce. Do we have any further questions from the floor? Yes, we have one in here.

Hello. Gordon Wallace, shareholder. Question to William Meeks, again, please. I'm not -- it's really about -- you're talking about wind farms. You're saying 15 years is normally the time you have the turnaround for. What about the -- are the costs a lot higher having wind farms? Or is the -- how long does a wind farm or a one last for because of the -- of servicing it as well as -- well, how long? Or is this just has to be the way we have to go now because we can't go in normal way?

Yes. Okay. I'll let him to sort of...

Threshold. You talked about threshold when you do a wind farm.

I think you're asking 2 questions, but I'm sure William can...

Before I sit down I'd go to somebody else.

So we certainly are seeing inflation in terms of generating equipment. If I gave you some quick examples, sort of a rule of thumb for grid scale solar at the moment would be about $1.5 million a megawatt, recognizing that solar generates about 20% of the time. A good wind farm generates over 40% of the time. Turitea as high as 46% of the time that's costing -- that cost $2 million a megawatt. So that wind farm will be better than essentially the grid scale solar systems we're looking at. The Nga Tamariki project that was announced today for $220 million, including -- so that's a geothermal plant. So that will generate -- Geothermal, that generates 95% to 97% of the time. So it's base load generation. That cost $5,000 a megawatt. But again, it's got a price that's actually quite comparable to Turitea, which was essentially, we entered into contracts back in 2018 and '19 for that. So the Nga Tamariki project is a good project from a cost of energy perspective. We're very happy with all the projects that we've built, absolutely.

But you're right. There are complex investment decisions. And as we build more renewables to help New Zealand with this transition. We're constantly having to weigh up when we'll get an investment return because I think we're all confident that over the period to 2050, demand will be there, but it is a question of timing as to when that demand turns up. So they're quite challenging decisions. Thank you. It's a really good question. Do we have any other questions from the floor? Moderator, do we have any questions online? Thank you, Paul.

Yes, Prue. We have one question from Mr. Musburger. It's a 3-part question. Our Mercury's service and customer service e-mail address is active and monitored. If so, I challenge the team leads to send an e-mail inquiry to see how long it is before we get a response. Second question, is this -- in this digital age of almost instant communication, what sort of time frame can we expect? Third part, is management considering employing AI to speed things up?

Thank you. Well, they're good questions. There are 3 questions in there. So I think to answer the first one, yes, both those e-mail addresses are monitored, but our e-mail channels aren't instant responses. And we do -- our frontline teams do their very best to answer them very quickly. But just recently, as Craig has talked about, we've been welcoming a number of new customers from Trustpower into the Mercury platform. So our frontline teams have been extremely busy. So I think the response times have been over the last little while slower than we would normally expect to provide. But we do have a web-based chatbot, which is -- it's AI-based. It's -- that is an instant response on quite a wide range of measures. And that sort of leads into the third question is, yes, we are looking very closely at AI for opportunities throughout our business and particularly in the customer business because it's just getting better and better. And I think we'll all find that increasingly we will turn to chatbots enhanced by AI to get instant responses, which are very comprehensive. So I think that -- does that answer all 3 of the questions, Paul?

Yes, that answers them, Prue. I've got one more general business question, from Van Richard Crimmins. What provision is made to recycle the blades of wind generators as they need replacing? What preventions are happening to minimize birds being hit by the windmill blades?

Well, I'll have a go at the first part of that question. I'm not sure I might whistle up fill on the second part. But recycling of wind turbine blades is something that we've been talking quite a lot about recently because clearly, everyone is interested in it. So there are some schemes where blades are repurposed and the life is extended and they are exported to countries perhaps in Africa to use for another 15 or 20 years. But increasingly, the turbine blade manufacturers are working on ways of actually being able to recycle significant proportions of the material. And I think 90%, 95% -- and I might ask Phil Gibson in the front row because he's going to be more technically expert than me, but this is a question I've asked myself. So going forward, we will expect that a lot of the turbine blades will be recycled into new turbine blades with processes that are currently in development by the turbine manufacturers. So Phil, do you want to...

Hi, everybody. Phil Gibson speaking.

I'm not sure about birds.

I think that covers the recycling advances that are coming and how we will think about that for future wind farms. And then for -- thinking about bird strike, mostly, it's a matter of where wind farms are located, how we think about the ecology and how the fauna, and how we go through consenting processes or understanding the environment before we build run farms and then there's a number of things that -- conditions that we build into consent to monitor against our modeling expectations, and make sure that we're not having effects that are worse than expected. And then we have provisions in our consent to make sure that we take action if we find that we've modeled any of those things wrong.

Thanks, Phil. Paul, do you have any further questions?

We have one further question, Prue. Why is the text in the annual report so small?

Good question because there's a lot of it. And I think I can say, Lucy, without giving away any secrets that -- you'll notice this year that there are more pages and to minimize the number of extra pages, probably the text has reduced because for the first year, we've included our carbon reporting, which we're required to do now. We are looking next year at perhaps reformatting the annual report. So there's a core section that's of general interest. And then there are different sections that you can pick up and read if you want to, but you don't need to read the whole thing. But you see that I wander around with my hobby glasses because I certainly and challenged by the small font. And I do sometimes accuse management of not picking distinctive colors on chats. And those of us were slightly more aging eyesight sometimes find it difficult to differentiate between the different shades of blue or yellow on a Mercury chart. So I have great sympathy for the question. That's all?

That's all, Prue.

There appears to be no further questions or matters for discussion. So I really would like to thank you all for your engagement and attention this afternoon. The opportunity to meet you and talk to you and offer you a cup of tea is something that is greatly appreciated by the Board, and I certainly hope to talk to as many of you as I can at the end of this meeting. But in closing, I would like to acknowledge the people of Mercury, all our partners, including EY and Maori Land Trusts, our customers and all our other stakeholders who contribute to making Mercury who it is. This brings us to the end of Mercury's 2023 Annual Shareholders Meeting. I wish you all well and I declare the meeting closed. [Foreign Language].