Mercury NZ Limited (MCY) Earnings Call Transcript & Summary

[Foreign Language] Good morning, everybody. To all our shareholders and guests, I welcome you to Mercury's Annual Shareholders' Meeting for 2024. So my name is Howard Thomas, and I'm Mercury's Company Secretary. It's a pleasure to welcome you here in person and online. Now I'm going to quickly run through some housekeeping before we get started. So this is a non-smoking, non-vaping venue. So if you want to do either of those activities, please go to the carpark furthest away from the building. Toilets are located on this floor. Pass the stairs to your left as well as downstairs by the Akarana Eatery. And now if there is an emergency, please follow the instructions of venue staff. They'll be wearing high-vis jackets. So there are emergency exits on the balcony to the left and right of me here. So please exit promptly through those and make your way down the external staircases. And this will take you to a gathering point in the carpark. If you have mobility issues, please seek assistance from a member of the venue staff. Now following today's meeting, we hope you'll join us downstairs in the Akarana Eatery for some tea, coffee and biscuits with your Directors, management and other members of the Mercury team. Now for those of you here in person, feedback forms were placed on your seats. So let us know what you think. Then you can place those forms in the box near the exit on your way out or leave it with any one of the good Mercury people here today. If you're online, a survey link will appear underneath the broadcast box near the end of the meeting. Now for a few procedural matters, for those here in person, we have roving mics. So if you want to ask a question during Q&A, please just raise your hand, and we'll bring you one of those microphones. If you wouldn't mind stating your name and whether you are a shareholder or a proxy holder. Now a quick run through of Q&A and online voting. If you've attended a meeting before, this should all be familiar. If you haven't, it's fairly intuitive. [Operator Instructions] If you need help, type it into the query and one of the Computershare team will help you using the chat function. Alternatively, you can go old school and call Computershare on 0800-650-034. Now we have a moderator present, my colleague, Paul, who will do his best to represent all of the questions asked online. Now Paul will not change those questions, except to correct any obvious typos. What he will do, however, is if there are several questions on the same subject matter, he may group those together into one representative question. So we do encourage you to submit questions throughout the meeting. I do note, however, that they'll only be addressed at the Q&A section later in the meeting. So please keep those questions relevant to proceedings and as distinct and clear as possible, and we will do our absolute best to reciprocate. Now turning to voting. The Chair will shortly open the online voting for both of today's resolutions to provide online attendees with enough time to vote. So if you are eligible to vote, you'll be able to cast your vote under the Vote tab. Now you can vote for both resolutions at once or one at a time, completely up to you. Now your vote, you'll know it's been cast when the tick appears. You can change your vote up until the time we declare voting closed by selecting Change your Vote. Now today, we have 2 resolutions. Resolution 1 is the reelection of Mike Taitoko as a Director of Mercury. Resolution 2 is a proposal to increase the annual remuneration payable to all directors, which the Chair will speak to later in the meeting. The directors together hold undirected proxies. So with respect to resolution 1, that's the reelection of Mike, 423,826 shares. For Resolution 2, which relates to REM 395,445 shares. The directors intend to vote all of those shares in favor of Resolution 1. However, due to voting restrictions applying to Resolution 2, which is REM, the directors will vote to abstain on that resolution as is required. Now the Chair will warn you before voting closes or as we move towards closing. So voting instructions for shareholders and proxies here today in person will be provided when we get to that part of the meeting. And I'll now invite your Chair, Scott St John, to open the 2024 Annual Shareholders Meeting. Scott?

[Foreign Language] Good afternoon, and thank you for joining us at Mercury's 2024 Annual Shareholders Meeting. My name is Scott St John and I'm Chair of Mercury New Zealand Limited. And I've had the privilege of being Chair of the company since January following the retirement of Prue Flacks in December 2023 after her substantial contribution to the company. On behalf of your directors, our new Chief Executive, Stew Hamilton, our leadership team and all of Mercury, I extend a warm welcome to you all, whether you're here in person or online. I'm pleased to confirm that we have a quorum represented here today and therefore, declare Mercury's 2024 Annual Shareholders Meeting open. Voting is open on all items of business. Outlining our agenda for today. First, I will introduce you to your Board, all of whom are here in person. I will comment briefly on our financials and the broader environment, which we are operating; and Stew will then talk to Mercury's forward focus. The Board was delighted to appoint Stew to the role of Chief Executive succeeding Vince Hawksworth, who retired at the end of August. As you may recall from our meeting last year, Stew was previously Mercury's Executive General Manager Generation. He has a proven track record of success in leading large, complex businesses in New Zealand and internationally. His appointment is the result of the Board's strategic focus on succession, planning and testament to the depth of talent that we have at Mercury. I also want to acknowledge Vince for his significant contribution to Mercury and the sector more broadly over a very long period. Following Stew's address, we will hear from our Executive GM Sustainability, Lucie Drummond; and Executive GM of Customer, Craig Neustroski, about key activity in this area -- in those areas. We will then move to resolutions. After the resolutions are presented and voting is closed, we will take general questions from you relating to the company. Now for the introductions. We have your Board of Directors: Mark Binns; Mike Taitoko; Adrian Littlewood; Susan Peterson, who chairs our People and Performance Committee; James Miller, who chairs our Risk Assurance and Audit Committee; Lorraine Witten; and Hannah Hamling. Nicole Rosie, our fifth future Director under the Institute of Directors' Future Directors program is also present. And Nicole is invited to attend and contribute to Mercury Board meetings and committee meetings, but in a nonvoting position. So we are also joined by our Chief Executive, Stew Hamilton; our Chief Executive (sic) [ Financial ] Officer, William Meek; and you've already met Company Secretary, Howard Thomas. Also present are representatives from EY who undertake the audit there down the far corner there on behalf of the Auditor General and members of the Mercury executive team. So Mercury's net profit after tax lifted to $290 million in the financial year '24 due to positive unrealized fair value movements in financial derivatives and carbon units, higher EBITDAF and prior year revaluation losses and impairment, partially offset by higher taxes and interest expense. Our scaled business produced EBITDAF of $877 million supported by increased wind and geothermal generation and higher customer prices, and partially offset by reduced hydro generation and higher operating costs. Operating costs increased to $385 million, primarily due to higher salaries and wages and an increase in head count and higher generation maintenance costs, partially due to the new wind operations at Turitea and Kaiwera Downs wind farm. Stay-in-business capital expenditure or CapEx increased to $142 million as our geothermal drilling campaign ramped up. Your Board was pleased to declare a fully imputed final dividend of $0.14 per share, which brings the full year ordinary dividend up to $0.233 per share, up 7% on last year and our 16th consecutive year of dividend growth. There has been commentary recently that companies like Mercury have been more focused on delivering dividends than investing in renewable generation for New Zealand. We believe we can and must do both. And the financial year 2024, 42% of our earnings were invested in new and existing assets, while 31% was paid out in dividends and 27% paid as interest and income tax. We have a responsibility to generate reasonable returns for your investment in our business. And the core way we do this is by investing to sustain existing operations and grow New Zealand's renewable generation supply. Flat national electricity demand for over 1.5 decade combined with the significant uncertainty around whether the New Zealand Aluminum Smelter would remain in New Zealand has required careful navigation over many years. The $1 billion that Mercury invested in wind farms, geothermal drilling and hydro upgrades between financial year '13 and financial year '23 reflects our focus on fiscally responsible decision-making balanced with an eye on the future. We currently have a further $1 billion of investment in the works right now reflecting an improved outlook. Our financial year '25 EBITDAF guidance has been set at $820 million with the lower-than-usual hydro inflows, higher gas purchase costs and trading activity at the start of the financial year impacting that outlook. Ordinary dividend guidance for the financial year '25 was $0.24 per share, which represents a 3% increase on financial year '24 and the 17th consecutive year of ordinary dividend increases. The New Zealand electricity market has effectively delivered secure supply while supporting significant growth in renewables over the last 20 years. About 85% of Aotearoa's electricity generation today comes from renewable sources and the sector is on track to deliver around 98% renewable generation by 2030. And that is according to independent work done by BCG in their report, The Future is Electric. Like other countries, our energy system is evolving to mitigate and adapt to climate change and enable the electrification of the economy. The global energy transition will be a complex and uneven process with disruption and challenges along the way. And this was brought about -- brought sharply into focus in early August when the country experienced an energy shortage, which resulted in record spot electricity and gas prices. Now as the charts on the screen show, this came about because of short-term issues like low national hydro inflows and the longer-term issues like gas supply challenges. More rain creating higher hydro inflows and demand response measures and Methanex gas deals that increased gas-fired generation saw these prices collapse by early September. Spot electricity and gas prices were close to $0 at times. These recent events have further underscored the critical importance of taking a whole-of-system approach to work through the challenges of the energy transition. As we integrate more intermittent generation like wind and solar, the challenge of matching supply and demand to maintain consistent supply of electricity increases with the potential for sharp peaks of demand or physical lack of supply. To that end, we welcome the refocusing of attention on security of supply, including the recognition of the critical role of gas as a transition fuel. The electrification opportunity is important to New Zealand's long-term prosperity. It will be the biggest contributor to the nation achieving its climate change goals and can help drive a higher growth economy. We need to work collectively to ensure it remains on track. Alongside the sector, we've worked hard to establish mechanisms for this, and you'll hear from Lucie about this a little later on. We recognize continuing to build social license with customers, community, people and the wider public is critical to the success of this journey. Before hearing from our Chief Executive, Stew about our forward focus, we will watch a short video looking back on the financial year '24 that showcases some of the ways that we're achieving this. [Foreign Language] [Presentation]

Thank you, Chair. [Foreign Language] Welcome, everyone. [Foreign Language] It's a pleasure to present at my first Annual Shareholders' Meeting as Mercury's Chief Executive. Over the past months, I've enjoyed connecting with many of our team across the country and stakeholders, and I'm looking forward to connecting with many of you today after this meeting. I firstly want to acknowledge the recent challenges that Scott touched on and the impact they've had on a number of businesses. Considering these challenges, we are continually evolving our commercial and industrial offerings to meet the emerging needs and including -- providing long-term arrangements in many cases. As a member of the executive management team for the last few years, I've been deeply involved in shaping our strategic direction. In the financial year of '23, we introduced a new purpose [Foreign Language] Taking care of tomorrow: connecting people and place today. We also updated our 2035 long-term aspirations. Then in the financial year '24, we reset our objectives that are shown on the slide in front of you. We now have objectives between the financial year of '25 through to FY '27. These objectives are shorter-term enterprise-wide goals that are key steps to enabling us to make progress towards meeting our long-term aspirations. They include our commitment to delivering more reliable renewable energy for New Zealand and our support to the country's shift to a low-carbon future. While delivering more generation is material in the way that we are also supporting the shift, we are also looking at things like how we support our customers as the energy needs change. The 3-year objectives also cover our focus on financial growth, creating success with others, our culture and innovating with technology, all of which enable us to deliver our ambitions and aspirations. As we move forward, I'm focused on enabling the Mercury team to deliver on these goals while also looking at the next steps in our growth story. Front of mind is looking at how we can further act on the significant opportunity that electrification presents in a way that delivers economic sustainable benefits for our communities, Aotearoa, and for our company. A key way we are acting on this is the opportunity to continue to deliver more generation for New Zealand at scale and at pace. The $1 billion investment that Scott called out before includes a $220 million investment and the expansion of our Ngatamariki geothermal station. It also includes the $486 million expansion of the Kaiwera Downs wind farm, which we began after signing a long-term supply agreement with New Zealand Aluminum Smelters. After delays due to procurement and construction logistics, we expect to reach final investment decision for the Kaiwaikawe wind farm in the far North this side of Christmas. We have much more plan to do as well, including 5 projects which we have put forward for fast track consideration. This includes 2 new projects that include a wind farm near Huntly, and a grid scale battery near Whakamaru, which is our hydro station. We are also investing significantly in existing assets, like the Karapiro hydro station, which will enhance its resilience and its performance. We've made significant progress against our ambitions for customer businesses, and you will hear from that from Craig in a moment. With the integration of the Mercury and our Trustpower now being complete. Craig will speak to that, and we'll also see the results and the benefits speaking for themselves, particularly in our considerable capability for product bundling. I believe that we perform at our best when we feel united, empowered and mutually committed to achieving something worthwhile. To that end, we continue to focus on empowering talent, uplifting diversity, equity, inclusion and which we recognize is a critical factor to attracting and retaining top talent. We also continue to prioritize health, safety and well-being. We have set several milestones to reach safety citizenship, which is the gold standard of safety culture, by December 2026. Finally, before I hand over to my team to speak, I want to take a chance to make a special mention to William Meek, our Chief Financial Officer. This is William's last Annual Shareholders’ Meeting after being at 13 -- 12 to 13 as CFO. And certainly, I've appreciated William's support over the last 3 years I've been at Mercury. He steps down in March 2025 after more than 3 decades, 16 years as CFO. I really want to thank William for his huge contribution to Mercury’. His presence has made a lasting difference to our team and to the organization, and the sector and capital markets more broadly. There is now robust recruitment process for his successor underway. It will be hard to roll to fill, but we will do our best. [Foreign Language]. Thank you for your ongoing support of Mercury. I look forward to speaking to you later on this afternoon. I now hand over to Lucie, who is our Executive General Manager for Sustainability. Lucie will talk further to external environment and actions were taken alongside others to actively shape the pathway forward. Lucie.

Thank you, Stew. [Foreign Language]. As the Executive General Manager of Sustainability at Mercury, my team works on our overall strategic framework and improving Mercury's’ resilience. We engage constructively and work across the sectors that we are part of to develop long-term sustainable solutions that set New Zealand up for success. The broader environment that Scott spoke to highlights just how important the energy trilemma is to our journey to a lower carbon energy system. By looking globally and locally, we understand the inherent complexities of the energy transition and are committed to navigating the challenges and opportunities that it will bring. Security of supply is of critical importance as Aotearoa rapidly scales up renewal energy. We are really pleased to see a refocusing of the regulatory settings to prioritize this element of the trilemma. This includes ensuring that there is fuel and plant available in our system that can respond flexibly to peaks in demand and also supply electricity when the sun doesn't shine, the wind doesn't blow and the rain doesn't fall. The recent focus on the relationship between the gas market and how gas might play a role in us supporting a secure electricity supply reflects the importance of this issue for New Zealand. We are supportive of the exploratory work on LNG as one potential solution and would like to see this done in parallel with exploring other security options. These may include domestic gas production or other fuels that can flexibly provide secure energy to our electricity system, both now and for the future as well as supporting sector work on delivering the physical solution to security of supply. We are actively contributing to market and regulatory settings work, which is needed for a successful transition. This includes contributing our expertise and experience and ultimately supporting the development of solutions that address key challenges and opportunities in this space. If we can improve the security of our energy supply, we can then improve electricity affordability for our customers. Affordability remains at the forefront of our strategy because we know that managing the costs of this transition is essential to keeping electricity accessible and that switching to electricity can ultimately drive lower overall energy costs for households and for New Zealand. To help with this, we are investing in digital solutions to optimize our operations and lower costs. We are also exploring innovative price models to help reduce peak demand pressures. The hot water load control trial that was mentioned in the video is an example of this in practice. In the regulatory space, we are advocating for changes that will support a smart and 2-way energy system. An independent report from BCG highlighted that this is the lowest path cost to effectively scale New Zealand's electricity system. Looking ahead, we are advocating for a clear long-term view of electricity pricing across the whole value chain because that will continue to provide -- and we will continue to provide help for our customers most in need, as Craig will speak to shortly. Just turning lastly to the renewability element of the trilemma. As we've seen overseas, building new renewable infrastructure like wind farms, requires earning and maintaining social license. With this in mind, we are committed to engaging early and frequently with communities, iwi and stakeholders, listening to their concerns and working together to ensure that our projects bring local benefits. This commitment is evident in our approach to our upcoming projects, where we have actively incorporated community feedback into planning to minimize the environmental impacts and ensure that we are enhancing the value that we share with those communities. Lastly, I just want to touch on collaboration. Achieving the scale and pace of change that the energy transition requires needs a whole-of-system approach. To us, that means lifting our sights beyond individual projects or issues and instead addressing challenges across the whole value chain from electricity production all the way through to end use. By doing so, we can ensure solutions that deliver the best long-term outcomes for New Zealand. This means thinking beyond our individual operations and collaborating with others. This is why we have been working alongside other participants across the whole system to develop an energy transition framework. The framework aims to speed up progress by concentrating on the key priority areas and sharing insights to lower the risks. It's the first time this level of collaboration has taken place, recognizing the critical importance of collective action. By working individually and working with others, we can help to ensure that New Zealand's energy transition is not only achievable, but also equitable and beneficial for all. In closing, while the road ahead is going to be complex, I'm confident that Mercury is well positioned to navigate these challenges. And together, we will drive the transition towards a secure, affordable and sustainable energy future for Aotearoa. [Foreign Language]. I'll now hand over to Craig to speak to the key activity in our customer business.

Thank you, Lucie. [Foreign Language] As the Executive General Manager of Customer at Mercury, I'm responsible for driving the strategy of our customer business. Electricity retailers like Mercury are at the forefront of the shift towards a more electric future. We are not just suppliers of electricity, but we will drive innovation and adoption of clean energy solutions. We are deeply focused on ensuring we set all of our customers up for a brighter and more connected future. As has been shared, FY '24 was a big year for our customer business. Our team has worked incredibly hard and we are very well placed to deliver the enhanced operating efficiencies and growth. We reduced our acquisition activity in the first half of FY '24 to prioritize the successful completion of the Trustpower integration within Mercury. Now this is complete. We are firmly focused on delivering the benefits of this integration, including leveraging our scale and bundling capability to enhance and expand our multi-product offerings. On that note, I'm very pleased to share that we recently achieved a mini milestone and having secured 10% of the fixed broadband market in New Zealand, and we are seeing acceleration in the uptake of our mobile services. We continue to deliver integration synergies with most of those expected to be secured in FY '25. We continue to think deeply about how we can enable our customers to play an active role in the energy transition. Our key focus relates to our gas sales with expected cost increases in the short to medium term being well documented. We are providing information to our gas customers and our partners about the outlook and the options available to them. Our intent is to equip them with the information they need to make well considered decisions. Another key area of focus is on helping manage pressure on the grid at peak times. As our customers' energy needs change, we want to ensure that customers can participate in demand management with increased transparency and control. This year, we undertook several successful pilots and projects in this space. The learnings of these are feeding into the new products we'll bring to market into the new year. We expect to see larger increases in lines and transmission costs than we've seen in recent years as a result of rising costs and the level of investment required in critical electricity infrastructure. We will continue to provide comprehensive support for customers experiencing hardship, including developing innovative solutions that address the broader challenges related to affordability. We are pleased that we've -- with the considerable impact that we are having in this space, including a 76% reduction in postpaid disconnections year-on-year. We continue to look for opportunities to drive better outcomes for customers and shareholders, and I'm very pleased to share that we have had 0 credit disconnections in the last 3 months. A lot of this is executed through our Here to Help program, which includes a team dedicated to providing tailored solutions to customers most in need. Since December '23, this team has provided comprehensive support in collaboration with government agencies and community partners to just over 1,000 of our customers who are most in need. Nearly 1/3 of these customers no longer require Here to Help support, highlighting the sustainable long-term impacts we've been able to deliver. Among other initiatives, we also continue to provide significant commercial support to social electricity retailers Nau Mai Ra and Toast to further help [ whanau ] need. I'm excited about the platform that we've created and the new ways we can use our scale and capability to deliver to shareholders and empower and serve all of our customers. Thank you. [Foreign Language], and I'll now hand back to Scott.

Thank you, Craig. So we now move to the formal business of the day. Today, we have 2 resolutions. Both will be presented before we pause for questions on those resolutions. All voting at today's meeting will be by way of poll. And accordingly, in my capacity as Chair, I require that a poll be held for each of the resolutions. For those here in person, shareholders who are permitted to vote and proxies who have discretion as to how they vote should have either the voting form that was sent with the Notice of Meeting or an alternative voting 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 have not received a voting form, please go to the Computershare desk located outside this room, where their representatives will be able to assist you. I'll invite you to vote after all resolutions have been introduced to the meeting. Voting will close at the conclusion of questions. Resolution 1 relates to the reelection of Mike Taitoko as a Director. The last year has demonstrated the benefits of careful succession planning at a Board and management level with the retirements and appointments of directors and the Chief Executive. As mentioned earlier, the CFO is also stepping down in March 2025. Mike is required to retire by rotation this year. However, in light of governance and leadership changes, I asked Mike to stay on as a Director and to seek reelection for another year. We are pleased that Mike has agreed and the Board unanimously supports his reelection. We consider Mike's continued service having been a Director since August 2015 and a current member of the People and Performance Committee to be in the best interest of Mercury to help the transfer of institutional knowledge and experience. Mike is a leading adviser on Maori economic development with well-established networks in Maoridom. He has strong commercial skills in the application of digital technologies. He is the Co-Founder and CEO of Takiwa Limited and a Co-Founder and Director of Toha Foundry Limited, technology companies commercializing cloud-based geospatial analytics services. He was formerly a Director of Auckland Tourism, Events and Economic Development. I invite Mike being eligible for reelection to address the meeting.

Scott, thank you for that. [Foreign Language] As Scott just mentioned, I've been a Director on the Board of Mercury for 9 years now. And today, I'm seeking your support for reelection. A quick step through my career. Scott has given you some of that. I'll put a bit more color around it. I actually started out as a fitter and turner when I left school and worked across a range of industries, including geothermal energy and pulp and paper sectors and led a range of engineering and project management, workforce redesign and organization, performance and redesign projects over the years. I jumped from engineering to Deloitte, where I worked as a Management Consultant, managed a lot of the corporate strategy work that we're doing out of Wellington Deloitte office at that time. And then set out to establish my own consulting and law firm out of Wellington and Auckland, focusing primarily on iwi and Maori economic development. And that work led me into kind of unnaturally focusing a lot of efforts into digital and data analytics in order to accelerate the transformation of some of the sectors that I was quite passionate about. And so for the last 10 years, I've had a couple of technology companies running focused mostly around land use, impacts of land use on environmental stuff. And more recently, over the last 5 years, heavy focus of climate impacts on our land and our productive food systems and ultimately, our export sectors. I've got an MBA. I'll come back to that shortly. But just qualification wise, I have an MBA with distinction. I'm an Edmond Hillary fellow, but my most important qualification alongside my wife is that of a grandfather of 9 full-on grandchildren. During my time on the Board, there's been many highlights as well as a few challenging moments, such as the recent August challenges with spot prices, low hydrology and high -- and gas availability. But I want to just mention a couple of highlights over the 9 years. One that stands out for me is Tilt acquisition gave us sneak peek into the Australian market, but started -- critically start to build our capability and understanding of wind generation. The acquisition of Tilt New Zealand assets boosted our capability into wind and then the subsequent build of Turitea, Kaiwera Downs 1 and now Kaiwera Downs 2 underway just shows how quickly and how well the team can mobilize into building these new generation opportunities for our portfolio, but critically adding to the stack across New Zealand's renewable generation, which is critical, of course, for our energy transition that I think everyone has spoken about so far. But another highlight was the acquisition of Trustpower. And for me, it wasn't just the impact that made on our books. It was the way in which our team set to work -- our executive team set to work on integrating a highly complex platform and product shift, merging these systems and technologies and tools together. But the way they did that and the success around that project was incredible achievement by the team. And I want to kind of highlight that because it gets to my third highlight, and that is the people in and around Mercury. I think the quality of people in and around the teams, the people at this table, the caliber and the experience that the Board, the directors each bring. But critically, our executive team over the last 9 years has moved through some pretty challenging times but have executed incredibly well. And below that, we've got the rest of the teams that are doing the hard work, the slog, business as usual, they just consistently keep on delivering high-quality results. And that flows out to our joint venture and commercial partners as well, many of who proudly [ iwi/Maori ] landowners, building capability and assets in the geothermal generation space. So off the back of that capability, I'll come back to that. It's critical because as we saw in August, the challenges we ran into really highlight the challenges that aren't going to go away anytime soon around this complex and challenging energy transition. We have to accept the role that gas is going to need to plan this just transition. And as a company, we have to get our timing right for further investment into renewable generation, the development of that new generation while ensuring that your investment is in safe hands. So putting my climate and [ food ] sector, my other day job hat back on. I just want to tell you that our industrials through to a lot of our small businesses, including our farmers are relying on a near-term future that can provide stable, secure, affordable electricity into their sectors that have more and more pressure daily coming on them from our global markets to decarbonize and reduce their emissions footprint. So we need -- what do we need? We need to keep focus on the end game here, and that's to make sure that we can support a just transition. We need to keep working with government agencies and making sure that the regulatory settings are right for us to get on and do the job. But on the people note, the thing that I can say now is that I have huge confidence that we have the right people, we have the right succession plans. We have a solid bench all the way through the business and around us. We've got the people that can help navigate through this pretty complex transition. It's tricky, but exciting, but I know we can lean hard into that and make the most of it and lead the way for the sector and for the economy. I'm passionate about this company. I'm passionate about it, and I believe passionately that it has such a major role to play and an increasing role to play in the transition and ensuring that our nation and our economy is successful and for the future. It's an honor for me to be a Director on this company on your Board. I believe I have some important skills left to kind of help us over the next 12 months navigate, and it's an honor for me to seek your support today for reelection to the Board, and I'll be around for another year should I get through. [Foreign Language].

So thank you, Mike. I now move as an ordinary resolution that Mike Taitoko be reelected as a Director. So I'm going to move to Resolution 2 now, and then we'll do questions on the resolutions after that. So Resolution 2 is a proposal to increase the annual remuneration payable to all Mercury directors in aggregate by $146,050 from $1,085,400 to $1,231,450 with effect from 1 October 2024. By way of background, the last time the directors saw an increase was in 2021. The proposal reflects the material growth in Mercury's business that directors have overseen since that last fee increase, including significant investment to develop renewable generation in New Zealand, the acquisition of the assets of Tilt Renewables and the growth of Mercury's retail customer base through the acquisition of Trustpower. It is important that our director fees keep pace with the market to ensure that we are able to continue to attract and retain governance talent, especially with the responsibilities and the expectations of New Zealand company directors increasing. We have obtained an independent report from PwC, benchmarking Mercury director fees against 16 other comparator companies. And you should have received a copy of PwC's report at the same time as you receive the Notice of Meeting, so you can access this online. The report indicates our current fee levels are materially below the market medium and the proposed fees are reasonable, if not relatively conservative. You will note that even after the increase, the proposed fees remain below the market median. I believe that this proposal is important to Mercury's continued success and therefore, in the best interest of shareholders. We have provided guidance in the Notice of Meeting as to how the fee increase, if approved, is intended to be allocated amongst directors. The Board is currently reviewing the structure of Board committees. And if the committee structure is updated, the allocation of director fees will be adjusted as appropriate within the approved pool. I now move as an ordinary resolution to increase the annual remuneration payable to all directors in aggregate by $146,050 from $1,085,400 to $1,231,450 with effect from 1 October 2024. Voting will conclude -- will close at the conclusion of questions. In accordance with the NZX listing rules, the directors and their associated persons are restricted from voting on this resolution. So I'm going to pause now to allow some time for questions to be asked on today's resolutions.

We will be getting some questions online, but I'm going to start by taking questions from the floor. Sir?

I've tried to divide the number of directors, 6, which I thought into $1.235 million. It comes to $205,000 each. Can you confirm that?

No, we've got 8 directors. If any one if you want to calculate here put down the -- so the way that I haven't -- I don't have the piece of paper in front of me, but there are 8 directors. And in essence, what we have is we've got a Board construct, and then we have several committees that sit underneath that Board. There is a fee for being on the Board. And then there are different fees depending on which committee you are in, for example, James is Chair of the Audit and Risk Committee. And so he gets a fee for being Chair of that committee. And then one of the other directors, perhaps Susan might be a member of that committee. She will get a fee for that committee.

So on average for what they get paid a year, is that an impossible thing to work out for the people here.

In the annual report, you will see exactly what each director is paid. Pardon?

Tell us now what it is.

I don't have the annual report in front of me.

Those people know what they're getting paid. $160,000 a year? I can't divide it in my head.

Each director has different levels of work. So dividing it simply won't give you the answer. But on Page 115 of the annual report, the exact detail of what directors are paid is outlined. So for example, I think -- well, I'll use Susan Peterson as an example. Her director fee is $103,000. And as Chair of the People and Performance Committee, she received $15,200, and for being on the Nominations Committee, she got another $3,000. So that adds up to $121,200. And so it goes for every single director. Other questions? Sir?

Lucie was saying about you hope to get together with other power companies. Is that what she means? And if that's so, but what happens with the government? They've got really the controlling say because of all the shares they own. And also -- sorry, and also if you are looking at gas, it will have to come from overseas because why would they come back?

You make a very good point. So what I'm going to do is I'm going to split that question up, and I'm going to go to Lucie first. Lucie, do you just want to just comment on the first piece of that question? And can we have a microphone for Lucy, please? Or do you want to come up here? Why don't you come up?

The work that I mentioned that we've been doing is working with a whole range of companies, private companies -- sorry. The work that I mentioned, we've been doing is working with companies that exist across the electricity system. So generators, network companies, Transpower. We're also working with government entities and with nongovernmental organizations. So it's about how everyone views the different challenges of the system and all tipping in the different perspectives and expertise that we have. So that's what I'm referring to as the framework conversation.

Okay. Now it's just that, as we know, the government -- we've been in the media quite a bit lately because of the situation in September. And end of the day, it's amazing how you're putting $1 billion out like other power companies for redevelopment. But you've really got to talk to the government, don't you?

Yes. So this is about people being in the room. So this is about just getting in a room together. There's a proposal that we could put a structure around it, but we're still working through that at the moment. But at this stage, it's just making sure that people are in the same room talking about these issues because they are, as we've seen through the August situation, they're really important to make sure that we're all in the room together.

Can I just ask one more question?

Do you want to -- there was a second piece of your question that relates to gas. And you're absolutely right, and I think the team highlighted it, and I think the government is very aware that gas we believe, is an important part of a solution for New Zealand. But I'm just going to get Phil just to comment on this very briefly.

Phil Gibson, EGM portfolio. So the -- I think the statement was where were going to get the gas from just have to come from overseas. That would be a good backup plan for us to develop, which is what the sector is working on now. And is there any more on the ground? I think that's a vital question we need to answer. So far, there's assumptions that we won't be able to get access to it. We should prove that, keep the energy revenues in New Zealand if we can. And if we can't clear that question, then yes, it would be foreign gas.

That's all about time, though, isn't it? That could take ages to try and say if we've got gas here. That's all.

Yes. Both of those plans take time, but they need to be dealt with now because time is not going to stand still with us.

Just one more, please. You told that, that was at a wind farm or solar farm up North. Where was that? Wind, where was it again, please? Somewhere near [indiscernible].

The nearest larger town.

So we're not sure what we publicly said, but we are hoping that, that will be by Chris.

Hopefully, we'll be underlies.

Yes. It's quite a serious matter. Some industries in New Zealand are closing down because they can't get enough power, which is very serious because internationally it's going to show big investors that we're not reliable. I know it's going to take time to fix. That needs to be acted on fairly quickly between you as well, obviously, other power companies and the government. What is going to happen there?

So look, I'm not privy to all of the details that sit behind the decisions that the -- I guess, the conspicuous examples are, which were the Winstone's and [ OG ]. And obviously, we very much empathize with the people who are directly affected by those decisions. But based on what I have read, I don't necessarily think it's a straight line to energy prices in terms of the challenges that those businesses have had. And if the suggestion is right that some of those businesses have been losing money for consecutive years, then that suggests there's a little more going on than just the energy piece. But unambiguously we agree, and we are part of the solution that we need to deliver on energy volume.

Exactly. Because there could be some other thing -- issues going on that we don't know about. But the big one is lack of energy. That is the core -- well, we're not sure if that's the core problem or not, but there is definitely a problem. I know that New Zealand gets droughts and stuff, and that does happen. But we need to have some other backup.

Yes. We -- I can't comment again, in its entirety on the 2 customers, but I do know in relation to one, we were very happy to offer them energy.

Now I'm going to bring up a very sensitive subject that will never happen in New Zealand not for a very long time is -- because I do know Britain is looking at it now and reinvesting in small nuclear power reactors. That's also -- I know trying to get that through part would be almost next to impossible. But that -- they reckon that is the future because Britain is now looking at it.

Look, I'm conscious of that and there's very much horses for courses. A number of offshore jurisdictions are looking at that, but it's not something that we're contemplating.

Yes. But you might in the future to try and to find fix the short -- well short term, you may have to eventually look at. Well, it'll hopefully get safer look at nuclear energy. You may have to.

Hopefully, we'll get there without it, but I agree with an open mind.

Well, I agree. Yes.

Okay, sir?

Grant [ Plimer ]. shareholder. With Mike standing again for the Board, which is great. But the indication is it's only for 1 year, which is not so great. He's done a fabulous job. But what's happening in a year's time when I mean he's going to be leaving the Board because he obviously brings some special skills that maybe some of the other Board members don't have.

He does. And what you will see, and we love Mike dearly, but our aspiration will be to find someone even more fabulous to replace him. But essentially, we plan a relatively high detail succession right throughout the organization. And at a Board level, what we're looking for is the right balance of continuity and freshness. We want the continuity to retain the knowledge that sits within the firm, but we also want fresh ideas to be running through the place as well. And so we have a sequence where we're trying to at a reasonably even cadence replace directors over time. We've had a bit of change around the place for various reasons over the last couple of years. And so our judgment was that it was the best thing to have one less moving part and give ourselves a little bit more time to move on that. But we're thrilled that Mike's agreed to stay for another year. Madam?

Barbara [ Cano ] from the New Zealand Cardholders Association. Thank you for the presentations. They were useful. I'm interested to know what further benefits you think are likely from the merger with Mercury and Trustpower. We talked about some benefits, but are there more to come? And if so, what are they?

Okay. Do you want to pick that? Why don't you pop up here? Craig runs that business. And so he is the source of [indiscernible].

Yes. So look -- so the benefits were twofold, really it introduced a lot of new capability into Mercury, allowed us to sell a broader range of products to our customers. And so there is a lot of work we can do there to offer [ telco ] services to existing Mercury customers. And we're -- as the team kind of shared. We've only really just completed the integration. So there's a lot more kind of, I guess, automation and efficiencies that we can now begin to work on within our business. So short answer, yes, a lot of opportunity to sell more products to our customers and a lot of opportunities to drive further efficiencies into our business.

Now the -- my Company Secretary has reminded me that I'm doing a very poor job as Chairman because we need to be focusing on the resolution. So if we could tidy those up and then we'll weave our way back into general business. So are there any other questions on the resolutions? Sir?

I would like to -- just one question -- Sorry. I would like to have our Director, James, or any others about Mercury, what are we doing for solar energy?

What we might do is we might bring that question back under general business. Are there any other questions on the resolutions? Okay. So I'm going to go offline and I -- well online, sorry, and I do have one question that I got before the meeting, which was from Cara Hudson which was, in essence, why is it thought appropriate to boost annual remuneration to directors given most already have multiple director roles and already receive an inflated package? I probably wouldn't necessarily agree with that. But in essence, what we're trying to do is pay all our staff fairly regardless of where they sit within the organization and that includes the Director group as well. And so we benchmark and we benchmark to market, hence, the delivery of the report from PwC for owners to consider when they're making the decision about whether or not to support that resolution. So are there any other questions online, Paul, relevant to the resolutions?

No, there appears to be no questions online for the resolutions, Chair.

Okay. Thank you very much. So thank you very much. That concludes our discussion on the resolution. So for those in the room wishing to vote on those motions, please tick 1 box to select for, against or abstain alongside each of those resolutions 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 votes 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 worth clarifying that all directed votes are treated as postal votes and proxies need not complete the voting form in respect of directed votes. Finally, in all cases, please ensure the voting form is signed. After voting, please place your form in one of the ballot boxes, which will be passed around the room as I speak. If anyone is unsure how to complete the voting form or hasn't got a form, please go to the registration desk outside the room where someone 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 the verification of voting. Please prepare your forms and cast your votes now. In a minute, I will close the voting system. Please ensure that you have cast your vote on all resolutions. So I'm just going to pause for a moment to give you time to finalize those votes for those online and in the room. [Voting]

Okay. So I think we're all just checking are we all -- just finalizing, I don't want to close the door early. Okay. So voting is closed. So please -- Computershare, please collect the voting papers from the room. So we're now going to open the meeting to questions of general business from the floor or which have been submitted during the course of the meeting. And I'm going to take questions from the floor first. And we had a question from this gentleman over here, which I carried over. And Stew, if you could answer that, please.

Yes. Thank you. Yes. So the question was around solar, why we aren't exploring solar more? Is it the...

Yes. In particular, I would like to ask James because he's asking us to vote for him for reelection. But now if he cannot answer maybe any other directors also -- to explain is what Mercury is doing? How do you feel Mercury is doing in solar energy and any new plans for solar energy as well?

I might start and then James can confirm change. So from a solar perspective, we have a team inside Mercury called the generation development team. They explore around New Zealand, all sorts of energy opportunities, whether it's solar, wind, hydro opportunities or geothermal opportunities. So they're constantly looking at those opportunities. And actually, at the moment, through some of our power purchase agreements, we actually support some solar projects in New Zealand. So we're actually supporting through some of our customers, some of those solar arrangements. Then we create a pipeline of opportunities, which have all those types of projects in them, whether they're hydro, geo, wind, solar, batteries. And at the moment, we believe that the most economic and best projects to be building that are in our pipeline are wind and geo and hydro projects. So you'll see, as I talked to before, the projects which we're currently progressing and those which are in the immediate future are wind and battery and some hydro and geothermal options because we think they're the best ones in our pipeline, the most buildable in the best places and the cheapest price to build. We'll keep exploring options. They'll keep flowing through the team. And as solar options crop up as we engage with various partners if they make sense and they're the best projects to build, then we'll build into them. Anything to add?

Well, yes, look, you're actually heading under quite a lengthy discussion we had at Board on this very issue. We call it the fourth fuel because we have 3 of them up, and the diversity of solar is quite interesting to us. We definitely challenged the team to say how can we get it up, which way can we do this and still be economic for us to bring it in because we would like to bring the expertise inside the house like we have just recently done with wind. But they looked at every way possible and for us to earn our cost of capital. It's just not quite there yet for us. It will definitely come. Mercury will be a big solar player, but it's just not quite ready for us yet. As Stew said, we have lots of better places to earn a way better return that will be better for us and better for the grid and other fuel sources at this point in time.

One of our fundamental roles is to take great care with the way that we allocate owners' capital. Sir?

I'll Chuck Bird, shareholder. I'm little disappointed Mercury hasn't looked more at nuclear. Now we need something for a baseload when the sun doesn't shine, wind does not blow, et cetera. I don't know if Mercury is aware that Peter Dutton, the leader of the opposition in Australia, has given a guarantee that he -- they will go nuclear in Australia if he becomes PM. And you've also got like -- you've also got places like Finland population the same as New Zealand. They've gone nuclear. COP28 advised tripling the nuclear supply. Is Mercury going to look more seriously at nuclear now and into the future?

At the moment, the pipeline that we have, when you talk about when happens wind doesn't shine -- wind doesn't blow and the sun doesn't shine and the water doesn't fall. From a Mercury perspective, that's the beauty of geothermal. Geothermal provides baseload regardless of those conditions. And we have, at the moment, a number of geothermal projects, which actually one we're building at the moment and a few in the pipeline, which I think leads to that point that you're trying to make. From a nuclear perspective, there's a couple of things that are key barriers to nuclear. One is capital, I mean, they're very, very expensive to run. You need a lot of expertise, which we currently don't have. So I'd say in the short to medium term, it's not something, which is currently in our pipeline. And we'll watch to see what others do. But at the moment, we've got a really good pipeline of projects, baseload through geothermal wind and hydro, which we'll continue to put our focus on the in the meantime.

And what I should add is that we don't have a closed mind to new technologies. And in fact, 18 months or so ago, the Board went on a study to where we essentially split up and went to Europe and the U.S. and looked at various different energy-related technologies, including process heat and various other things. And so we have an open mind. We run a lens over this stuff, but as owners, I can assure you, we've got plenty of exciting options on our [indiscernible] at the moment and into the foreseeable future. Next question.

Sorry, my name is David Lee, shareholder. I've got a question re Page 43 of the consolidated accounts, you might want to look at that. In brief, it seems as a breakdown between the wholesale and retail customer income and expenses. And it seems odd that your operating costs for your retail arm are about the same as for the wholesale arm and yet the retail arm produces 10% of the income. Why would you bother -- my question is really, why bother those retail customers? They're not profitable. You made a loss on them last year. You made a bigger loss on them this year. Why bother?

William, I might give you first swing at this?

Yes, that's a great question. At the end of the day, we -- as a company, we generate a lot of electricity. And ultimately, that is bought by New Zealanders from mom and dads at home, shops on the corner and in large industrial plants. So the customers pay ultimately for this industry's profits and returns. So customers are super important. The split of profits between them. Yes, we've got a market where we've been facing into elevated wholesale prices. And so the fact that essentially the profits have been lower in our retail business largely reflects the cost structures are rising faster than prices to consumers. So the integrated model is actually protecting consumers from some of those high prices right now, which we think is actually a good thing. So the conversation is around splitting companies. We think it's a very bad idea because at the end of the day, we make a lot of power. We sell it to our customers. That's a strong model. If you look at the U.K., where they had the big gas crunch a few years back, all the big retailers went bust. And that's because small profits, wholesale prices rose, couldn't pass on those costs to consumers and then we had effectively a power market and failure. The good thing about the integrated model was the lights have stayed on. There have been consequences for some people, particularly those who have chosen to take floating prices and the economics of the country at the moment are quite challenged generally. So not all business models are successful. So yes, the split between retail and generation changes. It used -- if you go back 10 years ago, it was quite a lot of profits were sitting in retail relative to generation, and that's really just a factor of cost moving between those 2 businesses. Our retail business has a lot of people. So the cost, they're looking at the relative cost structures, our generation plants cost a lot to build, but they don't cost as much to run, but they've got big mortgages on them.

We are -- just to be clear, we are very committed to our retail business. And one of the reasons that we executed the Trustpower merger was to give us a platform to continue to reduce our cost and make it a stronger business. Questions from this side, sir?

Peter Meusburger, a small shareholder. We've heard quite a bit about Trustpower and Mercury but not much about Manawa Energy, where does that fit in?

Well, apart from being a part of the market that we operate in, they operate very, very separately to us. They're a separate company. They're actually under takeover offer at the moment from Contact. And so that will be interesting to see how that process works its way through. But from our perspective, we are, I guess, an interested observer. Other questions, sir?

My name is [ Shiro Murtuza ], shareholder. My question may be a little bit new, but I would like to know from you, there are 2 questions. First is, we are a power generating company and we should be more powerful than the distributing company. But if you see the share prices of the distribution company, they are more powerful than the generation company. I would like to have some explanation from you on that? Secondly, the second question, I'll complete all my questions, then you can answer me. The second question is that you, as Mercury, you are giving more importance to new customers by offering them incentives $300, $400. I'm a Mercury consumer for the last 5 years, and when I ask for some incentive, they said, no, no, you are already with us. If you change over from a different company to us, we will give you $300 or if you remain with us, no incentive for you. Why is that?

Okay. So the first question I think was you are asking me how our company lines up in a value sense versus the lines companies, okay? And there aren't too many listed lines companies in New Zealand as Vector. I can't recall what their valuation is, but if I was guessing it might be $3 billion, whereas our valuation is $8 billion or $9 billion.

So didn't look the company on the...

It's just different. It's just different. The value of our company is many times the value of Vector, okay? And then just in terms of our customers, I guess, we largely look at the lifetime value of customers. We want our customers to be with us for a long term. But Craig, do you want to comment on the nuances of that question.

Yes. So as we've been working through that Trustpower integration, we've had to make some compromises. So until we were fully able to integrate Trustpower, we haven't been able to make the kind of offers we want to make the -- what we think of as our long-standing traditional Mercury customers. So we're kind of leaning into a lot of new offers for those customers. We've kind of -- through that integration, we were still trying to win and acquire new customers, but we kind of focused on that. And we didn't really have the capability to offer the kind of products and solutions we wanted to the traditional Mercury customers until we completed the integration. So kind of watch that space. We've got a whole range of new offers and plans coming for our traditional Mercury customers, which we're now just in the -- only now we're just reaching that capability to be able to kind of get that out into market.

Thank you, Craig. Are you pitching for lower profit, sir? Madam, were you -- did you -- just in here.

So we've been talking a lot today about generation because it's a problem at the moment. How much do you look at other types of sources of energy, and I'm thinking particularly about wood waste here. I know have a company who's swapped from gas to wood as their energy source. And so is that a commercial decision? And the other thing, which I kind of sort of the same indifferences is the micro generation. So the solar panels on the roofs of be that commercial or domestic properties. I mean, we went through a process, I think, last year of looking at putting solar on our house because we thought it would be a good thing to do. We decided the payback was 50 years. Well, obviously, nobody wants us to do it. So we sort of backed out of that. So you look at those parts of the market as well?

Yes. So going to the first part of your question with wood waste, I'm aware of a number of companies that play in the space. Fonterra comes to mind. I think Genesis may have a hand in that game as well. But I can't comment on the economics. The one thing I would say is that, look, your company has a whole suite of opportunities in front of it at the moment, looking out a decade. And one of the things that we have to do is look really, really carefully at that suite of opportunities and prioritize them to ensure that we are delivering on in selecting the opportunities that deliver you, the owners, the best possible outcomes. So there are many, many things that we could possibly do. But we see it as a badge of honor to be very focused and ensuring that we only allocate your owners' money to the best possible projects. But I will pass to you for...

Yes. You answered it very well. Ultimately, our role is to look at the strength that we think we have inside the business and then to utilize those to deliver greatest value. And the strengths we have is around finding, developing, operating great renewable assets and then selling them through to customers. And so at the moment, our focus very much with regards to something like wood waste is really around electrification. So how do we identify those businesses, which might be using coal, might be using gas and how do we help them move towards electrification as a solution. But there are others in the industry, which are offering wood pellets as an example. Genesis is one of those. But for the moment, our focus is very much on working with customers to electrify. And on the second question around rooftop solar. Yes, your assessment is a good one. So again, I understand -- I guess our role is to make sure that we think we're working on the types of fuel, whether it's the fourth fuel and solar or otherwise that are most likely with the best options, the most economic and most valuable options. And for the moment, for us, that's about building our wind, geo and hydro pipeline and assessing the kind of grid scale solar before we look at anything to do with rooftop solar.

Okay. Further questions, sir?

All right. I want just to ask about whether you're looking into other ways of generating electricity from renewable sources like wind by not building a giant propeller. So, for example, if you look out at the light poles out in the parking lot there, they're swinging back and forth today, and you can generate electricity that way. Also wave technology, generating electricity from wave technology. And also, why not build a wind farm by the hydroelectric dams so that you can pump water back up into the reservoir on windy days. Have you looked into any of these things?

So I'll have a crack at the kind of the broader question that you're asking. But essentially, it goes back to the same premise. We have a suite of opportunities in front of us. There are many, many things we could do with our owners' capital. And so what we are doing all of the time constantly is looking at those opportunities and ranking them according to what is going to deliver our owners the best possible return. So we absolutely accept that there's a whole lot of things out there that could produce outcomes. But by far, the best outcomes through our eyes for owners' money are the projects that we're embarking on. Many of them have very, very long runways in terms of putting them up. They are multi-hundred million dollar projects, [indiscernible] $500 million for our larger wind farms, but they do deliver the right sort of outcomes for our owners by [ besting ] cost of capital. But Stew, do you want to add to that?

Yes, maybe I'll just move through to the point that Scott raised before is we definitely keep an eye on other technology. I mean the Board and executive have gone to other parts of the world to look at what technology is out there, whether it's supercritical geothermal, different other types of thermal and new renewable technologies. So it's certainly something we'll keep an eye on. And then to your question around why not build a wind farm near a hydro station. Certainly, again, one of the options we've got at the moment for consideration next year is building a battery next to one of our hydro stations. So where it makes sense, we certainly look at combining those different types of technologies in the same location. But equally, you really want to build a wind farm where the windiest parts of New Zealand are. Often they're not where some of the hydro stations are. But as we look at different options, including geothermal, some of those stations might be suited to have solar right next to them. So definitely, those combination is something, which we're considering as part of our suite and our portfolio.

Sir?

I'm a minor shareholder. I've got 5 questions here, but I'll just make a comment on nuclear power. The country of France and England and Europe runs 99% on nuclear power, and it's the most visited country in the world. They don't see any problem with it. Just a comment. The other one is -- next one is a yes, no answer. When electricity consumption was in short supply in Auckland or whatever. And we were told to save energy and not use it at the critical times, did -- what ripple control used in order to switch off the water heaters like it used to be in the old days?

Craig, do you want to provide a quick -- no, just a quick response in terms of how we think about that?

So you're absolutely right. The ripple control that used to be, well, used by the sector is probably over the last decade or so has been optimized as much as [indiscernible] and a number of our partners are working on that now. So we run trials over the last 2 years or so.

You shouldn't really be working on it. It's been established in New Zealand for 40-odd years.

A lot of the capability was removed a few years ago. Sorry, just...

It was let to go to in decline and now it needs -- people with a smart meter then can they come...

That's what we're doing. So from next winter will be a large-scale controlling hot water heaters as necessary. It's a capability that was let to decline in.

May I ask one more question.

If I may, if I'm just going to move it around the room a little bit, sir.

Speaking as a shareholder. It's good that we are getting good profits, but we have also our responsibility for ourselves and for our children to be environmentally friendly. So like solar energy, our neighbors, Australians, have some incentives for people to install solar panels in their houses. They can even sell the excess energy to the Mercury -- to the electricity company. And in China, where I come from, there are so many terraces or even lands or hills. They have built so many solar panels, very big just like the size of the Mission Bay or the size of the CBD. And they are very environmental and also quite economical also. So I want to emphasize is that we are not only as a businessman or as a shareholder, we just get profit, we have to think about ourselves and also our neighbors, our children also. So solar energy, we have to consider as well.

And I guess that emphasizes relatively elegantly why we are a renewable energy company. And as James highlighted, we have looked at solar. We will continue to look at solar, and it is highly likely we will do solar at some point but the economics need to work for our shareholders on a sustainable basis. Other questions? Sir? Over your shoulder.

I'm intrigued about the Trustpower and Manawa energy situation. You're obviously sitting around the table with them taking over the customer base and no doubt Infratil is smiling their head off. But now we've got Contact Energy making a takeover for their capital generating assets. I'm just wondering whether that was discussed with Trustpower, Manawa at that time or whether, in fact, maybe Mercury's missed a vote on that one.

No. But well, I think what we need to understand is that these are all -- we're a listed company. Contact is a listed company, Manawa is a listed company. And so I can't be drawn into comments that are specific to those. But I think what you would expect from us as custodians of your capital is that we are scanning the horizon, looking for the best possible opportunities. And where we see them, we do our best to execute on them. So I'll just maybe leave it at that.

Just a favorable comment on Mercury to start, and then I have a question. I recently needed to get electricity connected in a property I own. I have shares in a number of electricity companies. I found 2 of them and could only get a phone-based text interaction to get a connection, but I phoned Mercury spoke to a real person, which is unusual these days, a very helpful lady you had the electricity connected in a couple of hours, which I thought was fabulous. So despite my saying why bother with the retail arm, you are actually doing a good job there. Okay. What was my question now? I shouldn't make compliments. It's always a bad idea. I'll pass on to someone else. I'll put my hand up when I rethink of it.

This is just a short question. You talked about a grid scale battery. My question is, how long will that keep the lights on between 5 and 9 p.m. on a cold calm night.

So the question was just a comment on the grid scale battery that we're thinking about and to give us a sense of how much power or how long would that keep the lights on for?

I don't have the numbers to hand in terms of how long it sits. You're right, in terms of the ability for a battery to hold enough to going to the grid, it's small compared to what's currently generated on the grid. So it's there to help -- it is definitely there to help through the peaks. So the sorts of batteries you're typically looking at a 200-megawatt -- 2 hour 100-megawatt batteries. So it's there to discharge them to the grid for 2 hours.

But just to be clear, again, the way we think about these things, their commitments of serious capital. And so what we're looking to do is deliver sensible outcomes for owners if we go down that path.

I just say something [indiscernible] question. Renewable, I'll come back -- sorry. Yes, my question was I noticed on a graph you had up earlier the cost of electricity and how it peaked about a month or so ago. How do you manage the tension between the fact that you want prices to be low and you want for customers' benefits and you want the supply to be reliable, but when the supply is highly constrained, you make bumper profits. So how do you manage that tension?

Okay. So that's the perception, but not necessarily the case. It really depends on what your situation is at that particular time with how much energy you happen to have. But Stew, do you want to comment on that? But we did not want to see prices move the way they moved. Stew?

Yes. I guess, the price you're talking to is a wholesale market price. So it's not the price most 99% plus of people actually exposed to. And so it's designed to send a signal to say, there's scarcity in the market, we need more generation to come from somewhere, and it worked very well at getting that action taken. You can see, though, it depends on the position we have with our lakes as well. So last year, we had an EBITDAF of $877 million. And this year, we're guiding $820 million. And part of that is on the back of the first couple of months of FY '25, which was -- so we were heavily impacted by some of those high wholesale prices as well. And the team does a great job to try and manage that risk through what goes on with lake levels and how they manage the portfolio. But certainly from our perspective, we want to make sure that the price seems the right signal for investing. And then secondly, make sure that in the long run, we're managing the trilemma, which makes sure that we're building into it, but also building something, which is affordable for customers.

Sir?

There's been a lot of talk recently that all the electricity companies who all put a bid in every half an hour, I believe, to supply electricity to the grid. They've been manipulating that so that Huntly Power Station is on -- as to supply and they're burning coal, which gives the highest price to all and everybody gets paid that high price. People with wind energy, hydro, anything because Huntly is burning coal, and it's putting the highest bid they all -- every electricity company gets to say that high price. Now do you really think that's fair?

There is the system -- and that is the system that Stew was just talking about. We have a system here that sends price signals to bring -- when things are tight, that brings on more capacity. Those are the signals that we as a country used to induce investment in future generation. And so...

That it's in your interest to maximize your profits to get Huntly to burn coal because then you all get the coal price, whereas you may be able to open the dams a bit further and produce electricity to stop Huntly being -- using coal, but it's not in your interest because your interest is to maximize the profits.

That might be the case if you were long energy, i.e., you had more energy than you needed to supply to the customers that you had contracted to. So just to be clear, we're not getting that high price for all our energy. Stew, do you want to add to...

Just again, confirm we don't manipulate the market or the price. So the market sends signals to us in terms of what we should dispatch. And that then determines when we see in water out of Taupo and down the Waikato River. It also determines when we hold it back, so that we can actually use it for other times to make sure that ultimately, the electricity grid is reliable. And that's really what we're trying to do is to make sure that electrons are there for people when it's needed.

Okay. So my Company Secretary is continuing to manage me very efficiently. I've got some other questions online, one, that I received -- a couple I received premarket -- premeeting from Kara Hudson. And essentially, what has been done to reduce the overall disparity between payment to those at the top of the structure and those at the bottom? So that's going to remuneration and when will a living wage be paid to all staff at Mercury? So in essence, the short answer to this is that we have some principles that we use to form our remuneration judgments right across the organization. But with the executive, we're trying to align to shareholder value. We try to link our performance to the delivery of successful outcomes and our bias is towards simplicity rather than complexity. We are very mindful of the cost of living challenges. And in 2024, we prioritized lower salaries and gender pay gaps. And with regard to living wage question, all permanent employees are paid at or above the living wage. And I have another question online, which is in essence, this is a good one for William actually. Could you explain the share -- why the share price has gone from a high of $7.15 on 18th of July this year to today showing $6.03, especially given the extremely high wholesale spot prices recently? I propose there be a vote of no confidence in the Board given the share price drop. So some of that question has been addressed, I think, by Stew in terms of what's going on in the wholesale spot prices, but William?

Thanks, Chair. Great question. Our share price is influenced by many things. some are controlled by the company, things like revenue, costs, our growth rate, our business risk profile and some of the external environment. They might be interest rates, could be the regulatory outlook, could be asset allocation, our investors putting money into bonds or equities or into real assets? Those are real. I had a quick look, we're seeing -- we've seen some of our competitors. Meridian is down $0.90, Contact is down $0.90. We're down $0.10. I mean it's actually a sectorial -- it's a sector issue, and we've come off. I mean it's hard to pick why people are making decisions to sell or buy shares over 6-week period. So obviously, we'd like our share price to be stronger. The reality is we released our guidance. We had a great year last year. We've had a high spot price and a dry start to FY '25. Our guidance is down $67 million from where we were the year before. But if you divide that by the number of shares it works out at about $0.05 a share. So certainly, the movement is not explained by the reduction in earnings. And as Stew said, our high spot prices don't necessarily mean generators make more money. And it's certainly not the case in our example. I think one of our competitors, Meridian, produced operating stats a few days ago. Their earnings were down $60 million in August relative to the prior period on an adjusted basis. So it's not -- the generators aren't necessarily benefiting because spot prices are high.

So I have another question online, and this is a good question. I probably should have dealt with this earlier, but I've been referring to something called EBITDAF. So EBITDAF is earnings before interest and taxation, depreciation and amortization and fair value adjustments. And if you sort of think about the profit and loss of the company, we have revenue coming in. We have expenses, then we have depreciation. We've got interest. We've got tax. And there's another thing in there, which you can study if you want to lose the will to live, which is these fair value adjustments. But a business like ours does take on very, very large financial instruments that are attached to the power contracts and the power supply that we deliver. They are hedges, but they move around and the accounting rules demand that we account for those in the profit and loss every year. It can be a bit confusing, which is why what we'll often do is take our descriptions back up to the EBITDAF level to remove that noise to give you a better sense of how we're tracking. Next one I have is when, where and what are the environmental concerns, costs of exploring for LNG? LNG -- sorry. I think the proposals that we have at the moment on the table and that are being discussed with government at the moment, relate to LNG being imported rather than explored for. Any more questions from there, Paul? Okay. So what has happened with regard to capturing CO2 on our thermal generation? So, you want to talk to the reinjection?

Yes, sure. So the CO2, which Mercury emits comes from our geothermal plants. And it's not from thermal generation, it's from CO2, which is ingrained and captured in the brine, which we pull out from under the ground. So when you produce geothermal power, you take hot fluid under the ground, bring it up, put it through power generating plant and then you inject the fluid back under the ground. That fluid has some CO2 dissolved in it and is admitted when we produce electricity. We've been running a very successful trial over the last 3 years to capture some of that CO2 and then reinject it back into the ground to put it back where it came from. That trial has been going very well. We are capturing about 25% of one of our plants. And actually, at the moment, we're just about to commission another part of the plant, which will enable us to go up to about 40%. And so over the coming 5 to 6 years, we'll continue to roll that technology out and understand how it can be applied to ideally all about geothermal plants.

So I've got another question from online regarding solar storms and flares and how they affect the electricity network and what we're doing about it. And in essence, the answer is that yes, they are a thing, and we're working with Transpower and others in the industry to look for solutions in that space. More from you, Paul? Is a solar farm on your plans for renewable energy? Well, I think we've already covered that, that we are looking but we're not quite there yet. Another question. What steps has -- well the company taken to mitigate disruption in the event of a major earthquake? Will the mitigation of such events be publicized? So look, we have insurance, but like others in our industry, the cost of ensuring the entire suite of our equipment would be prohibitive. But what we are doing as a consequence of all of the different generation projects that we have underway at the moment is diversifying our risk. So we are -- rather than being just concentrated on the Waikato River now, our assets are spread the length and breadth of the country from the far north to Bluff. Another question I'd like to invest in ethical businesses too. Maybe many years down the line, you could look at renewables, which are good for the environment. We agree with that question/statement.

No further questions online.

Okay. So we've had a pretty good go at questions. Maybe one last question. Is there one last question. Sir?

I just want to make a statement that you can build all the wind generation and solar generation, you won't, but it won't stop getting power on dark, cold nights when there's no wind and no solar. You've got to have a backup thing, which we've got in -- sorry, Mercury got in geothermal energy and I can't think of anything else. So do you see in the future?

Geothermal battery [indiscernible].

Do you see in the future where we have so many wind farms and solar energy firms that, that provides us with our baseload, and we use dam and others to supply with our peak loading? And on the complete reversal of what we've got at the moment. Or would you -- I don't suppose you'd build wind farms that didn't have a load factor of 30% -- 20% or whatever?

So I guess your point is, which is one of the big advantages Mercury has is with Waikato River and our hydro on the river is how do we use that to peak to provide electricity when the wind is not blowing and the sun is not shining. And that is a key advantage that Mercury has to enable us to be able to build wind and then firm it when the wind is not blowing.

Just one other point now.

Could we shut this down?

I'm asking good questions. Lake Onslow was -- that's the one question. Lake Onslow was something proposed by the previous government. But I'd like -- would you look into pumping energy from the Waikato River after it's been filled 6 hydro stations and pumping it back into Lake Taupo and using that for storage.

At the moment because as we explained earlier, we have many, many projects that are very, very attractive. And so that's not on the agenda at the moment. Sir?

Intrigued with the capture of the CO2 from the geothermal. Is that CO2 able to be captured and sold since there's a shortage of CO2?

It's a possibility. We're certainly looking at how we might be able to go, looking at that as well. It's a possibility.

Right. Ladies and gentlemen, thank all -- we've got one more question.

It's great having geothermal. That's fine. What about the transmission cost because getting that power from Taupo to Auckland and places that need it, transmission costs, what's the -- and the infrastructure because that's a very important link as well, getting that power from point A to point B.

New Zealand is certainly going to see a lot more investment in transmission assets right across the country. There's no existing problem in getting our geothermal to our customers. But Stew, anything to add?

New Zealand is a long skinny country with a backbone that transmits power from the fast South to the far North. So there's transmission lines at the moment, which our geothermal plants feed into quite adequately.

Right. So thank you all for your engagement and your attention. We have had a very healthy session on Q&A. And we appreciate the opportunity to interact with you in person at this meeting. So I'm going to conclude by acknowledging the people of Mercury, and Mike highlighted this a little bit earlier. Our people are just absolutely fantastic, and this is a company that you can be very proud of. Also our partners, including iwi, Maori land trusts as well as our customers and other stakeholders who contribute to who we are. That brings us to the end of the 2024 Annual Shareholders Meeting. For those in person, please join us downstairs at the Akarana Eatery for tea, coffee and biscuits. I wish you all well, and I declare the meeting closed. [Foreign Language].