Mercury NZ Limited (MCY) Earnings Call Transcript & Summary

[Foreign Language] to all our shareholders and guests in person and online. It's an absolute pleasure to welcome you to Mercury's Annual Shareholders' Meeting for 2026. I'm Howard Thomas. I'm Mercury's Company Secretary. This week is Te Wiki o te Reo M?ori and the start of Mahuru M?ori, both of which Mercury are celebrating. Now we're going to begin the meeting today with a Karakia, which I'm going to invite Director Rachel Taulelei to lead. Rachel?

[Foreign Language]

I'm going to quickly run through some housekeeping before we get started. So this is a non-smoking venue. If you'd like to smoke, please exit the building and go to the car park. Toilets are located in the foyer area past the Computershare desk where you came in this afternoon. Now if there's an emergency, please follow the instructions of Eden Park and security staff. So your nearest safe exit is back down the entry stairs for Gate G. That's where you came in this way, or alternatively, to my right, which is Gate F, that's down at the eastern end. So continue across the car park and then into Reimers Avenue, where you'll find the assembly point. If you have mobility issues, please seek assistance from Eden Park staff. Now please turn off your cell phones or put them on silent for the duration of today's meeting. Thank you. Following today's meeting, you are invited to come and join our directors, management and the rest of the Mercury team for light refreshments in this room. Now for those of you here in person, we love your feedback. So your feedback forms were placed on your seats. So please let us know what you think, and then you can place the form in the feedback box, which is near the exit, or you can just leave it with any Mercury employee. Now some procedural matters. After each resolution is presented, we'll pause for questions on that resolution. Now we'll have time for general business questions towards the end of the meeting today. Now we ask that questions be kept relevant to the proceedings, keep them succinct and keep them clear. Now for those of you here in person today, we've got roving microphones. So if you want to ask a question during Q&A, please just raise your hand and one of the good Mercury people will bring you a mic. Now please state your name and whether you're a shareholder or a proxy holder. We have representatives from Computershare here today and also good reps from customer service. You'll see them around the place in yellow T-shirts. So if you've got any questions as a customer about your Mercury account, please speak to them rather than asking questions during the Q&A session. So our team is here to help you. You'll also find them set up at the table on the way in there. So for those of you online with a question during the meeting, please use the Q&A tab, which is on the right-hand side of your screen to submit a question. If you need help, you can type your query, and one of the Computershare team will help using the chat function. Alternatively, you can call Computershare directly on 0800-650-034. We have a moderator, Paul, today, who's going to do his best to represent all the questions that are asked online. Now if there are several questions on the same topic, he will group those together into one representative question where possible. Now the Chair will shortly open online voting for today's resolutions. That will give online attendees plenty of time to vote. So if you are eligible, you'll be able to cast your vote under the Vote tab. So your vote has been cast when the tick appears. Now you can change your vote up until the time we declare voting closed by selecting change your vote. Now today, we have 4 resolutions. Resolution 1 is the reelection of Hannah Hamling as a Director. Resolution 2 is the reelection of Adrian Littlewood as a Director. Resolution 3 is the reelection of Mark Binns as a Director, and Resolution 4 is the election of Scott Scoullar as a director. Now the Chair will let you know before he moves to close voting. Voting instructions for shareholders and proxies here today in person will be provided when we get to that part of the meeting. So I now invite your Chair, Scott St John, to open our 2026 Annual Shareholders Meeting. Scott?

[Foreign Language] Good afternoon, and thank you for joining us at Mercury's 2026 Annual Shareholders Meeting. My name is Scott St John, and I am the Chair of Mercury NZ. On behalf of your directors, our Chief Executive, Stewart Hamilton, and our leadership team, all of whom are here, I extend you a very, very warm welcome. I'm pleased to confirm that we have a quorum represented here today, and therefore, I declare Mercury's 2026 Annual Shareholders Meeting open. Voting is open on all items of business. So outlining our agenda for today. First, I will introduce you to our Board. I will then make a few comments on our financial and broader environmental sort of conditions that we're operating in. Stu will then talk to Mercury's 2026 highlights. We would then move to resolutions. And lastly, we will have general Q&A. So first for the introductions. Starting on my right at the far end, we have Jasper van Halder. So Jasper is a Future Director who's joined us under the Institute of Directors' Future Director program. We have Susan Peterson next in, who chairs our People and Performance Committee. Scott Scoullar, who is a relatively new Director; Mark Binns, who's not quite so new; Adrian Littlewood, and Hannah Hamling, who chairs our Safety and Enterprise Risk Committee. On my left, at the far end, we have Rob Hamilton, who chairs the Audit and Financial Risk Committee; Rachel Taulelei. We're also joined by Mercury's Chief Financial Officer, Richard Hopkins, who's next to Rachel. Then we have our Chief Executive, Stu Hamilton, and you have already met Howard Thomas. Also here today are representatives from EY, who are our auditors. They're appointed by the Auditor General. We have our solicitors from Chapman Tripp. And as I mentioned, members of the Mercury executive team. And I also welcome Daniel Madley, who I believe is online, representing Treasury. So it's great to have you here with us today. I'd like to share some observations and reflections about the past year. There is no doubt that Mercury is in excellent shape and delivered impressive results this year. And those results were underpinned by higher volumes of generation, the development of 3 new renewable generation assets and a continued focus on really disciplined cost management. From a financial point of view, Mercury delivered a strong 2026 performance, which was very pleasing after the tough conditions in 2025. It was encouraging to see that all of our guidance metrics for investors were either met or exceeded expectations. So in terms of the headline numbers, net profit after tax was $321 million, up $320 million on last year, driven by higher earnings and partially offset by noncash movements in the fair value of our electricity derivatives. Our EBITDAF, and so that is our earnings before interest, tax, depreciation, amortization and fair value adjustments, was up significantly to just under $1.1 billion. So this was an increase of $282 million or 36% on the 2025 number off the back of higher hydro generation, rain a lot more, new geothermal and wind generation and disciplined cost management. Our operating expenses decreased to $370 million, landing $26 million lower than the previous year despite ongoing inflationary pressures and the major transformation and activity during the year. We have also made huge strides investing in disciplined growth opportunities and continuing to deliver strong dividends to our owners. In the financial year '26, around 2/3 of our FY '26 operating earnings, or more than $700 million, was reinvested in new and existing generation assets. Our stay-in-business capital expenditure was $150 million, up 9% on last year and in line with our long-term planning. And in particular, it is great to be underway with our nearly $600 million hydro refurbishment program as we continue to invest in existing infrastructure. Your Board was pleased to declare a fully imputed final dividend of $0.17 per share. This brought the FY '26 full year ordinary dividend to $0.27 per share, up 13% on the previous year, our 18th consecutive year of ordinary dividend growth. Our FY '26 EBITDAF guidance has been set at $1.075 billion. So this reflects the lift in new generation capacity being available for the whole year and continued focus on cost discipline, and it assumes that we can produce 4.1 terawatt hours of hydro generation from our assets on the Waikato River. We will see. As I noted, the company's balance sheet remains strong, and there is good headroom to fund our current growth program. That means we can keep investing in high-quality renewable generation assets, deliver sustainable shareholder returns, deliver value to our customers and ultimately, deliver benefits for New Zealand. We have signaled a review of our dividend policy and capital allocation settings over the next 12 months as earnings, cash flow and investment requirements evolve. We will keep you informed of this work. No outcome has been predetermined with our current policy remaining in place until that review is completed. We should be very proud of the role that Mercury plays, not just in delivering an essential service in our core function as an electricity generator and retailer, but also in helping build the energy system that New Zealand needs for the decades ahead. I wanted to take a moment to share a few thoughts around how we decide to press go on a renewable energy project. The market is working, and Mercury is taking a leading role in delivering New Zealand's -- delivering for New Zealand's energy future. Our significant investment is helping the electricity sector deliver the fastest rate of renewable generation development in New Zealand history. This will help meet future demand growth, strengthen resilience and support the country's economic prosperity. We use long-term earnings and reinvestment discipline to fund our renewable electricity construction pipeline. The cost to build this infrastructure is significant, and the decisions made here flow into the pricing pathways for decades. New generation takes years to consent and construct while demand from population growth, electrification and new industries like data centers arrive in their own time lines. We take a very deliberate approach to building the right project at the right time to deliver a more stable price path for New Zealand and New Zealanders over the long term. I am optimistic about the country's future, powered by an increasingly renewable supply and encouraged by the government's focus on clearing the path for private sector to keep delivering for New Zealand. The importance of having our own energy independence as a country has been brought into sharp focus with the ramifications from geopolitical and economic uncertainty in many parts of the world, impacting on fuel supplies and prices. New Zealand already benefits from an electricity system that is around 90% renewable. The next opportunity is to lift total renewable energy use across the wider energy system from its base of around 30% today. Investment in new renewable generation improves security of supply, helps provide commercial customers with greater cost certainty over time and will underpin the transition to a much more renewable overall energy system. Mercury has a big role to play as more and more of our transport, heating and industrial activity transaction -- transitions to electricity. The market can deliver on the transition to a low-carbon renewable energy system, but there are challenges to navigate. This includes ensuring the electricity system remains resilient during dry periods. We believe that harnessing a mix of solutions is the best lowest cost way to tackle this. With the availability of gas in sharp decline, we do not see any one single lever as being the fix. Our activity underway to counter the challenge comprises developing renewable options ahead of demand and committing major capital as demand becomes visible, working with customers on demand response and flexible plans and continued investment in firming. And this includes our baseload geothermal pipeline and our involvement in the strategic energy reserve at the Huntly Power Station. Another area of focus is ensuring electricity remains affordable and accessible for households and businesses as the transition progresses. We know electricity bills matter to households, especially when many are facing wider cost of living pressures across things like rates and fuel and rent and food. On average, New Zealand electricity prices compare well internationally with residential retail prices the ninth lowest in the OECD in 2025 and industrial prices, the fifth lowest in the OECD. We expect regulated lines and transition -- transmission increases to continue to be a major driver of household bill increases. So that's a piece that we don't control, while energy increases, the part that we do control, should remain at around CPI. And we know the best way that we can support affordability and energy security over the long term is to invest in more renewable electricity and deliver the infrastructure that Aotearoa needs to meet growing demand. Achieving our ambitions requires disciplined allocations of shareholders', your, capital. The Board's focus is on balancing investment in existing assets and new growth with balance sheet resilience, appropriate financial headroom and sustainable shareholder returns. We want to continue to fund renewable investment at scale, deliver sustainable shareholder returns and provide value for our customers, communities and Aotearoa over the long term. Before I close, I want to acknowledge our Chief Executive, Stu Hamilton, and the Mercury executive leadership team, and the entire 1,300 strong Mercury team for the significant progress that your company has made over the 2026 financial year. Also I want to thank my fellow directors for their guidance and governance over what has been a busy but satisfying year. And of course, thank you to you, our owners. We appreciate your continued support for Mercury as we continue to execute on our Better Today, Building Tomorrow, Brighter Together strategy in financial year '27 and beyond. Before I hand over to Stu, it does occur to me that being involved with an electricity company is a little bit like being the All Blacks coach. There's a lot of folks that have a view on how we should go about our work. Not all of those views are without bias and not all of those views have a lot of rigor attached to them. But what I can assure you is that through my eyes, this is a company that you and all of our stakeholders can be very, very proud to be associated with. Stu?

[Foreign Language] It's a pleasure to be here with you today. As Scott had noted, Mercury is in excellent shape. We've got resilient earnings, disciplined growth and a strong balance sheet that's enabling us to deliver value over the short and long term. Our progress reflects a clear focus on being better today, building for value tomorrow and being brighter together by partnering for long-term success. Our strong financial performance is being converted into record levels of new generation, greater system resilience and the capacity to support New Zealand's future economic growth. We have completed or are near completion of around $1 billion of investment in 3 major builds. Together, they represent 1.1 terawatt hours of new renewable generation. That's the equivalent of powering around 160,000 additional homes. The Ng? Tamariki Geothermal Station expansion near Taup? is now complete, and that has boosted the country's supply of renewable, reliable baseload energy. Meanwhile, we have the largest wind farm in the South Island. Last week, we had the pleasure of celebrating the opening of Stage 2 of our Kaiwera Downs wind farm near Gore, which has delivered on budget and on time. Together, Stages 1 and 2 will generate enough electricity annually to power the equivalent of around 96,000 homes. The $486 million expansion kicked off in 2024 following our signing of the long-term power purchase agreement with New Zealand's Aluminium Smelters to support the Tiwai smelter in Southland. As well as adding new renewable electricity to the grid, the expansion added around $100 million to the local and regional economy through employment of contractors, subcontractors, support staff, accommodation and hospitality. The third major build underway is at the Kaiwaikawe wind farm near Dargaville. It's been delivering electricity to the grid since July and is on track to be fully operational by the end of 2026. And we are not slowing down following this major period of investment. Our next development will be at Puke Kapo Hau, which is the Mahinerangi Stage 2 wind farm west of Dunedin. We are completing final grid connection studies with Transpower for this $506 million project. All going well, we expect to begin construction on it later this year. Mahinerangi wind farm with both Stages 1 and Stages 2 will be New Zealand's largest wind farm once complete. Puke Kapo Hau is positioned to support growing South Island demand. You may have heard that Datagrid is developing what is expected to be New Zealand's most advanced large-scale data center project. This is expected to be one potential source of significant future demand. Off the back of that, we have signed a 140-megawatt power purchase option agreement with Datagrid and invested $53 million for a 12.7% minority stake in Datagrid New Zealand. This is a great example of long-term demand, renewable development and disciplined investment working together. Beyond Puke Kapo Hau, we have multiple potential pathways to achieve our target of adding 3.5 terawatt hours of generation by 2030. This includes scaling our wind and geothermal platforms and progress on our hydro refurbishment program. This growth supports our financial year 2030 EBITDAF target of $1.2 billion to $1.25 billion. Our next geothermal growth phase is a particularly exciting area for us as it will not only strengthen our portfolio, but it will support long-term contracting and position us to support major energy users in New Zealand. Our potential grid-scale storage -- grid-scale battery storage at Whakamaru will further strengthen the resilience and flexibility of our portfolio. And then as electricity demand grows, our focus continues to be on bringing forward new renewable generation to support that growth while continuing to maintain reliable electricity for homes, for businesses and communities across the country. Turning to our customers. We are delivering more value for our customers with lowering our cost to serve with our scale, with platform improvements and the operating discipline continuing to lift productivity. Our multiproduct offerings across energy and telecommunications continue to be popular, with over 40% of our customers now on 2 or more products. This includes over 190,000 customers having fiber or wireless broadband and 50,000 customers having mobile. In electricity, we now have 2 rates available, flat rates and flex rates. Flex rates, which were launched in June, are a flexible time-of-use plan that gives eligible customers greater control over their electricity spend. They are already proving popular with both new and existing customers. Our smart hot water control program has also progressed well with 50,000 cylinders, which is the equivalent of 20 megawatts, now under management over winter. We recognize that higher cost of living continues to impact New Zealand consumers and businesses. We are responding with tailored support for customers and communities. Our care for households includes providing direct support for our customers experiencing hardship and collaborating with community partners to ensure comprehensive support for those most in need. We will also continue to provide material support to social retailers such as Nau Mai R? and Toast Electric, as well as community organizations to extend care beyond our own customer base. Later this month, you will see us celebrating 25 years as a 5-star partner with the Starship Foundation. Over that time, we are proud to have raised over $20 million with our customers for the hospital in that time. Meanwhile, longer-term contracts continue to be the way that we can support businesses. Looking forward, we anticipate to continue -- to see continued appetite for long-term electricity supply agreements that give businesses certainty of cost and supporting our investment in more renewable energy for New Zealand to help customers electrify. An excellent option for meeting demand through major energy users is baseload geothermal. Not only is it renewable, it runs 24 hours a day, 7 days a week, regardless of the weather. And as I mentioned earlier, scaling our geothermal platform is an exciting development focus for us. So before Scott moves to the formal business of the meeting, I'd love to play you a short video about our geothermal growth plans. So to conclude, we've made significant progress over financial year '26. We've entered into this financial year of '27 in a very strong position. I encourage you to review our updated strategic framework, which is available in our integrated report and online. And for more detail of what we are focused on, so it shows how we're continuing to grow and create value over time. [Foreign Language] Thank you for your continued support. [Presentation]

Thank you, Stu. And hopefully, that has given you a sense of where we're trying to get to and how we're going to get there. So we now move to the formal business of the day. As Howard mentioned today, we have 4 resolutions. After each resolution, we will pause for questions on that resolution. All voting at today's meeting will be by way of a 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 entitled to vote and proxies who have the 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 of this room where the representatives will be able to assist you. I invite you to vote after all resolutions have been introduced to the meeting. Voting will close at the conclusion of the questions. Voting forms will be collected at the end of the resolutions and voting section of the meeting by the Computershare team who will act as scrutineers, and the results will be posted on the NZX and the ASX later this afternoon. Resolution 1 relates to the reelection of Hannah Hamling as a Director. Hannah was appointed a Director of Mercury in February 2020 and is Chair of the Safety and Enterprise Risk Committee and a member of the Audit and Financial Risk Committee. Hannah is an environmental scientist with extensive local and international experience in resource management and health and safety and risk management, together with a strong background in engineering and construction project management. I invite Hannah, being eligible for reelection, to address the meeting.

Thank you, Scott. [Foreign Language] So thank you for all of you coming today and all of those online. This is my third election, so I'm addressing you for the last time. I've also written you quite a small dissertation about myself. So actually, I'm only joking, it's quite large. As Scott said, my education is in science. I have a master's degree in first class honors from the University of Auckland. I'm also a member of the New Zealand Institute of Directors. With the exception of a brief start at a merchant bank, most of my career has been environmental science and geotechnical engineering, working with industry and governments, both in New Zealand, Australia, Southeast Asia, the Pacific and parts of Europe. By way of background, at 30, I owned a business with 3 male colleagues and was a director of that company. So if you ever want to sharpen your business skills, go into business with 3 men. I thrived on the challenges of growing revenue and achieving excellence of work. In the early 2000s, when I was Managing Director of that company, I sold our business to a global engineering company called Golder. I was appointed on the global Board of Golder in 2010, a 10,000-person company with 168 offices across the globe. I remained on that Board until 2015, when I took up a role on the executive team as President of Asia Pacific, with -- responsible for 900 to 1,200 staff and revenues of over $400 million. At Golder in 2015, I double headed as Managing Director for our Australian operation, General Manager of 2 construction operations while also being President of Asia Pacific. We were very efficient. In 2019, under my leadership, Golder Australasia won the Beaton Best Professional Services Firm award and the Best Consulting Engineering Firm. As Scott's mentioned, I was selected for the Board of Mercury in 2020 for my experiences in risk management, health and safety, sustainability as well as my previous executive leadership roles. My experience across a wide range of industry, both in New Zealand and the globe, allows me to provide insight into risk management as well as opportunities for future electrification. I've spent many years in safety boots, fluoro vests. I've held toolbox meetings, safety -- stand down for safety days, implemented HR systems, increased efficiencies and revenue and turned around failing operations. I am now dedicated to my role as a Director in Mercury and my role as Chair of the Safety and Enterprise Risk Committee and a member of the Finance and Audit Committee. So you may well be asking a question, what have I contributed over the last 6 years to make myself a valuable director to Mercury. So I've encouraged and supported the ongoing strengthening of the critical risk program with a strong focus on major hazard facilities and process risk management. I've supported the management team and championed the Board and the maturity of the organization, safety -- health, safety and well-being culture to advance its goals and safety citizenship. Mercury is fortunate to have strong H&S management and an aligned Board. I have been relentless in my focus on our role to play the part in decarbonizing New Zealand in a way which strengthens the economy and provides reliable returns to shareholders. I encourage a focus on the future of electricity industry through a global lens, where appropriate, considering innovations and learnings from pitfalls of other countries on this electrification transition and capturing the opportunities the transition brings. In my role as SERC Chair and with my esteemed colleague, Adrian and Mark, we have been able to dive deeper into enterprise risk and safety and well-being. I've been able to share my experience of developing a risk-based approach and support the management team and its journey to risk citizenship. The SERC Committee is also running hard to be valuable and effective in governing cybersecurity. While at Mercury, I have had wonderful and humbling experiences representing Mercury at numerous events and functions with our M?ori JV partners and people who have hononga with the awa, roto, and whenua on which Mercury operates. In my final term, I'm confident that I will, along with my Board colleagues, continue to contribute to Mercury's advancement as a forward-looking energy company by helping Mercury's excellent executive team achieve its strategic objectives and continue to grow returns to shareholders and New Zealanders. So thank you for the time today. I ask for your support in seeking reelection and reappointment as your representative to the Board of Mercury.

Thank you, Hannah. So are there any questions? Okay. So I now move as an ordinary resolution that Hannah Hamling be reelected as a Director. We will move to Resolution 2. This relates to the reelection of Adrian Littlewood as a Director. Adrian was appointed a Director of Mercury in August 2023 and is a member of the Safety and Enterprise Risk Committee, the People and Performance Committee and the Nominations and Corporate Governance Committee. Adrian has wide experience across the infrastructure, property and technology sectors, including large-scale project management, corporate and market strategy and leadership of large organizations in rapidly changing environments. Adrian?

Thank you, Scott. Good afternoon, everyone. As Scott said, my name is Adrian Littlewood, and I'm pleased to be putting myself forward for reelection to the Board, having served one term. Just a quick bit of background on me. Earlier in my career, I started as a commercial lawyer. I saw the light, left the law, and became a management consultant in the U.K. Upon my return to New Zealand, I worked in a tech start-up for a while and then joined Spark New Zealand and worked in a wide variety of roles there before I joined Auckland Airport, where I was there for 13 years with the final 9 years as CEO. Outside of executive roles, I've held a bunch of governance roles, and I currently sit on the Board of Craigs Investment Partners. That's the only other Board that I sit on. In my spare time, I've also done a bunch of work for the government on a range of projects, including the turnaround of K?inga Ora, the Cyclone Gabrielle Recovery Taskforce and most recently in May this year, leading the review of how government delivers technology infrastructure and transformations and can use new tools like AI to improve service to all of us, its citizens. So that's my background. The reason for me wanting to stand again this year is actually very similar to when I stood 3 years ago when I explained to this meeting, I had a pretty simple criteria for why I wanted to stand for Mercury. It was that the company was important to our country's prosperity. It was a truly New Zealand company making its decisions locally, not offshore. It was tackling some important challenges in the years ahead and that my experience I felt could be helpful in those challenges. Three years on, those factors, I think, remain just as relevant. And in fact, my time at Mercury has reinforced what an important role Mercury plays in our country's future. You heard from Scott and Stu today about the critical new energy infrastructure the team is building across multiple fuel types, which is very important. In doing so, and I think this is really important, the team is using its skill and experience with the Board's support to find the best projects for our country that deliver the most value and the most reliable energy options. At the same time, we're investing in AI and new technology and processes to intelligently deploy, renew and eke more out of the generation assets we already have. And I think that's a topic that deserves attention because the team do a great job. And on top of that, we are actively investing in new industries such as data centers that Stu mentioned, that when done well, can diversify and lift New Zealand's prosperity in coming decades. So my time with the company over the last 3 years has shown how determined I think this Board and your management team are leading this change and doing it well for not only our customers, but also for you, its shareholders. So I mentioned those things because I believe my experience in working for some of New Zealand's biggest companies on some of their most challenging issues across large infrastructure projects, technology change, complex operations, all in a quite a complicated regulatory environment is directly relevant to the challenges ahead of the company in the years ahead. So I thank you for your support to become a director in 2023, and I again seek for your support for reelection. Thank you.

Thank you, Adrian. Are there any questions? Okay. I will now -- I will now move as an ordinary resolution that Adrian Littlewood be reelected as a Director. We will move to Resolution 3, which relates to the reelection of Mark Binns as a Director. Mark was appointed a Director of Mercury in September 2023 and is a member of the Safety and Enterprise Risk Committee. Mark is an experienced director and business leader with extensive operational experience in the New Zealand energy and construction sectors. I invite Mark being eligible for election to address the meeting.

Thank you very much, Scott. [Foreign Language] and good afternoon, shareholders. [Foreign Language] Scott kindly introduced me as not being the newest Board member. Here today, and he's correct. So the issue for the people present to decide whether there is some life and some value still left in the old fellow. So we will see. So the job of appointing directors is a very, very important one for shareholders. You want directors that have a vision for the future, skills and experience to help management achieve it, and to hold them accountable. The world is partway through an energy transition. And despite what some experts such as Donald Trump may say, I mean, the future is renewables. You've heard that Mercury intends to be at the forefront of that transition in New Zealand. I have the experience and the time as the CEO of Meridian Energy as an example of that. So I have a lot of energy experience. I've got a lot of construction experience. I had something like 22 years with Fletcher Building, and most of that was with the construction and infrastructure side of the business. So I feel that I have the ability and the energy and the dedication to make a contribution to the company's future, which is a very, very important point. What attracts me personally is that what we do at Mercury actually matters. It matters for New Zealand, and it is going to matter a lot in the future. So with that, I thank you very much for considering me for reelection today. Thank you very much.

Thank you very much, Mark. Are there any questions? Okay. There being no questions, I now move as an ordinary resolution that Mark Binns be reelected as a Director. Resolution 4 relates to the election of Scott Scoullar as a Director. Scott joined the Mercury Board on the 1st of September 2026, not that long ago. He is an experienced business leader and director with deep finance, accounting and commercial expertise across the public and private sectors. Scott is Chief Executive of Summerset Group and serves on the Boards of the Retirement Villages Association and the New Zealand Aged Care Association. I invite Scott, being eligible for election to address the meeting.

Thank you, Scott, and afternoon to our shareholders, both in the room and online. My name is Scott Scoullar, and it's my pleasure to offer myself for election as an Independent Director to the Mercury Board following appointment as a Director, as Scott mentioned. For those of you who don't know me, yes, I am Wellington-based and for my [indiscernible], I am CEO for Summerset Group, [indiscernible] NZX ASX Retirement Village Aged Care operator. I've spent my career in leadership and in finance to date in both public and private sectors, some of both, and I've had the privilege of working with organizations that serve New Zealanders every day. I've been with Summerset since 2014, initially as CFO and then in late 2020, I was appointed as CEO for the company. Before Summerset, I was CFO for Housing New Zealand and IRD. And prior to that, I spent 10 years of my career in National Bank and senior financial roles. Cumulatively, I've got close to 30 years' worth of experience across both commercial and sort of financial aspects of operating businesses and was CFO for the best part of 13 years of that. My governance experience includes, yes, sitting on the Audit Committee for Treasury New Zealand, previously sitting on Audit and Risk Committee for New Zealand Customer Service, and also on Wellington City Mission. I currently -- as Scott mentioned before, I currently sit on the Board of the New Zealand Aged Care Association and Retirement Village Association as well. I'm also a fellow of CPA Australia, and I'm a member of ICANS and INFINZ and also a qualified accountant, although I don't say that loud very often. I'm obviously new to Mercury and have been appointed recently. When I was approached to apply for the role for the Board role, it appealed to me as I believe that I can bring my experience from Summerset essentially to Mercury and add governance value through my experiences in a very large-scale capital-intensive business with a diverse staff base and complex operating and health and safety environment. So to provide sort of context around that, with Summerset, we operate in both New Zealand and Australia. We've got about $10 billion worth of assets, and we develop $0.5 million worth of CapEx projects per year. When I first joined Summerset, we had about $1 billion worth of assets. And in the last 12 years, we've gone from $1 billion worth of assets to $10 billion worth of assets. So I feel that like positions me well to provide sort of value in the sense of growth in Mercury in itself and the capital-intensive nature of both businesses are quite sort of similar. Summerset also prides itself on being independently judged as best New Zealand retirement village operator, and that's judged by our residents living in our villages. So we have customer satisfaction ratings of over 90%. So again, I think that sort of gives me a unique lens and sort of insight into sort of customer service value propositions and opportunities to sort of drive that in the business. Retirement Villages and Aged Care, in particular, also operate in a highly regulated and complex environment. I believe my experience with this aspect will also stand me in good stead here. So to conclude, it is my honor to seek reelection as a Director on the Board of Mercury and ask your support. Thank you.

So thank you, Scott. Are there any questions? Okay. So I now move as an ordinary resolution that Scott...

Scott, we do have one online question that's just coming now.

Okay. Right.

What are Scott's initial impressions of Mercury?

That's you, Scott. Mind while he's walking here, that it's a very, very good company. Go ahead.

Yes. Look, I attended my first Board meeting on Monday and was supremely impressed with, I guess, just the focus of management and the alignment of both the Board and management on just about everything we sort of talked about. And so there was a lot of challenge and rigor, but at the same time, a lot of focused conversations with their alignment. So yes, it's pretty hard to give too much insight based on sort of one very first meeting, but that would be my sort of initial synopsis.

Thank you very much. So Paul, is there anything else on the line?

That's all Scott.

Okay. Thank you. So I now move as an ordinary resolution that Scott Scoullar be elected as a Director. 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 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 the voting form is signed. After voting, please place your form in one of the ballot boxes, which are being 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 and somebody will be able to help you there. Once all votes have been cast, they will be counted by Computershare. The results of today's meeting will be released to the NZX and the ASX on the completion of verification of voting, which will be later on this afternoon. Please prepare your forms, cast your votes now. And in a minute, I will close the voting system. So I'll just pause here for a moment. [Voting]

Voting is now closed. Computershare, please collect -- finish collecting all the papers in the room.

And we will now open the meeting to questions of general business from the floor, which have been submitted during the course of the meeting. I know there are some questions coming through online as well, but I'll take questions from the floor first. And I know there are some. And so I'm looking out there. I think there's one over here. Sir?

Shareholder. There's no solar generation identified in your future development. Will this change? Or what's the story?

There was some solar indicated in one of the charts. But Stewart will just get you to briefly run through how we're thinking about solar at the moment and through to 2030.

So solar has a critical role to play in New Zealand's future, no doubt about it. We have a small set of interest in solar at the moment. And you might have seen on the chart before, as we head towards 2030, we absolutely expect to be contracting for solar. And we also have some solar options in our pipeline of development as well. So it will definitely keep coming. In the meantime, we believe strongly in wind, hydro and geothermal. We think they are the most valuable, and that mix is really strong for not only Mercury's portfolio, but for New Zealand. Matt and team have an amazing set of capabilities in wind and in geothermal. So that's really where we're putting our capital and our time and energy towards, but you will see solar show up as part of our portfolio in the coming years.

So was there a question over there somewhere? Over there, back row, sir.

I've got a couple of questions on the wind farms. What percentage of the year do the wind farms actually produce electricity? Question one. And question two, how do the economics compare with hydro and geothermal parts of the business?

So Tim, I'm going to go to you.

Thanks for the question. So yes, part 1, generally, a good wind farm has a capacity factor in the 40s, which means that when we install, say -- pardon me. Can you hear me? Can you hear me okay now? Okay. Yes. So part 1, a wind farm, yes, the wind does not always blow, but a good wind farm will generate from about 40% of the installed capacity. So we have wind farms that generate at 50% and wind farms that generate in the 40s, we can probably make them economic in the high 30% as well. In terms of how the economics compare, we are focused on developing and delivering the best projects. And for us, that means the most economic projects. Generally speaking, wind compares very well with geothermal. Solar investments, as Stu mentioned, we think are less competitive. But in the right context in terms of contracting for those projects, we can invest in those economically as well. But really, it's about, I think, as Scott and Stu referenced, our goal is to invest in the best projects. Our belief is that the best projects are in wind and geothermal. And there are a lot of other factors that go into that around location and strength of the wind, the ability to transport components there. So there's a lot of different factors that we consider. But that's our view, wind and geo being the highest value fuels.

I think there was a question just in front of that last question, somewhere over here, maybe yes, no. Okay. Over here.

Yes. So I see that on Page #45, the areas of judgment for the property, plant and equipment, that it's a huge asset, and discount rate is plus or minus 0.5%. And if the interest rate goes up by 0.5%, you will have 700 million asset reduction value. So aren't you worried about the higher interest rates because U.S. 10-year bond has already closed 4.9% or 4.7%? Because if the rates worldwide go up, then you may end up with $2 billion hit on your asset value.

Okay. So I don't have that page right in front of me, but I think what you may be looking at, and Richard, you might be able to help me is we think across a whole range of things, what if -- what happens if something goes up, what happens if something goes down. So we're trying to give a sensitivity to a series of events to make sure that we're operating within our risk appetite. I can assure you we are operating within our risk appetite. As you point out, the world is sort of an interesting place, and volatility is increasing, but that's not something that the Board is seeing as a sort of a clear and present danger. But Richard, do you want to comment?

Yes. No, you've covered it well there, Scott. So we do put sensitivities in the accounts looking at the valuations of our assets. The other thing that we do is we have a hedging program in place as well where we hedge interest rates longer term. So we have a treasury committee that meets regulators to discuss that both on interest rates and FX, and we have some discussions at the Audit and Financial Risk Committee as well. So look, we think it's in -- we think we're well managed on that. But yes, we're constantly looking at what the markets are doing and adjusting to that.

I was just wondering how much control the government has over Mercury, especially if we had a change of government. And when I look at Australia, the governments, I think, made a real miss of their power systems over there.

Yes. Yes, I hear you. So look, we run -- the business is run independently. You have an independent Board. All the directors are independent. The way the Board appointment process works is that we go through our meeting today. We consult with the government. And of course, we look for their endorsement, but we have never seen an example where the government has sort of stepped in and tried to change one of the recommendations this Board has -- was looking to take through to its shareholders. But I agree with you, we're best left to ourselves.