Meridian Energy Limited (15M1.F) Earnings Call Transcript & Summary

[Foreign Language] Welcome to [indiscernible]. I'm Owen Hixton, Investor Relations Manager. I'm just going to run through a few logistics for the day. Starting with the end of the day. If you're flying out of [indiscernible], there will be many vans to take you to the airport from here. In terms of those in the room, bathrooms immediately beside the [indiscernible] station and back past the main entrance you came. Orlando free is the WiFi. There's no password. In the event of an alarm or an emergency, we are asked to vacate evacuate to the car park. In the event of an earthquake, get under the table and get friendly. Today is a series of reasonably short punchy sessions. There is time for questions. If you're in the room and you have a question, can you please wait until the microphone [indiscernible] that will allow our online audience to hear the question. Questions from the online audience will come through and Phil Clark will very coherently read them out. highlighted a couple of key points, morning tea and lunch. Very important because there will be the Meridian Investor Day Golf competition running. Orlando Country Club staff will take you through the comp. So you can either get out early and establish a clubhouse lead or spend the morning visualizing how you're going to win it. There's some tremendous Meridian merchandise up for the winners. They will no doubt be the envy of the capital market. Michael announce the winners at the end. So welcome. I hope you enjoy the day. Please participate. And with that, I will pass it over to Mike.

Great to see everyone this morning. Thanks for those that are here that we're able to make it in person. And thanks to everybody who will be no doubt glued to their PC screens for the majority of the day given the talent that we've got coming to you [indiscernible] for those who don't know me, CEO of Meridian. I've worked at the business for a number of roles for 17 years now. I love the industry. I've spent probably longer in the industry than most other things. And it's incredibly important what we try and do as a country. So you get a lot of meaning from being in the sector. And the Investor Day is really important piece of our calendar is -- it allows you to hear from people within our business that are out there doing the work, actually leading and we've got a great brand and the merchant is tremendous. But what makes businesses successful are the people who are running it. And Owen and I love talking to you like we love hearing your thoughts and questions. Again, I was saying to someone last night, it's actually very difficult to get straight feedback on the things that you do well and places where you may not be best spending your time. And so we get that from these sessions, and it's really appreciated because I can tell you, and you'll see it as we go through this morning, the people that are here are from within Meridian are committed to making this business as successful as we possibly can, and insight from others is always helpful. If I give a little bit of context and then just talk to the agenda for a touch and then hand it over to Roy, who's going to come up after me is if I jump back 18 months when we did our last Investor Day, I don't know if [indiscernible] remembers what we framed it as, but we [indiscernible] a certainty. So that was the basic frame for the Investor Day. It was driven by 2 things. It was driven by the 20-year deal that we did with Insys. And the fact that we had confidence in gas as a transition fuel as the economy move forward. That was May 2024 and no one knew what was going to unfold post that. As we sit here today, the context is obviously very, very different as you've got security, affordability. They've all got political focus and lens. I think we've dealt with the security, electricity security issues through the arrangements that we've already got in place. So I'm pretty comfortable and confident around the security elements is the political concern of security. And we've got massive pace of change going on within the sector and within our business to keep up with the needs of customers primarily. We've got opportunity to refine and make the business more efficient and effective of what we do. And we've got to grow the scale of our business, if we are to support the economy appropriately and what today is about is how do we deliver sustainable returns for people who invest their money and us have the confidence to invest it in what we do. And you will hear from people why that's a reasonable thing for folks to do and get confidence in how we're trying to drive that underlying business performance. So that's the context. And the agenda follows it really is you're going to hear everything from. As I hand over to Rory, what we see in the future. So what do we think the future looks like? And then as we present the future, we talk about the things that we're doing, whether it's Murray Hill, who -- many of you won't know, but you're going to learn a lot about [indiscernible] is he has kicked off our hydro redevelopment. So while gas has been a challenge, there are silver linings to these things because it makes you do things differently. So we're getting back into the hydro development game. And you'll hear from Guy about our renewable development pipeline. You're going to hear from a lot of our executives, we're going to talk to how we're digitizing our retail business and our generation business to improve the way that we engage with customers and drive efficiencies. And of course, near term, there's a focus on regulation politics and what choices we've got from a consenting perspective to actually accelerate the pipeline of assets. So it is a super full agenda. As Owen said, it's -- we're after questions, feedback thought feedback and thoughts on the things that you hear. But please mingle please take the opportunity to meet those who are doing the work, not everybody that is in the room that's within the Meridian team will be up at the lectern. So we've got other experts that are in the room that are fundamental to the business and choices that we're making moving forward. So take opportunity to say get [indiscernible] if you don't know them because they're probably someone within the Meridian leadership team who's got a key role in supporting what we want to do. I'm going to close because we're here in [indiscernible] because the [indiscernible] is becoming a bigger piece of our business. We've got Tapti. We're looking at battery and solar farm. We've probably got a repowering project to do up at Tait at some point. So it's becoming a big part of our business as we look forward. And got a little bit, I don't know, the propellers is you got 91 turbines that produce about 100 gigs of energy every year and the reason that this fits [indiscernible] give it a couple of years and you'll have 3 bladed machines that are in the air that will be producing 700 gigs or 7x the production annualized production that these things do. So it's a little -- for those that didn't get there yesterday to see what to is today what it might look like and then give you a comparison of the size of the new turbines versus the old ones. Having done that [indiscernible]. And I love that last piece that is technology in action. Those turbines were built in 2009. And you look at them compared to what's available to us today to [indiscernible] economy. We are a technology business in many, many ways and harnessing this resource that the country has got is -- it's not only a privilege, but it's bloody important for our shareholders that we do a damn good job of it and for the country. so the economy does transition and become electrified over time. So I hand it to Rory, that's going to explore that a bit more.

[Foreign Language] Good morning, everyone. I'm here to take you through some of the work on -- we do on how the market might develop and a little bit on how we're reshaping the portfolio to deal with that future. Sadly, I don't have any videos like Mike, but I've got some colorful slides. I hope you look forward to. For those who don't know me, I'm the GM of strategy and portfolio. I took this role back in June of this year. I've been with Meridian since 2020. Prior to that, I've worked in the industry, both on the competitive side and more recently at the regulator since 2004. Among other things, my group holds the company's long-term I guess, view of how the market could develop, and we're also responsible for positioning the portfolio in the broader sense of what kind of assets we want to develop, but also hedging activities and our long-term contracting. Let's start off a bit like I did -- I didn't realize it was 18 months ago, but it's a bit of an overview of our modeling work that we've developed. We've -- it's an in-house I guess, replication of how we think the wholesale market will develop, but it tends to mimic what you'd expect to happen in a well-functioning electricity market. By that mean on prices over time, tending to cost security risks are reasonable. New investors are getting revenue adequacy, all that good stuff, what I say an all-singing dancing view of the system could develop, of course, predicting the future is always tricky. Secondly, it's great to have these [indiscernible], but you really [indiscernible]. They they only work as good as the [indiscernible] information you put in. And to that end, we've got a dedicated team and their sole job is to keep these things up to date. They periodically review them. We've got a I guess, team of interest [indiscernible] in with their opinions as well. And we do a big annual rich every year. the Board through it. And of course, as things change, we do more regular updates. And finally, these things are only as useful if you do actually use them. And we feel having that central set of curated assumptions and scenarios is super valuable. It's a really good coordination exercise for the business. And some of the stuff I'm going to talk to up on the screen today, it really kind of underpins a lot of the investment we do at Meridian. It helps some, I guess, internal views of how we should be kind of move the company forward and helps us respond to regulatory interventions. Those are just some of the inputs and the outputs I just highlighted. I was going to step through the stuff in green a bit over the next 5 minutes or so. Put up some charts and figures. I guess my request don't fixate on them too much. They just a snapshot at a point in time. I think, but I just did want to be open to kind of give you a broad overview of some of the stuff we're seeing some of the challenges, some of the conversations we're having internally. And as I say, it's not always the answer. It's a path to getting there where you get a lot of the insights. And we do -- we've got 2 kind of large scenarios or narratives that we kind of form a lot of things. We talk about plausible futures versus predictions per se. On the left, you've got evolution [indiscernible] and on the right [indiscernible]. Clearly, we do a lot more bespoke work depending on what the problem is we're looking at. But these are kind of permeate a lot of what we do really, I'd say it's a bit more BAU. It's kind of, I'd say, a modestly changing operating environment. Broadcast has limited decarbonization. So I think it's a future world that you would recognize based on what today. [indiscernible] a bit more shiny stuff, a lot more dramatic path to decarbonization. So a lot more of dynamic future. I guess in either case, you're going out. We assume that the market design kind of keeps track of what it needs to. And whether it looks like today or not, it's always trying to balance those 3 things that any market should be looking at sustainability, reliability and affordability. And I would say it's probably a pretty optimistic view of the future in the sense we don't assume per se that we're going to have a structurally like the RMA is going to be like it is for the next 3 years. You've got to assume over time, we'll get our act together and things will be able to be built at about a time. So kicking off with demand. This is our current house view of annual demand in gigawatt hours for generation. And no matter where that generation comes from, be it rooftop solar or connected generation. It's based on bottom-up that make up the constituent parts of demand. Takeaway here is in either world, [indiscernible], we still see significant demand growth, but it's really hard to tell what trajectory we're on. And that growth follows around 15 years of stagnation, and you go, well, why is it changing? Well, the big drivers that come from decarbonization of industry, basically heat conversion towards electricity, EV and EV uptake, which were a bit slower than others. And I guess, the cool new thing, which is data centers. Based on that, you're going to need widespread investment in generation at scale to meet that growth. And it's this kind of analysis that we chunk down to targets like you might have heard about the 7 and 7 target, which are Guy and Rebecca and the dev team lead. So that's what's behind it. That target, in particular, takes us to 2030. But if you look beyond that, if New Zealand is serious about moving to a low emissions economy, you're talking decades of growth. It's a really tricky area to look at some of those big slabs of demand. They're a function of specific policy initiatives and the relative costs of electricity versus substitutes. All of that can change. Data centers present a new kind of binary kind of thing, which is also hard. But -- so this kind of area can move quickly. I think the message though is I don't think we have a hit in the cloud here. I don't think our numbers are out of whack with other stuff out there. If anything, I'd say we're kind of mid to lower in the pack of where people see demand going. And you go, that's great. That's aggregate demand levels. But if you kind of lift the hood, there's quite a lot happening under there, which is why it's kind of so hard to predict as such. The point I just wanted to make was what we call demand that line on the chart is actually made up of a hell of a lot of constituent parts. And what I called out on the previous slide, the 2 big movers coming from that blue and green area, which is EV uptake and industrial decarbonization basically. That makes up the majority of demand growth. demand satisfied by rooftop solar is in there and that kind of pinky color. We showed it as a negative. Just to really highlight [indiscernible] different than the other ones. But it's still in there. It's from a customer perspective. It's still demand. It's just coming from the roof, not a power station. I think the other point worth mentioning is how that demand interacts with the market is also super important, whether it's the physical issue like batteries, vehicle to grid, how rooftop solar impacts. And also -- but there's no physical things. You can do a lot with tariff design for -- and that can change consumption patterns and that can have a massive bearing on the shape of what we call the residual demand curve. That's the demand left over that generators are competing to fill basically. Long story short, I think it's not just a question of how much shows up. It's when it shows up and what kind of demand shows up and how flexible that demand is that all kind of matters. That's all sitting behind all these kind of aggregate lines. now. We primarily -- well, we spend a lot of energy trying to understand cost because if you step back, you go like New Zealand really is a wash with energy potential. The issue is navigating the RMA and making sure you can get stuff connected to the grid and [indiscernible] can build enough grid to move the electrons around. So if you kind of say, well, look, that should be cleared up. Really, when you're talking about the future in understanding the supply mix, you're trying to understand, to a large degree where costs are going. And the chart here shows the levelized cost of electricity in real 2024 for 2 of the main technologies, solar and wind. So levelized cost of electricity, that's the average price a plant needs to receive in order to make meters investment hurdle. So basically, those things have been trending down over time, and that's because the world is getting a lot better at making these and deploying these, and that's the so-called learning curve. But -- and you can see that we're trending down until something happened around something in the mid-2020s. And due to political unrest and inflationary pressures LCOEs have kicked up a bit of late. You can see from the dots, we do our best to track projects and benchmark our views about the future, and some of those views are those green and yellow kind of shaded areas looking forward of where wind and solar costs could go in the future. As I said, this could all change, no doubt. But I guess I wanted to leave you with the message, we still see innovation has some ability to take costs out in real terms, albeit starting unfortunately, from a slightly higher base just because things have essentially reset at a higher level. Looking at the chart, our sense is solar costs probably have more potential to [indiscernible] versus wind perhaps a bit more commoditized. But look, that thing can always change. And I think that's why -- and Guy Waipara is very good with us. It's why it makes sense [indiscernible] in both from [indiscernible]. But I would say, remember, this is just cost. Just because you've got the cost plan does not mean the market is going to reward you for building that, but it is an important thing to understand. And before getting to prices, I wanted to touch on these 2 pictures, which is Flex or firming, which is kind of a cool new word. And that's how much the market, we think, is going to need going forward from the shorter term on the left and the longer term on the rock basically, charts show how much energy is being dispatched on average by various firming resources over time. I think the important thing, no matter how we look at Evo Revo, whatever scenario we look at, we just see a huge need for more firming resources going forward. And that's to fill the hole, which is left by gas and thermal exit, but also as you move into the 2030s, you just -- the challenge of just delivering reliable power year in, year out from a highly renewable system. The main chart I want to focus on was the one on the right because it's a lot of news. That is our view on the dry year energy needs in each year going forward. This is really hard to show, by the way, so it's perfect, but it's a good representation. The line represents how much more fuel is needed in a dry the bars show how you could achieve that fuel basically. Bars higher than the line means you're good from a security perspective, though more is always better, basically. And that underlines what Mike opened with. The line could drop over time. And the reason it does that is in our world, as you think the cost, I said we need more firming if that's really expensive to provide, it makes sense for the market to adjust and overbuild renewables because it's just more rational. When I mean overbuild, as long as prices compensate you doing that overbuild. And what that means is if you overbuild a bit in dry year, you don't need as much extra fuel coming into the market. There's also a bit of hydro profiles changing through time and all this kind of stuff, but it may not happen. It may stay up around that 3 that kind of 2025 figure where the line is 3 to 3.5 terawatt hours that could -- if that line doesn't drop, that's a good kind of rule of thumb that we use for how much kind of dry year energy firming flex, whatever you want to call it, the system needs. I would say in the bars, because some of you might say, why are they like that. We've derated the thermal plants a bit to account for they may not always be fueled by gas is operational considerations and the invest demand response is not at full board because you can't call it maximum every year. So you could argue there's a bit more slopping around the supply side. But I think standing back, I'm kind of happy with what the story, the chart is trying to tell us. And for me, it paints a picture we're okay from a security perspective. But I think the country would benefit from what we'd call more deep storage basically. And while we think the demand response contract with [indiscernible] massively positive, really good, getting more reliable access to hydro resources, be it in the short term from contingent storage or longer term from potential hydro development, which Murray is going to talk about, I think, would be hugely beneficial. It would just add to those bars, give us a lot more of a buffer basically. So on to prices. You put all that stuff I just spoke about, into our world, into our modeling framework, demand supply, a bunch of constraints at the [indiscernible]. It's not that simple. But those are the prices that come out. Those are average North Island prices Evo in real 2020 out to 2050. The front end, so [indiscernible] is -- that's kind of the name for our big annual refresh. And so I'm just looking at that blue-lated area going forward. That's -- you can see the front end. It's still dominated by, in our view, the effects of the rapid decline of the gas industry. But if you look beyond that, you can see it dropping and that's because of the renewable build and you kind of average outlets and bumps, what you get is prices clearing around $120 to $130 a megawatt hour for the next kind of 15 years thereafter after the prices drop. And then I guess because it's all in real terms, it starts trending down over that, and that's just a function of those learning curves and more renewables, stuff getting kind of -- getting built at the right time and changing that balance. So to come back to that opening slide, I spoke about at those price levels, build as a plant are getting the investment hurdle, securities concerns are managed everything is doing what it needs to do. That is a market and equilibrium that can work. There's other views of the future clearly. And over time, you would think a well-designed electricity market, you should see prices trending or going towards costs over time as long as you've got sensible supporting policies, gas, in particular, and resource legislation, [indiscernible] why doesn't it equal just that LCO those charts are put up earlier. And the difference is really the cost of firm that's essentially what's driving that delta between the two. And so much like I kind of looked under the hood with demand, this is doing the same with price. And I showed you average price. And I should say that's average across all hydrologies and the kind of the spread around hydrology prices is massive basically. But this is what's going on behind the scenes. The chart on the left shows [indiscernible] to [indiscernible] or price participation for some select assets or technologies that's a measure of the average price received by the plant divided by the average market price. So numbers bigger than 100% mean you've typically got [indiscernible] and you're just generating at the right times and so you get a price above the average basically. What it shows is as you get more intimacy in the system, you get more price volatility, meaning you should see a growing divergence between the price participation of intermittent resources, which is kind of the solar and the wind there trending down and the more flexible resources, and particularly the Waitaki chain up top going up. We think solar price participation will probably fall faster than wind and solar has got a lot higher kind of correlation than wind basically. And wind also has some variable running costs, meaning when prices get really low, it makes sense to spill wind basically. And what that does is kind of pumps up I guess, artificially onto your price participation because you're not getting your generation away at low prices. And you can see that blue line on the left-hand chart. We just took a slice through that to look at a typical day in 2036. -- if there is such a thing, that's the one right. And it's just kind of show you what a typical day could look like. So you've got the price in the red and the output of kind of on average wind insole in the green and blue and [indiscernible], prices kind of peak when wind and solar are not at their highest, prices dip in the middle of the day when solar and wind are really cranking basically. In that year at least, and that's again across all hydrologies which is an average of an average, basically, but you've got to make some headway. We're not seeing prices really collapse, like they have in other countries there. And the reason is New Zealand has got a really good backbone of flexible hydro. So when solar is really cranking. Price, should be -- people will have their own views, but you've got to factor this at the time you make an investment decision. So I think the takeaway is it's really important the market designers keep the prices adjusting to the physics and essentially the reality of the system because what it does is it makes sure investors are targeting the right investment for the system and instead just trying to put in the lowest cost plant. It's all about -- it's really -- it's not about an LCO shoot out. It's who can deliver the most value to the system basically. Now this is -- Owen is looking [indiscernible] describe this. But if there is an award for a slide of the day, here it is. I did mention correlation and Mike put me on this. The 2 blocks of color, yes, I guess, colorful tables, they show generation correlation for solar on the left and wind on the right. Red means high correlation, green means low correlation yellow somewhere in between. If you look at solar on the left, what you see is you've got rooftop solar sites, starting at the south of the country. Why we put South, I don't know, but we started the South. And as you head down to about halfway going northwards until your headline. And then we do industrial sites as well, studying it in the south, moving north. There's a lot of red there. And it's a very complicated way of saying, it's new everywhere in New Zealand at the same time, basically, all the solars cranking at the same time. Although you can see there's a little bit of diversity with the yellow colors. Wind on the other hand on the right, again, you've got wind sites starting at the south at the top of the table and as you go down your going north. When do you can see pockets that the red areas, there's pockets of regional correlation, but it's actually quite diverse nationally. And I guess it's a simplest way of, I think, showing why we feel solar's price participation will probably fall faster than wind. Okay. That's enough energy modeling. You go -- that's great, how you're going to manage all this? Managing our fuel water is preoccupies a large part of my team. And 1 of the main instruments we manage that with is with swaptions or callable agreements, basically, they're just a really good fit for our portfolio. And the lesson from the past year is gas, there's a whole lot worse than we or, for that matter, most people expected in contracts that try to pass that risk through really aren't worth all that much. So you can see here from this chart, the volume and the makeup of our swaption book and how that's changed over time, away from gas and towards coal and demand response. And in a perfect world, we're going to add more contingent storage to that as well. And the eagle eye among you will notice that the new NZS demand response contract starts from 2025 on the chart. We all know we used [indiscernible] mid '24. It's a bit of a par. Sorry about that. I get it next one. But I don't think it changes the story. I would say we've in green there, we've had a bit of success. This is seasonal stuff, not peak demand response. This is more -- goes to that chart I talked about earlier about really long-duration flexibility. We've had some success with other retail customers providing it. But it's -- I think we find the volumes a bit more limited than we originally thought. It's a bit hard to go, but there still could be some sum there. And the swaption is kind of -- they fall towards 2028, and that kind of lines up with that price chart I showed you earlier, where we feel prices with the amount of renewable build going on and a bit of setting of things. The market should find a new equilibrium and prices so we don't need as much insurer. Things don't stop at 2028, by the way. I just had to cut it off somewhere. We've got the Huntly deal out to the mid-2030s and we've got the [indiscernible] response out to the 2040s. So just what I wanted to leave you with, I feel we've got a good amount of flexibility, particularly in the front end, where we think the market could be the stressed the most, and we're still actively exploring other options on top of that, with the main event longer term will be augmentation potential augmentation of our hydro storage, which Murray is going to talk about a bit later. Finally, the other way we manage our risk position is the sales book and the C&I channel, which has been really good for us, provides another amount of. So managing our C&I position going forward will be particularly important, especially if Lisa and the retail team keep making [indiscernible] the mass market segment. [indiscernible] the wholesale prices do, in fact, ease like much chart suggested because C&I tariffs are really related with the wholesale market and the ASX curve in particular. So what this chart shows is our contracted sales position for C&I versus kind of what where 2025 is. And you can see it really falls in '27, '28. So we've got a choice really how much you want to recontract in those years. And if you do recontract, how much you want to kind of back-to-back or lay off through the [indiscernible] All of that, that's got implications for our risk position and our appetite to buy more or less portfolio insurance. I think point being combined with that swaption chart I showed you earlier, -- we've got lots of levers we can pull over the next few years to navigate things. And I think it really shows the benefits of the integrated model and lots of diversity in the portfolio. Summing up. Look, I'll have leave that in the background. I think the [indiscernible] story I presented, it is all manageable. And it feels as though with the signing of the Huntley strategic energy reserve, security is in a lot better shape despite the faltering gas industry. That said, I think there's a big difference between meeting security of supply requirements versus having affordable secure electricity prices. And for the latter, you're either going to have to import fuels or you're going to have to kind of unlock domestic resources. And we think for a host of reasons, the better option for New Zealand is to really take another hard look at hydro.

Andrew here has got the microphone at the moment. So a couple of questions, if I may, to begin. So first of all, how do you think about the LCOEs that you had up before which decline? How do you think about the -- I guess, you build out the best sites based on the fact that when you think about the generation stack over time, you build cheap sites first and more expensive sites later. Is that built into that chart at all or not? Yes, yes. Well, I think it primarily shows how the -- if you're talking about the green and the yellow areas going forward, I think that's more just about what we feel the inherent technology costs will do over time as opposed to -- they're probably using probably just average site stuff, like what a reasonably good site will produce as opposed to going through specific sites to develop that curve. When we build up the price, all that stuff at the front end that uses specific sites of known projects and announce things. And as you get further out, we're having to make a guess kind of thing. So we do apply a merit order. .

I think it was, which then showed the 1 after actually, that 1 there. So that then includes your view, I guess, of sort of the generation.

Correct. Yes. The build order, yes, we -- so as I said, we've got this team, they're going through all the announcements, reading some of your analyst reports as well. And it's working out what people have said, what we think they can actually do a live pragmatism and energy go in the back, that's what I said. We have to -- you've got a choice about how much optimism you apply there. And we kind of think that Again, it's a feedback thing. If prices are too high in our model, we add more generation as long as it's getting revenue adequacy, and we think it's you're not adding so much generation like the whole countries out there building wind farms kind of stuff. So we just keep iterating until we feel we've got a reasonable solution of the build run rate, prices, investor returns, security, so that's kind of -- that's where it's a bit more of an art than science, so to speak.

And my second question just relates to overbuild risk, and that's a topic that comes up from time to time. how will we know that when we get into a situation where we may have a bit of overbuild is, I guess, good overbuild in terms of providing additional security of supply versus overbuild, which suppresses wholesale prices for a period of time and we end up in the 2010s again.

How will we know? I think to some -- well, it probably depends upon that demand curve to some degree. I think we should be able to see some of that coming. So we've got the option. I'm not suggesting it, Guy, but you can I see the overbuild coming that will feed into our price forecast. The projects that we thought were economic will become uneconomic and you can throttle back the generation. So there is that as per I think the trouble which might have been in the past is if there's a real big bow wave of investment, and then you just see some the demand just doesn't show up like anyone suggested. And yes, I guess that is a risk. But we got bunches of people looking at this. And I think we've all got lots of projects in various states, and you can do things with pushing them back and all that. You can juggle things quite a lot.

Just. a quick one. On Slide 14, if you mind going there. On the GTO chart, are you able to talk to what the whole business is sort of expecting from portfolio level in FY '36. You talked to hydro increasing potentially. Obviously, you've got in-house win path as well. Just wondering what on a portfolio level, you see Gotting.

Well, I don't know. It must be dominated by -- from a generation portfolio. Yes. Well, it must be dominated, I mean, in those years by Monopoly and Waitaki. So I don't know off the top of my head, but it would be something approximating I would have thought I'd just be guessing, but it would be around 110 kind of 115. If I look at the [indiscernible], just so much volume basically.

Yes. So about 5% to 10% above where you're historically sitting in terms of relative pricing, [indiscernible] is fair.

You got -- I don't know that. But yes, I mean if I look at if you look at why take as a bit of a proxy for the portfolio, right? We did see it increasing. There's just -- as soon as you add more intermittency that just kind of has to trend upwards. I should say that's across all hydrologies. Now people who do this is like we've got 90 hydrologies sequences in history. You've got dry is, you've got hit years in there. There's no such figures an average year. But yes, so it will be very noisy to know to really say, oh, we're on that path [indiscernible]

Okay. Just a second quick one, if I have time. In terms of volatility between seasons, you sort of talked to kind of dry years and wet years. You're able to talk to how the portfolio is positioned between summer and winter and how you see sort of wholesale prices fluctuate between the seasonal stuff.

Yes. It's a good question because these dry years, they can be like dry quarters, so to speak, which is why the swaps on the profile of the callability is quite important. We're doing a bit of work. I guess, fundamentally, you kind of -- with the climate change, what's happening with our inflows I don't think we've seen any evidence at the moment that we're getting more seasonal volatility, though we are kind of peaking into that a bit more. So it's a hard 1 to know. I would just say, just anecdotally, it's just depending on the level of firming that shows up, it's just getting more volatile basically. So I would just anecdotally say it would be more spread between the seasons. So I'm not talking to the microphone. It's just things are getting more amplified basically. I [indiscernible] down, but [indiscernible]

One quick one. Okay. Just the headline 1 then. What is roughly over the next 10 years, the mix gigawatt hour kind of mix. of solar this is wind you expect to build in this profile. I just don't have that at my fingertips, sorry. Yes. I think I would say -- and maybe when [indiscernible], he can talk to this win is just so much more energy dense, right? So I would hazard to guess that the wind and the gigawatt hours, it's just, I think, some of the stuff that Mike said. Solar on average, what, 20% capacity factor, you got to build a hell of a lot of solar to kind of get to where wind levels are. When it's just really big. And when you see some of the options guys going to put up, there are some big ones in there. no supplemental about yes assumptions over the next 5, 10 years?

They're not great. So I think we've got some kind of gas experts in the crowd, but -- and we read their reports. We're not expecting great recoveries in the gas. It's kind of managed decline or rapid decline. Thank you all. I introduce Lisa, our Chief of Retail coming on.

[Foreign Language] So good morning, everybody. For those of you that I didn't meet last night, and for those people online. I'm Meridian's Chief Customer Officer and I am based in [indiscernible]. There's a real privilege to be here today. So when we met months ago with some of you, we set out the new path we are on with our retail business, and that was all about adapting thriving and staying really resilient in our rapidly changing energy landscape. And today, I'm really excited to let you know how we are progressing there. So retail's mission is really simple, but we think powerful and that's to deliver cleaner and cheaper energy for New Zealanders. And so today, we're giving you an update on how we're contributing to and that's by growing our retail business in new ways that create value from the energy system increase passing that value on to our customers. Our strategy is based around 5 pillars and they aren't just sort of things we made up on a Strategy Day, the are the things that they drive everything that we choose to do. So that is our digital and data-driven customer experiences making Flex valuable for customers, electrifying transport and heat, optimizing our cost and efficiency and increasing community good I'm going to walk you through the progress that we've made on each of those, and the stories about how we're really making a difference. So firstly, Meridian's digital transformation isn't actually just about new [indiscernible]. It's changing how we work, how we serve our customers and how we're using data to really drive innovation. Our $30 million next-generation retail program is really a game changer, we think. We've moved from siloed teams and legacy systems to a much more agile, cross-functional way of working and a really modern and modular technology stack. We've chosen Kraken as our new billing engine and the migration from Flux is well underway, and we are on track and on budget. It's been just less than 6 months since we signed our agreement with Kraken. And as of this morning, as I had to double check, we have migrated 34,000 customers. We're migrating a couple of times a week, so we'll have more customers going later this week. So that's going really well. Those customers will be the first to have access to our new mobile and web apps, which are built to iterate and really evolve as we introduce those new products and experiences underneath the hood of that, and our new data, a new retail [indiscernible] is really tying together all of those things, creating one view for our customers and our business and it's enabling us to leverage AI, both customer-facing improvements but also and importantly, internal efficiency gains. So what does that actually mean for our customers? It means faster service, it means smarter packs and it means a much more seamless experience, a much more seamless experience. And that's whether they're online, if they're calling us or using our app. And for our people, what it means is we've spent time we've got more time to spend solving and building new products and lease time rising with those old systems, we think we're building a business that's fit for the future. Now on to flexibility. So we're scaling our first mass market Flux product. We call it the smart hot water plan. And that's really about helping customers use energy when it's cleaner and cheaper and rewarding them for that. So since launch, we've credited $880,000 back to customers. and we've shifted 2,500 megawatts out of those peak periods. So every month, we're moving hundreds of mega out of those peaks that means customers can save on network and energy costs. And what it means for us is we're learning really fast how to do that and where the value lies. People often ask me whether as a $10 monthly payment, really good value. And I think for retail customers, it absolutely is. So they're getting $120 a year in the pocket. They've got no disruption to their hot water and there's no required effort from them to do that. For us, it's really about a move in the right direction. It shows us how we can find that value, how we can pass it on to customers. And we'll keep scaling and learning and sharing in those benefits. So it's not really about running experiments. What we're really doing is building the infrastructure and the data system so that we can make Flux a core offering for retail but also for our wider business. The next one is our transport [indiscernible]. So they still remain really massive opportunities for us. And today, we'll talk about electrifying transport. So our ambition is really clear. We want to build New Zealand's largest and most loved EV charging network by 2028. And so far, we've deployed 396 charge points nationwide with around 1,100 weekly charging sessions. And this year, we have a further 194 charge point agreements with the landowners. And of those 118 are currently in the under construction category. So we're really focused on DC charging, making long journeys possible and making charging simple and reliable. By 2030, we expect our Zero network to generate $20 million of annual revenue. And that's based on the assumption that the share of pure EVs in the light vehicle fleet will grow from around 2% today. to approximately 10% by 2030. So that will see an increase from around 90,000 vehicles to around $0.5 million. Those numbers do sound quite ambitious. And they do come from really reputable public and private sources. But as we know, it's really hard to be very accurate around the focus of our new technology, but we know that there's been some political change that has derailed some of that growth, but we're confident in the long run, it will come back. That revenue stream is really backed by Meridian becoming the dominant player in the rapid and ultra public -- ultrarapid public charging market. We've currently got a market share of less than 1% and we're aiming to get to over 20%. So turning to the customer, you need to have a very good customer experience to win in this space. So we're constantly improving that experience with better apps, better payment options and hardware. And I guess that our charging product is really one of those examples of how we're extending our core competency and energy to create that additional product or, if you like, is our form of bundling. We're leveraging our existing service infrastructure, our in-house asset deployment team and our core retail technology to drive that. So we think it will be a really low-cost new product for us. This is about us -- this isn't just about infrastructure though. We're very committed to accelerating New Zealand's transition to a cleaner and in the long run, cheaper energy source. Cost and efficiency. So retail has executed on a very clear growth strategy since 2018, and our customer numbers have grown by over 160,000 over that period. So this, along with our C&I growth has seen retail's annual sales volumes increase over 70% during that time. This calendar year alone, retail has grown by 70,000 customers, half of that is organic and the other half as a result of the FL transaction and subsequent migration. [indiscernible] has the most significant growth, but we're really pleased that we've also been able to grow the Meridian brand. Now this hasn't been at the expensive value, that's evidenced by the 63% increase in our net back growth. So while serving a much larger customer base, we've also successfully reduced our cost to serve on both an absolute and relative basis. That cost reduction has largely been driven by reduced headcount, but also on the optimization of spend on acquisition and retention of our customers. In recent years, we've really built up a strong data and digital capability in the retail business, and that's enabled us to be much more effective using data to acquire and retain customers. It's really helped us in making more effective decision-making and reduced our reliance on costly third parties to optimize processes and build those experiences and products. We have created real efficiencies by bringing our 2 retail brands together at the back end, operating like a true multi-brand retailer through our whole business. The net result is that we've demonstrated that we've got the ability to scale our business without the corresponding increase in costs. And finally, it's very important for us to be a leader in the industry. And so increasing community good is really critical. As we grow, we're determined to support our customers, the end communities and the climate. In fact, we think that, that's our license to operate. Two programs that we've seen really tangible outcomes from our energy well-being program and our community and business [indiscernible] fund. So in our energy well-being program, we've helped over 3,000 households since inception and with just nearly 2,000, we've assisted just over the last year. How we run that program is that we work directly with community energy partners right across New Zealand to provide in-home energy assessments and interventions that are providing long-term sustainable solutions for energy usage and efficiency with an aim to reduce energy costs. The second thing is our fund which is powered by the net revenue from our certified renewable energy product. That means that every certified customer is helping make that possible, which we're really thankful for. This year alone, we've supported 37 community groups across New Zealand, and we've invested $1.8 million in helping them further decarbonize and put more of their resources back into the communities that they're serving. Since we started that $4.7 million has been invested in 80 different community projects, helping them to cut costs and emissions. So we're incredibly proud of what we've been creating. And since 2023, we've shared those stories through our annual certified impact and transparency report that's highlighted the difference the fund is making for people and communities around the country. So that is my story. And now I'd be happy to take any questions.

[indiscernible] in a little bit with Rory's presentation before as well. Can you just run through why now is the time to focus on upweighting retail and think about down waiting C&I?

I think -- I don't think we're doing it today. But what we're trying to do is maintain the flexibility we've got to make that call when the time is right. So the beauty of having a book that is spread between C&I and mass market is that we're able to manage that very regularly. So as contracts come up, we can make that call. What we know is it's easy to shrink your C&I book, but it's really hard to grow your market book. And so we made a decision as a business that we want to be consistent, and we're just growing as the time is right. and that's working for us. So we're certainly not jumping out of C&I overnight, and we'll make those decisions as we get the signals from the market about when the time is right.

And second question, just on the migration of customer cohorts to [indiscernible]. Can you just run through what the staging of that actually looks like you're at 34,000 customers now? I think you've got, call it, 400,000. Just an overview of the staging of that would be helpful. You obviously can't do it all at once.

Why is that the case? We've chosen to do it in a really assertive way. So how the migration for Kraken works is that we do customer cohorts. We build out the product for that particular cohort, and then we learn from that, and then we need to do the next 1 and so forth. So the general plan is that we will have all of mass market done by February -- we moved our first [indiscernible] customer today in test. And then we're a very ambitious goal is to have the program completed by June next year. So we're doing C&I. We're building the C&I component now, but that C&I migration will start in April. Just a quick question on EVs. Obviously, a pretty core part of the strategy moving forward. Just wondering if you can talk to a bit of the economics behind charging stations? And sort of what's the average cost to build a charge point and maybe a bit about the utilization as well, please? Yes. So it depends. So every site is different, every site has different requirements, but it ranges from, say, $70,000 to $150,000, I would say, per site. And we have a utilization hurdle dependent on the site, and it starts around 3% to 5% in year 1, and then we're rising up to 20% by year '28, so a 20-year payback. [Break]

[Audio Gap] some of the points that they found. So there were some areas for improvement, but they made important conclusions in 3 areas, essentially saying the sector is doing well and working in the interest of consumers in the country. First, they said the fundamental design of the market is sound. There's no need for structural reform. They noted while uncertainty around demand supply and in particular, government policy, regulatory policy, had influenced investment in recent years, a strong pipeline of new generation was now being built by both generator retailers and independent generators in the sector. The review concluded that New Zealand's energy-only market design was working well and should be preserved. In fact, they said the core problem was the impact on investment from government policy volatility. [indiscernible] said that as this was a problem caused by the government, it required a government solution as there was no means for the private sector to address it. The second main finding was that competition in both the wholesale and retail markets were strong with multiple large and small players and concentration rates well below internationally recognized thresholds. Having 4 vertically integrated entities of a similar size were seen by them as a positive indicator of effective competition as well as evidence of substantial new entry in the market on both the retail and supply side. Frontier concluded that recent market outcomes have been the result of a lack of investment in firm capacity driven by the aforementioned uncertainty in terms of government policy rather than any indication of anticompetitive behaviors. And they found that in a demonstration of the price smoothing benefits that firms like Meridian could bring. They concluded that rather than misusing market power, the gentailers were actually acting to present -- to protect residential customers from some of the volatility in pricing in the market at the expense of their own margins. They were quite critical of the energy competition task forces level playing field proposals. That's an initiative of the Electricity Authority and the Commerce Commission. which I'll talk about in a second, noting that rather than resolving any underlying issues, those measures would only impose higher electricity costs on to consumers in the industry. The peer review has supported the frontier conclusions. They found there was not any evidence that the market was not addressing dry year risk. To the extent there was a dry year issue, they said it was more about prices than reliability. So affordability rather than whether the lights were day on. And they recommended interventions targeted at the gas sector. Now the public debate has quickly moved on from those conclusions from the Frontier report. I think a lot of people pushing for reform of the sector were left underwhelmed. But they're pretty strong findings. And as I indicated on the first slide, they're kind of consistent with the findings from numerous reviews over the years, which have reached broadly the same conclusions. Now these are the government's perfusions off the back of the frontier report. Meridian supports, I think there's 10 on that [indiscernible] them all. There's a couple where we're saying our position is neutrality. One an LNG facility, I think we've got an issue. I think much remains to be seen about whether that is going to be the least cost way of addressing dryer issues to the extent we need more to address that or at least to address affordability during years. And then also, I think we've got a concern that once you establish an LNG import facility, you need to try and do that in such a way, you're not permanently joining New Zealand gas prices and also electricity prices, energy prices more generally to world LNG prices and query whether the LNG proposal is currently being progressed. You can find a way to do that. The other one where we're neutral is Action 2.5, which is about strengthening the dry year regulatory risk framework. And there's very little detail on what this means. We know there's going to be some tweaks to the way transport does its forecasting in respective dry years, and you're starting to see some indications of what they might be with a greater focus, not just on what people's actual thermal capacity is, but to the extent to which they're contracted gas or other forms of thermal fuel to support that capacity. And we would broadly support that or strongly support that. But what more there is in mind is something that's being worked on held closely by the government at the moment. We know that there's a targeted consultation of the sector on that issue coming up, but we have not, at this stage, heard anything. In relation to the dry year risk framework, more general to say that when you look at the combination of Meridian's demand response agreement with ANSYS, the Huntley strategic energy reserve agreed between us and the the gentailers and provided better access to contingent storage or actual viable feasible access to contingent storage can be secured in some way. coupled with the amount of new generation that's going to come online in the next couple of years. We think we are a long way towards better managing drive risk and better managing it at more affordable levels. I think we would caution that further interventions need to avoid imposing additional costs on consumers unnecessarily and/or crowding out private sector investment. So I adverted to this previously. The next slide is about the level playing field proposals pursued by the Electricity Authority and the Commerce Commission and in particular, the nondiscrimination measures, which are currently on the table and moving towards implementation around middle of next year. The idea of these is to address perceived competition issues between generator retailers and independent retailers and in particular, give the independent retailers a leg up. to enable them to better compete notwithstanding they've chosen not to own generation. There's a current set of refined proposals that the electricity authority is currently consulting on and essentially, these principles would require that we -- the gentailers the 4 large gentailers do not discriminate in our dealings with independent retailers between them or against them and in favor of our own internal business unit, our own retail business unit, we would maintain that is already the case. As I said, the authority has got a more refined proposal on the table at the moment, and it's definitely an improvement on where they were, but I think there remains some risk of unintended consequences even with the proposal as currently set forth and proposed by the Electricity Authority. In particular, they have this proposal relating to what's being called a retail price consistency assessment that will compare the prices at which we sell hedge contracts to independents and other third parties and the level of our own retail pricing in particular segments of the market and under different brands. And the risk was that is it may end up forcing the generator retailers to increase retail prices to the extent the authority believes the current margins being achieved on the retail sides of our business are insufficient. There's a lot of dara in the details to be worked out. And -- and further consultation will take place over the first half of next year. We'll have to see where it ends. I think the slide says it will come in midway through next year. It will cost us some money in terms of implementing that. There's quite a lot of process to be observed, and we'll just have to see how that goes. Another major sort of regulatory initiative or issue that we're pursuing, and as I indicated earlier, we think it can make a massive contribution to our ability to deal with dry your risk in an affordable manner is to better enable or actually enable, I would say, access to contingent storage Contingent storage is the [indiscernible], I believe, is the number gigawatt hours of storage spread across 3 South Island Hydro Lakes, [indiscernible] And you can see each of them illustrated at the top of the slide there with the relative amounts they hold. There's 2 colors on the [indiscernible] slide because the dark blue is water that became -- becomes available when the -- when TransPower deems there to be a 4% risk of supply shortages. So still very conservative, a 96% risk -- or 96% chance of no shortages, but 4% chance of shortages, you get access to up to 220 gigs at [indiscernible] it's [indiscernible] hardware. And then at the 10% risk curve, i.e., 10% risk of shortages access has enabled to a further 24 gigs [indiscernible]. And what we're talking about there is water that currently sits between in terms of like [indiscernible] water that sits between 518 meters and 513 meters above mean sea level. It's water we can generate from to contextualize what we're talking about in terms of the impact on those legs, Pukaki has been raised by 46 meters from its natural level. So between 18 and 13 is a difference between 46 meters and 41 meters above it. natural level. We think the environmental impacts of that can be managed. And our suggestion is we should be able to use that water to generate through the way tackle scheme as we do the water above 58 meters. Transpower has released. What is sort of was a fairly positive proposal. They propose to increase, to some extent, the buffers, which is shown on that graph there to push up the point at which access is granted, but there the currently proposed buffers are probably insufficient to give us the confidence we need to change in any substantial way the way we generate and use more of the range in [indiscernible] there's still a risk in our view that when access to contingent storage is really needed. It will not be available. So we're pushing them to go further, and we will have to wait and see how that turns out separately by way of a completely different process. And the way this works is relevant. The relevant restrictions are contained in our resource consent. So our resource consents say we can only go below 58% when we -- when [indiscernible] you're at the 4% risk curve. So there's 2 ways to attack this. One is to push Transpower to properly model the 4% risk of, we would say, and to draw it at the appropriate place. And if that's done, we can get access that way. And the other way is to have the consent conditions actually removed from our consents, and we're pursuing that route as well via the fast track, [indiscernible] is going to talk later about [indiscernible] process. And that would be for the next 3 years, temporary removal of the constraints on contingent storage where we -- where the market moves through to a point where a number of the projects that are currently being built come online. And there's less tightness in the supply demand balance, if you like. That's all I was going to say on that. This is my last slide. Obviously, as we look ahead to the election next year, it feels like electricity is going to remain in the spotlight. If for no other reason then as a reasonably chunky component of the cost of living that everyone faces. So to the extent we are looking at a cost of living election next year. Electricity will remain a part of that. New Zealand first have signaled that they will go to the 26th election on a platform of renationalization and vertical separation of generation and retail. At the other end of the political spectrum, the act parties wants to see a further sell-down of the power companies, greater use of thermal plant and even removing barriers to nuclear generation. a number of the other parties, we're still waiting for details of their proposed policies. But the balance of perspectives and what exactly is going to win out in any future coalition party of coalition government remains uncertain. At this stage, as we look ahead to winter 2026. The current -- the outlook, as we've illustrated on the right there, is currently looking pretty positive continued operation of the third Huntley unit. The full coal stockpile, they currently have sitting there and currently pretty healthy lake levels. means as we sit here right now, [indiscernible], the system operators are looking pretty low risk for the next while. But obviously, a lot will depend on rainfall or lack thereof in the first half of next year. Another important factor is Meridian gets access to our larger demand response options. We've been on a stand-down period with NSS. We haven't been able to call those for some time, but those come back online, I think, in April or May next year. So to the extent there's tightness, those large options are available to us. an important factor that we'll keep the sector and the light in the spotlight, if you like, in relation to cost of living is there are another 4 years of regulated price increases to come. sort of 3.5% to 4% on average, I think from the -- just from the regulated side of things, even if we impose no price increases on our own. And you add that up and cumulatively, it's a chunky amount to come. So this means me and my team have a lot to do in continuing to engage with regulatory political stakeholders right across the spectrum and trying to ensure they have the facts they need to make good decisions. and that they are appropriately focused on the long-term interest of consumers. I think that's all I was going to say. Has anyone got any questions? If anyone is going to ask me about what was it? Enable the mom companies to raise equity with expectation these companies seek ours and bring forward opportunities for new generation. I'm just going to pump the touch and hand that over to Mike. So maybe I'll head that 1 off right now. Yes.

Just 1 quick question. So the EA gave an estimate of $2.2 million. This is the levelized playing for your cost, yes, 2.2 million in the first year and thereafter. Has Meridian done their own internal estimates of what the costs might be.

We haven't, I have to say, looking at that, that feels possibly a little strong, but they know more than us and they're going to consult with us further in the next we will. So those -- this will be a significant reform. Those numbers don't look crazy to me, but we haven't done the work and we won't until we get a better handle on exactly what they have in mind. And there's a lot of details still to be worked through.

Just a quick 1 on the [indiscernible] slide. Your consumer benefit of $527 million each year. Just wondering sort of what makes up that bucket. -- any sort of big components you can break down in that?

I don't know that I can. Rory might be able to talk more to the modeling. But essentially, we've got a range, the maximum [indiscernible] the top of Lake [indiscernible] is, I think, 532 meters, I'm going to get these numbers in 532 meets 5.33%. The bottom is in we are very cautious. We don't ever want to -- so the bottom before you hit contingent storage is 518. We are very cautious. We don't want to be pushing against that 518 limit and find that access is not available, and we can't generate. That gives us a real problem. So if you look at [indiscernible] corporate history, we've always generally stayed above 20%. We've left a margin there. to make sure that, as I say, there is generation there, and we can keep generating right through any dry period even as things look increasingly kind of dire and tight. If we are confident that we can access contingent storage that will give us it will give us the confidence to use that full range to go from $5.32 right down to $5.18 and even perhaps below. So effectively, in a sense, the lakes are bigger, and we can just generate more right through the year. We're not holding back in anticipation of a dry winter or as things become tight, if that makes sense.

Thinking it's a pretty good story to tell if -- I suppose you're trying to get the cross the line and convincing New Zealanders and regulators, that is a good idea.

Yes. We're doing our best. We've certainly told Tran power. We've put that $500 million number in front of Transpower, the electricity authority, all sorts of advisers people, I think, sort of their eyes glaze over when I start to mention the number. I've bought on at them so often about it. But I totally agree. It's a massive saving for consumers and why we're not doing it is or why we haven't done it sooner is is something I struggle with.

Just a quick question on the level playing field measures. I mean, it could be quite a potentially large change to how generator retailers operate. is their feedback going to the [indiscernible] that the implementation date in mid-2020 is just isn't feasible?

Not at this stage. The feedback is more sort of focused on the substantive what do they substantively propose about which we're still -- there's a bit of detail to work through. depending on what the final form of it is, I don't have to say I don't think that's crazy. I think we could do that. So we'll just have to see. Thank you very much.

[indiscernible] The privilege of leading Meridian's autumn generation team and our outstanding portfolio of what we think is New Zealand's best generating assets. And with me today is [indiscernible], who I've recently appointed into a new role leading our initiative to digitize the generation business, and he's going to talk a little bit about that with me today. So last year, which I think was the first year of generation stood up and talked about operations at an Investor Day. I talked a bit about generation business transitioning from a focus on cost optimization and asset life extension, which are still really important, obviously, but to a broader strategy, which included growth from our existing assets. flexibility and innovation in our maintenance practices, all the while continuing that focus on asset health and reliability. And this change was sort of -- it was driven by the rising electricity demand, the need for more dispatchable, flexible capacity as the energy landscape is evolving in New Zealand, and that made it increasingly harder to get access to the assets to do the work that we need to do. So we had to get clever and innovative about how we actually did that. Our hydro and wind fleet iconic, they're supported by very skilled teams and really robust planning. In recent years, we've completed some significant upgrades, remediation, we've ensured high availability and reliability despite challenges such as transformer failures. I don't like to say the teamwork too much anymore and increased maintenance needs because the hydro assets in particular, and some of our older wind funds are aging, and they need more work on them. We've also bought 2 new assets into the business this year from my dear friend Guy and his team, [indiscernible] wind farm, which has seen exceptional availability of 99% plus most months, which is outstanding. And more recently, our grid scale battery at [indiscernible]. So the generation business back in 2023, we see the clear goal. We wanted to deliver 300 megawatts of new capacity from our existing assets and return 200 megawatts of parked capacity by 2028. And that 200 megawatts of parked capacity, I think about a month later from that baseline date any became 328 when we lost another monopoi transformer, so that was pretty frustrating. And that strategy is sort of underpinned by those 4 pillars that you can see there, growth in Flex. How do we focus on health and reliability and also grow the capacity from our SC for a long time, the generation business was quite divided over. It's one or the other. And what we've done as a leadership team has really said, actually, we need both, and we need to do those things really well. Operational excellence, obviously, and in part of that, what Jani will talk a bit about is actually digitizing generation and getting improved productivity out of the assets climate action, very important. A lot of the half by 2030 halving our climate emission sits with generation and people and safety, obviously, is pretty important. So our progress in performance has been pretty solid since then part of our transformation, which was an operating model change and sort of rethinking our practices, we've delivered 112 megawatts of new and increased capacity so far from the assets with further hydro uplifts and upgrade investments in the pipeline. And the team's efforts have resulted in increased output and increased revenue at a very low capital cost, less than $2 million. We achieved that 112 megawatts, which is outstanding. And I very unfairly say compared to [indiscernible], which for a little few megawatts cost $450 million. So you can really see the value and just really applying some good thinking and innovation to our existing assets. Most of that work because the reason it was low capital cost was just good engineering studies and reviews in changing constraints. There's also been some further operational changes to reduce our outage days, and that's delivered some real value and choice to the business. So to date, the team has removed more than 200 outage days permanently from the system, which is an outstanding achievement and it hasn't increased the risk and it hasn't compromised safety. And there's been some challenges along the way. As I said, technical complexities like transformer guessing have been really [indiscernible] they've impacted time lines on some of our projects, but they've also driven some innovation across our portfolio on other projects to sort of optimize some of the downtime, which has been fantastic committed to still delivering the 300 megawatts of new in the 200 megawatts of returned by 2028. And I guess with all of that work, there's been a big cultural shift. We've invested quite a bit in our leadership capability we've driven a real cultural shift in the business. And with that and the operational gains we have achieved, we're sort of now ready to accelerate our transformation to a more fulsome digital program. And [indiscernible] will talk a bit about this later, but we believe we can deliver $25 million to $45 million of value back to the business. Jan will talk a bit more about that, but that's a mix of O&M efficiency but also increased availability. So that's pretty exciting. This slide here talks a little bit about our strategic investment pipeline, and Owen will talk in the next slot about capital expenditure and sort of deep dive into this a little bit more. But every year, the generation business would probably invest about an average of $15 million of stay in business CapEx on what we call core recurring projects. and bets to achieve things around asset health, upgrading equipment, maintaining compliance and safety. and the additional stand business CapEx will be committed for what we call periodic priorit or lumpy projects that are very large, often multiyear, very complex. And these projects occur maybe once in a decade or once every 40 or 50 years, they generally extend asset life. They improve asset reliability and performance. They strengthen seismic resilience because there's a lot of value, as you know, sitting in concrete and steel across our asset portfolio, and they modernize our plant. And we generally have discretion on those projects in terms of timing -- and the amount that we spend has ranged from, say, $10 million in FY '24 to $30 million in FY '25 with an uplift this year because we've kicked off there being more penstock seismic strengthening, which Owen will talk about in the next section. But what you see on this slide here is what we're calling our baseline view of what those periodic projects will look like over the next 10 years. Not all of them are fully costed yet. But the baseline here and has been for many years, informed by good engineering practice and standards. You should generally replace your turbines at about 45 years old. What I'm really excited about with our digital generation program is that it will provide us with alternative views of that baseline what work could we push out? What could our data tell us about asset performance and a more comprehensive view of actual time to intervention versus a conservative engineering standards type view. How might we better optimize the timing of the work to maximize revenue opportunities versus our traditional approach of avoid winter and don't have any more than 400 megawatts out and we should be all good. How do we get a lot more granular and refined about flexing and valuing where we might do work. And we're going to be using data to better predict asset failure to finish how we might time and prioritize that work -- so you'll see there, there's 3 kind of buckets. There's wind hydro in the sort of what we call civil and seismic resilience. You can see the wind one there. Obviously, Guy's team. We work very closely with our focus in generation is around what we call end-of-life studies. So when you sign the contract for the wind farm, it will have a certain life towards the end of that, we get the OEM and to do a study and say, right, can we get an extension. And we did it for [indiscernible]. We've got 10 years out of it. So it's really valuable. It's very valuable to keep running those on farms as long as you can. We're currently undertaking those end-of-life studies for White Hill and [indiscernible]. So that will tell us how much longer beyond the data on the tin can we get out of that on farm. So I will now hand over to Jan to talk a little bit more about [indiscernible]

I think Tad has already introduced me, I'm Janos. I've been a morning around 9.5 years and in a number of roles. And the part of my job that I enjoy the most, and I get to talk to you about today, is deploying new technologies that support our people to look after our aging assets. And this is a really interesting area to work in because you can deploy technologies just for the sake of them. But what we're doing here is trying to target it towards value. So the first thing about this is what is the value, what is the size of the price. And when you're trying to do an assessment like this is pretty good to get an external perspective. So just like our retail team did last year and they told you about with their base camp program, we're in a similar sort of space with the digital generation program. So we've got McKinsey consultants, and this is their view of the size of the price in our business and generation. And the value pools that we're targeting with this program a few years. So the main one is a reduction in our costs and an increase in our revenue. Now that revenue increase, we're looking at monetizing that flexibility and availability that a few of the previous speakers have talked about. You heard Rory say there's a lot of value and flexibility. You've heard Lisa highlight all the work they're doing to shift demand out of peak times. We're trying to do the same thing, and we're trying to do it with our downtime, to shift some of our downtime out of peak times and into areas where the prices are low. And the other power which [indiscernible] talked about, which we're targeting is to final scenarios for our stay-in business CapEx spend. So currently, our one is quite conservative. It's a world view driven by fundamental engineering principles, and we believe we can do a better job by informing what work we do and when we do it using as much hard data as possible rather than some of our historic practices. So that's what we're going after. And the next 1 want to talk about how was doing it. So we've got a 4-year program, which we've just kicked off about 8 weeks ago. So everything I'm presenting to is pretty hot off the press. And a big part of how we're approaching it is we're leveraging what our retail team did. And I'm hoping that next year, I'll be able to stand here just like Lisa did and tell you how that's how that's grown and what impact that's had. But we're already seeing some of the early signs of the sort of experiences that they had and leveraging a lot of the same resources that they used. So the sort of areas we're focusing on is how can we inform the work that we do on our assets and drive that work and trigger it more with data rather than some of the traditional ways we've done it, which is usually a calendar, something as we don't every 6 months, every 1 year. [indiscernible] mentioned stuff that as we done every 45 years. Another area that we're investing in is how can we optimize our outages. So many years ago, probably 10 years ago, we optimized how we use water. So a lot of you would have heard of Mercury's Digital River project. We've been doing that for the last 10 years with our hydro optimization tool. So now everybody that sets at a Meridian control desk and controls the water flow through our Waitaki system does it in exactly the same way. And all the improvements that are made to that approach made consistently across anybody that sits at their desk, we're trying to achieve the same thing with the way we schedule our downtime. And the guidance we got from McKinsey, who came in and gave an external perspective is that there's actually quite a bit of value than that. And that's their view. And through this initiative, we're looking to try and validate that. The other thing we're looking at is where we feel we'll get the most short-term gains as in our procurement. So we buy a lot of stuff across the generation business from a lot of different suppliers. So we're looking at using, I guess, the data on our spend and to understand our buying power and then to leverage it. And that, we feel, is going to deliver a lot of value early on that we can then recycle back into this program for further improvements. And overall, there's this sort of general theme of shifting the way we do our maintenance work. If you look at it on a bit of a spectrum from how sort of your family car mechanic works, you drop your car off in the morning and you pick it up in the evening to more like a Formula One pit crew where we shut the plant down for exactly the amount of time that we need to shut it down. And everything we do to their plant, we do it based on data that we've already seen before it comes in. So that's our approach, how we're going about it. And I can give you guys some examples. So in the last 8 weeks, we've been traveling around the country Talking about this program. So a lot of our people at different sites, collecting ideas from them. And I'm pleased to share some of you with some of those ideas with you today. So we just at [indiscernible] other day and we've got telling us, I have to walk around and check these gauges. And that's a really good example of the type of manual work that you get in a utility such as ours, lots of similar businesses would have inherited those sort of maintenance practices from their predecessor companies and cultures. And here, we got our people themselves saying, look, I've got to go and check this gauge. I've got to write the data down and they're going to go back and type it into a maintenance system. Is there some better way we can do it. So in a short space of time, we've gone and put in sensors that collect their data automatically. We've used the same data platform as our retail team is using to pull their data to our analysts. They've quickly developed analytics that can make sure that, that data finds the right person at the right time. And in the hardest part, the part we actually work on is the cultural change to be like cool, how can we change our behavior to deliver that value back to the business in the form of that's increased time available to do something higher value. And what we're finding is this is as much a cultural change as it is a systems 1 within the generation business. So in the short space of 8 weeks, we've found and actually tried and implemented ideas that have saved time. They've saved money and they've involved technology investment that we are going to leverage and reutilize on an ongoing basis going forward. We've really learn how to pull those value levers where you are actually reducing downtime. We're reducing the time taken to do outages. We're reducing the time in our maintenance system required to actually conduct tasks and manage the risk that we have to manage. And lastly, we're also really focused on through these initiatives, proving out and validating whether we're going to see the lagging indicators, which are the value pools. Are we seeing the reductions in [indiscernible] are we seeing those alternative scenarios for stay in business CapEx. And that is effectively further funding for this program is contingent on us proving that value is there. So yes, that's -- I think our current investment, we've got this year is about $4 million. We're looking to generate a return of about $2 million at least on that. And the early signs is that, that value is there. And then basically further funding on this program is contingent on us actually proving that, that's the case going forward. So yes, I think that's all we have to share with you today and happy to take any questions. SP-5 The Tech replacement looks to be 1 of the larger items on the maintenance side. Any idea of cost for that at the moment? Yes. So [indiscernible] is actually working on that for us at the moment. He's sort of -- we're aiming to hopefully get to FID next year. Costs at this stage, [indiscernible] $300 million, $400 million, I can't remember. What we've chosen to do with that station upgrade and actually, we've had some good conversations with Mercury and kind of -- they've got some good learnings from [indiscernible] and one of the ways to derisk it is to -- is everything from head gate to draft tube brand new, don't try and integrate new stuff with old stuff. [indiscernible] is a big mistake, and it will cost you. It's cost them a little bit on [indiscernible] in terms of issues they've had to sort out with old automation trying to integrate with new kit. The bits that we will recycle obviously, is the [indiscernible] because it's pretty expensive. And we would only adjust the civils if it was economically worse, which [indiscernible] But other than that, you don't want to do anything with the [indiscernible]. There's a little bit you can see on the seismic resilience the [indiscernible] uplift management. There's a little bit of what we need to do on the Hornell gallery there to strengthen it. So it's like when you renovate your house, if you piles need a little bit of work, it's important to do that before you spend a whole lot of money on renovation. So there's a little bit of that that we'll do concurrently yes.

Just to clarify, you mentioned you spent $115 million on core SIB CapEx.

So these projects are obviously on top of that. These are over and above. And the sort of core recurring average of $15 million is the stuff you're generally having to do every single year. And it's mainly on hydro. The wind is pretty OpEx hungry, but these are over and above, and we sort of had some choice around it. And the choice is really driven by timing. So that's part of the [indiscernible] is actually how do we kind of stretch that timing out and create more choice for ourselves and increase that. flexibility we have on the discretion.

I'm not sure if it's coming up later in the presentation, but is there an SIB CapEx pathway over the next few years.

Yes, I was going to talk about.

It is a great segue credit for the person who planned the agenda. Hopefully, it's obvious to you that I am not Mandy Simpson, nor am I the CFO. Unfortunately, Mandy has laid up in Wellington with something called [indiscernible] who knew that was a thing, but she is listening in, so Mandy Kite and best wishes for a speedy recovery. I had this session of mind because we quite often get asked about our stay-in business CapEx even as most recently as 30 seconds ago. I thought it would be a great idea to put someone up to talk about it. I never envisaged it would be me. So welcome to a session on staying business CapEx. And the question we usually get is why does it keep going up. Before I get to that, I just want to talk a little bit about what it is or isn't. And in very broad terms, it's the capital expenditure that we make or choose to make to maintain both our asset base and our systems. Now the great thing about staying business CapEx is there's no formal definition of it under accounting standards. So our stay-in business CapEx may be quite different to some other large electricity generator, for example. Typically, what goes into it is the investment into asset and technology life cycles. Think about things like major repairs or replacement of components that extend existing asset lives. To be very clear, what it does exclude is asset investment that we make that either adds new or additional installed capacity into our portfolio. and results in higher generation output. That for us is growth CapEx. There are a few wrinkles or uniqueness about it. One is in relation to wind. So same business CapEx excludes major wind component repairs. So we'll recognize and capitalize the 2 main components of a turbine, which is the turbine itself, everything above the ground. And the foundation, which is everything below the ground, excluding the cabling any repairs we make to components of the turbine itself over the life of a wind farm asset are treated as OpEx. So you won't typically see a lot of wind stay in business CapEx. Why does it matter? Well, it's a component of our operating free cash flow. That's the basis by which the Board pays a dividend on. So it does have a direct relationship with the yield that we're able to produce. And it's a factor in how the market values Meridian, but also how Meridian values itself. So Rory's team do a lot of work with Mandy's team around an annual accounting valuation of our asset base. which can result in quite large swings. And yes, it's going up or has been going up. So I'm just going to step through a few of the components. But as Tons alluded to, we are trying to frame up our same business CapEx along the lines of that, which is reoccurring, and that which is periodic. And I'll just mix and match a bit between the 2, but just touching on a couple of points. Our dramas with our Wellington corporate office on the Queen's Wharf waterfront are pretty well known as has been our long-awaited move into new premises in the old bank arcade. And we made a significant investment in our people to provide them with what is a world-class office, I think. So -- and that's had tremendous feedback and sort of positive engagement sentiment. So you will see periodic property investment by Meridian. We are moving into downtown Auckland offices. We are planning some refurbishment of the interior of our Cross offices. So there is an ongoing program of work there. and we put more and more charges into our assets. So those sort of costs come through. What you might not know is Mike runs a forestry business. Not necessarily for the product, but we're building a carbon sink with the intention of being able to offset our residual operation emissions beyond 2030. Now what that means is we'll build and manage and maintain a continuous forestry model, where we will steadily transition away from what is predominantly early planning of Azotic into more native timber over time. And achieve a much better biodiversity outcome in our portfolio. At the moment, that's about 14 planting projects. We've got 750 hectares of forest recognized in the ETS and we'll add another 250 hectares of that -- what that means is currently, we've got about 8,500 credits per annum in the ETS and we're looking to almost double that from 2030 onwards. And I think we're unlikely to stop. So we're currently considering further a station initiatives. So you are likely to see forest creation as an ongoing line of stay-in business CapEx. Skate, I'll talk to in a little more detail later. Flex, obviously, is an investment ceases with our selection of Kraken as a technology partner. Tom touched on generation investment on a reoccurring basis. We had the same thing with IT. So there's just an ongoing program of work about improvement replacement cyber resilience of a complex set of systems. Again, that kind of level in the mid-teens is something you can expect to see going forward. Vehicles for us is an investment program that's part of a long-term commitment to 100% EV fleet. We've got close to about 100 either pure EV or hybrid vehicles out of a total of passenger and commercial vehicles currently. And we're aiming for full electrification by 2028. That is a challenging target. Not so much for passenger vehicles, we are at 10% -- but the New Zealand market is still very limited for commercial pure EV models. And we imposed some pretty strict safety conditions. So some of the 4-wheel drive requirements that we have aren't yet met by available stock. In relation to periodic generation, I am going to mention the tea word. It's -- we've talked a lot about our transformer issues. But that cost will continue to hit our business until we are through a full replacement of transformers. -- we are having an ongoing discussion with the provider of our transformers around the situation we're in. I'd love to really tell you what work at gates are, but I think there was a picture at the start of Tanz' presentation. But essentially, there are adjustable veins that sit around a hydro turbine that control the flow of water. They are reasonably important pieces of kit. Manapouri Automation is a long-term project doing what it says on the tin, which is automating control systems and operating systems at Manati. But if I stand back from the CapEx picture, yes, it's more than doubled in the last 5 years. But within that 5-year period of spend, we are doing a 1- and 10-year scale replacement property investment and monopoly automation that probably occurs in the 20-year time horizon. Transformers are meant to last something like 40 years. And Bemore Pin stocks is once almost in a lifetime project. So that's what it's looked like, what it's going to look like as a likely peak this financial year. And then for the first time, we're giving you some direction around where we see it going in FY '27. So a lot of the in-flight programs -- we'll continue -- we'll reach a natural end of transformer replacement, hopefully, for a very long time. But we'll also add into FY '26, some other periodic generation projects at a number of hydro stations and at the Manapouri Lake control facility. What I would say as a general guide is that we expect to see all recurring expense. So generation IT, corporate property vehicles, et cetera, probably falling into the medium term $40 million to $50 million bucket. And then just depending on the decisions we make around periodic spend, so reference back to turns a slide on strategic investment. That might average out over time in the order of $20 million to $30 million. So broadly and as an indicative number over time, probably in the $60 million to $70 million of stay in business CapEx. -- cavitated by the fact that some of this periodic investment will turn up in significant chunks. And if you take the example of why Turkish station replacement, it's likely to be both growth and stay in business CapEx as we get into the project. So we don't suddenly hit $400 million of staininess CapEx in 1 year. A little bit of a dive into 2 current projects. To monitor and control our generation assets centrally without the need for having operators on each site. We use a generation control system using Skate technology. It's a reasonably standard thing globally. It does reach end of life in about a 10-year period. So we've operated the Siemens system since 1998. The last significant spend on that was completed 12 years ago. So we're into a new system or new investment in a new system from Hitachi. That will total about $55 million. We started that work late in 2024, and we're aiming for go live in -- and the very best project outcome is that no 1 notices we make the change. And it's progressing well. So the key elements of the system are tested. We've set up a securities facility in [indiscernible] and we are doing a bunch of work along with third-party organizations, including PwC on a continuous review of the work that we're doing. So it is complex. There are testing delays and integration challenges along with it, but we're pretty confident about deadline. The second project, I just wanted to lift the hold on a little bit is been more pin stocks. I actually sit on the Project Steering Committee for for this. And it's not because I bring an enormous amount of unique engineering experience. After each monthly meeting, I usually go and have a light down. So what I'm going to do has been Mike Wright into the room. He's our project manager, and he's going to give you a little bit of a flavor for what we're doing with the Benmore in stocks.

Penstocks is the tube that takes the water from the top of the dam down to the unit that generates the electricity. Every dam has a penstock of sort more stocks constructive concrete which is very unusual. These are about 5.5 meters internal diameter. The slipstionis about 130 meters long. Each pen stock takes about 110 Punit full flow. So an enormous amount of water screaming part in my year right now. We want to be able to generate electricity pretty quickly after an Alpine.That's a really big earth way for us to be able to do that. We need to invest and make sure that these pen stocks essentially have very minimal damage, no one else in the world retro filling a concrete in stock to improve its seismic resilience. The assets have been more show a really high level of resilience the slope section of the Pinson -- the project will deliver strengthening to that slope section to bring it up to mix the rest of the system called away from the intake structure through to the tail rates -- we're working with our main contractor site construction to come up with a system that's going to support the penstock while we're still generating electricity. That will allow us to slip the existing bearing out and replace that. We're also going to apply some fiberglass at to the PEN we're going to fix some distempers, which are pretty much like a car shock absorber and that will help dissipate some of that seismic energy, and we're also going to modify the top end of the slope section to make sure that it's got enough freedom of movement. -- when it quite happens. It feels really exciting to be delivering something that's essentially going to outlast me. I'm really excited to get stuck into it.

So back when more was built for economic and labor reasons and a bit of key ingenuity, we bypassed the steel option in terms of in stock construction and elected prefabricated concrete I guess New Zealand seismic maturity has evolved since those penstocks were built. And it now looks a pretty interesting choice. -- with the benefit of hindsight. It does give us a fantastic engineering opportunity to improve the seismic resilience. And without steering the horses, a 75% chance of and maybe 8% or higher at brake on the Alpine fall in the next 50 years. The whole country is operating under that risk. It's not just a Meridian specific one. So it is going to happen. It's just a question of wins. So what we are really doing with this project is ensuring that we can seismically shore up the risk to the Penstocks so that we can be more up and running in a large quake. And the reason for the focus on being more is it obviously sits at one end of the high-voltage DC link between the South and North Island. So we can power up in more and get that generation north and typically, with our hydro stations, the structures have a very high level of resilience to earthquakes, but our investigations have revealed that the concrete in stocks are a critical vulnerability. So we've done an enormous amount of work on this project without having actually changed anything yet. But what we have plotted is a way through that complex engineering so that we are able to minimize outages. What that will mean is that we will replace bearings essentially without a station outage and that 636 replacements will avoid close to 42 months of station outages during the approach that we're doing. It will cost us on -- depending on the current design, probably in the order of $110 million, $111 million. Don't hold us to that number because we are not yet at final design stage. The first question I asked when I got on the project was why don't we just replace them. And without doing any deep financial analysis, that's probably $0.5 billion in 8 years of station outage. So I've already asked my dumb question on the project on the first day I sat down. So it's likely that we will business case for this with our Board, probably early 2027 once we have completed the detailed design, and we've got more cost certainty. And then the project is probably likely to be carried out from that point, culminating mid- to late 2029 and that was really it. I'd like to ask for questions. But please, and I bet [indiscernible] first. I'll just put a caveat and I may find a friend actually and defer quite a few of these over to tons because she's the gatekeeper to the decent chunk of our [indiscernible]

A quick one. Just a little bit more color on the FY '20 and 9 in our numbers. Can you sort of talk to just take out backend number of $45 million base on $35 million per annum in more based on the $1million and then add on $70 million year for 120. So just wondering if that's the sell number 7 years

I think your techs numbers are a bit hot. So some of that will be growth CapEx as the replacement spend effectively builds further generation capacity out of the [indiscernible] so I think we're reasonably comfortable with where we kind of patched a longer-term view. That obviously is the most significant project on tons on Tansas pipeline. So it has the potential to move our stay-in business CapEx around a bit. But I think what we will do is continue to put forward a consistent view of spend occurring and then specific projects that are periodic. So you get a bit of flavor for it.

Do you know how much the Waitaki is growth?

Not yet. When we do, I think we'll provide some direction on that. Materis probably a better position to give you a sense of the type of spend that goes into -- or that will go into it. But it's pretty early days on that project. as is going to ask me questions.

Just to add to that, on the one page sort of investment pipeline you saw for generation. You might have noticed there's a couple of a pieces of work. So the Ohau and in BC, you might remember a few years ago, we started a refurbishment to extend the life on Aha. We did 2 units and then with the smelter issues we sort of pulled out and pivoted to Manapouri. So those 2 bits of work might not be a refurb. We might do upgrades. We're just doing a study at the moment. So as with Waitaki some of that might be gross. You can see there the team are sort of saying we might get 80 megawatts additional uplift across those 3 projects, Waitaki and a chain. We're just yet to quantify that, but some of that will be growth as well.