Meridian Energy Limited (MEL) Earnings Call Transcript & Summary

[Foreign Language] On behalf of the Board and Meridian management, welcome to you all. Thank you for being with us this morning. As some of you know, we rotate through the main centers in New Zealand on an annual basis. And being here today reminds me of 2011, I think our first ASM as a publicly listed company under the leadership of Chairman, Chris Moller. [Foreign Language] Chris, wonderful to have you with us. [Foreign Language] Wellington is also a [Foreign Language] country, and we've enjoyed considerable generous support from [Foreign Language] over the years. We acknowledge their work in the city supporting government, the corporate sector and social delivery sectors as well. So we acknowledge their contribution to the country as we [indiscernible] [Foreign Language] New Zealand [Foreign Language]. Standing here, 2 ideas come to mind, 2 phrases. The first is [Foreign Language] dynamic, ever moving, fast-moving, and it seems like that's a pretty good definition of 2020 as far as we've got so far. A lot of things have been happening this year at scale. We must acknowledge the impact of COVID, while we've all been impacted or frustrated perhaps in part. We don't have to look too far abroad to see the enormous impact in other countries, the significant loss of life and disruption, including to economies. And it's far from under control. So just to acknowledge people's loss and suffering. [Foreign Language]. So just a farewell to those that have been lost. And there's a long list of highlights for 2020. We won't go there. But obviously, fires in the United States, fires in Australia. There's a field in [Foreign Language] of increased volatility at this time. Second thought that comes to mind is the [Foreign Language]. The idea of care for people, care for the environment. And on that basis, we can move forward to support a sustainable future. Obviously, Meridian is a service company. We're in service to our customers, from individual residential through to large aluminum smelter and those in between. We're very proud of our support of our own staff to in turn support our customers. We've got a lot of relationships with suppliers, partnerships with EV communities where our assets are located and our shareholders. So care for people, the importance of relationships is very core to who we are as a company. Care for environment, water quality, biodiversity within water systems, helping our clients decarbonize, helping the country decarbonize. Environment is also very much part of this company's DNA. So we're very pleased to step up and take our share of the burden for the challenges at the time and excited that the opportunities to contribute to the collective well-being of [indiscernible] New Zealand. Thank you again for being here with us this morning, and thank you for being on this journey with us. [Foreign Language].

Thank you, Anake. [Foreign Language]. Ladies and gentlemen, good morning. It's lovely to be here on a fine Wellington day and to be able to have a physical meeting as well as an online meeting. We might be one of the first in recent times that's been able to do that. On behalf of the Board and management, I'd like to welcome everyone to the meeting, and in particular, Juston Anderson, Aaron Gill and Amanda Wilson from New Zealand Treasury, representing the Crown. As Anake has already mentioned, I would also like to acknowledge the presence of our previous Chairman, Chris Moller. Nice to see you, Chris. Mike Hoshek, the company's lead audit partner from Deloitte and Cath Shirley-Brown from Russell McVeagh are also in attendance. Health and safety is important to Meridian. In the unlikely event of an emergency, you'll be asked to follow these procedures. You'll be warned by an electronic alarm. If this alarm is sounding on this floor, you must evacuate the hotel to the evacuation point, which is across the road from the hotel in 1 Grey Street. While on the conference floor, proceed to the nearest emergency exit, use the main hotel stairs or the fire exits beside the Aurora and Featherston Rooms. Do not use the elevators. In the event of an earthquake or major incident, please remain calm and stay in this room and listen for an announcement over the hotel PA system for further instruction. And please always follow the instructions of the hotel staff. The bathrooms are located to the right as you exit the ballroom, and there are also bathrooms located to the left of the Restaurant Chameleon on the ground floor. Moving to today's business, I declare the 2020 Annual Shareholders Meeting open. I can confirm the meeting has been duly convened, and a quorum is present. The minutes of last year's meeting have been posted on Meridian's website and are held by the company's secretary. Today's meeting is also being held online via the Lumi platform. This allows shareholders, proxies and guests to attend the meeting online via the live webcast. Like our shareholders in the room, online shareholders and proxies can ask questions and submit votes. I will let you know when questions can be submitted for online shareholders. And in their case, to ask a question, please press on the speech bubble icon. Voting today will be conducted by way of poll on the item of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. For those attending online, once I open the voting, if you are eligible to vote at the meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with your voting options. To cast your vote, simply select one of the options. There is no need to hit a Select or Enter button as the vote will be automatically recorded. You do have the ability to change your vote up until the time I declare voting closed. If you're attending this meeting in person, voting will be by way of poll, which means it will be a secret ballot and you will need to complete your voting forms. Persons attending the meeting who are not shareholders, proxy holders or corporate -- representatives of the shareholders may not vote. That includes bondholders. I now declare voting open on items of business. The polling icon will soon appear for the online attendees, so please submit your votes at any time. I will give you a warning before I close the voting. I would now like to introduce the Meridian management and Board sitting beside me on stage. On my far right, Anake Goodall, who we heard from first; Michelle Henderson, Mark Cairns, Nagaja Sanatkumar; and our Chief Executive, Neal Barclay. And on my left are company's Secretary, Jason Woolley, Deputy Chairman, Peter Wilson; Julia Hoare and Jan Dawson. Now to my Chairman's address. Meridian's purpose of clean energy for a fairer and healthier world provides our company with the foundation and context for all our decisions. As a 100% renewable energy generator that is committed to sustainability, we focus our efforts in areas which we think can make a meaningful difference. We are proud to have been once again named one of the top 5 leaders in sustainability, through the Colmar Brunton Better Futures Report. But we know that now is not the time to take our foot off the pedal, and we need to accelerate the pace of change on climate change. As we have seen through the COVID-19 pandemic, businesses across the globe have re-evaluated what is important, what value they are providing. As a New Zealand business and one of the largest on the New Zealand stock exchange, we too need to be confident in the direction we are headed. We are privileged to have a strong management team and Board driving this company and delivering results for you, our shareholders, and for New Zealand. As of today, I understand we've had 1,836 probable and confirmed cases of COVID-19 in New Zealand. We have been extremely lucky by comparison to many other parts of the world, but there is a long way to go. The impact on our business community is yet to be fully understood and realized. We do not know the effects -- well, we do know the effects on our economy will be far reaching and long lasting. Meridian has been and will remain focused on working with our customers who were impacted by the virus. We've supported customers with tailored payment solutions, while making sure that no one had their power disconnected due to the virus. In our efforts to lessen the impact, we haven't charged late payment fees or credit reminder fees to customers across our brands in New Zealand and in Australia. We've supported our suppliers with quicker payment terms, and we've supported our non-senior staff with working from home allowances during lockdown. We also wanted to do something to help families facing hardship, so we matched the $1 million donation made by generous Kiwis to our charity partner KidsCan. Having worked with Julie Chapman and her team at KidsCan for a number of years, we know that this additional contribution is providing targeted help for families who need it most and at a time when it has been most needed. At Meridian, the product we generate and sell is needed by everyone, so the COVID-19 pandemic's impact on demand and on our business have not been significant. We will play our part to assist the economy to recover as quickly as possible and to help shape the opportunities that will deliver sustainable economic and environmental outcomes. It is those environmental outcomes in particular that Meridian is pleased to see being prioritized by the government. We are strongly supportive of the government's approach to tackling climate change. And regardless of the outcome of this year's general election, we hope the same focus remains a key priority for any future government. This year, there have been considerable efforts made at the policy level to support New Zealand to meet its zero carbon aspirations. The Climate Change Response (Zero Carbon) Amendment Bill was passed, the Climate Change Commission was established, and we now have a package of Emissions Trading Scheme reforms that are a key policy tool to drive emission reductions and help guide the efforts of business. In June, a water reform package outlined proposed changes as to how freshwater is to be managed and steps to improve water quality. These changes protect the flexibility and output of existing large hydro to support further decarbonization, while aiming to improve the health of our waterways and importantly, better recognize the values and perspectives of tangata whenua. These policies provide a runway for us all to radically reduce our emissions and transform our economy for the benefit of all New Zealanders. Meridian will continue to champion change that delivers on clean energy for a fairer and healthier world and you will see us act and be part of that change. Outside of the electricity sector, where the renewable share of generation was 82% for the 4 quarters ended June 2020, most of the energy that New Zealand consumes still comes from burning fossil fuels. That's the fuel that powers our cars, provides heat for industries, homes and public infrastructure. Combined, these energy sources account for around 41% of New Zealand's total greenhouse gas emissions. About half of that, roughly 20% comes from transport. And only 4% comes from electricity generation. We strongly support policy options like the Clean Car Standard for newly imported vehicles to prevent New Zealand becoming a dumping ground for cheap high emission vehicles. We also think the government could lead the way in converting the Crown's light vehicle fleet to be powered by electricity as a large number of corporations, including Meridian, have already committed to. That could occur quite quickly and would be a meaningful way of assisting to develop a second-hand market for electricity vehicles to subsidize demand, without subsidy. Good bang for buck. More co-funding of charging infrastructure and EV purchases would also be money well spent to both stimulate the economy and reduce a significant percentage of our emissions. Let's not stay in the slow lane like Australia. The opportunity to electrify transport and industrial use, the demand side of the equation, with renewable electricity is massive for our country. And once it's done, it will go a long way to eliminating our nonagricultural emissions. We need to do all of this while keeping electricity affordable and maintaining investment in renewable generation. It is important that all options are canvassed before significant public investment is committed. Public investment in pumped hydro could lead to an uneconomic generation overbuild, crowd out private investment and push up electricity prices, actually slowing down the electrification of the economy. This risk has been highlighted by independent experts such as the Productivity Commission and the Interim Climate Change Committee. Meridian encourages any future government to proceed with caution and investigate all options. We do need to be a nation of climate activists, and government and business need to work together to decarbonize the country and accelerate the pace of change to achieve our emissions targets. We are in the fortunate position in New Zealand with our renewable energy advantage, and the time to act is now. It is an exciting time and provides us with a real opportunity to make a meaningful difference and help combat climate change. We know that the work that we do at Meridian and we will do in the coming years to navigate the transformation of our market once Tiwai closes will bring us closer to our purpose, while demonstrating our commitment as a sustainable business which is focused on combating climate change. Turning now to the year that was. The Board and the executive are proud to have achieved another record result for the year. Group EBITDAF, which is a measure of our operating -- underlying operating performance, increased by 2% to $854 million. Due to higher depreciation on previously revalued assets and noncash movements in forward prices and rates on financial instruments used to manage risk, net profit after tax decreased 48%. Underlying net profit after tax also decreased slightly by 5%. The Board declared a final dividend of $0.112 a share, which is 4% higher than the previous year. This brings the total ordinary dividends declared in FY '20 to $0.169 a share, 3% higher than last year and represents a 75% payout of free cash flow. Meridian also declared an interim special dividend of $0.0244 a share in February under our capital management program. The shareholders will be aware that with Rio Tinto's announcement of its intention to close the smelter, the Board has now ceased that capital management program. Meridian continues to deliver strong returns for shareholders. In the 2020 financial year, Meridian's total shareholder return was again stronger than the other major electricity companies we measure ourselves against. And if you bought Meridian shares in the IPO, our latest dividend to be paid on the 16th of October will take your total gross return since listing to 318%. Before we move onto re-elections, I would like to take this opportunity to thank you, our shareholders. The significant developments of the COVID-19 pandemic and the upcoming closure of the smelter have created more uncertainty for our business, and your Board appreciates your continued support and investment in our mission, which is clean energy for a fairer and healthier world. I would now like to ask Neal Barclay, our Chief Executive, to address the meeting.

[Foreign Language] Let's get this sorted out. [Foreign Language] Ladies and gentlemen, I'd just like to start with introducing you to the remainder of the executive team, most of who are here today. So we've got Mike Roan, Chief Financial Officer; Guy Waipara, General Manager of Generation and Natural Resources; Tania Palmer, Chief People Officer; Nic Kennedy, CEO of Flux Federation; Chris Ewers, General Manager of Wholesale; Lisa Hannifin, Chief Customer Officer; and Claire Shaw, General Manager of External Relations and Sustainability. We also have with us today Bharat Ratanpal, who is our CIO. You've met Jason Woolley on stage. And Jason Stein, the CEO of Meridian Energy Australia and Powershop Australia, is not here today clearly, but very important person in our team. All right. Now there's 4 new faces in this team, very good looking bunch this year. And I'm pleased that the introduction of the new blood has not caused any loss of momentum in our business whatsoever. And I think that's both due to the quality of the people that we've appointed and also the fact that they are all internal appointments, so they were able to hit the ground running. Jason Stein, who was previously our General Counsel, has taken responsibility for our Australian operations. And Lisa Hannifin, Claire Shaw, Chris Ewers and Jason Woolley were all promoted from within the ranks. Now each of these appointees were tested through recruitment processes that included external candidates. So I think these appointments show that the skill and leadership that we're developing here at Meridian tests very well against the market. Employee engagement has remained strong and engagement scores across all major business groups lifted to 85% or more. This tells me that our people are proud to work for Meridian and are committed to the company. This is confirmed by the fact that nearly 60% of Meridian employees or New Zealand employees now own shares in the company through our employee share ownership scheme. So that's all good. But on the flip side, our health and safety results have not been nearly as positive. Now the thing that worries me most in our business is keeping our people safe. And clearly, our safety performance needs to improve. We had 8 lost time injuries during the year, and 3 of those resulted in serious injuries. But worrying about it doesn't make it any better, so we remain very focused on making tangible progress and evolving our workforce safety culture. I am confident that the backward-looking injury rate indicators will start to improve in line with what we are doing to manage all aspects of our work safely. The most important thing at Meridian is that our people do go home each night safe and well. Financially, last year was a very good year for Meridian, as Mark touched on, with another EBITDAF record result. But the global impact of COVID-19 -- of the COVID-19 pandemic and the announcement of the closure of the Tiwai Point Aluminium Smelter has presented us with some new unique challenges and opportunities for the next few years. Throughout the COVID-19 pandemic, we have maintained full operational capability. Our people right across the business have been exceptional in both looking after each other and looking after their customers, and I'm very proud of them for that. We did see significant -- a significant drop in demand for electricity during the Level 4 lockdown, but demand has bounced back to pre-COVID levels since that time. I would say, however, that the long-term effects on demand from COVID are still far from certain. I can assure you that your company is already adapting to the way we operate, and I'm confident that we have the teams and strategies to manage through these uncertain times. Growing our retail business is one of the ways we are adapting. Powershop in Australia, once again, achieved outstanding growth as customers continued to choose cleaner energy options. Customer numbers grew by 24%, and there was also a 24% lift in the volume of electricity sold, whilst gas sales were up threefold. Our retail success in Australia means that we're looking at new generation options and the business will need -- that the business will need in the medium term. These include the 130-megawatt Rangoon wind farm development that we have secured in north New South Wales. The wind farm would power the equivalent of 58,000 Aussie homes when built. In New Zealand across both the Meridian and Powershop brands, we grew customer numbers by 7% and the volume of energy sold by 18%. Even more pleasing, our overall customer satisfaction ratings and our customer retention rates improved and they do set the benchmark for the industry. We're also extending the capability of Flux Federation, our software-as-a-service business that has developed the Powershop IT platform. We are doing that to support the migration of the Meridian customers to the platform and to open up new sales opportunities for Flux offshore. The complexity of Meridian's customer base has meant that the Flux migration project, which started in 2018, has needed to be extended by 9 months and is now scheduled for completion during September 2021. Despite the delay, the benefits and the business case for the project and for Flux remain very positive. The wholesale trading conditions during the year were far more challenging for our Generation businesses on both sides of the business -- Tasman. In New Zealand, we generated a record amount of electricity due primarily to healthy inflows into our hydro storage lakes and good availability of our wind farms. But it wasn't all handed to us on a plate as we did cope with some significant transmission outages, most notably the Cook Strait Cable outage during January to March, and that limited the amount that we were able to generate during that time. So achieving a record amount of generation was a very good outcome, I think. But the big story for generation was a 28% reduction in the average wholesale price for electricity compared to the prior year. This was expected as prices fell as the gas system reliability issues that emerged in FY '19 were progressively overcome. All up, whilst generation volumes were up 5%, overall spot generation revenues were down 24% on the prior year. The generation trading conditions in Australia throughout the year were also very challenging. Wholesale electricity prices trended down as oil prices and then gas prices collapsed. And generation volumes from our hydro assets were down year on year due to deepening drought conditions. Our risk management processes were put to the test particularly during a number of high price events during the summer. Temperatures soared and bush fires raged, whilst people consumed energy to stay cool. And that energy could cost as much as $14,000 per megawatt hour at peak times. So we were hard-pressed to make headway, but we did avoid any significant losses during those events. EBITDAF, or net cash operating earnings, is the primary performance metric that investment analysts look to, to assess Meridian's comparable performance. And as you can see, the trend has been very good. So whilst the wholesale trading conditions during the year were challenging in both New Zealand and Australia, our continued success in growing our retail businesses, our ability to get the most out of the renewable resources that we had available and our ability to manage wholesale trading risk meant that, for the eighth consecutive year, we delivered EBITDAF growth. And in October 2019, Rio Tinto announced that it was undertaking a strategic review of New Zealand's aluminium smelter at Tiwai Point in Southland. And on the 9th of July, 2020, Rio Tinto announced the termination of its contract with Meridian and its intention to close the smelter by 31 August, 2021. Rio Tinto's decision is hugely disappointing for the smelter workforce, for the Southland community, of which we're a part. During the Rio Tinto strategic review, Meridian was able to put together a package of contractual amendments that would have delivered a significant reduction in the cost of delivered energy to the smelter. That package was worth well in excess of $60 million per annum. We believe that this offer was fair and in the interests of Meridian's shareholders, the smelter owners and New Zealand more broadly. As part of that package, we asked the smelter owners to commit to New Zealand for a period of 4 years. Rio Tinto were not willing to make that commitment and has instead chosen to terminate the contract with Meridian. Now the loss of roughly 13% of electricity demand within a relatively short space of time will undoubtedly be disruptive for our industry and for Southland in the short term. To better adapt to this disruption, we have offered Rio Tinto terms to exit over a longer period of time. We have also noted the Prime Minister's announcement earlier this week that the government are also in discussions with Rio Tinto to provide the smelter with a discounted transmission bill, also in support of a longer-term exit. To date, nothing has been resolved and it appears unlikely anything will be until after the general election, so we're going to have to wait a little while to resolve that one. What we can be confident of though is that the smelter will close sometime within the next few years, and with that challenge comes opportunities. Our team is working hard on our plan to mitigate the effects of the closure, maintaining our balance sheet strength and build an even stronger business for the future, all while still remaining 100% committed to renewable energy. One of the tough decisions that management and the Board had to make as a result of the Rio Tinto announcement -- announcing its exit from New Zealand is the deferral of our Harapaki wind farm in the Hawkes Bay. While the business case for Harapaki is very sound, the market needs time to adjust to Rio Tinto's decision to exit New Zealand. We're still confident we'll build Harapaki in the future as it remains one of the country's best new renewable options. In the regulatory space, there has been some good and some bad for Meridian this year. Let's start with the good news. Just before the end of the financial year, the Electricity Authority released its final decision on Transmission Pricing Methodology guidelines. We're pleased that a benefits-based approach to transmission pricing was adopted by the authority. It will provide certainty, be fairer and enable more efficient investment and use of the transmission grid. And it will be positive for Meridian financially. Now the not-so-good. In December 2019, a claim was made to the Electricity Authority by some of our competitors that the trading actions of Meridian and Contact during November and December had caused an undesirable trading situation, commonly called UTS. The claim covered a period of truly exceptional South Island flood conditions and inflows with highest -- some of the highest ever recorded. Now on 30 June, the Electricity Authority released its preliminary decision, determining that the UTS had occurred between 3 and 18 of December, 2019. The authority have observed that in their opinion, too much water was spilled and prices were too high during periods when water was being spilled. We disagree with the authority, their preliminary findings and we stand by our decision during the flood events to manage both the safety of those downstream from our dams and our environmental obligations first. The conditions dictated that proactive spill was necessary. We also believe our trading conduct was within the normal, and previously observed operation of the market. That said, we have certainly taken some learnings from the event and we are also asking the authority to support the market by providing clearer guidance on generation offers at times of spill. Their preliminary decision has created significant uncertainty. And in that regard, the whole industry needs that uncertainty resolved. At this stage, there has been no time line provided by the authority in terms of when we can expect a final decision. To be conservative, our financial statements have been prepared on the basis that the authority does not change their preliminary decision. I'll just make a few concluding comments in support of Mark's earlier observations around New Zealand's decarbonization opportunity. For Meridian, this means our commitment to 100% renewable energy and helping New Zealand achieve its zero-carbon goals remains our focus. Renewable electricity is the solution to combating climate change in New Zealand as it will enable us to reduce our emissions and reliance on fossil fuels. It also creates real opportunity for our company to grow value not only for ourselves, but for others. The key to take advantage of renewable electricity is to keep electricity affordable, both to ensure that we're playing our part to reduce energy hardship and to ensure the right priority is put on vital decarbonization projects. We expect the current trajectory to continue with renewable electricity generation only getting cheaper relative to other options. Meridian's modeling indicates that the electricity generation in New Zealand will be in excess of 95% renewable by 2035, which is why we don't think there's a case for any intervention in the electricity generation market. Renewables are already the most economic new-generation investment option and we're seeing that in the new builds currently underway, they're all wind farms, geothermal and solar. Under current market settings, I think we can expect the right investment signals will exist and will encourage private investment in new generation at the right time. The government are best to focus on supporting users of fossil fuel-based energy to transition to electric. It would seem that the smart use of the Emissions Trading Scheme is the best way to do this. The ETS will provide cost signals that drive businesses to innovate, to compete and deliver the lowest cost emission abatement solutions. It is really hard for any one entity or person, as a central planner, to pick the winning technology solutions of the future. That is why competition works. And in the ETS, we have a market-based tool that, with some refinements, can help foster competition of ideas and deliver the most efficient solutions. We need to use that tool. Where government can and are helping on the electricity supply side is evolving New Zealand's environmental law to support new renewables to be built whilst also preserving our backbone of hydro generation. Hydro is part of New Zealand's legacy, but it's also absolutely the key to the future expansion of renewables as it can flex and fill the gaps between intermittent wind and solar generation. As Mark referred to earlier, the government's direction on fresh water reform seems balanced and pragmatic in our view. The argument for renewable electricity is even stronger in Australia. Around 80% of electricity generated in Australia comes from coal and gas. And with that they've got a large number of coal-fired plants approaching the end of their 20- to 30-year life. We're confident that there will be significant opportunities for renewable electricity developments across the niche. So Meridian will work with the government, industries and our customers to support the future electrification and decarbonization of the New Zealand economy. There's much to do. I'm personally very excited about the future challenges ahead and the opportunity this company has to help shape the future. Thank you.

Thank you, Neal. I can advise that we've received 2 written questions by the deadline that was set. The first comes from Mr. [ Ken Hawkswood ] and asks, with the closure of Tiwai Point, has the Board given any consideration to establishing a hydrogen plant to use surplus power and water? Now it might be useful to give you a bit more background first. Hydrogen is an emerging energy fuel. It would make it -- it could be a possible means towards further decarbonization. It often gets talked about as a potential new energy source for heavy transport, for example. Green hydrogen, as it's often referred to, is increasingly talked about in New Zealand. It's where an electrical current is used to break water, H2O, into its component elements. Producing current from a renewable noncarbon-emitting source such as hydropower is what makes the hydrogen green. And describing that, you can see how it might be suited to New Zealand. And it's one of a number of new electricity load possibilities that we are exploring. We continue to have active dialogue with several credible parties. However, realistically, potential development is likely to be around 3 to 5 years away. The second question comes from Mr. [ Neil Walbran ], and asks, can you give any update on your North Island battery investigation work such as you mentioned in your annual results presentation? When we announced our 2020 annual results back in August, we mentioned that in partnership with Contact Energy, we are exploring North Island battery development options. We're also working with Transpower, the national grid operator, to see how a battery might be able to assist them with ancillary services that support the operation of the national grid. Meridian and Contact Energy see a battery as additional standby generation, if you will, and store -- energy that's stored in the North Island that might allow the export of more energy from the South Island following the Tiwai Point closure -- smelter closure. We're working through proposals currently from a number of potential battery providers. That is helping us to refine our understanding of the potential battery sizing and possible North Island locations. There is some way to go, but our analysis shows similar to yours, [ Neil ], that the economics of a battery option look favorable. I will now open the floor for questions from the room in the first instance. Online questions are also open and will be read to the meeting by a Meridian representative. We will accept questions from shareholders or anyone who has been appointed as a corporate representative. There is one microphone in the center aisle in front of us -- in front of me. If you have a question, please move to the microphone. And once at the microphone, introduce yourself and then address your question to me. This is important as the meeting is being filmed for the webcast and it is the only way the online audience will be able to see you and hear your question or comment. I will either then answer your question or redirect it to a member of the Board, the Chief Executive or one of his team as may be appropriate. Please only raise questions relating to the management and operations of Meridian at this stage and hold any questions relating to the formal resolution to that part of the agenda. Are there any questions or comments from shareholders at the meeting here. Sir?

My name is [indiscernible]. I'm a shareholder through [indiscernible]. My question is, could you tell us what part of the company is the thing that keeps you awake at night, the part of the company that needs most work or you're worried about that you're trying to lift the standard for one of a better word? We hear all the good things that the company has done, but sometimes you come to these meetings and you don't hear what's not going right. So could you have a comment on that, please?

Well, I'll ask Neal to -- thank you for your question, Mr. [indiscernible]. I will ask Neal to comment on this too, but I could unreservedly say that the thing that keeps me, the Board and the management team awake at night the most is safety, care for our people and our contractors and anybody who enters our sites. That would be the #1 issue. As Neal showed you in part of his presentation, you would have seen on the slides, we are never satisfied with our lost time injury performance, and we are on a course of continuous improvement. But Neal maybe could talk more directly in terms of the initiatives and the way that he and the management team go about prioritizing safety as our #1 issue.

Yes. [indiscernible]. I think we tried to give you a couple of areas that we are worried about, and safety is certainly the most -- well, the thing that keeps me up a lot at night, as I indicated. We do a lot of work. We're very focused on trying to build a safety culture. We work very closely with our competitors. We're part of the group called Stay Live, which includes all the major generators, plus a lot of the large lines companies and Transpower, where we learn from each other and try and ensure that we're staying up with best practice. We've also made some recent changes within our organization mostly around how we learn from our mistakes or our incidents. Previously, we had quite a stringent investigation methodology that's known as an ICAM investigation approach that's widely used across many industries. We've gone away from that because we found that it was putting a lot of pressure on people involved in incidents were weren't getting the true learnings. So we've developed a new way of going about gathering those learnings. We call them learning teams. And they're basically self-managing by the people involved in the incident itself. We're finding it's far less threatening. There's less blame involved, and we get some real rich learnings out of that, that we roll through the rest of the business. So that's been very, very positive. I guess, the other negative that I referred to in my speech was around the UTS. It's never good to be battling against the regulator. We do have a difference of opinion on this, but we'd like to get some sort of resolution because the overarching perspective of the industry as it works particularly well, delivers for consumers, it's giving us sustainable solutions in this country, and we've got a very reliable electricity sector. So we don't want to get -- we don't want to make too much of the friction points and just acknowledge that things are going well. And so that relationship needs to be continually looked after.

Thank you. Are there any other questions or comments from the floor? Okay. I see that we have a couple of online questions. The first is from [ Aaron and Yvonne Wynyard. ] Can you speculate upon the reason for the drop in electricity usage during the Level 4 lockdown as people were forced to work, play at home? Would you not have expected electricity users to have risen? Well, the first point I would make and -- but I will ask Neal to comment further is that, obviously, the lockdown meant that many businesses shut down and they take considerable load. For example, a commercial building has air conditioning and the like, which consumes quite a bit of electricity. And of course, that was all shut. And those volumes tend to be higher than what comes from the residential market. But -- Neal, do you want...

Mark, that's dead right. We look at demand across different customer segments, and we saw a big reduction in small- and medium-sized business demand. We also saw quite a significant reduction in large corporate industrial type demand. Offsetting that, we did see a big lift in residential demand as people were working and heating their homes more, but it didn't offset the reduction in those business sectors. Clearly, what we've seen since we've got out of Lockdown 4 is businesses have got fired up again, demand has largely bounced back to where it was.