Meridian Energy Limited (MEL) Earnings Call Transcript & Summary

[Foreign Language] [Presentation]

[Foreign Language] We welcome you all to Meridian's 2025 Annual Shareholder Meeting. Haere mai to those who are joining us today, both in person at Meridian's office in Wellington and to those of you online. And I'd like to say especially to the people that have braved the Wellington elements today, we do appreciate you coming. So thank you for that. We welcome to the meeting Anthony Smith and Daniel Lock from our auditors, Deloitte; and Ian Beaumont from our lawyers, Russell McVeigh. Welcome also to Daniel Madley and Aaron Gill from Treasury, representing the Crown. For those here in person, in the unlikely event of an emergency, please follow Meridian staff instructions. If the fire alarm sounds, our emergency exits are located to the rear of the seated area down the stairs and out the way you came in the building. Please don't use the lifts. Our staff are here to show you the way. Our fire evacuation point is on Customhouse Quay across the road on the foot path outside private restaurant. In the event of an earthquake, please drop, cover and hold. Once any shaking has stopped, please follow Meridian staff instructions. The bathrooms are by our reception area where you came in today. Our Meridian staff are here to help. I declare the 2025 Annual Shareholder Meeting open. The meeting has been duly convened and a quorum is present. The minutes of last year's meeting have been posted on our website and are held by the Company Secretary. Today's meeting is being held in person and online via Computershare's online meeting platform. All online attendees can watch a live webcast of the meeting and read the company documents associated with the meeting. In addition, shareholders and proxies can ask questions and submit votes. For those of you attending the meeting virtually, if you do have a question to submit during the live meeting, please select the Q&A tab on the right of your screen at any time. Type your question into the field and press send. Your question will immediately be submitted. Should you require any assistance, you can type your query and one of the Computershare team will assist via the chat function. Alternatively, you can call Computershare on 0800-650-034. Please note that whilst you can submit questions from now on, I won't address them until the relevant time in the meeting. Your questions may be moderated or if we receive multiple questions on the same topic, they might be amalgamated together. Finally, if we do run out of time to answer all your questions in this session, we will answer them by e-mail. At the conclusion of the Chief Executive's review, we will address questions on the operations of the business. Please keep any questions today on today's ordinary resolutions director appointments until we get to that part of the meeting. Voting today will be conducted by way of a poll on all items of business. To provide all attendees enough time to vote, I will shortly open the online voting for the 4 formal resolutions to be considered today. These relate to the reelection of current directors, Julia Hoare, Michelle Henderson, Nagaja Sanatkumar and Graham Cockroft. At that time, if you are eligible to vote at this meeting, you will be able to cast your vote under the Vote tab. To vote, simply select your voting direction from the options on screen. Your vote will have been cast when the tick appears. To change your vote, simply select change your vote. You can change your vote up until the time I declare voting is closed. Persons attending the meeting who are not shareholders, proxy holders or corporate representatives of a shareholder may not vote. This includes bondholders. Voting is now open on all items of business. The resolutions are now open in the vote tab. Please submit your votes at any time. And I will give you a warning before voting is to close. I'll begin my Chair's address by introducing the Meridian Board and some of the management team who are present today. This year, all Meridian Board members are present at our Wellington office. For those in the room, I ask directors sitting in the audience to raise their hands as I call their name. Julia Hoare, Michelle Henderson, Nagaja Sanatkumar, Graham Cockroft, Tania Simpson and David Carter. The Board has remained unchanged this year. Directors' extensive and varied range of experience has been invaluable in helping us navigate the different challenges, and we thank all Board members for the range of perspectives they've brought and applied to different situations throughout the year. Also present with me today are Chief Executive, Mike Roan; Chief Financial Officer, Mandy Simpson; and General Counsel, Jason Woolley. The rest of the Meridian's executive team, apart from Bharat Ratanpal, are also in the room. Meridian's purpose of clean energy for a fairer and healthier world underpins every action that our company takes and our intention to play a leading role in supporting Aotearoa to further strengthen the electricity system and [Audio Gap]. This year, we weathered a perfect storm. A combination of historically low hydro inflows, periods of low wind, 2 major droughts and a dramatic decline in gas availability made this a very challenging financial year. At the same time, we've worked hard to strengthen the fundamentals of the business through sound investment for growth and delivering on our strategy. We secured 5 resource consents for new assets, invested $193 million in building and maintaining generation plant. We acquired 2 new businesses and undertook a strategic reset of our retail business, all the while growing our customer connections. For us, fin year '25 will be defined by Meridian putting our customers in New Zealand's security of supply first, keeping the power flowing for homes and businesses and the financial hit we took because of that. Our balance sheet is structured to underwrite major droughts, and that is one of the ways our country benefits from having large and financially strong Gentailers supporting the economy. Bearing in mind, we supply roughly 30% of the economy, were we not to have done this, short-term prices could have been very challenging for many of our customers. It is important for us to take a long-term view. And as I will talk soon, we also strive to ensure that we continue to reward our shareholders for the trust you place in us during challenging times by investing, and we are pleased to have been able to show that our commitment to you by returning a dividend. Fin year '25 also brought an intense amount of scrutiny of both Gentailers like Meridian and the wider sector as people dissected the events of winter 2024 and the government responded with a review by Frontier Economics and other international experts. After many years -- many years, many months of speculation, the Frontier report and the government's response were released at the beginning of October. The company welcomed many of the proposed changes, including the government's willingness to indicate that it would potentially participate in equity raisings by mixed ownership model companies like Meridian as a means of bringing forward investment in new generation and in particular, firming capacity. This represents the biggest change to our capital investment settings since we were listed in 2013, and we acknowledge the government's commitment to help move the country forward. It has the potential to add even greater momentum to our currently strong development pipeline, building new generation is the best way to improve energy security and affordability. Meridian is also supportive of the government's focus on addressing issues related to gas supply, strengthening the powers of the industry regulator and changes to the security of supply regime to make it more robust. The unexpected loss of gas has clearly been identified as a key factor behind fuel shortages in winter 2024, and Meridian was pleased to see the government is looking at initiatives to remedy this, such as improving initiatives around gas supply and considering the procurement of an LNG import facility. Whilst further details related to the facility will be confirmed in the coming months, the government wants something to be in place by the 1st of June 2027. Although this is particularly relevant for gas customers, any facility could add to the suite of solutions that ensure against dry year risk in the electricity sector, placing it alongside the Huntly strategic reserve, our demand response agreement with New Zealand Aluminum smelters and access to more hydro storage. The energy task force is more advanced with its work and is close to finalizing its level playing field measures. In essence, these are about ensuring greater transparency in prices Gentailers offer to independent retailers as compared to the notional prices in place we have in relation to our own retail business units. From the outset, we've said that we'll be -- we are comfortable with these measures provided they are set up in a way that will benefit customers. Early in 2025, Meridian and others in the industry took steps to restore long-term confidence in energy security and improve affordability. On top of an unprecedented amount of generation development, a group of large electricity suppliers, including Meridian, signed an agreement to ensure the availability of 3 coal or gas-fired Rankine units and the necessary fuel at Genesis-owned Huntly Power Station. This agreement will ensure New Zealand will have continued generation capacity for the next 10 years. Maintaining a secure energy electricity supply is what we must do as we find ways to use more hydro generation and accelerate the deployment of new renewable projects to meet our future energy needs. This was a challenging decision for us to enter into the Huntly arrangements given our commitment to decarbonization and renewable energy. However, the sudden loss of gas as a transition fuel meant that extending the life of Huntly and building a thermal fuel reserve is in the best interest of Kiwi homes and businesses and for the broader economy in the short to medium term. The Huntly arrangements, which for us is a financial arrangement, alongside additional use of the country's hydro capacity are actions that will help make the country's electricity system more resilient and affordable. And the confidence it brings will allow the sector to continue to build new renewable generation at pace. An affordable, secure and highly renewable grid will enable future economic prosperity, allowing the country to take the opportunity to create and market green products internationally. And the facts are that New Zealand electricity prices actually do compare favorably with other countries. We're in the top 10% for both industrial and residential consumers as benchmarked across the OECD, i.e., that means lower prices. We're keenly aware of our social license. It isn't in the long-term interest of Meridian to see customers disappear from the economy. That doesn't make a sustainable business. It is firmly in our interest to see customers succeed in the economy through competitive pricing. The work we do is intended to underpin this country's growth and prosperity and ultimately bring down prices over time. During the past financial year, Neal Barclay's tenure as Chief Executive ended. Under his leadership, Meridian has grown a renewable development pipeline that will double the size of the asset base over time. We've refocused our business around customers. We've grown that business, and we've formed valuable relationships with a variety of stakeholders. Importantly, Neal led the team that secured a sustainable 20-year contract with New Zealand Aluminium Smelters or NZAS. The Board and executive team certainly thank Neal for his commitment to growth and sustainable practice and for anticipating how Meridian could play its part in delivering long-term value for customers, you, our shareholders and Aotearoa New Zealand. On behalf of the Board, I would also like to congratulate Mike Roan on his appointment to Chief Executive and the strong start he has made in the role. I will conclude my address by speaking to Meridian's shareholder returns. We understand that you, our shareholders, are happy for us to continue to invest in existing and new assets on the firm understanding that, that will provide you with appropriate returns over time. Long-term investors in Meridian will know that nature doesn't always play us a kind hand, and that was certainly the case in the last financial year. But we have a strong balance sheet structured and maintained to manage the impacts of such conditions. That strong balance sheet meant that the company was also able to continue to provide you with stable returns with the Board declaring a final ordinary dividend of $0.1485 a share. That brings total dividends for Fin year '25 to $0.21 per share. The Board approved continuation of the dividend reinvestment plan as well at a 2% discount. Thank you for continuing to invest in and support our company. I will now ask our Chief Executive, Mike Roan, to address the meeting. Mike?

[Foreign Language] It's a real privilege to be speaking to you today in my first shareholder meeting as Meridian's Chief Executive. I've come into this role with tremendous faith in our people and our strategy, but also with a bold vision. I believe that when we harness -- when we properly harness the natural bounty this country has to offer, the electricity sector can help to underwrite the economic growth of the nation. I want Meridian to be a driving force behind that. This will require an evolution of where we've come from and some change. I have an immense respect for what people have done to get to Meridian to where it is today, and I also have a clear idea of what's required for us to continue to succeed as we move forward. First, I want to further accelerate our development of renewable energy. While we're well on track to deliver seven new developments in seven years, that target was framed before the gas sector collapsed. So we need even more clean energy to realize that ambition. And as we do this, I want us to go back to our roots. 60-odd years ago, the Waitaki Power scheme was devised and built in the Mackenzie Basin. It remains the country's largest hydro scheme and the backbone of Aotearoa’'s electricity system, but there's room to further optimize this scheme to meet the challenges of 2025 and through 2055. The good news is that the Waitaki Power scheme has so much more to give. There's more water to be accessed, more megawatts to be achieved from existing assets and scope for a fundamental shift in the role that stored hydro plays. This can be done in a way that's aligned with our value set, one that balances environmental and community concerns. And I know the Meridian team is up for the kaupapa. In my view, the route to global competitive advantage for our country can only come if we harness more water from existing hydro catchments. We've recently established a hydro development team to explore new opportunities, and we've received ministerial approval to have our application for access to Pukaki contingent storage through the Fast Track process. With the government's willingness to take part in equity raisings for new developments, we now have an opportunity to think even bolder and we will. Second on my list of priorities, I want us to get even closer to our customers. That's where we've set our compass. Like every business, you're only as successful as the customers you serve. So as well as evolving to help our customers thrive in the future, we're highly tuned into how we can support industrial and residential customers in the current tough environment where cost of living is a key concern. Now Fin year '25 was a year where nature didn't help us. Our hydro storage was heavily affected by 2 consecutive record low inflow periods last winter and again through the most recent summer. Periods of unseasonably low wind and the country's declining gas production challenged electricity generation as well. From a financial perspective, the business struggled to get out of first gear and even had to hit the brakes hard at one point. Shareholders in our business know that when it doesn't rain, it's tough to make hydroelectricity and turn that into profits, particularly when we exercise insurance to cover the loss of that generation. And each of those decisions hits our bottom line. Operating cash flows of $318 million for the year ended 30 June 2025 were down $349 million or 52% from the previous year. Net profit after tax, which also reflected the changed treatment of the main NZAS contract, was a $452 million loss compared with a $429 million profit in the previous year. EBITDAF was down 32% to $611 million and underlying net profit after tax fell by 84% to $56 million. Now both EBITDAF and underlying net profit after tax are non-GAAP measures. But as Mark said, we did work through some challenges, and I'm pleased to say that we've made a strong start to the new financial year. Now there are a few changes to our exec team announced during the year as well. Rory Blundell was appointed to the newly created role of General Manager, Strategy and Portfolio; and Chief Information Officer, Bharat Ratanpal, has returned from a comment as Interim CEO for the Flux business. More recently, Mandy Simpson has joined Meridian as Chief Financial Officer. The merging of the Wholesale Operations function into the generation team also saw Chris Ewers leave the exec team to take up a new role in the company as Electricity Security Manager, reporting to Tania Palmer, our GM of Generation. Now there's been a lot of talk amongst politicians in the media about the need to build more, and we are. We're doing it as fast as we can. Meridian's 7 projects in 7 years renewable build program is advancing at speed. This year, we met the first 2 milestones. The 176-megawatt Harapaki Wind Farm is now fully operational and the 100-megawatt battery energy storage system, or BESS, at Ruakaka Energy Park near Whangare was commissioned in May 2025. This BESS lift system capacity by allowing us to reintroduce stored power into the grid at peak times, and it's already making a big difference. Now on the 29th of August this year, the joint venture with Nova Energy confirmed that the first stage of the 400-megawatt Te Rahui solar farm had met its financial hurdles and so moved into construction as well. In addition, we've got 4 wind, solar and battery projects consented. Another battery in the Manawatu, a wind farm at Mount Munroe in the Wairarapa, Stage 2 of Te Rahui and the first repowering with existing wind farm at Te Rere Hau. And finally, with 3 consents currently being processed by councils, the Swannanoa, Waikato and Manawatu solar farms. The acquisition of New Zealand wind farms was approved by their shareholders in June and completed in July following approval of the High Court. This deal rewards New Zealand shareholders -- New Zealand wind farm shareholders for the value created to date and brings delivery of the Te Rere Hau repowering project fully into Meridian. A decision on that project is expected mid- to late 2026. Some critics say the industry is holding back on investment, but the above list says something different. Meridian has invested over $1 billion in the last 5 years, and there's a further $2 billion planned in the project list I just talked to. This project started -- this progress started some time ago even when demand projections were flat, and there was considerable uncertainty over whether the Bluff aluminum smelter would remain. The development projects delivered so far and those to come in the next 3 years will deliver almost 2,500 gigawatt hours of new annual generation, a 6% increase on -- to the electricity system. And this is part of a wider industry effort that added up means New Zealand is now building new electricity generation at a faster rate than was capable at the height of the Think Big era in the late '70s and early '80s. Now our existing assets matter too. In fact, they are the backbone of the business, and we're extremely lucky to have a world-class team working hard to maximize availability and output. This includes work to add new capacity to existing assets where we can and restore capacity through issues such as transformer outages. We're already delivering some exciting results, including 110-megawatt uplift of additional dispatchable capacity. This is the result of lots of small gains achieved through activities like unit upgrades and compressed maintenance windows, and it all adds up to more than we get from installing an extra unit at the Benmore Power Station. But it wasn't all play sailing. This year, we faced a few challenges with plant failures. And as we talked about last year, transformers have been a headache. Things are now looking much better on that front. We signed deals to procure 5 new transformers for Manapouri and earlier this month, completed the installation of a replacement transformer at West Wind. It's also been a busy year for the retail team as they transform the operating model to deliver digital and data-driven customer experiences. And this year, our mass market volumes and market share grew about -- grew across both Meridian and Powershop brands despite lower market demand. Customer numbers lifted by 70,000 over the year. Half of this was a result of organic growth, which is amazing and half through our May acquisition of Flick Electric’s hedge and customer books. This growth reinforced our position as the fourth largest retailer by customer numbers. While Meridian's residential energy price increases were modest again this year, the regulated increase in lines and transmission charges that form part of the overall bill is going to impact all customers for a few years to come. This is a difficult reality as we know many New Zealanders are doing it tough. Cost of living pressures are more than a media headline. They are real and they affect many Kiwi families. We're doing what we can to help. And part of that is building more generation capacity. But within retail, the focus is on reducing the size of a customer's overall energy bill. And we've made good progress this year with new products like 4 hours free and smart hot water that give customers more choice and flexibility. Smart hot water rewards customers with $10 off their monthly payment, allowing us to take control of their hot water heating and move the demand outside of peak periods to help take pressure off the grid. We now have around 20,000 customers on this plan and have shifted around 500 megawatt hours out of peak periods over each of the past few months. And this is just one of our initial steps. Ultimately, we plan to create a variety of products that help customers work with us to manage their electricity use and budget. The retail team also began the rollout of a new Kraken platform and a new customer app. These changes are aimed to improve how we engage with customers and how we track and support them to save energy and money. We also continue to support customers in need through our Energy Wellbeing Programme. The goal is to support 5,000 of our most vulnerable households via this program by Fin year '28. This year, over 1,700 households were supported, and we've now assisted 3,185 households since the program was launched in 2023. Kiwis are facing financial challenges given wider cost pressures. So we'll continue to monitor how we can make a meaningful and sustainable difference for those in hardship. It was also extremely pleasing to see Powershop topping the Kantar Customer Leadership Index for 2025, which was announced just over a week ago. This is particularly special for us because this index spans multiple industries and ranks companies on how well they deliver for their customers across brand, service offerings and customer focus. Ka pai team. This year, we conducted a review of the half by 30 emissions reduction target. Scope 1 and Scope 2 targets remain well on track at 50% reductions by Fin year 30, but the target for Scope 3 emissions has been revised. Halving these by Fin year 30 is now, in our view, not possible given the amount of sector growth the country is planning and the speed at which this needs to happen. From 1 July, we began using an intensity-based target for Scope 3 emissions. This involves a target based on dividing the supplier base emissions by the total installed capacity of Meridian's generating assets. It allows Meridian to work towards a target that means there'll be less emissions for each megawatt of capacity installed. Meridian is targeting a reduction of more than 51% by 2030 and we will start reporting on this year. The refined Scope 3 goal remains credible, ambitious and science-based and has been independently verified by the Science-based Targets initiative. Pleasingly, Meridian was ranked #1 in the electric utility sector in the e Dow Jones Best-in-Class Sustainability Asia Pacific Index, an independent global Standard & Poor's index that ranks our environmental, social and governance performance against companies -- like companies in the region. This is the 10th consecutive year we've been included in the index, but the first ranked #1 in Asia Pacific. And I hope this gives shareholders, customers and communities confidence that we're leading in sustainable practices as well. Now I'm sure it goes without saying that we relieved to have last year behind us, and I'm pleased to say we're off to a strong start in Fin year '26. We're experiencing good spring winds and rain. We're benefiting from the introduction of the e Ruakaka BESS, and we have above average late levels in both in the Waiau and the Waitaki catchments. While another neutral to weak La Niña summer is expected, which can bring dry conditions, we're happy with how things currently stand. And as I've outlined, the business is extremely well positioned for future growth. Mark touched on the Frontier Report and Government Energy Reform Package announced at the start of this month. I want to reinforce the importance to us and the industry of the clarity these reports provide and the significance of putting the uncertainty behind us. We've experienced 14 months of intense media and political scrutiny. But in the end, 3 world-class independent firms of economists concluded that our market is well structured and performing well, that vertically integrated companies like ours are positive for customers and that our market has healthy competition. I cannot stress these 3 elements enough, particularly with next year being a general election and the likelihood that some of the tired old arguments about our sector will be recycled. We do expect the scrutiny to continue, but we'll have no hesitation in reminding the public of the facts presented by those expert international firms. While Meridian is laser-focused on continuously improving how we serve our customers, I also know that shareholder confidence can be chilled by the constant threat of major regulatory change looming year after year. The size and place of investment this sector is now delivering directly underpins the health of the broader economy. So let us get on with it. You'll see more evidence in the year ahead of Meridian team executing on our strategy, delivering for customers, working alongside communities and growing value for our shareholders. We appreciate your continued support for our business and enabling us to deliver on our purpose of clean energy for a fairer and healthier world. Thank you for this and for your participation today.

Thanks, Mike. And now to question time. Before we open up to the live audience, I'll begin with the one written question that was submitted in advance by a shareholder. The written question comes from [ Mr. Jack Reden ], who asks, how long should customers have to wait on a phone call to be answered? And how long should customers have to wait for an e-mail reply? [ Mr. Reden ], thank you for your question. We always endeavor to answer customer communications as promptly as possible. Over the past year, our average speed to answer for chat and calls was approximately 14 minutes across both brands for residential customers. That is an average, and it does vary week-to-week and seasonally. Our average e-mail wait times for residential customers was 4 days, again, varying week-to-week and seasonally. As you will have heard in the session today and as written in our annual report, we have experienced unprecedented growth over the last 12 months, increasing customer connections by over 70,000. The retail team is also making significant changes to both our systems and operating model so that we can better deliver products and services to all our customers. While this is the current status, as I've outlined in terms of wait times, we are aiming to improve our response times considerably as we complete the migration of customers to our new Kraken platform and embed a new way of working. From here, I will ask shareholders present today in the room first for your questions. If you have a question to raise, please raise your hand and wait for the microphone to be passed to you. Then if you could, before asking your question, state your name so that we can record it properly in the minutes. And now we -- so the floor is open. Yes, sir.

My name is Thomas, and I saw you guys have a lot of investments on the [Audio Gap] But just wondering, do you have other strategy level to check how to do the things smartly like offload the peak time usage more. So that means you don't have to invest too much on the assets. And also the EV charger -- do you have any plan to kind of utilize the EV cars to backfill your peak usage time?

Thank you for your question. We are doing both. There is quite a prize for us in what we would call broadly demand response, that is where customers feed back into the system, which avoids the need at peak times to inject so much other generated power into the system. And part of the reason for moving on to the Kraken platform is to enable us to utilize that even more. We've already got people on smart water plants. Lisa, how many do we have currently?

20,000.

20,000 now. That number has grown considerably. We've also got EV packages for our customers. But the aim is to, over time, to the extent that customers will trust us is to help us manage their electricity consumption such that we can use it back into the overall system. So there's quite a big prize for us in that. So it's a very good question, but it's -- that alone won't solve New Zealand's issues. We've got to do both. Any more questions from the floor? Yes, sir.

[indiscernible] Solar energy demands land. How competitive is this now becoming? And how is that affecting the prices of land given rural situations, in particular, the likes of farmers and farming sector and the forestry sector.

Right. Good one for you, Mike.

Yes. I mean solar development, I mean, solar is a technology and the cost of deploying solar arrays has come down massively, which is why the technology is being explored in the country. Obviously, when you build a solar array, you do affect the land use if it was current -- if it was previously farming land. Primarily dairy farming is it becomes harder to farm dairy. But people running sheep or beef, it's not as big a challenge. So the land use challenges aren't as significant. We haven't picked up any impact on competing land values, so driving cost of rural properties up. Often, you can find marginal land that suits the purpose of developing solar farms and arrays. And where there are opportunities to use more productive land is we haven't noticed any impact on the competing uses of either farming or solar arrays.

With the solar plants in place, what additional use of that land is possible?

Are they often -- so what you'll see, as I say, for marginal land, what we tend to find is land that isn't used for farming is -- we'll tend to restore wetlands as part of building a solar farm. So we actually improve the quality of the land that existed before we put the solar array on. Where you're putting a solar array, say, on a dairy farm is you put the solar panels up. There's still enough sunlight to grow grass, but just not enough for milking cows. And so what they tend to do is replace the cows with either beef or sheep. So the grays underneath the solar arrays.

All right. Any more questions from the floor?

You've explained that you've had quite a gain in customers during the past year, yet there's been quite a substantial downturn in the financial accounts. But with respect of having more customers, have you become more competitive? And are your energy prices likely to remain? Or are they going to be less for the customers?

Do you want to give a go?

Yes. Well, I think we've got a stated ambition to, as I mentioned, to grow our relationship with customers. It's really important given the challenges that the country is going through that we are very effective in that regard, and we are very mindful of the cost of living challenges that people are facing. Now the reality for folks out there is that there are 2 components of an electricity bill is there's a lines and distribution component and an energy component. Over the next 4 years, the Commerce Commission has approved increases in the lines and distribution charges. And so over the next 4 years, customers are going to see increases in their electricity bill. This past year, the increases in the energy component of the bill were -- we were able to maintain those at rates of inflation. So we are very mindful. And then the second thing that we're doing is we are introducing products that better cater to people's personal circumstances. So you might have heard us talk to the hot water heating product where we'll take $10 a month off a customer's bill in return for having access to their hot water cylinder for short periods of time to move the load outside of peak periods. And so what we're doing is, one, being mindful of the circumstances that people are in. Two, we're honest that over the next few years, there are going to be increases in distribution and transmission rates, and that will impact people. But three, doing what we can to provide products that help alleviate those challenges that people are facing.

Yes. And it's important to bear in mind, we don't control not our assets or charges, the transmission or distribution charges. We pass that through as we're required to. Okay. Yes.

So what's your relationship with distribution company in the New Zealand? I mean, some things is beyond your control like the hot and other things. Actually, there's a repo relay control. But the investment on the distribution company will they put more investment on these [ repo ] control elements? Or what's kind of your relationship with?

Well, we naturally have a relationship with each and every one distribution company, which is interesting because they all often have different requirements. So it's a challenge for the retail team, but they do spend a considerable amount of time engaging with them and trying to influence how they invest their money. So it's not like we're just standing aside and saying, well, that's your responsibility. And it's important that we maintain a good relationship with them because when we want new generation assets connected, we want to be up near the front, if not at the front of the queue to be able to do so. So whilst ultimately, we don't have any control, we certainly endeavor to influence the outcomes in terms of how they spend and invest.

Do you put a proposal or something maybe stand some kind of like a standard because each distribution company have a different standard on their own.

Well, that's the challenge because they have their own different standards. So we're endeavoring across the industry, as I'm sure others are trying to get a common approach. But yes, it's work in progress. Okay. If there are no more questions from the floor, we'll now turn to our online shareholders. I've got colleagues passing through questions from the online audience. 4, I'm told, 4 questions. The first one, whilst Meridian ensures that the lead audit partner is rotated every 5 years as required by the NZX listing rules, it doesn't disclose if the audit firm is rotated at 10 years. Notwithstanding tenure, New Zealand Shareholders' Association also expects disclosure of the appointment dates of the lead audit partner and firm to improve transparency for investors. NZSA notes that under the Public Audit Act 2001, the auditor of Meridian is the New Zealand Controller and Auditor General. The New Zealand Controller and Auditor General ultimately makes a decision on auditor appointments having previously appointed Deloitte to perform the audit of Meridian on their behalf. We would expect the Auditor General to provide some guidance via the company on policy around audit firm rotation and the process to test the market as regards audit fees. And that question comes from Riki Manarangi of the New Zealand Shareholders' Association. I think, Riki, as you're recognizing, we actually don't have control over who performs the audit on the Auditor General's behalf. That is the mandate of the Auditor General, and it's governed by the Public Audit Act, I think it's called. We have made repeated requests on shareholders' behalf for the Auditor General to consider audit firm rotation. So we're not letting the issue go, but we haven't succeeded so far. So I hope that answers your question. Next question is from Oliver [indiscernible]. Can you please provide an update on the solar farm at Ruakaka? Well, I'm pleased to say that the work is underway. I understand the first shipment of kit panels has arrived at Northport and is in the process of being cleared by customs. So we're underway. That the answer to that. A question from [ Mr. Alexander Glen. ] Mr. Roan mentioned expanding the power output of existing hydro lakes. How might that be achieved? Do you want to answer that?

Yes. I mean it's a great question. It's something that we, as a company, have just started to reexplore given the loss of gas that the country had relied on for many years. But what we're doing is we'll -- we're starting with what we know. So there's a form of existing storage known as contingent storage. So it's water that sits in the hydro lakes that has been historically tucked away for not a rainy day, but a dry day. So we get access to more water when it doesn't rain or mother nature doesn't play nicely. And with the loss of gas, that the country has been through is we are seeking access to that additional water today through the fast track process. We're also exploring what we might do with our existing asset base, as I talked to a little earlier, like what capacity can we get from our generation assets, how might we upgrade our power stations to be able to use more water that's available to us and look at the existing structures, dam structures and go, could we reoptimize the use of water within those structures and effectively fill those lakes up a little more than they currently are. And then we're rolling our -- well, we don't have the expertise within the business, but we're stepping back to look at the role of hydro generation and particularly the role of Pukaki and Waitaki storage to meet the country's needs longer term storage to meet the country's needs longer term. Now that's a longer-term challenge because you need to assess many things in making any call or decision in relation to extended hydro development, but it is something that we've started to explore as well.

Okay. Thank you, Mike. John White of Century Securities Limited. Why did you borrow $310 million to pay the dividend? It's a good question. It's a fair question. Obviously, the extraordinary nature of the droughts last year were a challenge and impacted our cash flow severely. But the counter to that is the strength of our balance sheet gave us sufficient comfort that we could maintain the level of our dividends. In the ordinary course of business, of course, our policy is that we pay our dividends in the range of 80% to 100% of operating free cash flow. But we had the opportunity in this occasion to take advantage of our benefit. There's a reason -- it shows up why we want to maintain such strong settings. We're very conscious of not doing this on an ongoing basis, but it's certainly -- we thought it was appropriate to smooth the path of dividend returns to shareholders. So hence, the decision that we made. Okay. Is that it? Two more. Right. Again, from Mr. White, Century Securities. Why was your hedging so bad last year? Well, one of our major hedge contracts was actually suspended by a counterparty due to unexpected gas availability. And that just required us to write new hedge contracts to support gas purchases from Methanex, and that came at a considerable cost, unfortunately. The long-term contract that we've just agreed through the Huntly Strategic Energy Reserve provides us with cover now that is not so vulnerable -- well, it's not vulnerable to New Zealand's declining gas supply. So we've taken steps since as have others in the sector to replace that. Really unfortunate set of circumstances, one that we do not wish to repeat. Okay. William James. When does Meridian estimate LNG will be in operation? And would Meridian import LNG from Russia? You want to answer that, Mike?

Well, I don't think Meridian is in the business of importing LNG. So that piece of the answer is really straightforward. But the government is looking at the potential building of an LNG terminal as part of its proposed industry reforms. And we'll know a lot more about that as we near the end of this calendar year and as we step into next calendar year. But right now, the intent, as we understand it is, if possible, to have an LNG terminal up and available for operation before the winter of 2027. Now with any large investment in infrastructure, there are obviously risks to time lines and timetables. So as we learn more, we will get a better understanding of when and if that LNG becomes available to New Zealand or to our market.

Yes. So we want to be a part of the conversation. We want to be involved in it, but it's way too early to ascertain how that's going to show up. And so we're reserving judgment. Is that it? Thank you. Okay. We now come to the formal resolutions set out in the notice of meeting. I'll outline the voting procedures again. For those of you online, you should note now a new icon has appeared on your screen. Selecting this icon will bring up the 4 resolutions and present you with voting options. To cast your vote, simply select one of the options. There's no need to hit a submit or enter button as your vote will automatically be recorded. For those of you who are present today, please cast your vote and place your voting form in the boxes that you will find located at the back of the room. Persons attending the meeting who are not shareholders, proxy holders or corporate representatives of a shareholder may not vote and that includes bondholders. Many shareholders who are not attending the meeting today have already voted. At the request of the Shareholders' Association, the announcement of the proxy count will be deferred until after the formal resolutions have been considered by the meeting. So to the first resolution, it's my pleasure to introduce and move the resolution to reelect Julia Hoare as a Director of the company. Julia joined the Board in 2019. She chairs the Audit and Risk Committee, and we consider Julia to be an independent director and unanimously recommend that shareholders vote for her reelection. So Julia, I'll now ask you to address the meeting.

Thank you, Mark. [Foreign Language] It's a real privilege to be standing in front of you all today and obviously online as well as I seek reelection to the Board of Meridian Energy. Meridian is a really great company, and I've been honored to serve as one of your directors for the last 6 years. As you probably know, I chair the Audit and Risk Committee, which oversees and how we enhance the value of your investment in your company. And it's really important to make sure that we are thinking about you as shareholders. I also really enjoy contributing to the strategic discussions that we have around the Board table and bringing my wide experience to the Board. In particular, through my governance insights that I have attained from our other 2 Boards, Auckland Airport and also Port of Tauranga. I've been very heavily involved in sustainability initiatives right throughout my career and prior to my governance career, and I still am today. I'm currently a member of the Chapter Zero New Zealand Steering Committee, whose mission is to mobilize, connect and educate and equip directors to make climate smart decisions. And that really aligns very much with where Meridian is at and what we do. And as you all know, Meridian's purpose is to provide clean energy for a fairer and healthier world. This really aligns with my own values and was actually one of the reasons that I was really attracted to Meridian and was delighted to be approached to join the Meridian Board. I'm really proud of the fact that we produce energy from 100% renewable sources. As we've talked about today, Meridian has an incredibly exciting next chapter ahead. We've got a pipeline of really excellent renewable opportunities, and they will continue to enhance the value of your company. And I'd be very proud to continue to contribute to the team in guiding it to further success. So [Foreign Language], thank you, and I hope I have your support to continue that journey. Thanks very much for your time.

Thanks, Julia. I now formally move that Julia Hoare, who retires by rotation and is eligible for reelection, be reelected as a director of the company. Is there any discussion or questions? Okay. I have moved the resolution. I now put the resolution so shareholders should complete their voting for the resolution. I will now pause to allow you time to just submit your vote. [Voting]

Okay. Thanks, Julian. It's now my pleasure to introduce and move the resolution to reelect Michelle Henderson as a Director of the company. Michelle joined the Meridian Board in October 2019. She serves on the Safety and Sustainability Committee and the Audit and Risk Committee. The Board considers Michelle to be an independent director and unanimously recommends that shareholders vote in favor of her reelection. Michelle, would you like to address the meeting?

Thanks, Mark. [Foreign Language] I appreciate the opportunity to speak to you today. Meridian Energy's purpose to deliver clean energy for a fairer and healthier world is something I remain deeply committed to. It's important to me that Meridian contributes to an affordable, secure and highly renewable energy system to ensure economic prosperity for Aotearoa New Zealand whilst producing appropriate returns for shareholders. Meridian's investment and wider performance should contribute to growing our economy and in turn, that will benefit you as shareholders. My engineering background and lived experience from my executive career, including in the electricity sector, is particularly relevant at Meridian as we make choices to deploy capital on both new and existing assets. We're investing in and concurrently building new renewable generation sites under our 7 and 7 program. We're partnering with others in joint ventures, optimizing shutdown durations to restore generation more efficiently and finding new ways to maximize our generated energy. I enjoy guiding the team and working on these important strategic decisions for our business. You've heard from our Chair and Chief Executive today, they've talked to the work underway to transform the retail operating model, delivering data-driven customer experiences, bringing a choice of products and flexibility, I think, will be a game changer in helping customers to manage their electricity usage and their budget. I support this really important evolution, and I think it will differentiate our retail offerings and bring value for shareholders as well as customers. I remain committed to my own professional development to ensure that I can deepen my contribution at Meridian and other companies that I serve. Last month, I was confirmed as a chartered fellow of the New Zealand Institute of Directors. And I'm also studying towards the masters and information governance at the University of Auckland to deepen my technology base and expertise in the areas such as data privacy, cybersecurity, blockchain and artificial intelligence. It would be a privilege to continue representing your shareholder interest by serving as a director at Meridian. So I respectfully seek your support for my reelection today.

Thank you, Michelle. I move formally that Michelle Henderson, who retires by rotation and is eligible for reelection, be reelected as a director of the company. Any discussion? I've now moved the resolution, and I put the resolution, shareholders should now complete their voting for the resolution. I'll now pause briefly to allow you time to finalize your vote. [Voting]

Thanks, Michelle. It is my pleasure now to introduce and move the resolution to reelect Nagaja Sanatkumar as a Director of the company. Nagaja joined our Board in January 2020. She serves on the Safety and Sustainability Committee and the Audit and Risk Committee. She has also chaired our Cyber Security Committee and serves on the People, Remuneration and Culture Committee. The Board considers Nagaja to be an independent director and unanimously recommends that shareholders vote in favor of her reelection. Would you like to address the meeting, Nagaja.

Thank you, Mark. [Foreign Language] Good morning, everyone. My name is Nagaja Sanatkumar, and I'm standing for reelection to the Board of Directors. Thank you for this opportunity to speak with you and seek your continued support. Since transitioning from an executive career spanning retail, technology and general management to full-time governance in 2019, I have dedicated myself to guiding organizations that form the backbone of our economy and society. I have served on Meridian's Board since January 2020 and currently also serve on the Boards of ANZ New Zealand, Southern Cross Insurance and Healthcare and Tuatahi First Fibre. My purpose and inspiration for my work in governance are to guide and grow infrastructure and core services organizations that are essential for Aotearoa New Zealand's economy to flourish and for our society and ecosystems to thrive. My international leadership experience in digital innovation and large consumer-facing businesses, combined with academic qualifications in engineering, business administration and sustainable development, enables me to contribute meaningfully in commercial strategy, talent development, technology innovation and operational excellence across Meridian's customer value propositions. I bring a well-rounded and well-informed perspective to governance, helping navigate today's business challenges while positioning the company for its critical role in New Zealand's transition to a net zero economy. As a member of the People and Remuneration Committee and Chair of both the Safety and Sustainability Committee and the Cybersecurity Committee, I work alongside my Board colleagues and management to continuously develop the organization's capabilities, systems, processes and resilience that are imperative and best practice for our employees, customers, stakeholders and shareholders. I am deeply passionate about addressing the energy trilemma that our country faces, balancing security, affordability and sustainability. And I remain committed to seeking innovative and pragmatic solutions to this challenge, holding myself and others accountable to the highest standards of responsibility. I humbly ask for your support to continue serving you as a director at what I believe is one of New Zealand's best organizations. [Foreign Language], and thank you. I'll now pass back to Mark.

Thank you, Nagaja. I move that Nagaja Sanatkumar retires -- who retires by rotation and is eligible for reelection, be reelected as a director of the company. Is there any discussion? No. I have moved the resolution, put the resolution. I now put the resolution. Shareholders should complete their voting now, and I will pause to allow you time to do so. [Voting]

Thanks, Nagaja. Last but not least, the fourth resolution, it is my pleasure to introduce and move the resolution to reelect Graham Cockroft as a Director of the company. Graham joined the Meridian Board in July 2022. He serves on the Audit and Risk Committee, the People, Remuneration and Culture Committee and the Cyber Security Committee. The Board considers Graham to be an independent director and unanimously recommends to shareholders that you vote in favor of his reelection. Graham, I invite you to address the meeting. Thank you, Mark.

[Foreign Language] Good morning, ladies and gentlemen, and fellow shareholders. Thank you very much for joining us today. I'm very grateful for the opportunity to stand before you and seek reelection. It has been a privilege to serve on the Board for the last 3 years. During this time, I've been very impressed by the quality of the Board and management and by the company's commitment to safety, customers and local communities, including Eiwi. The energy industry globally is going through some significant changes, and New Zealand is no different. We are trying to decarbonize our energy economy by electrifying as many of our activities as we can and then meet that increased demand through investment in renewable generation and the expansion of our electricity grid. While doing all of this, we also want to ensure we have a system that provides reliable and affordable power for our homes and businesses. Throughout this period of change, there are many opportunities and challenges for New Zealand and Meridian. Recent reviews of the sector by Frontier Economics and the government have described some of these challenges. And just to highlight a few of the examples where I believe there are significant opportunities for Meridian, I just highlight a couple of points here. First, as electricity demand grows, there is a need for -- not only for more supply, but also for more flexibility and supply to balance the intermittency of wind, solar and hydro. Meridian has world-class assets and capabilities on hydro generation, and there are opportunities for us to build on this strength through expanding our hydro storage and generation capacity. Second, the customer-facing part of our business is also changing as new technologies transform the way electricity is used and even generated in the home and business. With our retail transformation project, we will bring new products and services to market and more quickly to help customers manage their power requirements. At a governance level, these opportunities and challenges require thorough deliberation by a Board with a range of skills and experience. We have a significant investment program ahead of us, and we'll need to call on all the skills and experience of the Board to ensure we maintain a disciplined capital allocation and preserve the financial strength of our company. For my part, I bring over 30 years of international experience in the energy industry and a variety of executive roles in New Zealand, the U.K., South America and Asia. I'm now on my fourth year as a Non-Executive Director of AGL Energy in Australia. So I'm seeing the energy transition through an Australian lens as well. Ladies and gentlemen, should you endorse me today, I would be honored to continue to participate in this Board and company and accordingly offer myself for reelection. Thank you.

Thanks, Graham. I now move that Graham Cockroft, who retires by rotation and is eligible for reelection, be reelected as a director. Is there any discussion? We do have a question. What does the Culture Committee mean? Well, it's the People, Remuneration and Culture Committee, but the culture part of it relates to the broader working environment that operates in Meridian. Simple as that. So I think I've answered that. Is there any other question? That was from [ Mr. Kelso ]. No. Any more discussion? Okay. I've moved the resolution. I now put the resolution. Shareholders should complete their voting for the resolution. I'll now pause briefly to allow you time to finalize your vote. [Voting]

Thanks, Graham. Shareholders, thank you for your attendance to the resolutions and the meeting. As advised earlier, many shareholders have already voted by proxy before the meeting and at the request of the Shareholders' Association, we delayed the announcement of those results until after you'd considered the resolutions. You can see on screen now, I can now advise that just under 2.1 billion votes, representing 79% of shares on issue were lodged with Computershare, our share registrar 48 hours before the commencement of the meeting as required. That concludes the discussion of our items of business. I will soon close the voting system. Please ensure that you have cast your vote on the resolutions. Just pause briefly if you require any more time. Okay. I will now close voting. Thank you for voting. For those in the room, the gentleman standing at the rear of the room has the relevant box to put your votes in. Once all votes have been cast, they will be counted by Computershare and scrutinized by our auditor, Deloitte, and results will be announced to the New Zealand and Australian Stock Exchanges later today. Thank you for attending our annual meeting. I now declare the meeting closed. Thank you. Now for those shareholders who are actually with us in person today, we love it if you join us for morning tea. Thank you.