Vector Limited (VETTF) Earnings Call Transcript & Summary

Good afternoon, everybody, and welcome to this meeting. My name is Doug McKay, and I am Vector's Chair. I'd like to acknowledge Ngati Whatua Orakei as mana whenua for Central Auckland, where we are today. As we have a quorum, and it's 2:00. I will now declare open the 2025 Annual Meeting of Vector Limited shareholders. We're starting today with ordinary business, which includes short addresses from myself and Simon, and then 7 resolutions. We'll see how short Simon can be given its his last one. You take as long as you like, mate. As part of these resolutions, you will also hear short addresses from the directors who are seeking reelection. After that, we'll move to general business, Q&A and then voting. Today's meeting is a hybrid meeting where shareholders can participate here in the room and online. As this is a shareholder meeting, we ask that you do not use the time for asking specific operational or customer service questions that relate to individual projects or your situation. We're happy to have those questions and queries. But we have members of our customer team available here in the room and after the meeting, and they will be very happy to help you with any of those types of queries. We do encourage shareholder questions, and we'll indicate question time after each of the presentations. We'll have microphones available for you. Once you've asked your question, please give the microphone back while we're answering your question so that others can have their turn. And so that everyone can have a turn, we ask that you keep to 1 or 2 questions per person. If you still have more questions or feedback, Simon, our Group Chief Executive, and I will be available after the meeting to chat with you as required. We also welcome the media to our meeting today as observers but ask that you please hold your questions until after the meeting or if you would like to talk to Simon and myself, then please make yourself known to one of our communications team. who are at the back of the room or call our usual media phone number. If you're online and you'd like some help, you can type your query and one of the Computershare team will assist you. Voting today will be conducted by way of a poll. If you're here in the room, you can mark your voting paper at any time. and a team member from Computershare, will collect the voting forms before the end of the meeting. If you're online, you will be able to cast your vote under the vote tab once I declare voting open. I will indicate when voting will close so that you have a final opportunity to cast your vote. So with those instructions now complete, I do declare voting to be open. The number of proxies and the proxies held by myself as Chair of the meeting or in my own name are shown on the screen. It is my intention to vote the discretionary proxies I hold in favor of the resolutions. It's now my pleasure to introduce my fellow directors: Alastair Bell; Vaughan Busby; Dr. Paul Hutchison; Dame Paula Rebstock; Bruce Turner; and Anne Urlwin. Also at the table, we have Group Chief Executive, Simon MacKenzie; and John Rodger, our Chief Legal and Assurance Officer and Company Secretary. Vector's Chief Financial Officer, Jason Hollingworth; and external auditor, [ Matt Depros ] from KPMG, seated in the front row, together with other members of Vector's executive team and advisory team. So now to the business. I'm pleased to report that our financial performance for the year has been solid, as you will have seen in our results announcement in August. Just before I get into some of the highlights, I want to comment briefly on the regulatory cycle for electricity networks. As this has a strong impact on our results, and you'll hear this come through in the presentations. Late last financial year, we entered into a new 5-year regulatory cycle for electricity networks. This is where the Commerce Commission resets what revenue we can earn from the electricity distribution business. This is known as DPP4 because it's the fourth of these cycles, and DPP stands for a Default Price Quality Path. DPP4 started on the first of April 2025 and so has been in effect for the final quarter of these financial results. Simon will go into more detail shortly. But if I move through some of the numbers, for continuing operations, adjusted EBITDA has increased by 16%. Adjusted EBITDA is earnings adjusted for fair value changes, associates third-party contributions and significant one-off gains, losses, revenues and other expenses. The increase is a result of higher revenue, particularly in the last quarter, where higher revenue from the new regulatory price path has come through. We've also managed -- we've also maintained prudent financial management across the group. Group net profit after tax for continuing operations was $154.7 million, which includes a $37 million impairment of the gas distribution -- the impairment recognizes our latest forecast for gas network connections, where we see a decline in connections in FY '26 as a result of significant market uncertainty scarcity of gas and rising costs. Following the impairment, the carrying value of the gas distribution business is now consistent with the estimated value of the regulated asset base, which is key to determining the regulated revenue. The electricity network performed within the regulatory quality standards for the duration and frequency of outages, although we acknowledge that any outage is frustrating for customers, and we understand how important it is that homes and businesses can rely on their electricity supply. I want to give my thanks to the Vector team and the field service providers who work so hard to keep the lights on for Auckland. This is not just after a severe weather event, but every through large-scale programs of planning and building for the future, maintaining the network we have today and getting out to make repairs quickly and safely when something impacts network performance, such as a car heading one of our poles. We've announced an unimputed final dividend of $0.13 per share, taking the full year dividend this year to $0.25 per share. This represents an 85% payout of free cash flow in the midpoint of the 70% to 100% range as stated in our policy. Shareholders should not interpret this year's payout as being an indication that future dividends will be in the midpoint of the range. Overall, the Board is pleased to see a solid financial result and completed transactions, including the sales of our natural gas trading business, on gas LPG and HRV. These completed transactions enable us to concentrate on the core strengths and demands of our of our regulated electricity and gas networks while also exploring growth opportunities. These growth opportunities include Vector Technology Solutions, our investment in metering business Bluecurrent and other options that may emerge with the changing market. Consumer needs, and the scale of investment required for the economy to electrify and decarbonize. Our balance sheet is strong. And as such, we have the capacity to consider other opportunities. I'd like to thank Simon and his executive team and everyone else at Vector for their hard work throughout the year. This is Simon's final Vector Shareholder Meeting. And so I'd also like to commend him for his leadership and significant contribution to the business during his time at Vector, including the past 17 years as Group Chief Executive. We've also announced that Chris Blenkiron will be joining the team as Vector's new group Chief Executive in December. Chris is a highly regarded leader. We conducted an extremely thorough search process, both locally and internationally. And through this process, Chris demonstrated astute insights into the energy sector and Vector's future growth opportunities. I'd like to now hand over to Simon.

Thanks, Doug, and good afternoon, everyone. So I'm pleased to share some highlights over a year, including examples of how we're bringing our strategy to life and some of the key issues facing vector and the wider sector. So Doug has mentioned the DPP4 regulatory cycle that began on first of April this year. Under default price path 4, we've seen the Commerce Commission increase allowable revenue for transmission and distribution businesses, which has occurred largely as a consequence of higher interest rates and inflation experienced within the prior default price path 3 period. We are well placed to continue our disciplined network investment approach in the DPP4 period. which is to avoid committing to high levels of capital investment in areas where there is significant uncertainty or to cover short demand peaks when there are other less capital-intensive ways to use available network capacity and maintain network resilience. We're very conscious that cost of living pressures for consumers remain high. So DPP4 has resulted in price increases on power bills, and we recognize this is hard on all consumers. However, in real terms, our electricity line charges remain very similar to what they were more than 10 years ago and the increase under the Default Price Path 4 is a function of interest rate movements. It is also important to note that the total increase has been smoothed out over the next 5-year period. Our distribution line charges make up around 27% of the total bill that consumers receive. We've heard commentary in the media that is that it's these lines charges that have driven higher consumer power bills this year. Whilst it is true that the Commerce Commission changes under the price path have increased bills, but only 27% of the bill or around 35% if you also add in transmission costs from Transpower, there is still a majority of the bill impacted by other factors such as the cost of energy. What is at least well understood is that the that a key measure of the cost of producing new electric trite levelized cost of energy has stepped up significantly in the past year and this will need to flow through to power bowls eventually. Our commitment to Auckland's growth and electrification remains strong, and the region continues to grow despite the broader economic slowdown. While we've seen a softening in the rate of new connections this year and fewer private electric vehicles being sold, Auckland is experiencing rising demand for hyperscale data center connections each with significant energy requirements. Data center projects offer major opportunities for the region and for New Zealand more broadly. For example, hyperscale data centers typically request around 20-megawatt MPs in the first phase of multistage developments, which is roughly equivalent to 8,000 homes. However, they're accompanied by uncertainty about the rate at which the electricity demand will grow to meet the capacity the requested since this depends on the adoption of data center services by the data center clients. We know these hyperscale data center requests will drive a need for us to invest in system growth, but we must ensure our investment is moving in step with the anticipated demand. Because of the scale of some of these projects, their impacts may not be confined just to our distribution network. They may also affect electricity generation and transmission so a careful and coordinated planning is critical and working closely with data center sector and government. Our Symphony strategy puts our customers at the center of our decisions, and we're acutely aware of the importance of getting the right balance between affordability and prudent, efficient investment, given the cost of living pressure many of our customers are facing. Our approach to investment I referred to earlier as one example of how we manage costs that flow on to customers. customers. As we've talked about in previous annual meetings, our strategy looks to harness smart use of technology to smooth out consumption away from peak periods. This is part of how we ensure our electricity network is equipped for increased demand as the reliance in electricity continues to increase. While we must prepare for the future needs of Aucklanders, our focus remains on providing a reliable, resilient, secure energy supply today and doing this as efficiently as possible. So for example, in the past year, we've inspected more than 2,000 kilometers of network using drones, and we've completed 12 projects to boost resilience and future capacity in the alongside numerous other projects large and small across the entire region. An example of our strategy to embrace strategic partnerships to help us innovate faster realize cost efficiencies and facilitate disciplined investment is the launch of GridAware. So GridAware is a new AI tool that is reinventing the way we inspect and maintain the electricity network. This tool was developed as part of our partnership with X, Google's Innovation Lab and Tapestry. It's Energy Moonshot division, and it's the first tool to be deployed on our network from this collaboration. GridAware helps us improve our network inspection processes by using aerial imaging and data captured by drones and helicopters to give us highly detailed views of the condition of our overhead assets. This helps us prioritize our maintenance investment, but GridAware can go also further because as we use it, we're training artificial intelligence to help us complete condition assessments of our network automatically. The Commerce Commission has recognized the customer benefit from this project awarding us an innovation project allowance in the final year of the previous cycle known as DPP3. With this project in place, we're also the first distribution utility in the world to integrate another Tapestry tool that vastly speeds up our ability to assess future network scenarios. This helps us run long-term network solutions that help us plan for a range of different future scenarios. And this is extremely helpful to see the potential impact to the network of things like different rates of EV take-up, data centers and rooftop solar. We now have a short video for you to help illustrate these projects and how they come together to benefit our customers. [Presentation]

So moving on now. In 2020, we set a target to reduce Scope 1 and 2 emissions excluding electrical loan losses by 53.5% by 2030. This year, we recorded a reduction of 55%, which is calculated against the businesses we now have meaning it reflects our actual emissions reductions, not from those businesses that we have sold. This means that as at 30 June 2025, we have achieved our 2030 target. We did this by innovation and technology and processes and successful initiatives are now embedded into our operations. One of these initiatives are shown on screen. Our guest sniff trucks that proactively identify leaks from our gas network, enabling us to fix them faster and improve safety for our customers as well as reducing the from these leagues. We'll continue to focus on our mission targets because we know how important it is to maintain these reductions. However, there may be some volatility in our overall emissions performance. This is especially true when factors outside our control come into play, such as severe weather that requires temporary generation to restore power or third-party damage to our gas networks. I'll now move on to the wider energy landscape and some of the challenges we're seeing. An important issue for us is the reform to the electricity distribution connections as announced in July by the Electricity Authority. The key issue we were concerned about was that funding of connections and the potential of being required to move away from policy of the people causing the connections growth, paying 100% of those costs to a policy of the costs being shared across all Auckland consumers. The EA or the Electricity Authority is continuing to engage on this having deferred a final decision on the level of contributions that can be charged for customer connections. There were a number of technical changes announced, which will add complexity to what is already a highly complex process, especially that we do new connections of around about 15,000 a year more than any other electricity network in New Zealand. We need to make changes to our internal process, and we'll do so within the time frames that we've been given. The Electricity Authority has also expressed that is expecting some of these changes to be done in a nationally aligned way. We're already participating in the processes through the member Association, Electricity Networks TR, and we'll continue engaging with the electricity authority as well. Looking to gas, there is unprecedented uncertainty around the future of natural gas in New Zealand. This is driven in the near term by significant market uncertainty, scarcity of gas and rising costs. And in the long term by lack of clarity over how guest distribution businesses will be impacted by New Zealand's 2050 net zero emissions targets. The current regulatory settings were designed in a more stable environment, where demand for gas was growing, and we are urging the Commerce Commission to update them to recognize this uncertainty and to ensure any shift away from gas protects the interests of customers as well as stakeholders. A new draft gas default price path is expected to be announced by the commission later this year, and we are participating fully in the process so the commission understands our perspective, both for investors and customers. Key issues for us is that the commission recognizes in response to the context this reset is occurring in, which is the significant risk to gas revenues because of the near and possible ask of forecasting guest volumes. Fabs into the future as well as medium- to long-term risk that some of the gas distribution assets become stringent, if the guest market scales down much earlier than anticipated. As for the energy sector as a whole, the government hasn't yet released the report and commission to help with its review into the energy sector. We, like many others are waiting to see the contents of this report and the government response. I'll now go over financial guidance we provided when we announced our results and as with the half year, we will be providing guidance on adjusted EBITDA, gross CapEx and capital contributions. For financial year '26, the range is shown on the slide. For adjusted EBITDA, the forecast increase on financial year '25 was driven primarily because of the financial year 2016 is the first full year of the new electricity price path. The forecast increase in capital expenditure is linked to expected customer-driven growth and our continued investment in the network. And before I close my address, I'd like to make a few comments as this is my last address as Vector Group Chief Executive. I feel incredibly privileged to have been had a career in New Zealand energy sector, firstly, with AZNZ, then to Mercury Energy and then now to Vector. The journey has been one of change, challenge and continual growth. and for me personally as well as for the sector as a whole. But there are some stance that have always seen set vector apart. Vector's never been content to simply follow the easy path or do what others are doing. Instead, we've constantly taken the deliberate approach to develop and articulate our own view, even if it sets us apart, and we've always tried to put the customer at the center of our thinking. We don't just look within our own sector for answers nor do we just look into New Zealand. We look outside the energy sector. and where innovation and forward thinking is happening globally to find the right skills and perspectives. Our views are always welcomed, but we've always believed in articulating our position so that people know exactly where we stand, even if they may not agree. We like to challenge ourselves as well as the wider industry. Consumer expectations have grown immensely, and that's a real challenge for the energy sector, where you can't build big things overnight. When you're facing such a complex challenge as we are with the energy transition, you can't just settle for the status quo. Our willingness to have a view is why we've been able to partner with global leaders like Google and Amazon. They looked around the world to find and found it refreshing to work with a company like Vector that stands for something. These partnerships and others before them with Palantir and Tesla have provided our staff with invaluable experiences and relationships that are far more useful than simply setting at home in our corner of the world, thinking we have all the answers ourselves. Being a regulated entity as part of our portfolio also brings its own unique challenges. We've had the privilege of running nonregulated businesses in highly competitive markets like gas trading, fiber and metering. But with other parts of our business is being regulated. I sometimes hear comments this means we don't and have the same competitive pressure constantly driving us. But make no mistake, everyone at Vector is committed to doing the right things. Our teams and our field service provider riders are out there every day working for customers. And then the storms, they are outside in all conditions rallying to get the power back on quickly and safely as they can. Over my time of Vector, we've managed a large portfolio of assets, including some that are regulated and many that are in competitive markets, including technology start-ups. We've known when to invest, when to grow and win to exit. And in most cases, we've picked the right time to exit, so we could invest in growth businesses. Well, sometimes because the risk outlook wasn't where we wanted it to be. For example, we divested the Wellington Electricity Network and invested in metering. We exited gas transmission and gas process and trading and distribution because we saw the risk profile just wasn't where we wanted it. And now we have a more electricity centric focus. So that's timely because electricity is what the world needs more and more of now and into the future. Looking ahead, I was recently asked if there were -- will be more energy shortages. And given the dry year risk hasn't gone away, and we're seeing more extreme weather conditions, all across the country. I think it's highly likely there could be more energy shortages. In the past 2 years, what I call the hope strategy has kicked in and then it rained. There's no clear strategy or plan or accountability over the whole energy system as a whole. So finally, I'd like to thank all our staff, field service providers and Telnet for the huge efforts every day to deliver to our customers. I'd also like to thank all their service providers for a huge amount of work they do to support us and also special thanks also to the Vector Board past and present, for their support and challenge, and to all our shareholders, including interest support over the years at Vector. Thank you very much.

Thank you, Simon. Now we'll begin working through our agenda items. The notice of meeting lists the items for voting and those eligible to vote, can I remind you, you can do so now at any time. Only shareholders registered at 5:00 p.m. on Friday, the 26th of December 2025 or their proxies or representatives may vote. The first agenda item is to invite questions on my and Simon's reports for the financial year ended 30 June 2025, contained in our annual report and delivered today. Questions on future performance will be addressed in general business. The annual report was published online on 25th of August 2025 and hard copy reports were sent to all shareholders who requested one. Questions on this topic may be put directly to our external auditors, KPMG, but please keep those questions relevant to their auditing role. If there are any questions in respect of the annual report, the financial statements and audit report for the year ended June 2025, please raise your hand and wait for my signal and a microphone. Are there any questions? We have one down here. I know who you are. I think I can see through the light. That's you, [ Carlie ], isn't it?

It is. You're talking about energy generation, and it sounds like there is a real risk of shortages, especially with the data centers. There's also talk about mining cold at Hunt to bone. Now is there anybody investigating tidal power in New Zealand? They've got it in the U.K. I've seen it on TV and programs. With our coastline, surely, there's a place to start looking at tidal power?

I'd have to say I'm not aware of any serious investigations of tidal power. The experience overseas has shown that it's a high-risk venture. There's a lot of things in the natural environment that get accentuated in a title environment that are difficult to control. We still have so much potential for generation in wind and solar. So I'm not sure there's a big need for us to be looking for other sources of energy at this stage but more to capitalize on the sources we know and we have in abundance. But that takes the generation gene failures to actually do it, doesn't it. And at the moment, they're not motivated. Well, that would have to be a question for 4 other general AGMs, I think, not for me.

Well, it's just that you talked about energy supplies. So I don't go to those other meetings. I'm sorry. You are my last resort.

Right. Well, look, the premise of what you're saying is absolutely true. We are in danger of energy shortages. I don't think we lack sources of energy potentially. We just haven't built new generation fast enough. And I've heard the generators talk and they are doing a lot of investment themselves as are others in the solar field and Wind field. So I think we just have to park that one for the moment. I can't give you infinitive answer. Any other questions? Okay. There's no other questions in the room. So can I ask if there's any questions from shareholders watching online? Sophie, do I look to you for that answer.

There are no online questions.

There are no online questions at the moment. Okay. All right. Thank you. That ends the questions in relation to that agenda item. The Vector Board considers its mix of skills and experience carefully, and we appoint new directors to complement the skills of those already serving on the board. Today, Vaughan Busby, who was appointed by the Board in June stands for election. Alastair Bell, Paul Hutchison, Paula Rebstock and I retire by rotation and stand for reelection. I will invite Paul, Alaster, Vaughan and Paula to each speak briefly, and I'll also make a short speech regarding my reelection. Given that there are 5 speeches today, we won't take questions as we go, but we'll take questions as a group at the end, if you don't mind. So Vaughan, would you like to step up?

Good afternoon. Just before I begin, there's something I probably need to clarify, and that's despite press reports to the contrary, I'm not actually an Australian. I'm a kiwi who's living in Australia. So I'm sure all the New Zealand is in the room, which is probably all of you will understand the need to make that clarification. I actually grew up in 2 only. And before heading offshore, I lived in Auckland for about 8 years. All my families will live and work here in Auckland. By way of background, I've got over 20 years' experience in the energy industry, everything from energy trading, building generation, both renewable and thermal smart metering, which is obviously an important business line for Veda. I've run retail businesses and have been involved in the development of software for energy trading and to facilitate the physical dispatch of energy international and regional markets in New Zealand, Australia, Asia and Europe. And for the last 9 years, I was actually non-Executive Director of Energy Queensland, the largest Tricity distributor in Australia I've said on numerous boards, including listed companies, private companies and government-owned corporations. Should you support my election today, I'm sure my energy and technology background will add value to Vector. I also see another area where I think I'll be able to add value is by providing a slightly different insight and perspective having operated in different jurisdictions as to the way they are tackling energy issues. Obviously, electricity and gas is critical to an economy and New Zealand is facing some real challenges with regard to the supply of energy and its impact on the cost of living. Australia actually has many of the same issues with regard to electricity and gas that New Zealand does. However, they stem from slightly different causes. Having said that, I see a real difference between Australia and New Zealand in terms of making policy decisions that require bold changes. So with my energy and technology background, combined with having operated in different markets, I believe I can add some real value to the Vector business and tackling the various issues that are being faced in the New Zealand energy sector. I'd appreciate your support. Thank you.

Mr. Chairman, Simon, shareholders. I'm Alastair Bell. Thank you for your nomination for reelection to the Board. Since joining the Vector Board in 2019, I've seen firsthand both the opportunities ahead for the business and the responsibilities we hold as stewards of this essential company. Vector sits at the center of a rapidly changing energy system, energy consumers, energy sources and energy distribution are all evolving at pace. Vector can look ahead to a power system that is more electricity and data-centric. Vector plays a critical role for its consumers and for Auckland. Our job is to keep energy distribution reliable and affordable while investing for the future. The cost of delivering energy to consumers where the businesses of households is a constant consideration and an appropriate constraint. It's right to that intergenerational considerations ensure the enormous capital costs while delivering upgrading and growing Vector's assets and infrastructure are balanced fairly between today's consumers and future generations. Vector invests $0.5 billion annually into its networks. Power outages are within regulatory limits. Vector's greenhouse emissions are falling. Its balance sheet is strong, and its dividend per share has increased. Customers are at the center of Vector's Symphony strategy. digital technologies and data solutions are leading changes in how Vector delivers as well our network businesses are capital intensive and in long-term return profile. Vector wants to balance this by providing technology and services with shorter paybacks, for example, VTS. This will augment adjacent businesses such as the Bluecurrent joint venture. As a non-independent director, I represent Entrust, Vector's majority shareholder alongside Dr. Paul Hutchison. Entrust's 368,000 beneficiaries are all consumers on the Vector network and central as in South Auckland. This unique ownership structure aligns Vector's interests with those of its consumers just last week. Entrust dividend -- as Entrust delivered its share of Vector's dividend directly to those Auckland households and businesses amounting to over $125 million into Auckland's economy. The Vector Board, of course, works for all 630,000 electricity consumers and 120,000 gas consumers across Auckland. It's a privilege to work along our independent directors, led by Doug McKay and with Simon MacKenzie and his executive team. Simon's retirement marks an important milestone and his leadership will have left a lasting impact on Vector and the wider energy sector. He departs with our gratitude and best wishes. I'm seeking your support for reelection today. If elected, I will continue to work collaboratively to deliver value and sustainable returns for you to our shareholders. Thank you.

Good afternoon, ladies and gentlemen. Mr. Chairman, thank you very much for the opportunity to speak as I seek to be reelected to the Vector Board as a non-independent trustee director. From the outset, I want to emphasize my support and enthusiasm for Vector as it leads New Zealand and well beyond our shores in creative a new energy future. By way of background, I was privileged to join the Vector Board in 2021, and I was first elected to Entrust in 2015. Vector has to date been a leader in transforming its own business. grounded and data and insights and smartly using technology to benefit customers. Customers remain at the center of our symphony strategy, and I see my role is continuing to support this focus, challenging and questioning where appropriate as an Entrust director representing a large part of the Auckland community. This focus is especially important to me. As 1 of 5 trustees of Entrust, we are committed to doing everything possible to increase and protect your dividend alongside prudential financial management. ensuring reliable and affordable power supply, supporting the transition to a low carbon energy future and investing in innovation and digital solutions for the benefit of energy customers and finally, to continue undergrounding power lines where appropriate. As a trustee director I strongly support the ongoing growth of a constructive relationship with the Vector Board and management. My position on the Board means I can positively contribute to these important matters and focus on representing the entrance of all Vector shareholders. As a medical practitioner, I've been very encouraged by the way Vector proactively manages the health, safety, mental health and well-being of Vector's people. Their best health is vital to the success of the company. It's been very exciting and rewarding being on the Nominations Committee, leading to the appointment of Chris Blenkiron as the new CEO. I'm confident Chris will build on Simon's magnificent legacy. A huge personal thank you to Simon for the incredible hard work and leadership you've demonstrated over so many years, both at Vector and on a national basis. You're a constant source of inspiration. Thank you very much for the opportunity to serve on the Vector Board. I greatly appreciate your support.

It is a privilege to put myself forward for a second term as a Vector Board member. I joined the Board originally in 2022 and then became your Chair in 2023. And I covered my relevant history and background when I was first elected so I won't repeat all that. More important, I think, that I summarized what I have contributed in the last 3 years. I count my major contributions as one, the driving force behind the reshaping of Vector's business portfolio. We divested our gas trading and on gas assets at a time that maximize value and took into account the state of the gas market and their risk profile. Overall, these businesses performed well for our shareholders over time. And we believe we exited at the right time for Vector. HRV did not meet our performance expectations and that sale was completed just after balance date. We have now cleared the decks for an unambiguous focus on succeeding with Bluecurrent and Vector technology solutions. We now have a balance sheet that also gives us scope to explore other growth options. Bluecurrent and Vector technology solutions originated out of the needs of our core electricity business, where we are subject matter experts. They both support the energy transition and play to the macro trends of distributed energy, network management and optimization through digital solutions, empowering customers to adopt demand response solutions and all of us using energy more efficiently as well as our core focus on providing reliable and affordable energy for Aucklanders. With these remaining businesses, we can grow here at home in Australia and internationally, leveraging but deep core competencies. Secondly, for near on a year, I have led the search for a new CEO to replace Simon. We have been extremely focused in demanding to get the right individual. Simon, after announcing his intention to retire after 17 years as our CEO has worked with me to ensure there is a seamless transition and landing on the search. My fellow directors have all played a part in ensuring the best possible outcome in securing Chris Blenkiron. Chris will join us before Christmas and get some weeks of valuable overlap with Simon. Your company will be in good hands. Thirdly, I have led and refreshed the Board with exciting new talent, and Vaughan Busby is seeking your support today. In addition, each incumbent Board member has decided to stand again so we get important continuity at this time of important change in the company and the industry. Fourthly, the Board has a very constructive and open relationship with our majority shareholder Entrust, and I would like to acknowledge Entrust Chair, Denise Lee for her role in that. This is an important relationship to get right, and we work hard to achieve it. Five, we landed a good regulatory outcome in the 5-year DPP4 path through -- sorry, I'll start again. We landed a good regulatory outcome in the 5-year DPP4 round through FY '24-'25 and again, engaged constructively with the Commerce Commission despite not always being an agreement, we found a way to work with that. These outcomes are the most important inputs to our business every 5-year regulatory period. So for those 5 contributions that I thought I should highlight today, of course, there still remains much unfinished business. Like building even more customer focus into every interaction we have with them. making us easier to deal with an internal culture with more challenged and urgency remains a high priority for me. Vector is an excellent business, well run by an experienced and talented management group. I want to ensure though we are getting the most out of the company for shareholders, customers and the people of Auckland. If I can have your support, this is what I intend to focus my efforts on over the next 3-year term. And I thank you in anticipation of that support.

Good afternoon, shareholders. It was a privilege in to join the Vector Board and have the opportunity to contribute my infrastructure, energy and regulatory experience to Vector. I'm pleased today to offer myself for reelection. Looking ahead, Vector as the nation's largest electricity network is well positioned to support Auckland as it continues to grow. Not only will Vector provide a reliable network that keeps all these lights on, we are committed to our vision of creating a new energy future, which we've heard a lot about today. In practice, our strategy at its core is not just about utilizing technology to deliver energy in the most cost-efficient manner. Importantly, it's about meeting changing consumer demands, responding to climate change and the need to decarbonize and ensuring reliable and affordable energy solutions. In my tenure vector, I have served at different times on each of the Board's committees, including currently the People and Remuneration Committee, the Finance and Audit Committee and the Nominations Committees. As the current Chair of the People and Rem Committee, I've had the chance to support Vector's commitment to develop our people, undertake succession planning and continually improve workplace culture and the health and safety and well-being of our workforce. Previously, I had the great pleasure of serving on the meter transactions subcommittee, which led to our partnership with QIC, currently called Bluecurrent. Subject to that transit action, I was appointed as a vector Director on Bluecurrent Australia and New Zealand. Not only has that transaction resulted in Vector having a strengthened balance sheet, Bluecurrent has grown and contributed to Vector's financial performance in line with our expectations at the time of the transaction. Just like to acknowledge that since I've been on the Board of Bluecurrent, I've had the pleasure to serve with Simon MacKenzie as one of our other directors. It's been really beneficial to Bluecurrent to have the person who grew that business from the ground up continue to support it. And I probably particularly pleased that Simon will be continuing on the Bluecurrent Board for a period going forward. Having said that, though, like my colleagues, I want to acknowledge his outstanding leadership while he's been the CEO of sector. My previous governance roles include Chairing the Commerce Commission and the ACC and being a Director of several infrastructure companies like KiwiRail, AT, Auckland One Rail and SeaLink, among others. Furthermore, I currently chair all the new labs, New Zealand Post, and I'm Deputy Chair of NZX and AIA Insurance. Having started my career as an economist, I have a strong interest and focus on business performance and strategy amongst the companies I serve. Looking forward, I would welcome the opportunity to continue to govern and grow Vector for the benefit of its customers and shareholders. I have the passion, focus and time needed to support the achievement of Vector's vision. I've appreciated the opportunity to address you all here today, and I seek your support for my reelection as a director. And I'll hand back to Doug .

Thank you all. Could I ask if in the room, there are any questions for the standing directors? Sorry, it's just a bit difficult to see out there with the spotlights. Okay. We have a question here.

[ Grant Plummer ], shareholder and our recipient of Entrust dividend as well. Thank you. With the movement into part of the address was the movement into using AI, what directors have skills in that area and what's the future with AI?

Good question, Grant. Thank you. Look, I probably am stepping out on a limb here. I don't think any directors have sufficient direct experience with AI given how new it is and given how we developed our careers over the last few decades. So let's be very clear about that. But we are partnering with people who are experts in AI in the areas where we think that's going to have the most early and significant impact. And that's Simon referred to Google X AWS and people like this. But many businesses now are working out how they are going to cover the AI opportunity and the AI challenge, and we're no different from many. We -- this afternoon and morning at our board meeting, for example, approved our first AI use policy. So how we are going to have AI used and available within the company for our employees to use in all sorts of different ways. So we're at the very early stages. So I don't want to gild the lily here. We'll be buying in or consulting for that expertise when and if we see opportunities that we need to get moving on it quickly. Over time, I think as we recruit and planned succession for new directors. A technology emphasis, including AI, will become much more a part of that recruiting brief and looking for people who are more advanced in their experience with AI than the current crop. Sir? Microphone is on its way.

A question for Vaughan, responding to the directors' speeches. I understand you're domiciled in Australia. So will you be physically attending meetings, Board meetings in New Zealand? And if so, who bears the cost of that?

Yes, I am domiciled in Sydney, and I'm attending all meetings in person physically. And the company does bear the cost of that. And just going back to the previous gentleman's question, I do have some experience in generative AI.

Yes, if you recruit an overseas director, I'm very certain that the policies companies have is they pay the travel costs, accommodation costs for the director to attend the meetings in person. I'm not aware of any other -- any company that doesn't do that. We have a director based in [ Wanaka ], for example, and Irwin. And that same policy applies in the hands travel to and from Wanaka to be here for meetings. Vaughan came in a day early to the board meeting today because we had a workshop yesterday, for example. So he is very accommodating and knows that the expectation is he turns up in person. We're not doing it on the phone or on a Teams call. And he comes out in the field. We've all had days out in the field with our staff and field service providers last week and the weather, and Vaughan will be here for those opportunities as well. I don't think it will be that many. We're probably, John, what, 8 or 9 Board meetings a year, yes. But you could possibly you could double it for the other interactions that I definitely would expect Vaughan to be having as if he was living in based here in Auckland. It's very difficult to find the experience in electricity networks in New Zealand at the size and the scale and the sophistication that we operate at. company shareholder interest. Yes, exactly. So a lot of that experience relevant experience for us is resident in Australia. So I'm continually thinking about how many offshore, how many onshore directors just the right balance. And at the moment, Vaughan's our only offshore director and it's working very well. We've had nearly a year's experience sorry, 3 or 4 months for experience working with Vaughan. And so I'm confident that we found the right person for the right reasons. Are there any other questions in the room before I go online? No. Okay. Sophie, any questions?

No online.

Yes, we'll have general business questions in a minute, yes.

No director questions online.

No questions online, okay. The proxy voting positions for these resolutions are now shown on the screen. Okay. That's very good. Thank you. The next item of business is the proposed increase to the directors' people. We've carried out a benchmarking exercise with PwC. We'll put that online that paper from PwC online for shareholders to see. And we proposed an increase to be spread over 2 financial years as detailed in the Notice of Meeting. Are there any questions on this resolution from the room. Yes, down the front. Richard, will just get a microphone for you, so others can hear you. I can hear you from here.

[ Richard Jenkins ], shareholder. When was your last the increase?

The last fee increase was 2 years ago and the last -- and the increase before that was 15 years ago. So we've been a bit schizophrenic, frankly, about how long we wait between increases. I want to move to a 13 years was unacceptable, totally unacceptable. I want to move, and that's what this proposal recommends smaller and more frequent increases perhaps every 2 or 3 years, depending on the market, if the market is saying there's no justification then we won't put one up. But we've clearly felt that there is justification for these modest increases over the next 2 years. And let's keep an eye on the market so that we don't have these big long interregnum periods, we don't change. And then you've got to come and ask for a massive change, which might be at a very difficult time in the business cycle. That makes it even more challenging. So I think small and regular is sort of what I would like to be moving to. Are there any other questions in the room? Okay. Sophie, are there any questions online?

No online questions.

Okay. Thank you. The proxy voting position for this resolution is now shown on the screen. I now move to the appointment and remuneration of the auditor. Under the Companies Act, the company wishes to record the automatic reappointment of KPMG as auditor. The company also proposes that the Board be authorized to fix the auditor's fee for the ensuing year. Are there any questions on this resolution in the room? Okay. Are there any other questions online, Sophie?

No.

Thank you. That ends the questions in relation to this resolution. The proxy voting position for this resolution is shown on the screen. We have now finished all ordinary business, and I would like to open for any items of general business to be discussed or questions to be raised. As a reminder, acknowledging the interest of shareholders, please do not ask specific operational or customer service questions. Members of our customer team are available here in the room today and we'll be very happy after the meeting to take these types of questions. So let's start with those questions in the room, and I know we have 1 flagged down here in the aisle, please.

This will be directed, I think, to Simon, about the cost of power pole replacement. So in my street this year, there's been 2 power pole replacements earlier in the year, now one of them there was 17 people on site and 3 vehicles for a whole day. So we were out there in the evening, waiting for it to be finished talking to neighbors and estimating the cost of replacing 1 power pole is probably between about $8,000 and $12,000, which seems extraordinarily high for 1 power pole. There was another power pole done 2 months later, and that had 23 people on site plus 6 vehicles. Would these costs be approximately correct? And is there any way of reducing those costs? I'm sure you're looking into it, but I'd like an answer in person. Thanks.

I mean, obviously, the cost of each pole replacement varies depending on what material we're using, what size of poll, sometimes we put in double poles. That's probably around the ballpark that the -- one of the big challenges we do have, which we have been seeking to address with Auckland transporters, all the traffic management requirements. Those are extremely material. And it's not just putting the pole, but typically, it's also how we do the line connections and the requirements. I don't obviously know what road you're on, but there are very specific Auckland transport requirements for traffic management, which we do seek to basically continually challenge with Auckland Transport in the order of 45% of project costs basically traffic management related. So that is one of the challenges that we do have. We continue to look for ways to utilize as efficient as we can with some of the projects like pole replacements, new cross arms and at the time in time, they'll be doing we've undoubtedly be putting in a new pole, new crossarm and so forth. So it's a bit more to it than just the concrete pole, but yes, look, I think that's just the reality is the challenge does typically seem to around the safety, which we can't compromise but also those external factors rather than just putting the pole on the ground.

Paul Hutchison and I were out for half a day last week in the weather on the East Coast Base Road replacing 6 poles. We're just watching how our teams work that process. Like your observations, there was a lot of trucks and a lot of people but when you stood out on the footpath and talk to the teams and watch what they do for 3 or 4 hours, you understand why each of those pieces of equipment is necessary. So for example, the hoist truck that lifts the people up to the top of the cross arms at the top of the pole, and you've got 1 person on 1 side of the poll, 1 person on the other side, disconnecting the power lines after somebody else has been earlier and turned off the power for that whole area. You've got 2 people up there that have been hoisted up. They've got to disconnect all across arms, take down the lines, carefully drop them. There's somebody down on the truck managing that hoist. There's another person down on that truck, putting the new crossarms and all the gear that needs to be installed to replace. Then there's another truck that needs to come along with a crane that lifts the pole out when it's disconnected. And then another truck turns up to bring the pole that's going in. So you get where I'm going. It doesn't take long and there were 2 traffic management vehicles on East Coast Base Road, if you can imagine, very busy roads almost like a highway. So you have to have 1 stopping the cars at that end and the other stopping the cars at that end. You get a driver on each of those trucks, and you had 2 people doing traffic management who then walked out into the road to make sure that it was all clear as we dropped the line from 1 pole on 1 side of the road to a poll on the other side of the road, had the roll it cable up carefully place it on the other side and then open up the traffic again. It was all done within 3 or 4 minutes, but there were -- there was 40 to 60 minutes of preparation to get that 3 or 4 minutes of clear space. Yes. So I had the same reaction to you initially driving up, oh my god, look at all these trucks and these people. There was another interface that we observed. So our supervisor had to deal with a neighbor who was not happy about the trucks being over their driveway. We weren't prepared to stay or 6:00 at night because the power might not have gone on. And I wouldn't have liked to have dealt with the neighbors at that stage. But -- so complex, very complex. The cost of traffic management was 45%, did I get that correct? If management typically cost around -- but certainly, traffic management has increased significantly, and we're now starting to grapple with new rules being put in by Auckland Transport about times in which you can operate. so then you get into this challenge to the point around if we can't operate on some real roads, and we can't start to tend in the morning have to be finished by 3 in the afternoon. basically remove all the traffic management, cones and everything being pretty much the only way to get the job done quickly is to put more people into it. So there's a raft of those kind of complexities. So that would be adding to cost, the increased requirements on optimum transport. We believe that does. And magically, now Acton transport is going to report to counseling. Everything is going to be better, maybe. My overwhelming impression despite the observation of how many trucks, how many people was just how committed and how expert our people were. Incredible. I was literally blown away by the skill and the agility and the ability to think on the effect because remember, no one workplace for Vector is the same. You don't go to the same bench and work every day. You don't go into the same factory every day. You don't go to the same office. You turn up on a job and everything is bespoke for that job that day. And I have to say, being registered we were getting texts from one of those rental nearly 8 p.m. And so we're getting texts about every hour telling it's still delayed, still delayed. So you weren't having to wonder down and talk to people and say, hey, when does the power come back on. Finishing a job too early, create its own problems, too, because then people come out and say, well, why the hell did I organize to get the kids baby set for the whole day. So you can't win. You over deliver and you under deliver at the same time. we understand all that. Try to do our very best. Have a question here.

One question, Mr. Chairman. There has been reports in the press that you could be in the position to export energy. The only thing is that didn't state in what form. So I just wondered if you could like not on this one?

Well, I was trying to insulate you, Simon, but I have no idea how to answer that question.

No. Well, I -- that is a unique proposition, let's say, but certainly not electricity because we kind of really have enough for ourselves. So I would only imagine that would be probably potentially if there was more gas fines obviously, coal. But other than that, there's really no other source of energy that we could export from my understanding.

The thing I've learned from it, they stated this form of energy, whatever format is would be stored and softened and then exported from Samsung to wherever is required. That's why I've been able to pick up. So I just saw someone here might know about it [indiscernible] hydrogen and so where this excess energy in the market from, for example, solar, converting that to create hydrogen and then shipping the hydrogen offshore. That said, it's been a lot slower to take hold and a lot more expensive than people thought. So at the moment, to be honest, it's a big question mark as to whether it will happen in Australia.

[ Neil Anderson ] is my name. I'm a shareholder. I've got a question about solar on premises. There was questions for some of the [ gen-tailers ] about solar on premises and why they're not supporting it, and they seem to say that they thought it would disturbing the market. But I would like to know, as retailers, what's your view about supporting solar on people's properties or on business because at the moment, there is no support. In several countries, there is a lot of support for solar on premises. But here in New Zealand, zero. So I would like to know what is a retailer, your viewers about that and whether you are thinking about supporting solar on your customers' premises?

I think it's well known that New Zealand has not had an incentive scheme running for solar or a subsidy scheme, whereas by contrast Australia went all out to subsidize solar. So that's the policy setting we deal with here in New Zealand. It's quite a mixed question between distributed solar on rooftops versus aggregate solar that is used to sort of fuel battery farms. And then that energy can be released when it's needed. So I'll ask Simon to speak more technically about solar and what we at Vector can and cannot help with? Maybe, Simon, would you be able to respond to that?

Yes, I agree with you, Doug. The New Zealand policy settings is very much market on founded. So government has not had any intention to put in place subsidies like we saw in Australia with regards to Vector as a distribution company. We support the ability for people to connect solar, to put batteries in. There's technical requirements for how they connect them to the house, how that has to have what's called bidirectional metering and the ability to isolate it because of, for example, a lineman is working on the line because there's a fault. You don't want the energy being fed back into the network and electrocuting the person that -- from our perspective, we do not retail electricity. We sell the line and services. With regards to the points Doug raised, absolutely, we have people looking to connect solar farms. So our focus is how do we connect them and make sure they get connected into either our network or the transmission system. From a wider perspective, I think what we have seen is that solar typically is best paired up with entries. The costs of the technology itself is coming down, but then the other side is the installation costs are very high. A lot of customers don't necessarily just want to put that upfront capital in. So there are companies out there that provide I guess, products and services for people to put solar and batteries into their homes. We have seen one of those. Though also recognizing in recent times, solar going into liquidation, which obviously couldn't sustain its business model. So as long as the -- one of the other challenges that has been prevalent and looking at solar and the economics of it as when is the solar producing. And if you are exporting energy that you're not using in your home, is that actually getting a fair price in the market when people are buying it back, and that's something that's still a hot topic of debate. So I don't see that kind of market setting changing anytime soon. So it will be left to people that might want to provide those solutions to consumers. One of the other unique characteristics that we've certainly seen in New Zealand is, I think the average turnover of people and homes is something like 7 years. So the payback for solar when you look at the upfront capital cost versus just buying the energy, it's quite a long payback period.

I can actually provide a context to the Australian, how it worked in Australia. So in Australia, it was certainly a government subsidy. So the government paid basically to encourage people to put solar panels on their homes. So it didn't have anything to do with the retailers or the distributors or anything like that. Yes, it was wildly positive in terms of getting the number of solar panels on routes to the point where they now have taken those subsidies off and are looking at aging consumers, the privilege of injecting power into the grid. So it's sort of -- it's almost come 360-degree areas now.

Okay. So in other words, no plans really from Vector to be involved in that, okay. I have another comment actually on the way you run your business in this particular area, and that is Bluecurrent. And I'm aware that there are -- whenever there's a problem with Bluecurrent, it's vector who gets the phone call about my meters not going or blue current happen come and done whatever they should do with my meter. It's damaging your business that you -- that down the track, Bluecurrent doesn't even do it. They get to enter with some other contracts to come and do it. So there's about 3 people flipping the ticket on the way through. And Vector is the person -- sorry, not the person, the entity where the customer sees a problem, Vector is where the problem ends up at. Your call center or your call centers gains the problem for the fact that Bluecurrent outsources that somebody else who outsources it to somebody else? And you guys end up looking like the bad guy in this, and that's because somehow the business practices, we don't want to have to deal with that, we'll give it to somebody else to deal with. So I think that you've got a very bad business model in that not taking -- you don't have the ability to deal with the problems that come up from metering. Sure, you are when you're doing -- putting the poles in the ground and things that your guys going and doing it might be a contractor going and doing it, but it's under the control of Vector, not when you're doing metering. When you're doing metering and I can tell you that from personal experience, but I don't want to raise that in the meeting. I'll just think your business practice needs to be looked into.

Okay. Thank you. I've got 2 directors of Bluecurrent here, so I'll maybe ask either or both of them to comment. But I personally don't have a problem of Vector's call center as the recipient for issues with the meter and then we send that communication to Bluecurrent to take on the remediation. I think we've got those resources. We're a 50% shareholder in Bluecurrent. I don't think I really want Bluecurrent replicating all that cost when they don't need to. We've got it, and we've got a very effective call center. So I'm not perturbed by that observation so much. I recently just -- as a customer, I had communication from Bluecurrent in the normal way that they needed to upgrade my meter on the gas connection to my home. And I'd have to say the whole -- and it was event here contractor who turned up to do it. The whole experience was just first class. But they had no idea who I was. So I think we all have our individual experiences, but I think we've got to be very careful that we don't jump to general conclusions about it because I acknowledge there's always room for improvement. But whether the business model needs changing, I think we are best placed to think about that and to recommend that. And we would if we thought it was a good thing to do. But maybe I'll ask Paula or Simon or both to offer some comments.

I guess the reality is with the metering business, the deployment and management of meters in the field has always been managed by our field service partners. So whether it's been here or other contractors a small contracting business that was managing some of it, but fundamental very hard to justify having the amount of people to manage all the metering fleet because utilization would have been exceptionally bad. And also just because we cover all of New Zealand, one of the things where Vector, has been involved, and I'm not too sure with this being your experience, but we had to go through a total refit of not total rot, but a change out of all the communication cards and the meters right across the country because of the cellular network being shut down. So [indiscernible] was our contractor that was doing that. And by and large, they did a really good job. I mean, it got through nearly 1.5 million meters in a very tight time frame to change out all the cards. There will always be areas where we could improve and sometimes issues with metering can also just be passed on from retailers who may not know to contract Bluecurrent and because of the changeover to Vector, but certainly sitting on the Bluecurrent Board with Paula, we might want to also add is that whole service level and customer focus is something that we watch clearly. We do very much look at how the contractors performances. But to Doug's point, don't always get it right absolutely agree with that. And if we can learn from some of these things, we're happy to understand what went wrong.

I just going to add a couple of things just building on site Simon's comments, it would be very hard for Bluecurrent, as it was for Vector, to directly employ the metering workers because it's quite sporadic. We might do a big rollout in a particular area and then we don't need to be back there for a number of years. So I think that part of the business model is driven really by the nature of the rollout and how often you need to go back for maintenance. We do keep really good stats on customer feedback. We have tended to be performed extremely well in this market in New Zealand. Australia has always been a little more challenging forest, not just customer feedback, but generally in terms of getting the rollout at the scale and timing that we need. But it is something that we focus on a lot. So I think if you do have particular feedback back about your own situation, it would be really great to feed that through to Bluecurrent. Like Doug, I had my meter replaced been in our home for a very long time. And when the guy came to do what I went out and he explained to me that he was doing. And it was quite -- I thought it was a great service, and he had no idea that I was on the Board of Bluecurrent in Vector, but he was very accommodating to explain to me what he was doing and how he was doing it. And again, he was a contractor. He wasn't directly employed by Bluecurrent. But I agree with Simon, there's always room to improve. So we do welcome the feedback where we need to do better.

If you had a personal experience, you think it would be beneficial for us to know more about, very happy to hear that after the meeting. Thank you. Thank you for the question. At the back, hand up.

[ John Hume ], shareholder. You've divested HRV. Did you make a profit or loss when you sold it? And if so, how much?

We made a very significant loss on sale. And we were losing significant amounts of money annually in the operating of the business. And we could not find and we'll see a way to turn that around after numerous efforts and numerous changes. The business model aims significantly impacted through COVID, given it was an operate in-home model contractors, ice holders calling in on homes to install. So Cove destroyed the business for a time. It also was a business that operated across New Zealand. And as you know, we are an Auckland-centric company. And we could not after a lot of effort, valiant effort to try and turn the business around, we could not see a way to stem the losses that, that business was running year-to-year. We didn't sell it for a large amount of money. We basically transitioned it to an existing franchisee who was willing to take on the risk and the challenge of running the business. So that's the story with HRV. It's not a very good story. Sorry, I didn't mean to say anything there's no criticism of the HRV people, we just could not find as the owner a way to make it successful for us and our customers. Okay. There's no more questions in the room as far as I can tell. Any questions online, Sophie?

No. No Questions.

Well, that's got to be some sort of record. No questions online at all. All right. Well, thank you. That ends the questions in relation to general business and Q&A. I will shortly close the voting. I don't want anyone to not vote because they were surprised I'd closed it out. So please ensure that you have cast your vote while we wait a moment for final votes to be cast. Thank you for all your support of Vector as shareholders. I would also like to thank my fellow Board members for their input during the year and Simon and his team for their performance throughout the year. The results of these votes will be released to the stock exchange tomorrow. So it's a bit like an auction now. Any other bids? Has everybody voted we'll collect the votes now as Computershare people will come around and collect the votes. Last chance. That's great. Really good. Okay. Well, I'm going to declare voting now closed, and the meeting is closed. Thank you again for joining us. A reminder that Simon and I and other members of the team will remain in the room in case there are any further questions over afternoon tea. Thank you very much.