Latest / Best of Business / Stew Hamilton: Mercury Energy CEO on the company posting an improved increase in earnings

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Stew Hamilton: Mercury Energy CEO on the company posting an improved increase in earnings · Best of Business

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  Speaker 1: You're listening to a podcast from Newstalk ZEDB. Follow this
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  Speaker 2: Mercury has posted a net operating profit of three hundred
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  Speaker 2: and twenty one million dollars, which is a lot better
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  Speaker 2: than the one million dollars it posted last year. But importantly,
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  Speaker 2: it also hit the one billion dollar mark for the
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  Speaker 2: first time in operating earnings. That is a thirty six
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  Speaker 2: percent increase on last year. Chief executive is Stu Hamilton heistew.
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  Speaker 3: Hi, Heather, how are you.
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  Speaker 2: I'm very well, thank you, But I have to say
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  Speaker 2: it's awkward timing. Isn't it to hit the billion dollar
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  Speaker 2: mark at a time when people are complaining about their
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  Speaker 2: power prices, isn't it?
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  Speaker 4: Yeah, no doubt that people are definitely filling the pinch
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  Speaker 4: at homes and the businesses across New Zealand.
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  Speaker 3: And so when you look at the one billion.
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  Speaker 4: Dollars that we're produced over the last year, you kind
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  Speaker 4: of have to put it in context or the size
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  Speaker 4: of our business being a ten billion dollar company, and
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  Speaker 4: the fact that eighty percent of that increasingly but death,
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  Speaker 4: is coming from the significant investment the billions of dollars
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  Speaker 4: that we've been putting into the grid and the generation
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  Speaker 4: that's coming from that.
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  Speaker 2: Okay, so is I mean, can you put this down
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  Speaker 2: to one particular thing. Is that the hydro that's tipped
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  Speaker 2: you over the billion dollar mark?
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  Speaker 4: Yeah, it's hydro and it's other renewable generations. So definitely
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  Speaker 4: hydro has helped us a lot. But equally, in the
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  Speaker 4: last year, we've built three new power plants, two wind farms,
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  Speaker 4: one down in the south and one on the north,
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  Speaker 4: and also invested in the geo thermal plant. So it's
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  Speaker 4: a combination of renewables, wind, geo thermal and hydro which
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  Speaker 4: has tipped us over.
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  Speaker 2: Okay, what are you anticipating doing with power prices in
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  Speaker 2: the next year?
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  Speaker 4: So I think that's the kind of big part of
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  Speaker 4: the power price, especially when it comes to households in
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  Speaker 4: the next oft the while will be the fact that
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  Speaker 4: over half of the bill is imposed by regulators for
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  Speaker 4: lines and transmission charges.
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  Speaker 3: So that's a portion that we don't control.
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  Speaker 4: But when you look at the energy component of the
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  Speaker 4: bill that we do control, we're expecting that that will
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  Speaker 4: be at all below CPI in.
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  Speaker 3: The next few years.
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  Speaker 4: In fact, in the last little while, I mean, the
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  Speaker 4: last year, Mercury's power price on average went up by
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  Speaker 4: about six point eight percent, and the energy component of
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  Speaker 4: that on average for households is less than six dollars
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  Speaker 4: a month.
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  Speaker 2: So what is CPI running at? Is it about four
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  Speaker 2: point four percent?
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  Speaker 3: Yes, between the three and four percent.
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  Speaker 2: Yeah, And if you were running at below CPI, would
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  Speaker 2: that be below your historical average?
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  Speaker 4: Now, if you look over the last ten years, power
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  Speaker 4: prices for households have gone up by about or just
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  Speaker 4: slightly below CPI. So in the last ten years, retail
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  Speaker 4: prices have gone up by about thirty five percent.
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  Speaker 2: Yeah, okay, because so if you are I mean obviously
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  Speaker 2: CPI is something that changes all of the time. So
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  Speaker 2: if you were sitting below CPI where it is currently,
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  Speaker 2: how does that compare to where you have been in
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  Speaker 2: the last ten years your average increases?
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  Speaker 4: For example, our average increases over the last ten years
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  Speaker 4: have been just below CPI.
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  Speaker 2: And CPI back then might have been two percent.
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  Speaker 4: Yeah, So over that time we've been mentioned as being
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  Speaker 4: about thirty five percent increase over the last ten years.
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  Speaker 3: So sometimes it's gone.
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  Speaker 2: Up sometimes, So why is it high at the moment?
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  Speaker 4: A couple of reasons for that one is I mentioned
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  Speaker 4: that over half of the bill, and actually a significant
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  Speaker 4: portion of the increase is associated with transmission increases, their
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  Speaker 4: distribution increases, which is necessary to keep the resilience of
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  Speaker 4: the grid. And the other factor is that over the
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  Speaker 4: last little while, because gas in New Zealand has dropped
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  Speaker 4: off quite suddenly and significantly, it's meant that we've been
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  Speaker 4: needed to put quite a bit of investment into the
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  Speaker 4: resilience of the grid and that's then flowed through to
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  Speaker 4: the wholes whole price increasing.
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  Speaker 2: All right, we're paying for it. Then Hey, talk to
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  Speaker 2: me about this data center in Southland? Is it getting
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  Speaker 2: any more popular?
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  Speaker 4: It's progressing, and it's definitely I mean, from a construction perspective,
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  Speaker 4: we're now doing what's called horizontal work, so we're starting
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  Speaker 4: to do the work to build the roads and build
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  Speaker 4: the big bund that goes around the outside. But no doubt,
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  Speaker 4: there's definitely concerns, which are very fair concerns about where's
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  Speaker 4: the power going to come from, what's the water, and
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  Speaker 4: what does it look like for the community. And when
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  Speaker 4: it comes to the first question, where's the power coming from?
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  Speaker 4: One of the really exciting things that we're out today
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  Speaker 4: was that we've made the decision to build.
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  Speaker 3: The next wind farm.
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  Speaker 4: Need to eat and book a cup or hoe and
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  Speaker 4: that'll be when you combine that stage with the first stage.
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  Speaker 3: Or that wind farm, it'll be New Zealand's biggest wind farm.
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  Speaker 3: So that's a big bitment by us.
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  Speaker 4: And basically what we're saying is we absolutely agree that
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  Speaker 4: data centers like Data Grid should be contributing to new
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  Speaker 4: power stations being built on the grid.
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  Speaker 2: Yeah, totally. Where do you think this is going to go?
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  Speaker 2: The other day I saw that there was a there
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  Speaker 2: was some sort of a data center meeting catch up
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  Speaker 2: here at one of the hotels in Auckland and a
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  Speaker 2: bunch of protesters that had, you know, like basically set
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  Speaker 2: themselves up outside with the loudhailers and the placards and
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  Speaker 2: stuff like that. Do you think it's going to catch
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  Speaker 2: on the opposition to data centers.
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  Speaker 3: I think there's definitely concerns that are out there.
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  Speaker 4: I think there's a lack of information that's available for
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  Speaker 4: people to understand. Most people at the moment look at
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  Speaker 4: the data center experience in the United States and what's
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  Speaker 4: been happening over there is not the intention to happen here.
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  Speaker 3: We're a very different climate for us data.
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  Speaker 4: We've got a different opportunity in our grid, and so
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  Speaker 4: I'd say that what we'll see over time has more
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  Speaker 4: information being shared. And one of the things that we're
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  Speaker 4: entering into at the moment is looking at entering into
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  Speaker 4: a voluntary accord to actually address to make sure that
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  Speaker 4: we agree to say, actually, when these but data centers
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  Speaker 4: come along, we should be building power for it. We
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  Speaker 4: should be making sure that water is managed very efficiently
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  Speaker 4: and that the community are involved and the benefits of
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  Speaker 4: the data center.
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  Speaker 2: Stu listen, it's been wonderful to talk to you. Thank
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  Speaker 2: you very much, and good luck with the next financial year.
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  Speaker 2: That's Stu Hamilton, Mercury's chief executive.
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