Latest / Best of Business / Mike Roan: Meridian Energy CEO on the company posting a multi-million dollar financial loss

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Mike Roan: Meridian Energy CEO on the company posting a multi-million dollar financial loss · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks'd be follow
• 0:12
  Speaker 1: this and our wide range of podcasts now on iHeartRadio. Now.
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  Speaker 2: Meridian Energy has suffered from a drought, and then suffered
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  Speaker 2: from a wind, and is now suffering from no profit.
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  Speaker 2: The company reported a brutal full year result, posting a
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  Speaker 2: net loss of four hundred and fifty million dollars. Remember,
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  Speaker 2: last year was a net profit of four hundred and
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  Speaker 2: thirty million dollars, so lack of when low energy yields
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  Speaker 2: from hydro all been blamed. But shareholders will still get
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  Speaker 2: a dividend of almost twenty one cents a share full
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  Speaker 2: year dividend. Mike Rohan is Meridian CEO.
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  Speaker 3: And with us Hi Mike, Hey, Heather, how are you doing?
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  Speaker 2: Yeah, I'm very well. That looks like a pretty stressful year,
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  Speaker 2: was it?
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  Speaker 3: Oh? It was tough. You know, the events like we
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  Speaker 3: just saw play out don't come around that often. Fortunately,
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  Speaker 3: feels a bit like we wear that a perfect storm.
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  Speaker 3: But I know, if I walk away from the year
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  Speaker 3: with anything, you go wekoga hat, no question about that.
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  Speaker 3: But we kept the lights on so altrusy flowed to
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  Speaker 3: people and we managed to shield our customers from the
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  Speaker 3: high prices that played out in wholesale market. So you know,
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  Speaker 3: we took the brunt of the financial issues. And you know,
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  Speaker 3: reality is droughts are inevitable in the country, so every
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  Speaker 3: now and then we're going to face a tough year.
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  Speaker 2: How much higher than normal was the three hundred million
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  Speaker 2: dollars that you spent on price hedges.
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  Speaker 3: A lot magnitude of at least ten. Is what we
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  Speaker 3: tend to do is will buy hedges as insurance products,
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  Speaker 3: so you pay the insurance premium typically and that might
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  Speaker 3: be in the order of twenty to thirty million. It's
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  Speaker 3: when you exercise them. So when you go through a
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  Speaker 3: drought like we did, that you exercise them and that's
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  Speaker 3: where you bear really high costs. And of course this
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  Speaker 3: last year, a couple of the insurance products that we
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  Speaker 3: took out were suspended so they didn't work, so we
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  Speaker 3: had to buy and assurance at the time we were
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  Speaker 3: going through the drought, which is that costs a lot
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  Speaker 3: of money. Yeah, And you know, the it was, as
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  Speaker 3: I say, it's kind of one of those years where
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  Speaker 3: we had well two droughts and we lost the gas
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  Speaker 3: sector as a fuel for the ultricy sector. So you know,
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  Speaker 3: thankfully that sort of stuff doesn't happen that often.
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  Speaker 2: Right now, on the gas thing, what do we do
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  Speaker 2: about this? How do we fix the situation? If at all?
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  Speaker 3: It's tough. I don't know if I have an answer.
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  Speaker 3: The what we are trying to do is we're trying
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  Speaker 3: to as an electricy sector, move away from gas as
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  Speaker 3: quickly as we can. So, you know, the Strategic Energy Reserved,
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  Speaker 3: the agreement that we wrote with Genesis to improve the
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  Speaker 3: capacity at the Humpty power station basically was that was
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  Speaker 3: the altricy sector stepping away from gas. You know, a
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  Speaker 3: transition fuel hopefully free some gas for you know, direct
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  Speaker 3: gas customers, but ultimately, unless the gas set to can
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  Speaker 3: find some more gas, which looks increasingly unlikely, you know,
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  Speaker 3: they're going to have to step away from gas as well.
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  Speaker 2: Okay, so Mike, so you guys have faced the reality
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  Speaker 2: of a declining gas situation. Do the rest of us
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  Speaker 2: need to do that as well? I mean, if you
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  Speaker 2: if you were a business using gas, do you need
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  Speaker 2: to switch to something else like biomass or electricity. If
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  Speaker 2: you're a homeowner who is still using gas, do you
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  Speaker 2: need to do the same thing?
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  Speaker 3: I think as a business, you should be looking at it.
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  Speaker 3: As you know, it's not a choice for everyone. So
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  Speaker 3: not everybody can step to biomass or electricity, as you
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  Speaker 3: say either, but for those that can, they should be
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  Speaker 3: looking at the economics and the speed at which they
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  Speaker 3: can move away from.
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  Speaker 2: You, I mean, don't don't sit around waiting for more gas.
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  Speaker 2: A no, what about residential customers?
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  Speaker 3: So I think residential customer's got a little longer. Of course,
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  Speaker 3: this all comes back to economics. And you know, while
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  Speaker 3: we've seen electricity prices rise, they are largely driven by
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  Speaker 3: the transmission distribution price increases. Gas prices have lifted far
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  Speaker 3: quicker and faster, recognizing gas is fast gear so than
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  Speaker 3: we imagined. So I think residentials, residential customers will start
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  Speaker 3: to see the economic impact of staying with gas, and
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  Speaker 3: that'll motivate people to move all their applies.
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  Speaker 2: When do we start noticing it?
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  Speaker 3: I would say this winter. If my gas bill is
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  Speaker 3: anything to go by, is it's a lot higher this
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  Speaker 3: year than it was last year.
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  Speaker 2: So okay, now, does the government just need to come
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  Speaker 2: out and say this, I mean they're dicking around with
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  Speaker 2: all this, you know, like giving us the impression. Certainly
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  Speaker 2: Shane Jones, is that there may be some sort of
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  Speaker 2: a gas solution. Do they simply need to come out
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  Speaker 2: and say, guys, parties over switch to something else.
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  Speaker 3: You know, it's possible. All they know more than I do.
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  Speaker 3: You know, we renewable energy business, so we don't. You know,
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  Speaker 3: we don't see directly into the gas sectors as they might.
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  Speaker 3: But you know, from everything that we can see from
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  Speaker 3: the outside, it doesn't look promising that gas has a
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  Speaker 3: major role to play for the country. So I hope
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  Speaker 3: I'm wrong. I don't think you are, but hope, well
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  Speaker 3: hope you know, as they say, hope, it's not a strategy.
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  Speaker 3: And the you know, you've got to look at the
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  Speaker 3: cost that you're facing them whether you can actually get
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  Speaker 3: access to you know, gas, and we've decided as a sector,
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  Speaker 3: but that's increasingly unlikely for electricity users and it's impacting
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  Speaker 3: the cost of electricity, and so we've got to move
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  Speaker 3: to other fuels, and ultimately we've got to invest in
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  Speaker 3: more renewable assets to move off gas entirely, reduce the
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  Speaker 3: amount of coal we're using the system, and actually drop
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  Speaker 3: the cost of electricity for people more generally and drive
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  Speaker 3: competitive advantage into the economy. So we've had a you know,
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  Speaker 3: we've had a wake up as well, but we're moving
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  Speaker 3: at pace.
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  Speaker 2: Yeah, Mike, listen, it's good to talk to you. I
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  Speaker 2: really appreciate it. Micro own Meridian Energy CEO.
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