Latest / Best of Business / Vince Hawksworth: Mercury Energy CEO on the company reporting a 159 percent annual net profit increase

Transcript

Vince Hawksworth: Mercury Energy CEO on the company reporting a 159 percent annual net profit increase · Best of Business

• 0:09
  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.
• 0:16
  Speaker 2: Now.
• 0:16
  Speaker 3: A second major electricity gen Taylor, in just two days
• 0:20
  Speaker 3: has posted a massive profit increase. It was Contact Yet yesterday.
• 0:23
  Speaker 3: Today it's Mercury Energy reporting a net profit of two
• 0:26
  Speaker 3: hundred and ninety million dollars for the year to June.
• 0:28
  Speaker 3: That is up one hundred and fifty nine percent on
• 0:30
  Speaker 3: last year. Vince Hawkesworth is Mercury Energy's chief executive and
• 0:35
  Speaker 3: with US now have vins Cia head. You have to
• 0:39
  Speaker 3: admit the timings were awkward, isn't it.
• 0:42
  Speaker 2: Look? But the important thing to understand is that net
• 0:46
  Speaker 2: profit is an accounting issue about the way you measure
• 0:51
  Speaker 2: financial derivatives. If you look at the cash or something
• 0:55
  Speaker 2: closer to cash, earnings before interest, appreciation and amortization, that
• 1:00
  Speaker 2: was up four percent, which reflects the underlying performance of
• 1:03
  Speaker 2: the business.
• 1:04
  Speaker 3: Okay, are you profit tiering like shape? You're obviously going
• 1:10
  Speaker 3: to say no. Well, what do you then make of
• 1:12
  Speaker 3: what Shane Joan said?
• 1:15
  Speaker 2: Oh, look, I'm not a politician. I just run an
• 1:18
  Speaker 2: energy company. We are not profiteering. You know, if you
• 1:24
  Speaker 2: look at today's result, and yes, it was a very
• 1:26
  Speaker 2: good result on the back of quite a bit of
• 1:29
  Speaker 2: new investment in our business. But at the same time,
• 1:32
  Speaker 2: we also signaled that the year that we're in the
• 1:36
  Speaker 2: year that we'll report this time next year. At this stage,
• 1:39
  Speaker 2: our guidance is down fifty seven million dollars and that's
• 1:45
  Speaker 2: because we have also seen the effects of very dry
• 1:49
  Speaker 2: weather on our hydro system and the prices that come
• 1:54
  Speaker 2: from the gas situation we've been in. So those spot
• 1:58
  Speaker 2: prices that everyone talks about are really impact generators generally
• 2:04
  Speaker 2: because we buy and sell in the spot in order
• 2:07
  Speaker 2: to supplay customers, and over ninety eight percent of the
• 2:12
  Speaker 2: volume we sell to customers is at fixed prices and
• 2:16
  Speaker 2: not affected by that spot price.
• 2:19
  Speaker 3: Is it going to change that.
• 2:22
  Speaker 2: Spot prices won't have an impact on our pricing?
• 2:28
  Speaker 3: No, no, no, But I mean, are you continuing to offer
• 2:30
  Speaker 3: gas contracts?
• 2:32
  Speaker 2: We we actually have gas customers, we continue to supply.
• 2:36
  Speaker 2: We can't we can't actually get gas contracts ourselves to
• 2:40
  Speaker 2: back that, and so but we continue to supply our
• 2:44
  Speaker 2: gas customers and buy off the gas spot market to
• 2:48
  Speaker 2: supply them. You know, the gas situation is very troubling
• 2:52
  Speaker 2: for everybody, I think, and but we won't be. But
• 2:57
  Speaker 2: we won't be dropping our customers just because of that.
• 3:01
  Speaker 2: That's our job to keep supplying them.
• 3:02
  Speaker 3: Do you reckon the government has got the appetite to
• 3:04
  Speaker 3: break up the generation and retail arms.
• 3:08
  Speaker 2: Well, that's a pretty political question. I don't. I'd like
• 3:13
  Speaker 2: to understand, like what we think the impact of that
• 3:16
  Speaker 2: would be the gen Taylor's as we're called, and certainly
• 3:21
  Speaker 2: Mercury have been investing significant amount of money in New Generation,
• 3:27
  Speaker 2: will continue to do that, I think. You know, the
• 3:32
  Speaker 2: market reforms that led to this have served New Zealand
• 3:36
  Speaker 2: incredibly well. I'm old enough to remember nineteen ninety two
• 3:40
  Speaker 2: and when with hydrology like this, we we saw blackouts
• 3:44
  Speaker 2: and brown outs. You know, if you want to look
• 3:48
  Speaker 2: at the hierarchy of things, clearly, keeping the lights on
• 3:52
  Speaker 2: is number one. The price that customers pay has to
• 3:57
  Speaker 2: be number two. And we can do both of those
• 4:00
  Speaker 2: things and be more renewable. We have to stay the distance.
• 4:03
  Speaker 3: How much money of you guys putting into New Generation
• 4:05
  Speaker 3: at the moment, have you got anything that you're building
• 4:08
  Speaker 3: at them in it?
• 4:09
  Speaker 2: Yes, we have, we've currently. I mean, if you look
• 4:12
  Speaker 2: at the year just gone. We've put forty two percent
• 4:14
  Speaker 2: of that EBIT but into new projects. Over the past
• 4:22
  Speaker 2: few years, we spent nearly six hundred million on two
• 4:24
  Speaker 2: projects that represented about two point four percent national demand.
• 4:29
  Speaker 2: That was and this year we have spent or are
• 4:33
  Speaker 2: spending seven hundred million on two more projects, one year
• 4:37
  Speaker 2: thermal in the Central North Island, one wind farm in
• 4:41
  Speaker 2: the South Island, and we expect to announce another project
• 4:44
  Speaker 2: before Christmas that will take that total investment to around
• 4:47
  Speaker 2: about a billion dollars.
• 4:49
  Speaker 3: The geothermal and the wind farm. Are they online yet?
• 4:53
  Speaker 2: No, No, they're under construction.
• 4:54
  Speaker 3: When are they going to be online?
• 4:57
  Speaker 2: So in the towards the back end of next year
• 5:01
  Speaker 2: and then the mid to late of the it just
• 5:04
  Speaker 2: takes well, yeah, yeah, I mean they are a big
• 5:07
  Speaker 2: they are big in engineering tasks, but we have brought
• 5:10
  Speaker 2: on six six hundred million worth of generation in the
• 5:14
  Speaker 2: last two years.
• 5:17
  Speaker 3: Thence, when we roll over the prices that we pay
• 5:20
  Speaker 3: as residential customers in April next year, what kind of
• 5:23
  Speaker 3: increase should we expect.
• 5:27
  Speaker 2: Look, we haven't done the analysis on what we think
• 5:31
  Speaker 2: that we will charge customers, but the way we approach
• 5:35
  Speaker 2: customer pricing is it's.
• 5:38
  Speaker 1: Going to be a lot of way.
• 5:39
  Speaker 3: It's going to be a lot, well.
• 5:42
  Speaker 2: I mean a lot, like a big range of a number.
• 5:45
  Speaker 2: But I would say that we pass through those direct
• 5:48
  Speaker 2: costs like distribution and transmission and all of those things
• 5:53
  Speaker 2: as we receive them, and we certainly won't be thinking
• 5:57
  Speaker 2: about the sorts of prices we see in the spot market.
• 5:59
  Speaker 2: As I said, the spot price is a way of
• 6:02
  Speaker 2: allocating the fuel resources, whether that's and it is not
• 6:06
  Speaker 2: faced by customers.
• 6:08
  Speaker 3: Thank you very much for talking through us through it.
• 6:09
  Speaker 3: I really appreciate has Vince talks with Mercury Energy's chief executive.
• 6:13
  Speaker 1: For more from News Talks at b Listen live on
• 6:16
  Speaker 1: air or online, and keep our shows with you wherever
• 6:19
  Speaker 1: you go with our podcasts on iHeartRadio