Latest / Best of Business / Stew Hamilton: Mercury Energy CEO on the Government's plan to build a new LNG import facility

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Stew Hamilton: Mercury Energy CEO on the Government's plan to build a new LNG import facility · 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: The government is facing some heat over its plans for
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  Speaker 2: an allergy import terminal at a cost of more than
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  Speaker 2: a billion dollars. Now, what you may not realize is
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  Speaker 2: the major power retailers considered building this terminal themselves last
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  Speaker 2: year and decided not to, and among them was Mercury
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  Speaker 2: Energy Chief executive Steu Hamilton is with us now, haste,
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  Speaker 2: good evening. Why do you guys decide not to do it?
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  Speaker 3: For us, it's really making sure that we've got multiple
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  Speaker 3: solutions in place to support the resilience of the gredful
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  Speaker 3: New Zealanders. And so at the time, we were investigating
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  Speaker 3: a number of those options. One of those is to
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  Speaker 3: keep building power plants as fast as we can, which
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  Speaker 3: we're doing the otherwise with the Huntley firming options. So
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  Speaker 3: for us, we felt we'd explore a number of those
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  Speaker 3: options and had some of them in train already.
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  Speaker 2: So you guys went with the Huntley firming the coal
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  Speaker 2: instead of the gas import.
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  Speaker 3: Yeah, we think there's a number of options which I needed.
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  Speaker 3: Huntley firming options with coal is one of those. Using
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  Speaker 3: response from other users like the topoint Elements belt is
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  Speaker 3: a key part of the solution. And then for us,
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  Speaker 3: we thought that we could put our best use of
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  Speaker 3: our capital in place to build things like wind farms
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  Speaker 3: and g thermal power stations.
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  Speaker 2: And let me get this right, but the project that
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  Speaker 2: you had looked at would have cost about two hundred
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  Speaker 2: to five hundred million dollars, right, and you turned that
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  Speaker 2: down at that cost. The government is looking at something
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  Speaker 2: costing more than double that.
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  Speaker 3: Yes, so it definitely no doubt that it's a tough
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  Speaker 3: period for New Zealand right in terms of cost, and
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  Speaker 3: that shows up for households in for businesses equally. So
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  Speaker 3: we need to make sure that what we're investing our
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  Speaker 3: money in is best for not only our owners but
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  Speaker 3: also consumers and our customers.
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  Speaker 2: Why doesn't the country just go with the coal at
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  Speaker 2: Huntley instead of this?
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  Speaker 3: I think that what's being talked about so Huntley is
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  Speaker 3: a form of solution, but it doesn't solve the whole problem.
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  Speaker 3: So when we get to dry years, because it's really
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  Speaker 3: what we're looking at is the dry years it exists
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  Speaker 3: with we're missing some energy in New Zealand, and Huntley
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  Speaker 3: provides about half of that, and at the moment gas
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  Speaker 3: provides a portion of it as well. But the sort
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  Speaker 3: of looking out into the long term, as gas in
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  Speaker 3: New Zealand does dive away, there is a need for
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  Speaker 3: other forms of solutions.
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  Speaker 2: This why can't we get Huntly to.
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  Speaker 1: Do all of it?
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  Speaker 2: Well?
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  Speaker 3: It potentially so coal provides Summer Huntly power, but gas
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  Speaker 3: is necessary for another part of Huntley's generation. So gas
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  Speaker 3: is still needed to keep Summer Huntly going.
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  Speaker 2: But why don't we let Cole do all of it
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  Speaker 2: instead of building a billion dollar terminal and bringing in
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  Speaker 2: gas to do some of it.
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  Speaker 3: It's a great question. So there is actually a number
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  Speaker 3: of solutions which I need and coal is part of
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  Speaker 3: that solution. But ultimately we sort of when we sat
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  Speaker 3: down and looked at it, we worked out or actually
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  Speaker 3: the best thing we can do as a company for
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  Speaker 3: Mercury As is to build gfm or and build wind farms,
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  Speaker 3: and that's what we're doing. STU.
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  Speaker 2: Isn't the truth that New Zealand is running out of
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  Speaker 2: gas and it will only be sped up when Method
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  Speaker 2: X finally closes and the drilling maintenance stops and suff look,
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  Speaker 2: we are going to run out of gas faster than
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  Speaker 2: a lot of people realize, and actually what we need
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  Speaker 2: to do is get it everybody off gas. Isn't that
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  Speaker 2: the truth?
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  Speaker 3: Yeah, we are definitely running out of gas, and it's
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  Speaker 3: happening at a rate that was faster than what we expected,
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  Speaker 3: and so we need to do a few things. One is,
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  Speaker 3: we need to encourage consumers and households to get off gas.
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  Speaker 3: But not all forms of businesses, for example, can get
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  Speaker 3: off gas, so we need to come up with other
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  Speaker 3: forms of energy for them. So, yes, you're right, we
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  Speaker 3: definitely needn't need to encourage that transition away from gas.
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  Speaker 3: But equally we need to be building power stations as well.
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  Speaker 2: Yeah, totally. But so if we accept that we're running
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  Speaker 2: out of gas and we need to get off gas,
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  Speaker 2: then this is just a really expensive way of basically
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  Speaker 2: subsidizing industries that are still on gas. Is that not right?
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  Speaker 3: It is a cost You're right. Actually to put this
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  Speaker 3: project in place where will require in a Zealand to
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  Speaker 3: invest in this. What is an effect in insurance, Really
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  Speaker 3: it's it's put in place with the expectation that it's
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  Speaker 3: there for a dry year. That reduces the risk and
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  Speaker 3: I guess in the long term should be looking at
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  Speaker 3: reducing price. But it is a cost to invest in
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  Speaker 3: that plant upfront.
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  Speaker 2: Sue, is this going to bring down If this all
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  Speaker 2: goes to plan, will it bring down our power prices?
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  Speaker 2: I think in the short term.
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  Speaker 3: I at the moment currently, most of the price increases
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  Speaker 3: that households are seen are actually due to investment in
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  Speaker 3: power lines and transmission. So actually not much of it
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  Speaker 3: is due to wholesale power prices. So in the short term,
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  Speaker 3: that's where the cost is coming from. In the medium term,
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  Speaker 3: as I mentioned, there's there's some investment needed in this
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  Speaker 3: power plant or in this energy import facility. But in
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  Speaker 3: the long term, it should cap the prices that New
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  Speaker 3: zeal to see in dry periods. And I guess what
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  Speaker 3: that means is that prices should go up less than
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  Speaker 3: they will.
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  Speaker 2: If they're not coming down, they're just not going to
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  Speaker 2: go up as fast the levy. You're going to pass
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  Speaker 2: it on to us, We are you guys going to
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  Speaker 2: suck it up.
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  Speaker 3: It's a bit early for us to really work out
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  Speaker 3: what the details look like. Ultimately, when work out a
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  Speaker 3: long enough the way to know how it works is
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  Speaker 3: to say it's a cost fin ze on right, so
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  Speaker 3: somehow we need to be working out how we're going
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  Speaker 3: to invest in this, in this facility and how that
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  Speaker 3: shows up through the consumers.
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  Speaker 2: It's always lovely to have your your your time. I
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  Speaker 2: really appreciate it. Steve Hamilton, Mercury and the gy chief Executive.
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