Latest / Best of Business / Mike Fuge: Contact Energy CEO on the company merging with Manawa Energy

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Mike Fuge: Contact Energy CEO on the company merging with Manawa Energy · Best of Business

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  Speaker 1: You're listening to a podcast from News talks'b Follow this
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  Speaker 1: and our wide range of podcasts now on iHeartRadio. Now.
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  Speaker 2: Contact Energy has reached an agreement to take over Manawere
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  Speaker 2: Energy in a near two point three billion dollar merger.
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  Speaker 2: Contacts Chief executive Mike fuj said the merger would make
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  Speaker 2: Contact more resilient and diversify its generating portfolio. The deal
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  Speaker 2: is still subject to approval by the Commerce Commission, the
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  Speaker 2: High Court and shareholders, but the companies would like the
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  Speaker 2: deal done by early next year, and Contact Energy CEO
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  Speaker 2: Mike futures with us.
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  Speaker 3: Now, Mike, Hi, how are you going very well?
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  Speaker 1: Thank you?
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  Speaker 2: Do you reckon? You'll get permission for this given what
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  Speaker 2: is going on with the criticism Gen Taylor's getting.
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  Speaker 3: Yes. Absolutely, Look, we're very confident that we will. The
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  Speaker 3: Commerce Commission obviously have to do their due diligence and
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  Speaker 3: perform the regulatory duty. But we wouldn't be have done
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  Speaker 3: today's announcement if we didn't believe we had a very
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  Speaker 3: good case. Remember this isn't about today's headlines. This is
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  Speaker 3: about a sixty year investment and so that what the
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  Speaker 3: perspective people have to hold.
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  Speaker 2: There, right isn't mana we're a generator and you guys.
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  Speaker 3: As a generator, Yeah, man as a generator and we're
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  Speaker 3: a generator and retailer.
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  Speaker 2: Yeah, And so you would be strengthening your position as
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  Speaker 2: a gen tailor, which is the very thing that is
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  Speaker 2: copying the criticism.
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  Speaker 3: No, Look, we can more than adequately supply our retail
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  Speaker 3: position as it stands today. What this enables us to
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  Speaker 3: do is to firm up our wholesale portfolio and provide
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  Speaker 3: more products to commercial industrial New Zealand and to tear
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  Speaker 3: to retailers that we can more than adequately already supply
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  Speaker 3: our retail Yeah.
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  Speaker 2: I just wonder, I mean, because surely the situation they
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  Speaker 2: would look at is that they would they would ask
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  Speaker 2: the question, is it better off with Contact owning this
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  Speaker 2: business or this business supplying wholesale to Contact? And surely
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  Speaker 2: if that's if that's the question they have to ask,
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  Speaker 2: they'll probably prefer the latter, Wouldn't that.
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  Speaker 3: No, not necessarily, because remember the hydro that we're buying
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  Speaker 3: from Manua is winter weighted and our hydro is summer spring, summer,
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  Speaker 3: and the combination actually in and of itself freeze up
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  Speaker 3: generation to be put into market because we're not as
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  Speaker 3: individuals trying to hedge our position. We've got a combined
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  Speaker 3: portfolio which we can manage. So overall, our assessment is
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  Speaker 3: it's better for the market. It freeze up generation, and
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  Speaker 3: as I said earlier today, it underpins more renewable intermittent
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  Speaker 3: renewable generation, because that's the big dilemma we have to solve.
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  Speaker 3: What do we do about these intimate renewables.
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  Speaker 2: Yeah, okay, did you see the methdex news.
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  Speaker 3: Yes, yes, that they are considering, and that that's a
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  Speaker 3: function of the gas market. Methin x does underpin the
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  Speaker 3: gas market. The upstream gas market has had some real
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  Speaker 3: issues over the last year or so in terms of
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  Speaker 3: dry wells being drilled, and so it's probably a natural outcome.
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  Speaker 3: And what we really need there is we need some
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  Speaker 3: drilling success from the upstream players and that should bring
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  Speaker 3: that back under control.
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  Speaker 2: I'm reading this the very last thing that they said.
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  Speaker 2: I'm reading as unless there is more gas, we're shutting
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  Speaker 2: the whole thing down. Are you reading it like that?
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  Speaker 3: That is Look, that's the logical outcome. But the critical
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  Speaker 3: thing is is that we still have gas reserves in
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  Speaker 3: this country and we need to go after and drill
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  Speaker 3: for them, and that will stabilize the situation.
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  Speaker 2: Do you believe, Mike, that there's more gas out there?
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  Speaker 3: There's always more gas because did you see what Richard
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  Speaker 3: Tweety said yesterday. Yes, Richard did say we do need
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  Speaker 3: to He did say Method X should close and alng
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  Speaker 3: import and alan G import would be a good insurance policy.
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  Speaker 3: And we are looking at that. But I think obviously
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  Speaker 3: with Taranaki still got a bit to give. All in
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  Speaker 3: gas drilling is always sometimes you had a good run,
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  Speaker 3: sometimes you have a bad run.
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  Speaker 2: Mike, he actually said we're running out of gas as
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  Speaker 2: a country. Do you think he's wrong? I want you
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  Speaker 2: to tell me he's wrong.
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  Speaker 3: I wouldn't put it that way. Gas is the matter
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  Speaker 3: of the hoant do you bring to bear, the investment
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  Speaker 3: you make, and how you think about the reservoirs. It's
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  Speaker 3: a complex technical subject. No, one never really runs out
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  Speaker 3: of gas. It just becomes economic at some point to
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  Speaker 3: produce it.
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  Speaker 2: Are you paying methad X as much for the gas
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  Speaker 2: as the government.
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  Speaker 3: Is, that's commercially confidential. We did we did a very
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  Speaker 3: We did a good We did a good commercial deal
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  Speaker 3: with meth and x which stabilized the electricity market very rapidly,
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  Speaker 3: and prices have come back down to the lowest in
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  Speaker 3: the western world. That's quite not quite the dramatic headline
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  Speaker 3: as it was a few weeks ago, but the world
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  Speaker 3: has turned in the electricity market.
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  Speaker 2: Do you because it's fallen off off the cliffs so badly?
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  Speaker 2: Did you think, oh geez, we didn't have to pay
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  Speaker 2: that much for the gas after all?
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  Speaker 3: No, No, that's again, that's like the man of a deal.
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  Speaker 3: That's just good prudent risk mitigation. And we don't think
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  Speaker 3: about to today and tomorrow's spot. As I said, our
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  Speaker 3: time horizon is always over the medium to long term
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  Speaker 3: and we're looking for common sense solutions and that was
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  Speaker 3: the right thing to do at that particular time. So
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  Speaker 3: absolutely no regrets whatsoever.
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  Speaker 1: Mike.
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  Speaker 2: It's good to talk to you always, as I really
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  Speaker 2: appreciate your time. That's Mike's fuge. Contact Energy CEO for
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