Latest / Best of Business / Mike Roan: Meridian Energy CEO on the company returning to profit

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Mike Roan: Meridian Energy CEO on the company returning to profit · Best of Business

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  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
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  Speaker 2: Now, Meridian Energy is back in profit after a drought-induced
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  Speaker 2: loss last year. It's recorded a net profit after tax
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  Speaker 2: of $ 130 million. The loss last year was $ 425 million,
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  Speaker 2: so it's a significant turnaround. Mike Roan is the chief executive. Hi, Mike.
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  Speaker 1: Hey, Hayley.
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  Speaker 2: How are you? I'm very well, thank you. Were you
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  Speaker 2: expecting a turnaround quite that big?
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  Speaker 3: Yeah, we were. I mean, 2024 was really challenging for
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  Speaker 3: lots of reasons. But remember, you know, not only do
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  Speaker 3: we have a big drought, but we spend a lot
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  Speaker 3: of money on energy from other people to keep the
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  Speaker 3: lights on in the country. So, you know, 2024 was tough.
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  Speaker 3: It was 2025. The electricity system and, you know, luckily us,
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  Speaker 3: we had access to plenty of fuel and, It's more
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  Speaker 3: of a, you know, I'd describe this result as a
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  Speaker 3: bit of a rebound or a more normal result for us.
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  Speaker 1: Yeah.
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  Speaker 2: Now, talk me through the energy margin, which has gone
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  Speaker 2: up by 50%. Why is that?
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  Speaker 3: Oh, boy. That's not a term you hear every day
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  Speaker 3: on the news. Energy margin. Hey, it's... So energy margin
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  Speaker 3: is really similar. You mentioned net profit after tax going
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  Speaker 3: from negative 450 to, you know, 130 million positive. Energy
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  Speaker 3: margin is... is the equivalent revenue line. So just like
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  Speaker 3: we had a material lift in profitability, we've had a
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  Speaker 3: material lift in revenue that drove that profitability. So energy margin,
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  Speaker 3: think of it as just the revenue line.
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  Speaker 2: Oh no, I do understand what the energy margin is.
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  Speaker 2: I'm just surprised it's so big. How can you justify
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  Speaker 2: putting it up by 50%?
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  Speaker 3: So it really was driven by those same conditions that
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  Speaker 3: I mentioned earlier, which is Last year, our revenues were
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  Speaker 3: down massively, given the conditions that we faced and the
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  Speaker 3: fact we bought a whole lot of energy from others.
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  Speaker 3: This year, there wasn't a drought, so we had lots
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  Speaker 3: of fuel and we didn't have to buy those products.
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  Speaker 3: And so our revenues restored to much more normal levels
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  Speaker 3: for us.
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  Speaker 2: Okay, but it does suggest, I mean, if you're making 1.47,
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  Speaker 2: just in that margin, billion, by the way, in that margin,
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  Speaker 2: that does suggest, I mean, you could have peeled that
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  Speaker 2: back a little bit. And sure, you wouldn't be making
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  Speaker 2: as much money, which is really the point of your company,
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  Speaker 2: but you could have given people a bit of a
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  Speaker 2: break on the power prices, couldn't you?
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  Speaker 3: Well, we had some good news on that front today
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  Speaker 3: as well, Heather. You know, not only, I think, I've
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  Speaker 3: signalled that business customers are benefiting from the fall in
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  Speaker 3: wholesale electricity prices. You know, they're off about 40%. And
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  Speaker 3: they're flying through to business customers when they come off
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  Speaker 3: their contracts. But what we see today for households that
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  Speaker 3: are out there is given the change in conditions is
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  Speaker 3: we have committed to making sure that any change in
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  Speaker 3: their prices on average across all of our plans, the
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  Speaker 3: energy component won't change by more than the rate of
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  Speaker 3: inflation over the next year. So we're trying to pass
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  Speaker 3: some of that benefit through to And then we made
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  Speaker 3: a further statement about one of our brands, PowerShop. PowerShop
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  Speaker 3: is kind of a novel brand and it allows people
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  Speaker 3: to buy products. We actually started discounting the products available
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  Speaker 3: to PowerShop customers today, again, to pass some of the
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  Speaker 3: benefits through to customers. So we had good news for
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  Speaker 3: business customers and the start of... really good news for
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  Speaker 3: households as well.
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  Speaker 2: Yeah, and I appreciate that, but why do you need
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  Speaker 2: to put the price up at all, even at the
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  Speaker 2: rate of inflation, if you are making $ 1. 5 billion in
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  Speaker 2: an energy margin?
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  Speaker 3: Yeah, so stuff is always a little complex, but businesses
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  Speaker 3: face the full impact of rising wholesale prices, whereas over
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  Speaker 3: the last decade, couple of years, we've shielded residential customers
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  Speaker 3: from those increases. So as wholesale prices have come off 40%,
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  Speaker 3: it's important that businesses see the benefit of that. The
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  Speaker 3: increase in their margins will be used to reinvest in
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  Speaker 3: their businesses and hopefully employ people. Whereas households, the prices
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  Speaker 3: are back to the levels that the residential tariffs have
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  Speaker 3: been sitting at. And so what we're communicating is we
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  Speaker 3: don't need to make the increases in price that they
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  Speaker 3: have seen over the past couple of years. Okay.
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  Speaker 2: What are you most worried about at this election? Do
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  Speaker 2: you think New Zealand First is actually going to come
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  Speaker 2: through on its policy of busting you guys up?
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  Speaker 3: I mean, I think there's a lot for people to
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  Speaker 3: think about. Because it's pretty wild, isn't it? It's pretty tight. But,
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  Speaker 3: you know... think we go through this every three years.
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  Speaker 3: There's an election that we work our way through. I
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  Speaker 3: think from my perspective, what we've seen over the last
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  Speaker 3: few months is the electricity market actually working really, really well.
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  Speaker 3: We saw prices lift when we lost gas as a
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  Speaker 3: fuel for our sector. We've invested massive amounts in new
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  Speaker 3: renewable generation. That's brought prices back, so wholesale prices have
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  Speaker 3: come down massively, as I mentioned, and those benefits are
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  Speaker 3: starting to flow through to not only business customers, but
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  Speaker 3: also to households generally. And so if I was looking
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  Speaker 3: at what the market structure in our sector has been
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  Speaker 3: able to do, I feel really good that it's delivering
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  Speaker 3: the outcomes that people would expect. And I hope the
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  Speaker 3: politicians see that as they work their way towards the
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  Speaker 3: election and whoever wins form their coalition afterwards.
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  Speaker 2: Well, I mean, I'll tell you what, they'll be pretty
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  Speaker 2: pleased with the dividend. How much do they get in
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  Speaker 2: the dividend?
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  Speaker 3: So a dividend's about $ 550 million.
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  Speaker 2: Is that just to the government or is that the
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  Speaker 2: whole dividend?
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  Speaker 3: No, so that's the entire, yeah, so the.
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  Speaker 2: Government gets half of it. So they get about 51%
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  Speaker 2: of that, yeah, 50%. Reasonable amount of money. Mike, listen,
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  Speaker 2: thanks very much. Appreciate it. That's Mike Rhone, Meridian Energy
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  Speaker 2: Chief Executive. Should I make a prediction now?
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