Latest / Best of Business / Stew Hamilton: Mercury Energy CEO on the company's recent drop in profitability

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Stew Hamilton: Mercury Energy CEO on the company's recent drop in profitability · Best of Business

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  Speaker 2: Been a bit of a tough year for Mercury Energy.
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  Speaker 2: The company has released its full year result today and
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  Speaker 2: its operating profit was seven hundred and eighty six million dollars,
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  Speaker 2: which is down ninety one million from the previous year,
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  Speaker 2: but that pretty upbeat for the near future, predicting a
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  Speaker 2: billion dollar operating profit for the current financial year. Ste
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  Speaker 2: Hamilton is the chief executive and with.
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  Speaker 3: Us now, Hey, Stu, Hey, heither, how are you well?
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  Speaker 2: Thanks very much? Why the drop in profitability?
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  Speaker 3: It's been a really tough last twelve months, really, particularly
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  Speaker 3: because it's been the driest on record for us. So
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  Speaker 3: when you look at a lot of our electricity generation
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  Speaker 3: comes out of hydro off the Waykatta River. When we
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  Speaker 3: have a very dry period, it means that it's really
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  Speaker 3: tough for us to produce electricity and that obviously has
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  Speaker 3: an impact all the way through to customers, both large
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  Speaker 3: businesses and New Zealand households. And so we're working pretty
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  Speaker 3: hard to try and improve and build that confidence.
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  Speaker 2: And so why so confident that it's going to improve
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  Speaker 2: in this financial year, so.
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  Speaker 3: We're investing heavily and new power plants, So we're investing
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  Speaker 3: about one billion dollars in new power plants at the moment.
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  Speaker 3: That's from the top of the North to the bottom
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  Speaker 3: of the South, and wind farms and also g therm
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  Speaker 3: or so we see the significant pace of build coming
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  Speaker 3: on stream and that's going to be good for New
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  Speaker 3: Zealand in terms of providing an affordable and secure gred
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  Speaker 3: as we go forward.
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  Speaker 2: How much new generation are you building at the moment?
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  Speaker 3: It's about one tier whatar hour, which to convert that,
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  Speaker 3: it's about one hundred and fifty thousand homes equivalent and
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  Speaker 3: it's about two percent of New Zealand's grid.
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  Speaker 2: Okay, now, how do you feel about these new rules
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  Speaker 2: we got from the Electricity Authority today?
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  Speaker 3: Yeah, there are some components of it which are are
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  Speaker 3: we're supportive of. We certainly support having more transparency in
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  Speaker 3: the prices. But it's also important to understand that the
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  Speaker 3: market that we have is actually globally very competitive. We're
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  Speaker 3: consistently in the top five to seven in the world
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  Speaker 3: and we have about fifty retail brands and so that's
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  Speaker 3: double what you see in the UK. So our take
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  Speaker 3: on it is that there is good retail competition, can
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  Speaker 3: it be better? Use it can? And we're keen to
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  Speaker 3: support the work that the EA ANDCOMM are doing.
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  Speaker 2: Do you think that it's actually going to drive down
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  Speaker 2: the price of electricity or drive it up? Because I
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  Speaker 2: mean it seems to me if gentailers are having to
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  Speaker 2: sell their power at a higher rate to themselves, then
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  Speaker 2: it should actually push the electricity price up, shouldn't it.
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  Speaker 3: Yeah, our take on it is that the integrated nature
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  Speaker 3: of our businesses actually create quite a lot of synergies
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  Speaker 3: that support things like the build rate, And so we
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  Speaker 3: need to come back to work out what's the problem
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  Speaker 3: we're actually trying to solve for New Zealander. And the
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  Speaker 3: problem is we just don't have enough energy at the moment,
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  Speaker 3: so we need to build more power plants and the
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  Speaker 3: best way to do that is to use the generators
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  Speaker 3: that we have to actually make sure we're building at
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  Speaker 3: pace so we can actually ultimately bring those prices down.
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  Speaker 2: Is it possible that the government is dithering on this
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  Speaker 2: in order to give you guys the opportunity to get
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  Speaker 2: that building going so that they don't actually have to intervene.
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  Speaker 3: I guess. I mean there's different for speak on this right.
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  Speaker 3: But what we can control is the rate that we're
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  Speaker 3: building at, so we're building at pace, and the other
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  Speaker 3: thing that we're doing is working across the sector to
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  Speaker 3: look at. One thing is to make sure we've got
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  Speaker 3: the power. The other is to have it when you
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  Speaker 3: need it. And that's the work which we've actually been
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  Speaker 3: doing with the likes of Huntly over the last few
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  Speaker 3: months to actually work out how we provide this form
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  Speaker 3: of firming so that when the rain's not falling and
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  Speaker 3: the wind's not blowing, that we actually have some form
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  Speaker 3: of power there to provide it through to households into businesses.
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  Speaker 2: You what's your advice to residential gas customers. I mean,
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  Speaker 2: if somebody is on gas at the minute, because you're
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  Speaker 2: an expert on it, basically you're involved in it. If
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  Speaker 2: somebody's on gas, if they're running the heater through gas,
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  Speaker 2: should they be thinking about with the government talking about
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  Speaker 2: potentially rational gas, should we be thinking about switching to electricity?
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  Speaker 3: Yes, definitely, but the issue is whether people can afford
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  Speaker 3: to do that. So there's definitely a strong drive at
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  Speaker 3: the moment prices of gas are likely to keep going
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  Speaker 3: up as the supply comes down, and so fundamentally the
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  Speaker 3: right thing to be doing is to be switching to
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  Speaker 3: electricity or away from fossil fuels in general. The challenge
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  Speaker 3: for many is how we actually go about supporting that
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  Speaker 3: transition to electrification. That's easiest when new houses are being built,
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  Speaker 3: but certainly something we're looking at to support those that
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  Speaker 3: need to transition for houses that are currently there.
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  Speaker 2: Interesting stuff. Hey, thanks j you ste Hamilton, Mercury Energy
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  Speaker 2: Chief executive.
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