Stew Hamilton: Mercury Energy CEO on the company's recent drop in profitability

Mercury Energy's earnings have fallen on the back of weaker renewable electricity generation, and its bottom-line profit has taken a hit.

The company's profit has plunged from $290 million to just $1 million, due to tough power generation conditions.

Despite this, Mercury Energy CEO Stew Hamilton is hopeful ahead of another financial year.

"We're investing heavily in new power plants - we're investing about $1 billion in new power plants at the moment. That's from the top of the north to the bottom of the south."

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
It's now been a bit of a tough year for

(00:01):
Mercury Energy. The company has released its full year result
today and its operating profit was seven hundred and eighty
six million dollars, which is down ninety one million from
the previous year, but that pretty upbeat for the near future,
predicting a billion dollar operating profit for the current financial year.
Ste Hamilton is the chief executive and with us now,
hey Stu, hey, Heather, how are you well? Thanks very much.

(00:23):
Why the drop in profitability.

Speaker 2 (00:26):
It's been a really tough last twelve months, really, particularly
because it's been the driest on record for us. So
when you look at a lot of our eletricity generation
comes out of hydro off the Waykatta River. When we
have a very dry period, it means that it's really
tough for us to produce electricity and that obviously has
an impact all the way through to customers, both large

(00:47):
businesses and New Zealand households. And so we're working pretty
hard to try and improve and build that confidence.

Speaker 1 (00:52):
And so why so confident that it's going to improve
in this financial year.

Speaker 2 (00:56):
So we're investing heavily and new power plants, so about
one billion dollars in new power plants at the moment.
That's from the top of the North to the bottom
of the South and wind farms and also GF therm
or so we see the significant pace of build coming
on stream and that's going to be good for New
Zealand in terms of providing an affordable and secure gred
as we go forward.

Speaker 1 (01:16):
How much new generation are you building at the moment?

Speaker 2 (01:19):
It's about one tier. What hour which to convert that,
it's about one hundred and fifty thousand homes equivalent. It's
about two percent of New Zealand's grid.

Speaker 1 (01:27):
Okay, now, how do you feel about these new rules
we got from the Electricity Authority today?

Speaker 2 (01:32):
Yeah, there are some components of it which are we're
supportive of. We certainly support having more transparency in the prices.
But it's also important to understand that the market that
we have is actually globally very competitive. We're consistently in
the top five to seven in the world and we
have about fifty retail brands and so that's double what
you see in the UK. So our take on it

(01:53):
is that there is good retail competition. Can it be better?
Yes it can, and we're keen to support the work
that the common doing.

Speaker 1 (02:01):
Do you think that it's actually going to drive down
the price of electricity or drive it up? Because I
mean it seems to me if gentailers are having to
sell their power at a higher rate to themselves, then
it should actually push the electricity price up, shouldn't it.

Speaker 2 (02:15):
Yeah. Our take on it is that the integrated nature
of our businesses actually create quite a lot of synergies
that support things like the build rate, and so we
need to come back to work out what's the problem
we're actually trying to solve. For when news yonder, the
problem is we just don't have enough energy at the moment,
so we need to build more power plants, and the
best way to do that is to use the generators

(02:35):
that we have to actually make sure we're building at
pace so we can actually ultimately bring those prices down.

Speaker 1 (02:40):
Is it possible that the government is dithering on this
in order to give you guys the opportunity to get
that building going so that they don't actually have to intervene.
I guess.

Speaker 2 (02:50):
I mean there's different perspectives on this, right, But what
we can control is the rate that we're building at,
so we're building at pace, and the other thing that
we're doing is working across the sector to look at.
One thing is to make sure we've got the power.
The other is to have it when you need it.
And that's the work which we've actually been doing with
the likes of Huntly over the last few months to
actually work out how we provide this form of firming

(03:11):
so that when the rain's not falling and the wind's
not blowing, that we actually have some form of power
there to provide it through to households into businesses.

Speaker 1 (03:20):
What's your advice to residential gas customers? I mean, if
somebody is on gas at the minute, because you're an
expert on it, basically you're involved in it. If somebody
is on gas, if they're running their heater through gas,
should they be thinking about with the government talking about
potentially ration and gas, should we be thinking about switching
to electricity?

Speaker 2 (03:35):
Yes, definitely, But the issue is whether people can afford
to do that. So there's definitely a strong drive at
the moment. Prices of gas are likely to keep going
up as the supply comes down, and so fundamentally the
right thing to be doing is to be switching to
electricity or away from fossil fuels in general. That the
challenge for many is how we actually go about supporting
that transition to electrification. That's easiest when new houses are

(03:59):
being built, but certainly something we're looking at to support
those that need to transition for houses that are currently there.

Speaker 1 (04:04):
Interesting stuff. Hey, thanks to you, stew Hamilton, Mercury Energy
Chief executive. For more from Hither Duplessy Allen Drive, listen
live to News talks 'b from four pm weekdays, or
follow the podcast on iHeartRadio