Mike Fuge: Contact Energy CEO on the company's 62% rise in underlying profit, household energy prices

Household energy bills are expected to keep rising, but the increases should be much lower than previous years. 

Electricity gentailer Contact Energy's reported a 62% rise in underlying profit, due in part to higher renewable energy production. 

Chief Executive Mike Fuge says power prices for businesses have been starting to fall. 

But he told Mike Hosking power prices for consumers will keep rising as increases in lines and transmission charges will offset any reduction in their prices. 

He says energy bills will continue to rise, but the good news is that will be at —or below— the rate of inflation. 

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Episode Transcript

Speaker 1 (00:00):
It's not a bad time to be a power company

(00:01):
in this country. Contacts net profit up twenty eight percent
to four hundred and twenty three million, operating earnings topp
to a billion next hop as a data center apparently
in Taranaki. Mike Fuji is the Contact Energy CEO, and
he's back with it's a very good morning to you.

Speaker 2 (00:15):
Good morning, Mike. How are you very well?

Speaker 1 (00:16):
Indeed? Thank you manure in its role. How successful has
that acquisition been?

Speaker 2 (00:21):
That acquisition has gone very well. All the synergy benefits
which we promise in terms of cost savings, but also
the portfolio benefits have come through and we're delighted with it.

Speaker 1 (00:32):
How reliant is the industry generally on its still raining well?
The reason I asked that is the warnings that went
out last week because it was a bit cold, but
it has rained well, the lakes are full, et cetera.
Are we still in a it needs to rain well stage?

Speaker 2 (00:46):
No? Look, last week was interesting, wasn't it, because we
had a lot of generation out with retired tcc E
three P was off at Huntley and one of the
coal units fell off that was almost a thousand megawatts
and we had peak power by more than two hundred
and fifty megawatts and the system got through and the
difference is those batteries with even more batteries coming on.

(01:09):
So in many ways, last week was a good story.

Speaker 1 (01:12):
Right, So we are we in nirvana in terms of
generation as a country?

Speaker 2 (01:16):
Now?

Speaker 1 (01:17):
Do we have what we need?

Speaker 2 (01:19):
We should be very proud of what has been achieved
in terms of the renewable energy level that we're now
at what we need. What we hope is that this
enables New Zealand to grow and to create jobs and
so that we can continue to build renewable energy projects.
But yes, we should be very proud of the renewable
energy component.

Speaker 1 (01:39):
How do you guys now navigate between what we want
and what I want, which is a reduction in my
power bill, which I'm not seeing yet despite the fact
that you're producing more than you ever have renewably.

Speaker 2 (01:51):
Look two things in there. One, we'd love to see
power prices come down. We all would obviously in terms
of benefit to the economy. Power prices for businesses are
actually coming down with the ASEX coming off, but the households, unfortunately,
those lines and transmission charges will keep going up for

(02:12):
a little while, which will offset any energy savings that
we're able to make. But the overall story is that
the increases should be overall should be at or below inflation,
which I think everyone has been hanging out For the
other thing, I'd ad might we do give the means
for people to save on their power costs through the
good nights and the hot water disorder and the good

(02:34):
weekend's plan. So we do give people the means to
save on their power bills significantly as well.

Speaker 1 (02:41):
That data center that you're into, are you into our
data center or are you just into the business of
supplying power to the data center?

Speaker 2 (02:49):
Well, this one, because it's new to us and it's
new to New Zealand, and because the Stratford site is
such an excellent site, we're going to both supply the
power but be part of the data center. Why because
it's new, it's new technology the site itself, we have
the connection, we have the transformer, we have the land,
and in order to ensure that it goes as quickly

(03:12):
as possible, the best way forward was for us to
be part of that data center proposition.

Speaker 1 (03:17):
Are you bullish on data centers generally?

Speaker 2 (03:20):
I think data centers are in new reality both for
us and the world. And the question for New Zealand
is are we up for participating in that new opportunity?

Speaker 1 (03:29):
Right the news and by the way, the new did
you do the New Zealand steel deal we were talking
about on the program?

Speaker 2 (03:34):
Yes, we did, that's you we did.

Speaker 1 (03:36):
So what do we get out of that? I mean,
are we just making more renewable steel so good on
the climate? Is there any other benefit to us you
anyone by doing that?

Speaker 2 (03:48):
There's a good thousand more jobs in New Zealand steel,
which I think everyone's very glad that they can continue
in that employment. It's a great it's a great industrial
story for New Zealand and the fact that they have
been able to electrify to ninety eight percent renewable energy.
And the other thing about it is that they actually
help us by coming off during peak periods and so

(04:09):
it's a great story. It's safe jobs, save jobs in
the Auckland region, which has great outcome, the helping the
resilience of the electricity sector in general for those cold
nights and gold mornings, and it's ninety eight percent renewable.

Speaker 1 (04:24):
Still, how much time are you spending on the election
campaign thinking about those who are looking to break you
guys up the gent tailors.

Speaker 2 (04:31):
Ah, Look, we invest in thirty year cycles, not three
year cycles, and so we have to navigate between the
various policy We hope our big thing is just avoiding
radical or not so smart changes to market settings that
just raise the sovereign risk and raise the cost of

(04:52):
capital that ultimately that flows through to power prices and
the cost of the projects we build. So as long
as everyone stay sensible and they all avoid those list
trust moments, I think will be okay.

Speaker 1 (05:05):
Good on you appreciate it less trust moments. Mike Fush,
Contact Energy CEEO. Mike, we converted to the soul of
this year sixteen panels in a battery power bill this
month one fifty without solo on average four to five
hundred will pay it off in five to seven years.
I'm a pension yep for you. That's great. All I
was asking earlier on and what they're finding out in
Australia is whether you are there for five or seven years,

(05:25):
what happens if the technology overtakes you, and do you
ever pay it off? And do you go into debt
to do it in the first place? There they're the
questions of the age, aren't they?

Speaker 2 (05:34):
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