Mike Roan: Meridian Energy Chief Financial Officer on the changes in the power sector, rising prices
February 26, 2025 • 7 mins
More changes are on the way for the electricity sector, as power prices continue to rise.
The Electricity Authority's proposing new measures to stop the big four electricity companies giving their own retail arms preferential treatment.
The Government's lifting restrictions to allow lines companies to invest more in electricity generation.
And Meridian Energy Chief Financial Officer Mike Roan told Mike Hosking the sector's also looking at how they can shore up energy supplies after being caught out by the gas shortage.
He says they're scrambling, dusting off old contingency plans from 10 to 15 years ago.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
More insight into our power industry as we had towards winter.
Meridian reported in that loss of one hundred and twenty
one million dollars yesterday. Is that bad? Yes, it is.
Meridian chief financial officer and incoming CEO, Mike Rhans with
us on all of this might be very good morning
to you.
Speaker 2 (00:13):
Hey morning, Mike.
Speaker 1 (00:14):
This line you ran yesterday, you took a hit for
New Zealand. Does that spin or reel?
Speaker 2 (00:20):
Oh, it's real. You know last year last year was tough,
largely because it didn't rain, but we also had an unexpected,
unprecedented shortage of gas at the same time, so we
had to take two hundred million dollars of cover that
we didn't expect we'd need to to keep the lights on.
(00:41):
So you know, what we were trying to say is
we put some curious supply first, and we do it again.
I mean, it's part of the it's part of the
territory for US. Droughts, managing droughts part of the territory.
But you know, being a big business in the country
is when things get tough, our job is to help
manage those conditions. So that's what we did.
Speaker 1 (01:00):
Which would you so manage the conditions. You can't. If
you haven't got any gas, you haven't got any rain,
there's nothing you can do about it. You lose money.
Is your mix all wrong and you're fixing your mix?
Speaker 2 (01:08):
Well, I think that was the problem that was unexpected.
The loss of gas was, you know, something we didn't expect,
and we think that is the big challenge we you know,
we rely on gas, we rely on water, but uh,
you know, it's the loss of gas that we think
is a potential structural issue for the country, not just
(01:29):
the electricity sector, and we think it needs a lot
of attention.
Speaker 1 (01:33):
So didn't you, I mean, I don't know what you
were doing when Jacinda was running the class, but once
you wandered around said we're not going to look for
oil gas anymore, did know? And Mercury go that Meridian
rather go that might affect us.
Speaker 2 (01:46):
We've always said that, you know, electricity sector, while we
can become more reviewable over time, that we're going to
need gas is a transition feel So you know, I
think that's the challenge that we found last year, is
that transition fuel has got its own challenges, and you know,
we thought it was going to be affordable. We found
it was unaffordable. It shows through in our result. And
(02:09):
so now we're scrambling, you know, we're we thought we
were going to rely on it as a country. We're
scrambling to find or turn its and so we're going
back to you know, things that had been dust or
were dusting things off that been looked at ten fifteen
years ago. And you know, one of the things we
found is that there's a bunch of contingent hydro storage
(02:30):
that sits out there. So it's about twenty percent of
New Zealand's hydro storage that sits there for these sorts
of conditions that doesn't get touched. And we're talking to regulators,
you know, our stakeholders transpower to see whether we can't
open that up to try and bring energy prices down
and deal with the fact that, you know, we don't
(02:51):
have the gas supply that we thought.
Speaker 1 (02:53):
Why wouldn't they, Why wouldn't they This is interesting, Why
wouldn't they do that? Why would they let it spike
last one to do eight hundred bucks and still not
let get you access to that?
Speaker 2 (03:02):
Yeah, well, I mean it's I might not be the
right person to ask.
Speaker 1 (03:06):
Michael, probably a bit company.
Speaker 2 (03:09):
Yeah, well, we think it's a no brainer. So, you know,
we think it'll bring electricity prices down and it'll deal
with the fact that we've got some challenges in the
gas industry. So we think it's exactly what we need,
and you're wearing a conversation with them to try and
do exactly that. Let's not wait for those same conditions
to unfold. Let's open that at hydro storage up so
(03:31):
that we can use it.
Speaker 1 (03:33):
Has has last year's disaster of the season coalesced the
industry in general around the broad idea that we need
to do better than we are.
Speaker 2 (03:44):
Yeah, I mean there's a massive amount of investment that's
going on, you know, the challenge that we've got, so
you know, we're going to invest embarks by the end
of this calendar year. You've heard others talk to the
same thing, and that investment's going in. But the challenge
would got it takes any intensive industry, it takes a
couple of years for that investment to come to fruition.
(04:06):
You know, we're not going to have those power stations
producing energy for a couple of years, so it's what
do we do in the next couple of years? Given
we found that we're not going to reply on gas and.
Speaker 1 (04:19):
We're cold and stuff like that. Can you reassure me
that that all of this investment in renewables is when
it comes online, that's it. We've done. We've sorted our
problem out and we're not going to have the same
tedious conversation leading into every winter that we don't have
enough power.
Speaker 2 (04:36):
Yeah. I mean, that's the great news is I can't
show you once that comes on board, as it allows
us to use the hydro storage. You know, New Zealand's
got a bounty of hydro energy that other countries would love.
And once we've invested in those renewables we sought our
hydro storage out is it can drive competitive advantage into
this economy. That's durable good because other countries don't have
(04:59):
what we've got, and.
Speaker 1 (05:00):
That includes data centers and stuff like that.
Speaker 2 (05:04):
Yeah, if we can invest in more you know, renewable technologies,
we can invite people to come to the country and
do their business here and that that's I mean, that's
basically the plan is we've got a bounty of renewable energy,
we've got to get those investments in place, and then
we've got a power system that other people around the
(05:25):
globe will look at with envy because they can't replicate
what we've got. So we're hopeful of attracting, you know,
whether it's data centers or anybody, we'd love them to well.
Speaker 1 (05:34):
I hope, I hope you're right. I've got a personal
obsession with nuclear and there's a lot of people going nuclear,
and you can do it a lot more efficiently and
in a smaller capacity and way than you used to
be able to do You ever see the day that
that could even be a conversation in this country of
where just that that ship sailed.
Speaker 2 (05:50):
I think it's a tough one, Mike, I do. I
think it takes so long introduce the regulatory settings and
then invest in so I think, you know, we're better
relying on the resources that we've got, and you know
where we need to open up this conversation on hydro storage.
It's the thing we've got as a country that other
people don't like. We have it in space. You know,
(06:11):
we've got a lot of water that flows.
Speaker 1 (06:13):
I think most people I followed this industry, I would
argue reasonably closely. I didn't know that. I didn't know
that transpower will holding you back. And there's a scandal
in that, and I don't understand why there's a scandal,
And I don't understand why there's a Minister of energy
that would be overseeing the scandal at a point of
eight hundred dollars for a spot price and all the
nonsense we went through last winter and not have done
something about that. If you've got the water and all
(06:34):
you can need is access, why don't we have I mean,
how hard can it be?
Speaker 2 (06:38):
Yeare we think everyone's supported, Mike. It's just working through,
you know, it's working through the issues to get it unlocked.
So yeah, well good luck with it.
Speaker 1 (06:47):
But yeah, good luck with it. Well we'll follow up.
Who's the Minister of energy? Off the top of my head,
give it to me now, actually ring them up? Did
you know about that? I didn't know about that. I'm
disappointed myself that I didn't know about that. But if
we've got all that, and they'll say arts for reserves
for a really difficult day, they couldn't say it's for
a rainy day, because that's exactly the sort of day
(07:09):
they'd want. Come on, what, Simon, Wat's Simon, I've got
more water? Than I need. What's what's great name from
a Minister of energy? What's he doing? We're gonna get
him on the program.
Speaker 2 (07:23):
For more from the Mic Asking Breakfast, listen live to
news talks it'd be from six am weekdays, or follow
the podcast on iHeartRadio.
More insight into our power industry as we had towards winter.
Meridian reported in that loss of one hundred and twenty
one million dollars yesterday. Is that bad? Yes, it is.
Meridian chief financial officer and incoming CEO, Mike Rhans with
us on all of this might be very good morning
to you.
Speaker 2 (00:13):
Hey morning, Mike.
Speaker 1 (00:14):
This line you ran yesterday, you took a hit for
New Zealand. Does that spin or reel?
Speaker 2 (00:20):
Oh, it's real. You know last year last year was tough,
largely because it didn't rain, but we also had an unexpected,
unprecedented shortage of gas at the same time, so we
had to take two hundred million dollars of cover that
we didn't expect we'd need to to keep the lights on.
(00:41):
So you know, what we were trying to say is
we put some curious supply first, and we do it again.
I mean, it's part of the it's part of the
territory for US. Droughts, managing droughts part of the territory.
But you know, being a big business in the country
is when things get tough, our job is to help
manage those conditions. So that's what we did.
Speaker 1 (01:00):
Which would you so manage the conditions. You can't. If
you haven't got any gas, you haven't got any rain,
there's nothing you can do about it. You lose money.
Is your mix all wrong and you're fixing your mix?
Speaker 2 (01:08):
Well, I think that was the problem that was unexpected.
The loss of gas was, you know, something we didn't expect,
and we think that is the big challenge we you know,
we rely on gas, we rely on water, but uh,
you know, it's the loss of gas that we think
is a potential structural issue for the country, not just
(01:29):
the electricity sector, and we think it needs a lot
of attention.
Speaker 1 (01:33):
So didn't you, I mean, I don't know what you
were doing when Jacinda was running the class, but once
you wandered around said we're not going to look for
oil gas anymore, did know? And Mercury go that Meridian
rather go that might affect us.
Speaker 2 (01:46):
We've always said that, you know, electricity sector, while we
can become more reviewable over time, that we're going to
need gas is a transition feel So you know, I
think that's the challenge that we found last year, is
that transition fuel has got its own challenges, and you know,
we thought it was going to be affordable. We found
it was unaffordable. It shows through in our result. And
(02:09):
so now we're scrambling, you know, we're we thought we
were going to rely on it as a country. We're
scrambling to find or turn its and so we're going
back to you know, things that had been dust or
were dusting things off that been looked at ten fifteen
years ago. And you know, one of the things we
found is that there's a bunch of contingent hydro storage
(02:30):
that sits out there. So it's about twenty percent of
New Zealand's hydro storage that sits there for these sorts
of conditions that doesn't get touched. And we're talking to regulators,
you know, our stakeholders transpower to see whether we can't
open that up to try and bring energy prices down
and deal with the fact that, you know, we don't
(02:51):
have the gas supply that we thought.
Speaker 1 (02:53):
Why wouldn't they, Why wouldn't they This is interesting, Why
wouldn't they do that? Why would they let it spike
last one to do eight hundred bucks and still not
let get you access to that?
Speaker 2 (03:02):
Yeah, well, I mean it's I might not be the
right person to ask.
Speaker 1 (03:06):
Michael, probably a bit company.
Speaker 2 (03:09):
Yeah, well, we think it's a no brainer. So, you know,
we think it'll bring electricity prices down and it'll deal
with the fact that we've got some challenges in the
gas industry. So we think it's exactly what we need,
and you're wearing a conversation with them to try and
do exactly that. Let's not wait for those same conditions
to unfold. Let's open that at hydro storage up so
(03:31):
that we can use it.
Speaker 1 (03:33):
Has has last year's disaster of the season coalesced the
industry in general around the broad idea that we need
to do better than we are.
Speaker 2 (03:44):
Yeah, I mean there's a massive amount of investment that's
going on, you know, the challenge that we've got, so
you know, we're going to invest embarks by the end
of this calendar year. You've heard others talk to the
same thing, and that investment's going in. But the challenge
would got it takes any intensive industry, it takes a
couple of years for that investment to come to fruition.
(04:06):
You know, we're not going to have those power stations
producing energy for a couple of years, so it's what
do we do in the next couple of years? Given
we found that we're not going to reply on gas and.
Speaker 1 (04:19):
We're cold and stuff like that. Can you reassure me
that that all of this investment in renewables is when
it comes online, that's it. We've done. We've sorted our
problem out and we're not going to have the same
tedious conversation leading into every winter that we don't have
enough power.
Speaker 2 (04:36):
Yeah. I mean, that's the great news is I can't
show you once that comes on board, as it allows
us to use the hydro storage. You know, New Zealand's
got a bounty of hydro energy that other countries would love.
And once we've invested in those renewables we sought our
hydro storage out is it can drive competitive advantage into
this economy. That's durable good because other countries don't have
(04:59):
what we've got, and.
Speaker 1 (05:00):
That includes data centers and stuff like that.
Speaker 2 (05:04):
Yeah, if we can invest in more you know, renewable technologies,
we can invite people to come to the country and
do their business here and that that's I mean, that's
basically the plan is we've got a bounty of renewable energy,
we've got to get those investments in place, and then
we've got a power system that other people around the
(05:25):
globe will look at with envy because they can't replicate
what we've got. So we're hopeful of attracting, you know,
whether it's data centers or anybody, we'd love them to well.
Speaker 1 (05:34):
I hope, I hope you're right. I've got a personal
obsession with nuclear and there's a lot of people going nuclear,
and you can do it a lot more efficiently and
in a smaller capacity and way than you used to
be able to do You ever see the day that
that could even be a conversation in this country of
where just that that ship sailed.
Speaker 2 (05:50):
I think it's a tough one, Mike, I do. I
think it takes so long introduce the regulatory settings and
then invest in so I think, you know, we're better
relying on the resources that we've got, and you know
where we need to open up this conversation on hydro storage.
It's the thing we've got as a country that other
people don't like. We have it in space. You know,
(06:11):
we've got a lot of water that flows.
Speaker 1 (06:13):
I think most people I followed this industry, I would
argue reasonably closely. I didn't know that. I didn't know
that transpower will holding you back. And there's a scandal
in that, and I don't understand why there's a scandal,
And I don't understand why there's a Minister of energy
that would be overseeing the scandal at a point of
eight hundred dollars for a spot price and all the
nonsense we went through last winter and not have done
something about that. If you've got the water and all
(06:34):
you can need is access, why don't we have I mean,
how hard can it be?
Speaker 2 (06:38):
Yeare we think everyone's supported, Mike. It's just working through,
you know, it's working through the issues to get it unlocked.
So yeah, well good luck with it.
Speaker 1 (06:47):
But yeah, good luck with it. Well we'll follow up.
Who's the Minister of energy? Off the top of my head,
give it to me now, actually ring them up? Did
you know about that? I didn't know about that. I'm
disappointed myself that I didn't know about that. But if
we've got all that, and they'll say arts for reserves
for a really difficult day, they couldn't say it's for
a rainy day, because that's exactly the sort of day
(07:09):
they'd want. Come on, what, Simon, Wat's Simon, I've got
more water? Than I need. What's what's great name from
a Minister of energy? What's he doing? We're gonna get
him on the program.
Speaker 2 (07:23):
For more from the Mic Asking Breakfast, listen live to
news talks it'd be from six am weekdays, or follow
the podcast on iHeartRadio.
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