Mike Fuge: Contact Energy CEO on Methanex temporarily shutting down New Zealand operations

There's praise for a deal to free up gas to help keep the country's lights on.

The nation's biggest gas user, Methanex, will shut down Kiwi operations until October - and is selling its gas to Contact Energy and Genesis Energy.

It'll let them generate more power to combat a supply shortage that's sent power prices skyrocketing.

Contact Energy CEO Mike Fuge says it will cost Methanex some export earnings.

He says that's outweighed by the benefit to the country.

"In terms of the security of supply - that's what our focus is at the moment and we're very confident that we'll be able to see the country through." 

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Episode Transcript

Speaker 1 (00:00):
So we have yet another casualty of the high power prices.
The country's largest gas user, method X, has stopped production
until the end of October because there just simply isn't
enough gas to go around. It's going to sell the
gas that it would have used instead to Contact Energy
and Genesis, And Mike Fusia is the chief executive of
Contact Energy with US.

Speaker 2 (00:16):
Now, Mike, hi, are you doing that? Adam?

Speaker 1 (00:19):
I'm well, thank you. How much you're paying for the gas?

Speaker 2 (00:22):
I can't say that that's obviously commercially sensitive, but we're
paying a fair price for the gas given the circumstances.

Speaker 1 (00:28):
Are you paying more for the gas than you would
pay just on the open market?

Speaker 2 (00:33):
Well, the open market has been as high as fifty
dollars a GJ, So no, we're not paying probably not
paying that much, but we're paying a fair price. It's
fair to.

Speaker 1 (00:43):
Say any idea how much this is going to cost
the country because obviously we're going to lose, right because
they're not exporting any methanol.

Speaker 2 (00:48):
Now, look for the bulk of New Zealanders. It won't
affect them in any way form of fashion. As a
market flip for the wholesale market, ninety five percent of
Kiwi homes and businesses are there not on time of
use contracts. They're not exposed to the wholesale spot market.
And what our focus has been on making sure those
entities that have exposure is calming the market down through

(01:11):
deals like this and just getting on with it.

Speaker 1 (01:14):
Yeah, but I mean you would accept that the country loses,
right if we're not exporting methanol from methd X.

Speaker 2 (01:20):
The country does end up losing some export earnings. But ultimately,
if in the long term we've found a way that
will secure methd x is future here through its ability
to flex like this, just like the smelter, that's actually
a win long term for New Zealand.

Speaker 1 (01:36):
Okay, Yeah, that's a fair point. Does this mean that
we're going to avoid spring outages?

Speaker 2 (01:41):
Absolutely? In terms of the security of supply, that's where
our focus is at the moment, and we're very confident
that we'll be able to see the country through.

Speaker 1 (01:50):
Is it going to bring down the prices that we
are paying currently for electricity and talking about the spot
prices obviously.

Speaker 2 (01:57):
Oh, the spot prices will come off. You've already seen
the futures market which we have is that the futures
market has calmed down considerably. A year out, it's come
down I understand about forty to fifty dollars, and so
you're seeing everything starting to calm down.

Speaker 1 (02:10):
Now, are we going to have to do this next winter?

Speaker 2 (02:14):
Well, look, we sincerely hope not. We've got a couple
of powerstations which should be online by then. We've got
the demand flex in both meth and X and the smelter,
and if we can continue to develop those demand flexes
from ourgin industry, and we should see I think there's
a couple more wind farms coming on, and if we
get the rains we need, I think next winter should

(02:34):
be fine.

Speaker 1 (02:35):
Mike, thank you very much, really appreciated. Mike's fugue, chief
executive of Contact Energy.

Speaker 2 (02:40):
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