Mike Roan: Meridian Energy CEO on the company posting a multi-million dollar financial loss

The recent energy crisis has rippled out to the big companies, with Meridian the latest to take a significant financial hit.

Meridian Energy recently confirmed a $452-million-dollar loss, after being hit by periods of low wind, two major droughts, and a shortage of gas.

CEO Mike Roan says the company's been through a tough year, but they managed to shield customers from the high prices.

"We took a hit, no question about that - but we kept the lights on, so electricity flowed to people."

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Episode Transcript

Speaker 1 (00:00):
Now Meridian Energy has suffered from a drought, and then
suffered from a wind and is now suffering from no profit.
The company reported a brutal full year result, posting a
net loss of four hundred and fifty million dollars. Remember
last year was a net profit of four hundred and
thirty million dollars, So lack of when low energy yields
from hydro all been blamed. But shareholders will still get
a dividend of almost twenty one cents a share full

(00:22):
year dividend. Mike Rohan is Meridian CEO and with.

Speaker 2 (00:25):
Us high Mike, Hey, Heather, how are you doing?

Speaker 1 (00:27):
Yeah, I'm very well. That looks like a pretty stressful year,
was it?

Speaker 2 (00:31):
It was tough. You know, the events like we just
saw play out don't come around that often. Fortunately, feels
a bit like we wear that a perfect storm. But
I know, if I walk away from the year with anything,
you go. We took a hat, no question about that.

(00:51):
But we kept the lights on so alciously flowed to
people and we managed to shield our customers from the
high prices that played out in hot So you know,
we took the brunt of the financial issues, and you know,
reality is droughts are inevitable in the country, so every
now and then we're going to face a tough year.

Speaker 1 (01:12):
How much higher than normal was the three hundred million
dollars that you spent on price hedges.

Speaker 2 (01:18):
A lot magnitude of at least ten is what what
we tend to do is will buy hedges as insurance products,
so you pay the insurance premium typically and that might
be in the order of, you know, twenty to thirty million.
It's when you exercise them. So when you go through

(01:38):
a drought like we did, that you exercise them and
that's where you bear, you know, really high costs. And
of course this last year, a couple of the insurance
products that we took out were suspended so they didn't work,
so we had to buy insurance at the time we
were going through the drought, which is that cost a
lot of money. Yeah, and you know, the it was,

(02:00):
as I say, it's kind of one of those years
where we had well two droughts and we lost the
gas sector as a fuel for the utricy sector. So
you know, thankfully that sort of stuff doesn't happen that often.

Speaker 1 (02:15):
Right now, on the gas thing, what do we do
about this how do we fix the situation if at all?

Speaker 2 (02:23):
It's tough. I don't know if I have an answer.
The what we are trying to do is we're trying
to as an electricy sector, move away from gas as
quickly as we can. So, you know, the Strategic Energy Reserve,
the agreement that we wrote with Genesis to improve the

(02:44):
capacity at the Humpty Power station basically was that was
the eltricy sector stepping away from gas, you know, as
a transition fuel and hopefully freeze some gas for you know,
direct gas customers, but ultimately, unless for gas set to
can find some more gas, which looks increasingly unlikely, you know,

(03:06):
they're going to have to step away from gas as well.

Speaker 1 (03:08):
So, Mike, so you guys have faced the reality of
a declining gas situation. Do the rest of us need
to do that as well? I mean, if you if
you were a business using gas, do you need to
switch to something else like biomass or electricity. If you're
a homeowner who is still using gas, do you need
to do the same thing.

Speaker 2 (03:25):
I think as a business you should be looking at it.
As you know, it's not a choice for everyone, so
not everybody can step to biomass or electricity, as you say, heither.
But for those that can, they should be looking at
the economics and the speed at which they can move.
Away from you, I mean.

Speaker 1 (03:42):
Don't don't sit around waiting for more gas. A no,
what about residential customers?

Speaker 2 (03:50):
So I think residential customers got a little longer. Of course,
this all comes back to economics. And you know, while
we've seen electricity prices rise, they are largely driven by
the transmission distribution price increases. Gas prices have lifted far
quicker and faster, recognizing gas is fast gear so than
we imagined. So I think residentials, residential customers will start

(04:15):
to see the economic impact of staying with gas, and
that'll motivate people to move all their applies.

Speaker 1 (04:22):
When do we start noticing it?

Speaker 2 (04:25):
I would say this winter. If my gas bill is
anything to go by, is it's a lot higher this
year than it was last year.

Speaker 1 (04:32):
So okay, Now, does the government just need to come
out and say this, I mean they're dicking around with
all this, you know, like giving us the impression, certainly,
Shane Jones, is that there may be some sort of
a gas solution. Do they simply need to come out
and say, guys parties over switch to something else.

Speaker 2 (04:50):
You know, it's possible they know more than I do.
You know, we renewable energy business, so we don't you know,
we don't see directly into the gas sector as they might.
But you know, from everything that we can see from
the outside, it doesn't look promising that gas has a

(05:10):
major role to play for the country. So I hope
I'm wrong. I don't think you are, but hope, well, hope.
You know, as I say, hope, it's not a strategy
and the you know, you've got to look at the
cost that you're facing and whether you can actually get
access to gas, and we've decided as a sector, but

(05:32):
that's increasingly unlikely for electricity users and it's impacting the
cost of electricity, and so we've got to move to
other fuels, and ultimately we've got to invest in more
renewable assets to move off gas entirely, reduce the amount
of coal we're using the system, and actually drop the
cost of electricity for people more generally, and drive competitive

(05:54):
advantage into the economy. So we've had a you know,
we've had to wake up as well, but we're moving
at pace.

Speaker 1 (06:02):
Yeah, Michael listen. It's good to talk to you. I
really appreciate it. Micro own Meridian Energy CEO.

Speaker 2 (06:08):
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