Kyoda and welcome to Shed Lunch, brought to you by Shears's. In this bonus episode, we continue our conversation with outgoing Meridian CEO Neil Barclay as he reflects on his seven years at the helm of one of our largest companies. We have this conversation at a time when New Zealand faces another uncertain winter around power supply and as prices start to rise for consumers. Before we jump in, here's some important information.
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Neil, welcome to the studio. Just thinking about the last year and given that you are moving on in so a few months time, would you describe it as the annis horribilist? Just recently you said something about taking one for New Zealand and your media release.
Yeah, it was an extreme drought last year and it cost us a lot of money to manage through it. But we we did what was right, you know. We made sure that we invested money to ensure that there were some physical responses from thermal generators, from companies like the aluminum smelter who could reduce demand, and then we could use that energy for other customers. We paid for all of that and that ensured that the light stayed on.
So that's that's an important part of the role that we play as a gen Taylor in the New Zealand market. We are large. We have the financial capacity to help support the system and New Zealand through significant drought situations like we you know, like we had last year. But at the same time, we've we've progressed our development options considerably. We've now got four projects coming up to five fully
consented and ready to build, including to Hoe. We've continued to grow our share of the retail market in New Zealand. So magically the businesses has had a fantastic year, just a financial hit based on a drought that that do come along and we prepare for them.
What are some of the other things that you've done I think for customers, I mean, would this for example, would this deal if it goes through, have an effect on them?
Ultimately? Yeah, because the more renewables that we build into the system, they have a very low cost marginal cost, so when they're generating, it's very low cost and that will drive energy costs down in New Zealand on the whole and on the average over time. It'll take a week bit of time for.
That to flow through, because aren't we all, I mean, most of us are seeing increases in our electricity bill and that's probably going to take a while. It could be five percent I think I've seen in some cases.
Yeah, there are some price increases coming through. Most of them are actually coming through the monopoly parts of the business, so lines companies just yea, the generators generate the energy and then we sell it to customers at the retail end, you've got all those wires and transformers and things that get it between the generation plant and the customer premises. Because that those businesses are largely monopolies, they get regulated
by the Commics Commission. The Commics Commission sets what their maximum price can be, so the Commis Commission has how to look at that and put the prices up. We think that needs a bit of looking at, but you know, we're not the experts in that area. So those costs have to get passed on to consumers, because there's no way we can absorb them, or offset them, or become more efficient through them. What we do, though, is take a long term view on the cost of energy. So
that's how part of the business what we generate. And whilst generation costs wholesale generation costs were very high last year, that does not get passed through to consumers because we take a long term view and we know that once we're through this gas pinch point we're calling it, we've got a whole bevy of new renewable generation projects that get delivered probably within the twenty seven twenty nine time frame, that pinch point will be resolved and you'll start to
see a moderation those whole high wholesale prices again and then we you know, so we wear the cost in the meantime if you like, to not put too much burden on the customers.
So you're saying in time, power prices will come down.
Energy costs in New Zealand and time will come down. That's my strong belief. That's what the global trend would tell us. Cost renewables is coming down. It's now cheaper to build to really or a soul the farm in this country than to run an existing gas fire plant. So it's inevitable. We're just going to build these renewables.
It will drive costs down in the long run. And as people electrify their use, so stop burning petrol in your car and go to an EV, the cost of powering your vehicles, powering your homes, powering your businesses will come down.
You've got an EV, yeah, yeah, Tesla.
No, no, it BMW AND's got a little money as well, so yeah.
And do people get enough money back though from the grid. That's all often a thing in terms of because the solar they have, and yeah, and because I've heard people grumble a little bit about that. Is that going to change?
It goes through stages. At the moment, Meridians buyback rates are pretty competitive. I shouldn't quote this because it's you know, we're marketing, we're changing prices all the time, but it's I think it's up around seventeen cents. So we're buying energy off people and there's who have solar on their roofs at that sort of price. But we can build terillary hoe for probably something around eight cents or so.
It's far more expensive for us to buy it off solar customers than to build a wind farm or build a grit scale solar plant. But what we're trying to do is still support customers who want to build solar on their rooftops because we think it's still going to be a really important part of decarbonizing the whole economy and the whole system. We can't do it all with
grit scale generations. So we do need you know, we do need solar on most roofs in this country, and so we're trying to support that through buy back rates and through also coming up with a decent solar proposition that support.
Yeah, I think so because we had that solar company that went bust, didn't we that was earlier in the Yeah, and I think that's kind of tainted a few people's views on things.
Yeah, that's unfortunate. I don't think any of the customers have been left in the lurch, which is really good. Okay, and you know, but we need to have a look at what went wrong with that business model. There's no need for solars installers to be going broke. I don't think the business is only going to grow.
Surely we can arn off Australia.
Yeah, we can and Australia haven't necessarily done it the smart way, so they've you know, they've invested a lot of subsidy dollars to support customers to build solar, and what that has meant is has created distortions within their markets.
So there's actually too much solar in Australia in those sunny days, and it means that the grid scale big coal plants that have to run and can't slow down or speed up when there's a whole bunch of solar being injected into the grid have to keep running and have to pay to run, so you're not getting negative prices, and what that's doing is discouraging the investment in new renewables.
It's really perverse impacts, but it's so sort of nono unintended consequences you do tend to get when governments and policy makers decide to intervene in a market and decide what they think is going to work best. You're best off letting the economics drive the right activities and allow customers customers to make informed choices on the fundamental economics of what's driving things at that time.
Now, now you've been at Meridium, I think it's actually close to two decades, if I'm not wrong, and seven years at the Helm. It sounds like there's going to be quite a change for your life coming up. I think you're going to be on the board of the New Zealand and Chorus. Is there anything else that you can to tell us?
Not of any interest. I mean, my wife's looking forward to having some help. We've got a bit of a lifestyle block six an rfect. There's there's always stuff to do. I need to upgrade the chainsaw, for sure. I love fishing, hunting and need to do a bit more of that. I'll probably look at another board appointment or two, just so I keep my hand in. But certainly it's a lifestyle change for me. You know, when you're a chief executive of a business like Meridian, it takes a lot
of effort. And you know, my sixtieth birthday this.
Year, so congratulations.
And hand it over to a young whipper snapper like Mike, who's he's got heaps of energy. He has a lot of good ideas.
We had him on the frogum not so long ago. And I don't think I've got a word in hitch ways.
I never do either. But but no it's it's it's great to have a bit of change, fresh injection of ideas and enthusiasm and energy, and the time is right for me to sort of bark on a different stage of my life and career.
So would you you're still an investor and I imagine an advisor at some point if you need to be, I mean your knowledge, Look that.
There's it's not it's not considered good governance in New Zealand for a chief executive to go straight on to the board.
Point.
Yeah, so there is a sort of a standown period. But I Obviou said, hey, look in three years time, if you need another director, I'll be around.
I'll be the one I'll be around.
And I'll be more than willing because I love the business. It's a fantastic company, it's a fantastic culture, and like I say, the opportunities to support New Zealand to decarbonize, it's just that there isn't a better one, and the opportunities to grow the businesses outstanding as well. Whilst supporting our customers ultimately pay less for the energy and that's pretty fundamental to what we're trying to achieve it.
So would that be the most exciting thing you think in that tenure that you've been able to achieve or with the team.
There's a lot that we've done internally, difficult to go into a couple of things. I'm immensely proud of our energy hardship program. We got the board a few years to go to sign off on a five billion dollar program of work over a couple of years that would allow us to support five thousand customers in a hardship. We know there's more of our customers that are in energy hardship, so we've got to do better. But that
was a real step forward. I think we set the standard across all retailers in New Zealand around that and how we pork people to be able to afford to pay and keep for their bills and keep their homes, women and so forth. Like say, our retail business has grown by more than sixty percent, and retail in New Zealand has not grown by anything in fifteen years, so that's all been market share. We have one market share off other retailers because I think we're doing it better.
We care more for our customers, We've got the pricing service propositions right. We can always improve and we've got some really exciting ideas and opportunities how to do that, particularly supporting customers to use assets within their home to be able to move their energy around and therefore get
cost savings as a result. For example, we've launched a hot water product, So if you allow us to control your hot water cylinder, we'll make sure that you don't have a cold shower in the morning, but we will move the time that that water in that cylinder gets heated around to fit better within low rice periods of
the day. Those sorts of ideas, and it can all be done automatically, so the customer doesn't have to be involved or think about it or pushing buttons or telling us what to do, and we just set it up in advance. Same with charging your ev you know, we can move that energy around, and there's quite a lot you can do with solar and batteries. So these are the sorts of ideas that we're working through that will save customers money and I think further enhanced the Meridian brand.
So yeah, there's a lot of stuff on the customer front that I'm just super chupped with and a lot more opportunity to go for.
To Finnish Neil Any regrets that.
Has no point in hand regrets. There's a few things I would have liked to have got done that it probably won't happen on my watch. I'm very determined that Terrari will be one of those will get done on me, not one that wouldn't. But now I would have liked to have moved faster, if anything. But it's it is hard, it's complex. It's very difficult getting a project of the scale consented in New Zealand. Meridians never had a consent
turned down. We always do the right thing by both the environment, by the communities in and around who operate in and around these sort of large scale ultricy generation plants. But it takes time.
It's hard too, isn't it.
And it's expensive.
Yeah, because Contact's been kicked back in christ Church for a big soldo.
Down and down in the Deep South. I don't know all the facts that all the ins and outs around that. It'll be disappointing for them. Like I say, we've never been kicked back, but we've had to go through the hoops and we need to find a way to streamline, streamline that Companies like Meridian contact and others. We need to do the right thing by the environment. You need
to be trusted to be able to do that. But we need to speed up the whole process if we're going to successfully decarbonize the economy, and we will, we will. It's happening. The government's working on it, we're all working on it. It's happening. It's just this pesky little problem
with gas that we've got at the moment. But like I say, and I don't want to my understate that because it is significant, but it will be resolved and its projects exactly like Terry whole, that will make all the difference.
So you'll be watching from the sidelines but doing a fear bit more fishing and leisure of time is going to be where it's at from now on pretty well.
But I think the New Zealand Bord will keep me with.
Yes, a few challenges there.
And I was sitting next to someone I barely knew on a plane the other day. It was pointing out some improvements that I could take back to the boot, So yeah, you get that. I think being an the New Zealand ambassador in our country because that company is so important to us all and the chorus Borders is also really citing connectivities everything, and they they are you know, they know, they're run five a network in this country
that connects us all. So I mean, I've tried to choose businesses that matter, and they are two that do, and Maridin obviously is one that does well.
I wish you all the best, Neil, thank you for coming in today and talking to us, and thanks everyone for tuning in. You can watch Shared Lunch on YouTube or follow us on your favorite podcast app. Leave us at rating and tell us what you'd like to hear next. Ma twa