Earnings Call: H1 2021

Feb 22, 2021

Good morning, everybody, and welcome to this presentation. I'm joined by William Meek, our Chief Financial Officer. I'll move through to Slide 3, which outlines the highlights of the first half of the FY 'twenty one year. We've had a positive first half that's largely been driven by a strong trading performance and by a lift in yields across all of our sectors. And in the same time overcoming some headwinds due to continued low hydrology, which we continue to face into the future. Wholesale prices have remained elevated and obviously the New Zealand aluminum smelter decision has firmed those prices alongside the gas constraints and the hydrology that we have seen. But the positive thing about all of this, of course, is that we do have a clear pathway to the transition to a low carbon economy. And this pricing sends signals for new investment. Our customer segment yields have improved. However, competition has remained fierce. And we expect that to continue through the coming period. We've been very focused on operational improvement programs. Those programs, which we've called our Thrive initiative, are focused on process, performance and culture. And we've signaled that we are looking for an improvement in EBITDA RF of circa $30,000,000 in the FY 2022 year from that program. Our investment into Turatiya continues to face some headwinds and difficulties. But we do now see that the north section of the project will likely be completed in October 2021. That is largely about overcoming the access arrangements with the for the blades, but we do see a pathway to completion. The southern section, we still remain challenged by the physical nature of the terrain and the civil engineering issues are providing some challenges. We're confirming our interim dividend of €0668.8 per share, which is a 6.3% increase on the same period last year. And full year guidance of $0.17 is also confirmed. This will be the 13th year of ordinary dividend growth. If we turn to the next slide, we can see the breakdown of that financial performance. So energy margin reflecting the yield story that I mentioned before, our operating expenditure reflecting less planned outages compared with the previous period and the focus on operational excellence, that giving us the uplift in EBITDAF. At NPAT level, the gain on Hudson Ranch sale, our U. S. Geothermal investment has provided us with an uplift. Free cash flow has improved and remains positive. And prudent management and post COVID issues have meant that our stay in business capital expenditure is lower than the previous period. Our growth investment reflects Turotar Capital Investment. I'm now going to pass to William, who will take us through the next slide. Good morning again to those on the call. So we're now on Slide 5 with the earnings bridge for half year 2020 starting at $258,000,000 and effectively bridging to this year's result at $294,000,000 EBITDAF, so an increase of $36,000,000 a good bridge where most of these steps go up rather than down. So certainly, the period saw slightly lower generation, lower hydro but higher geothermal performance, so about 108 gigawatt hour downward swing against the PCP. We saw higher prices in this period versus the prior half year. And so that benefits generation and obviously is the detriment of the retail portfolio, which is shown in the chart. We did see an easing back in volumes and a benefit there in terms of prices as yields across all segments lifted strongly. So 7% at mass market to $138 a megawatt hour and in the C and I segment, up almost 9 percent to $94.60 Megawatt Hours. Vince has called out the trading performance. You can certainly see that strongly with a $14,000,000 delta in derivatives there, and those are bridged more exhaustively in Slide 20 of this deck. OpEx, it was down 6% and other up, again, on the back of recognition of our share of profits in TILT Renewables and from the sale of our interest in the HR1 plant in California, leaving us with a half year EBITDA of $294,000,000 I'll hand back to Vince for Slide 6. Thanks, William. So just looking at these key performance indicators, on the customer line, our brand remains strongly positioned and we continue to be pleased about the way that that performs in the marketplace, especially in the construct of the second line where the Climate Change Commission draft report is supportive of electrification and the government's commitment to vehicle emission standards really is very strongly aligned with the Mercury brand and the Mercury brand story. Turning to Kaitiakitanga, we continue to look at our emissions intensity and we will continue to try and drive that down as part of doing our job for a net carbon neutral future. Turning to people, I guess it was disappointing for us to have an increase in TRIFA, total recorded incident frequency rate. But that has got some explanation around it given the high levels of activity on the Turatia site. We've worked closely with both Festus and Downers on process controls around injury risk and hazards on that site. And I'm pleased to say that we are seeing a significant improvement in the way that site is being operated. From a commercial line perspective, as we've said, we announced the dividend of $0.608 per share as the interim dividend and are continuing to stay on track for our progressive dividend increases. Stay in business CapEx is lower and that reflects both the effects of COVID and our focus on maintaining our positive cash flows. So I'll hand back to William for the next few slides. Thanks, Vince. So we're on Slide 7 now. A very familiar scatterplot here graphing delta to national storage averages of those New Zealand Lake levels versus the Auckland spot price. Certainly, again, the first half of this financial year, again, seeing elevated prices. So again, a lot of dots in yellow scattered with those black and blue really coinciding with elevated prices since the Powakoura outage in 2018. So certainly, issues with the gas market and tightness of supply definitely feeding through to spot prices throughout the country. TCC has essentially has gas just for winter, hasn't run for some months. So during the summer months has been offline. We're seeing high commitment now with the Huntley Rankins, a lot of that I suspect on coal. So gas definitely feeding through to high prices. Hydrology nationally has been challenging over the last 4 months. So New Zealand is running a 6 percentile inflow. That's largely driven by the South Island, which traditionally would be in its wettest inflow period over those summer months, so very acutely dry in the South Island. And then obviously, carbon outlook on the back of the Climate Change Commission report released at the end of January. Certainly, outlook there for carbon prices to continue to rise as the government looks to its net zero carbon targets in 2,050. So the second chart here on Slide 7 really showing the decline in thermal generation. It singles out the Huntley ranking units, which certainly, in recent years, have been running at much lower levels than they were at the beginning of last decade. And then you see a very acute step up there in the Otahoop futures price with the calendar year 2021 now pricing at around an average of $180 a megawatt hour and then falling back slightly to $140 and then $120 by CAL24. So phenomenal step change in energy costs relative to the relatively modest prices for most of the last decade. It's sort of sitting in the $80 a megawatt hour range. Turning to Slide 8, a slightly different representation of similar data. Again, a number of price curves here. The yellow line showing the spot price, and we can see that big step up in terms of revolving price from late 2018. The blue line showing Otahue Future price, which has steadily risen from 'eighteen and then get very, very strongly from February this year and again, essentially, Mercury's adjusted mass market energy yield. So certainly, against spot prices and against futures prices, those yields on a cost adjusted basis, well underwater relative to underlying energy costs if benchmarked to futures and current spot. So certainly, that price is, as Vince has already mentioned, the commitment for the smelter to remain in operation through December 'twenty four, certainly shoring up demand. Demand generally pretty resilient in the face of COVID-nineteen impacts with only very slight reductions. So again, New Zealand performing fairly well there in regard to demand. And certainly, we are seeing and expect to see further generation development announcements to essentially look to bring supply on to, 1, decarbonize New Zealand's electricity sector but, 2, to certainly introduce supply to bring those power prices back from these elevated levels. Turning to our customer business on Slide 9. Again, a very familiar chart in terms of net gains and losses. We do continue to focus on customer value, looking to optimize that value across all our sales channels. So that's into spot markets, the commercial industrial and mass markets. So that's residential and SME. The strategy has seen a lift in sales yields across all those segments, which I have already referred to. Power switch comparisons are are very interesting. When we look at those across networks throughout New Zealand, we certainly can see quite a disparity in pricing between Mercury's offers and the cheapest offers from other major gintailers. And so those deltas are quite large, ranging between $20 to $60 a megawatt hour, so a very large gap with a note calling out that based on segment reporting, retail operating costs running at about $25 a megawatt hour. So certainly, again, on the chart on the prior page, you're seeing some quite large negative gross retail margins against that. When we look at our strategy, our losses have been largely flat once normalized with a decision to exit the farm source contract. And but what you can see very distinctly there is that Mercury's acquisitions have been steadily declining over that 2018 to essentially early 'twenty one period. In terms of fixed price sales, fixed price sales commitments across C and I and mass markets have actually lifted. The company is actually selling more fixed prices to end user customers with a reduction in mass market sales volumes of 117 gigs, with C and I increasing by 172 gigawatt hours. On Slide 10, which looks at lake management. So clearly, management of Lake Taupo, which feeds the Waikato River catchment and hydro chain, very, very important. So we can see in the yellow line a good performance in actually dry conditions to bring the lake up to near its particularly normal well, what would I call it, operating can see upper bound at 3 57.25 meters above sea level. So we're getting pretty high, almost 600 gigs. And then you've seen a sharp decline as essentially the drought particularly but again from January, February with us slightly below mean levels at this time. Certainly, in a fairly strong position going into the autumn months, We expect to see Chaparral likely to continue to decline. But again, inflows running for the year to date at around the lower quartile. So again, dry in the North Island, which has been a thematic over the last couple of years, but more acutely, you're seeing very dry conditions starting to emerge in the South Island. I'll hand back to Vince. Yes. Thanks, William. So looking at Slide 11 here, I mean, I think you're all aware that the Climate Change Commission draft advice has come out and it can only be seen as positive for the sector with renewable energy being the key driver for decarbonization. I guess from a Mercury's perspective, we support the view that it's the adoption of renewable energy rather than 100 percent renewable electricity. However, in reality, the direction is net positive for the sector anyway. And I think it's we need to be careful about focusing purely on any individual target, but more the market conditions and the environment for continued investment. So that's strong support for transport electrification and for process heat decarbonization is really important. I also note that there was a UTS with subsequent actions to correct and Mercury is unlikely to be materially impacted in that process. So turning to Teratia. So as I say, not without challenges. However, looking at it from a positive perspective, the transmission and grid connection works are largely complete and are available for energization as soon as we have an operating wind turbine on the northern section, where we have 14 base towers and 10 nacelles installed. And the photograph there shows the Black Hawk helicopter delivering the top of a transmission tower and a crane lifting in the cell. Of course, blade access has and remains a critical element. We have increasing confidence that that problem will be overcome. And on that basis, expect completion of the North section in October 2021. Obviously, the shape of that and pace to that time will be dependent on blade delivery. The southern section does provide a much more significant challenge with contracted delays and knock on impacts from the late completion of the northern section. Now whilst the latest schedule shows a significantly later commissioning and a large delay, we continue to work with our EPC contract Vestas to try and find ways to bring that date forward. As I noted on the earlier slide, health and safety has been a major focus on what has proven to be a pretty challenging site from a civil construction perspective. But we are pleased with the latest audit we've done and with the positive way that Vestas and their subcontractor Downer have sought to ensure that hazards are well managed. Turning to the next slide. Now like all businesses, I think COVID-nineteen caused us to take stock and think about how resilient and efficient we are as a business. And it's been fantastic to be able to use an in house review team of the brightest and smartest within Mercury to look at opportunities for us to work smarter, faster and better, but also importantly set a culture of improvement that will stand us in good stead for many years to come. None of that happens without obviously setting some targets. So we've come to a view that there is a $30,000,000 EBITDAF benefit to be achieved. And importantly, in achieving that, that we will be able to focus on new ways of working, using data better across the business, more digitization, looking at where customer what customers value, improving our capability. And we've proven that already to ourselves through an accelerate program, which was looking for opportunities that emerge from the business and taking those through to fruition in a more deliberate, purposeful and faster way than we perhaps would have in the past. So that's all about being fit for the future, but also being resilient to change. So looking at Slide 14, our issue of green bonds, we were really pleased about, because it proved once again that our business reflects what investors care about, a sustainable, better world. Our sale of Hudson Ranch was a great outcome after many, many years of hard work by a very small team to, I guess, get out of some quite complicated arrangements. We have retained a small interest in a technology looking to extract lithium from geothermal brine. We obviously always looking at M and A opportunities and clearly there are 2 well canvas strategic reviews going on at the moment. I will be making absolutely no comment on the TILT process. But I do confirm that Mercury is participating in the Trustpower strategic review of its retail business. We're now turning ourselves to think about what happens after Turatiya and the great asset that we have in the Pukatoy wind farm. We firmly believe that that is not only Mercury's next best generation development opportunity, but amongst the best new generation opportunities in New Zealand. So we'll be looking to progress that and understand both the economics and the pathway to a decision on build. Simplification is a bit of a theme that we've got going through our business at the moment. And we note there are 2 things that we have done to reduce complexity, getting out of Mercury Solar through the sale to ChargeSmart and the consolidation of the Bosco brand. So to wrap up, we did review guidance again and we've revised that to 520. That's really reflects the significantly dry conditions that we have seen through late January and into February. Also reflects the fact that wholesale prices in the ASX remains significantly elevated for the remainder of the year. Of course, as we always say, the change in the weather may result in a change in the guidance. We do confirm though that our year for FY 2021 dividend guidance is maintained at $0.17 per share and that stay in business capital guidance has been revised down from $80,000,000 to $70,000,000 So with that, thanks for your attention. I think we can head back for questions, operator. Thank you. Your first question today comes from Grant from Jarden. Please ask your question, Grant. First question on the EPC contract delay. I think at the start of the year, we were looking for about a $5,000,000 EBITDA from Turitier in this fiscal year. Is that the sort of damages we'd be expecting to be incorporated in your guidance for FY 2021? No. There's no LDs in the 'twenty one guidance. Is that how the contract works in terms of what you're expecting to earn? You'd recoup that from the provider? Yes. So the way liquidated damages would be treated for accounting purposes, they need to be a bit like an insurance contract payout. So they need to be particularly certain. So essentially, while you're in until you get through that process and essentially either strike an arrangement and clarify those that they're going to be paid, then you won't recognize them. So Thanks, Rob. The $30,000,000 of continuous improvement benefits, sounds very much like a cost out program. Can you give some sort of split between revenue opportunities and cost out in that €30,000,000? Look, Grant, it's Vince here. I think at this stage, we're probably not ready to give you that guidance. There's still quite a few projects that are in early stages, but it is across revenue and cost. And yes, part of it is improving doing business with ourselves. Like all organizations over time, you can look at opportunities that simplify things. And you could take a bit of a steer from the executive structure changes that I've made as an example of where that opportunity is. The move to consolidating generation, for instance, provides opportunities to reduce friction in the business. But look, we'll talk about that some more in the full year. Thank you. And then as you sort of 4 months left in this fiscal year, are we expected to see any of that benefit this year? Or is it all accruing into FY 2022? Any benefits that we see this year still built into our guidance as it stands today. Thank you. And my final question just on your commentary that you are looking at the Trustpower retail opportunity. Could we also consider you guys looking at maybe buying the New Zealand assets out of the TILT process? Or is it too early to tell there as well? You obviously didn't listen to the no comment bit, Grant. Okay. Well, thanks for answering my questions. Okay. Your next question comes from Andrew Harvey Green from Fullstack Bar. Please ask your question, Andrew. Good morning, team. A couple of follow-up questions from what Grant was asking. First of all, just on the €30,000,000 benefit for FY 2022. I just wanted to confirm that that is all, I guess, incremental on top of any sort of yield increases and obviously sort of to retire benefits that will come through? Yes. Yes. Yes. Okay. And secondly, are there any costs likely to actually deliver those benefits? Well, there's obviously going to be investments in multiple places to improve processes and systems and things of that nature. But we've made it an EBITDARF target for a reason. That's because that's the level of uplift we want to see. Okay. So the uplift doesn't have any cost to deliver in essence? It's at the EBITDARs level, yes. Yes, yes. Okay. Second question, just in terms of the Turatiya delays and just confirming that there are no financial implications for yourselves other than, I guess, the delayed earnings, which will get off season due course by any LDs? Yes. So it's best to talk about Turatia in the two parts. The North, as Vince says, we expect that to complete in October. The South is definitely more challenged. You're looking at an almost 2 year delay. So we need to work through that with the contract divestitures. Okay. So it is possible that it may end up having some higher CapEx associated with that then? Too early to tell. It's just time. It's mostly driven by time. Yes, okay. But time obviously does have BI consequences. Yes, yes. And the second sort of theory to your question is just I understand that some of the blades were on the Napier ship that caught fire earlier. You didn't mention any sort of implications from that? It wasn't blades. It was nacelles. Nacelles, right. No, that won't cause any delays. They will get remanufactured and delivered before they're needed. We got that on critical path, Andrew. Yes. Okay. Yes. Next question was just in terms of the drop in OpEx and the drop in the maintenance. Is it just more of a timing thing? Or is it sort of an ongoing step change or is it reasonably chunky step change in the first half? Largely a timing issue from a perspective of 1 half year to the next and influenced by the fact that these things do occur partly and partly influenced by obviously reframing what we do under the sort of COVID world that we were living in. However, it's fair to say that as we work through all of those things that some of the opportunity that we've also seen in the way we approach OpEx that will lead into that $30,000,000 Yes, yes, okay. Last question for me is just I guess around Pocatoy, but a more broader question in terms of looking at we've seen a number of new developments announced. I suspect there might be 1 or 2 more coming in the next couple of days. What is your thoughts I guess around the balance in the market once all of those things go through and concerns around overbuild or potentially even underbuild and how being, book to toy fits into that? Well, I suppose a starting position from my perspective is that in any market situation, the most valuable projects should get built 1st. Now, obviously, there's a competitive overlay to that, so people will make decisions based on what they can influence. The next thing I when I think about Pukitoy is its location and wind resource is exceptional. So it is a project that will get built. Timing, obviously, we still need to work through. The risks of I suppose at the moment, the risks of overbuild are whilst they're real, the environment we're in at the moment is it's I think really important that the sector steps up and shows a pathway that will take us past this very challenging transition we have over the coming years with uncertainty around gas and with the fact that we do need to see coal burn reduce if we are going to meet our targets for decarbonization. So that's it's something that has to be navigated that we have to be aware of all the time. However, I think it's far worse if the sector sits on its hands and doesn't start to deliver real sustainable change. Great. Thanks for that. And that's all from me. Thanks, Andrew. Your next question comes from Cameron Parker from Craig's Investment Partners. Please ask your question, Cameron. Hi, guys. Well done on a good first half and a shame about Turitier, but I'm sure that will come along. Look, can you give me a feel for Turitier generation coming on in terms of gigawatt hours over the financial years over the next FY 2022, 2023? Yes. So 'twenty two, based on the timing for Terreter, October full commissioning will be so you can just take essentially a pro rata of the 4 70 gigs for an annualized output. And then given the date of July or mid-twenty 23, you'll end up with the South coming on for a full year from 'twenty four FY 'twenty four. Okay. Thanks, William. Just looking at your residential customer numbers and volumes, they're coming off, what sort of level of concern do you have there? And also, are you going to be putting through any residential price creases over the next 12 months or so? Well, I mean, I would say I don't think I ever like losing one customer to be honest. But equally, we have to accept that there is a very competitive environment out there. And as William indicated, there are some pretty varied views of what appropriate netback is for residential customers. So I guess we're getting increasing visibility of how people think about that transfer pricing. But in this environment, I think we have to think about where we place all of our volume. And obviously, we have chosen the C and I market as a much more of a market which responds over a shorter period of time to changes in price. In terms of residential price increases, well, ultimately, our price increases will reflect the underlying costs. So I think any sensible retailer passes through those costs as they come through, whether they're transmission distribution or other underlying costs. So we will pass those through. And that's currently what we're doing and what we will continue to do. Okay. Thanks, Vince. And you mentioned C and I. What sort of level of C and I volume should we think about for Mercury going forward? It's been increasing markedly over the last 6 months. So it'd be interesting to see where it sort of yes, where it ends up, what level in the portfolio? Look, I think at this stage, we probably it's a little bit dependent on the timeframes for Turotar coming on board. So and we ultimately were responding to the trade off of opportunity to secure forward revenue and forward customers versus the risks that sit in the marketplace that we've talked about with respect to hydrology and gas and some reasonably high levels of volatility in the marketplace. So just picking a number is probably not that helpful. Okay. And lastly, I was just wondering what your view is on there's been a bit of noise in the sector recently around carbon emissions from geothermal plant. What are your thoughts on that? And what's your approach to cost mitigation as carbon prices increasing substantially? Well, I suppose if you accept the thesis that carbon has to be paid for, then it's just a fact that there's some carbon emissions and they have to be paid for. That will just simply like many other technologies mean that some fields will be better than others. I think this idea that it just means you should just close things when there is a process for mitigation is probably not such a bright idea. I think the other thing that we think this will drive is it will drive people thinking about carbon reinjection. And that is that's an interesting technological opportunity that Mercury is interested in. And that's what you want. You want people to innovate to overcome the challenge. But I would say geothermal is a fantastically good resource for New Zealand Incorporated if you take the view that it's the overall transition to a low carbon economy that's important. That's right, Clive. We are investigating a trialing reinjection at Natsumoriki on one of the OECs there. So that project so that's very positive. And if that works, obviously, that can be extended across the wider fleet. I mean, the biggest opportunities at Koda, given that geothermal plant, it's got the highest CO2 concentrations, but it would require a much bigger investment. But certainly, in terms of outlook on carbon prices and sequestration, the economics of that look pretty positive, which would massively reduce the carbon footprint and save mercury money. When we do have carbon inventories and carbon contracts, that's essentially on our carbon footprint will take us through to 2,031. So we've actually pretty long dated in terms of existing positions, but we're always looking for opportunities around carbon to lock in prices that will be below where carbon prices might trade in the future. Your next question comes from Stephen Hudson from Macquarie Securities. Please ask your question, Stephen. Good morning, Vince. And Will, just a couple from me. Just firstly on the guidance. Well, can you confirm that the $6,000,000 benefit you got in OpEx as a result of reduced planned outages in the first half will reverse in the second half? Or are you expecting that sort of run rate to continue? Also, are you expecting any sort of carbon trading or nonrecurring items for the full year? And then maybe one for Vint. I can't remember if you said you were prepared to comment on the Trust Bowery structure, but if you are, is your expectation that the proposal to convert that consumer trust to a charitable trust is your assumption that that is going to be successful this time? So on your first question, so your full year forecast for cost is what, Stephen? Sorry, I think you've got a benefit of $6,000,000 in the first half for large plant outages. Are you expecting that sort of reduced level of OpEx to continue in the second half or sort of normalize higher? You mean it's going to double and carry through? No, no. Yes. No, you're not going to get a $12,000,000 benefit with the full year. No. Okay. So that will normalize largely? Yes. Yes. And sorry, the other part of the question was whether or not you're expecting any sort of nonrecurring type items, sort of carbon trading gains or other sort of nonrecurring gains in that full year guidance? Yes. So the guidance takes account of any mark to market that exists today. That obviously is a function of where prices ultimately settle over the next 4 months too. So that's built into guidance, so no. I think the next one was for me, Stephen. So look, will the Trust's proposal to restructure get through this time? Well, they've managed to exile 1 of the biggest storms in their side last time around, put him out to grass somewhere else. So look, my feeling on it is yes, I think it's more likely to than not. I think there's been a lot of soul searching go on at the trust about how to present this and they're presenting in a different way. And clearly, as the trust proposal says, they were made aware of the form and approach that Trustpower wanted to take to its strategic review and have had the chance to consider that as and what they're putting forward as a result of that. So I mean, notwithstanding that there may be people in the Tauranga Western Bay community who still feel that it's the wrong thing to do. I think clearly last time that voice had the full support of Truss Power and that won't be the case this time. So it seems to me that it looks much more probable and it also appears that they won't have to go in the way they've done it this time. They won't be going for a vote. It will be consultation and a decision by trustees. So all of those things would lead you to say that it will get through. That's you, Saw Vince. Sorry, just while I've got you, I'll sneak in one more. You mentioned that there's sort of quite a variation across the mass markets on what sort of price increases are seen as achievable, sort of one retailer talking about CPI and another, if my experience is anything to go by, sort of talking sort of 2 or 3 times that kind of level. Why do you think that is? Why do you think retailers will take such a different approach? Well, I suppose you could come up with your own views of that. My view is that if retailers take a view that they're not going to pass through the real costs that come to them, it catches up with you eventually and then you face big upward step changes. But for some, maybe they see the ability to increase market share as a reason for keeping those prices lower. But you still, as we've all seen over many years, face the one day that comes home to roost and you then face the necessity to put prices up again. But we are seeing distribution charges across the largely across the board in New Zealand go back up again. And I think those if you don't respond to those, well, you end up in a very difficult place from a sustainable retail business point of view. Your next question comes from Jeremy from UBS. Please ask your question, Jeremy. Good morning. I just have one question for myself. We've obviously seen some operators who are happy to sign PPA agreement or in the market for PPA agreement. I'll just be curious around what Mercury's view is on that and whether or not it would impact the decision to build or encourage or support building at Pogoitoy? Well, my view is it's very positive when people are prepared to support projects by signing PPA agreements. If that enables change to occur and if anybody wanted to do a PPA agreement with Mercury, we'd be open for business. And relative to the stabilized cost to build Pocatoy, would you be happy to sign a PPA at that price or slightly above? Or what's your thinking around that? I mean, I didn't think this was a sort of Dutch auction. But my thinking is if someone wants to put a proposal to us, we're open to discussion. Have you got a price in mind? No, I'm just trying to get my head around things. No, look, I mean, ultimately, I think we will be rational builders and we'll be rational investors. And obviously, anybody signing a PPA also has to who is taking the capital investment risk and construction risk has to get a fair return. And one would hope the people buying the PPA are happy that it represents good value to them in the market against other choices they could make. Understood. Thanks Your next question comes from Neville from Jarden. Please ask your question, Neville. Good morning, team. Thanks. Just 3 from me or 3 areas. So the first one on the Turitier delays. I'm just trying to think through what that might mean for Pocahtois. So if the terrain is difficult, are there any sort of implications for Pocahtois, timing and I guess really two questions there. Your FID decision making on Pocotoi, is that in any way constrained by having to have Turitiere completed first? And then the second part of that question is, would you expect the timeframe construction of Pukitoy to be nearer your original Turitiyya timeframe? Or is that likely to take longer as well from FYT to completion? Just number 1. Thanks. That sounds like 3 questions in one anyway, Neville. But look, there are a lot of lessons, I think, to be learned out of the Turatiya program. And yes, clearly, the connection back into Turotia substations from Pukatoye is a factual thing. And yes, there's a transmission line. I think some of the lessons learned are about thinking about the terrain. So probably the biggest challenge with Booker Toh is the length of the transmission line and making sure that we understand how that works, then there's obviously access to the site for these rather large pieces of kit. But the actual hills and design of the Pukatoy wind farm is significantly different to Turatiya. So whilst one wouldn't say we want to be complacent about the civils on the hill itself, effectively it's a ridge with a long line of turbines on it. In terms of FID, well, I don't think we're in a position to even sort of say when that might occur. But clearly, we have to make sure we've got product we're able to get the product to market in which is all about the transmission system. That probably is much I'd say about that. William, anything? No. But you wouldn't expect to have to sort of show delivery of Toquito South, until sort of 2023 before you were ready to bring Pukitoy to completion yet and sort of have an artificial constraint about that? No, I don't think there's any yes, no, I don't think there's a relationship between those two things because the transmission line that we built. It will be more about sensible timing and making sure that the all of the project risks are well understood and well managed and the lessons that we are learning and have learned from the Turotia project are built in so that when we say we're going to build something by a certain time, it happens. Perfect. Thank you. So second question, just following on a bit your comments about some of the potential CapEx in Nata Mariki. Obviously, in the Climate Change Commission review, they talked about high carbon emission geothermal plant. I mean, one presumes they're really just referring to Nafar and Ohaki. But do you think Kawarau, which is sort of somewhere towards the wrong end of that list, it looks well short of CGTs. But do you think they were including Kawarau and they were talking about limiting emissions from GFM projects? I think the correct answer is we don't know. It's not clear. But there's no denying that all geothermal plants have a carbon footprint. But again, against coal or gas, significantly lower in most cases. Not far, probably being the biggest I mean, the biggest Yes, yes, exactly. And my last question really just goes to thinking about your portfolio for the years ahead. Obviously, you've talked about sort of a bit of a switch towards C and I in the past, but or as a strategy, it looks like it will continue while prices remain elevated and the mass market remains constrained. But from our perspective, sort of looking at your whole portfolio, it does seem like the CFD channel probably has the if you recall it a channel, has the highest netback relative to say C and I and mass market and that would seem likely to continue. So we shouldn't expect and this is the question part, we shouldn't expect mass market and C and I combined to grow very much over the next few years in your portfolio. Yes. Given the there has historically been a link between generation and sales that puts you in a holding pattern. If you're going to move beyond that, that essentially means you are going to be buying spot energy or wholesale energy from market and selling to customers. That's going to be pretty challenging, I suspect, given where acquisition pricing is currently sitting to buy futures and then on sell that to acquisition mass market at current prices, which are $180,000,000 $140,000,000 $130,000,000 for calendar years 'twenty one, 'twenty two and 'twenty three. So yes, I mean, total sales commitment. So we'll be broadly consistent. We're up slightly this year on the prior year, but that's in the round. Right. That's useful. Thank you. Thank you. There are no further questions at this time. So I'll hand the call back to your presenters for any concluding remarks. Thank you, operator. Well, thanks everybody for your attendance and the questions. Always good to share where we're going and what we're trying to achieve. So once again, thank you from William and I. Thank you. Ladies and gentlemen, that does conclude today's conference call. Once again, thank you all for participating today. You may now all disconnect.