These are indeed interesting and dynamic times. In addition to COVID and other challenges, we're also witnessing increased climate instability across the world. And after a long, slow burn, if I may, we're now seeing bold action from governments, corporates and citizens globally.
This is true in Aotearoa New Zealand as well, of course, with the establishment of the Climate Change Commission, Te Pouarangi, and through it, the establishment of our national game plan to reach 0 emissions. We're very excited at the opportunity we have as a company to contribute materially to that just transition. This task, this challenge is far too big for any one agent alone. We look forward to continuing to work collaboratively, constructively, quickly with governments, our Iwi and community partners, our customers, of course, and to standing beside our competitors as we all jointly focus on the work of the time. This is also a time to acknowledge those who are lost to us who have passed across the course of the year and the loved ones they leave behind.
As we acknowledge them, we accept the baton that they pass to us and undertake to continue their work. As we fare well, those who are gone, we return to the world of light and the business of the day. Speaking of transitions and moving on, this is the last time I'll address you in this role after 10 years on this board and what a considerable privilege it's been. I thank you for your support. Of me, yes, but particularly of your Board, of the Board and management of this genuinely remarkable company.
As the proverb, the Papatauaki reminds us, kapu, tahu, kahaul, tahuangatahi. As the old net wears out, it's time for it to cast aside and for the new net to go fishing. Tena koe Tanya, no mai. Kati ake ra. Thank you again for being with us here today.
Kia ora koutou. May you all be well.
Tena koutou katoa and Morena. I am Mark Verbiest, Chairman of Meridian Energy. On behalf of the Board and management, I welcome everyone to the meeting, in particular, on Anderson and Aaron Gill from the New Zealand Treasury representing the Crown. I'd also like to acknowledge Mike Hosek and Anthony Guy from our auditors, Deloitte as well as Naitahu representatives on the call today. Moving to today's business, I declare the 2021 Annual Shareholder Meeting open.
The meeting has been duly convened and a quorum is present. The minutes of last year's meetings have been posted on Meridian's website and are held by the company secretary. Today's meeting is being held online via Computershare's online meetings platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting and read the company documents associated with the meeting.
In addition, shareholders and proxies and their representatives have the ability to ask questions and submit votes. If you have a question to submit during the live meeting, please select the Q and A button on the right half of your screen at any time. Type your question into the field and press send. Your question will be immediately submitted. Should you require any assistance, you can type your query and one of the Computershare team will assist with the chat function and reply to your query.
Alternatively, you can call Computershare on 800-six fifty-thirty 4. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on one topic amalgamated together. Finally, due to time constraints, we may run out of time to answer all questions. And if this happens, we will answer them in due course via e mail.
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To change your vote, simply select Change Your Vote. You will have the ability to do this up until the time I declare voting closed. Voting today will be conducted by way of poll on all items of business. In order to provide you with enough time to vote, I will shortly open the voting for all resolutions. Persons attending the meeting who are not shareholders, proxy holders or corporate representatives of a shareholder may not vote.
This includes bondholders. I now declare voting open on all items of business. The resolutions will now be open in the vote tab. Please submit your votes at any time. And I will give you a warning before I move to close the voting.
I will now move to my chair's address, and I will begin by introducing the Meridian Board and some of the management team. The Meridian Board members online today are Nagajar Sanathkumar Anike Goodall Julia Hoare Deputy Chairman Peter Wilson Mark Cairns Jan Dawson and Michelle Henderson. And our new Independent Director, Tanya Simpson, is also online today. And with me today is Chief Executive Neil Barclay. Meridian's purpose of a clean energy for a fairer and healthier world drives all our business decisions.
We're proud to be Aotearoa's largest 100% renewable generator, and our commitment to sustainability ensures that we focus our efforts in areas where we believe we can make the most meaningful difference. Over the last 12 months, we've put even more focus into accelerating the work we are doing to help combat climate change, and we will cover off some of these actions during this meeting. Given our scale and size, we know we can, and indeed, we must play a material role in supporting our Te Aroa to transition and to thrive in a net zero emissions future. We are proud to continue to hold our position as one of the 5 leaders in sustainability recognized through the Colmar Brunton Better Futures report. But there remains a lot to do.
The COVID-nineteen pandemic continues to play a large impact on our day to day lives. Meridian is fortunate that as an essential service, we're able to continue to operate relatively normally, which has allowed us to continue to deliver for New Zealanders and for you, our shareholders. Meridian has been and will remain focused on working with our customers who have been and continue to be impacted by COVID-nineteen. We've supported customers with tailored payment solutions while making sure that no one had their power disconnected due to the pandemic. In our efforts to lessen the impact, we have not charged late payment fees or credit reminder fees to customers across our brands in both New Zealand and Australia.
We've also supported our suppliers with quicker payment terms. Meridian was supportive of the Climate Change Commission's final advice to the government and our government's willingness to accept it. We must remain alert to the very small window we have to make progress, which we must take. The urgency of the challenge was revealed in the recent U. N.
Climate change report that draws on much of the up to date physical science. It is a sobering read. At the same time, the government is working through RMA reforms. There appears to be a potential conflict between the principle of protecting New Zealand's physical environment and New Zealand's decarbonization goals. We think there needs to be serious consideration to ensure that decarbonization is prioritized so that we don't end up with an unworkable policy platform that actually creates a barrier to building at pace the renewable generation that is needed.
Alongside climate change policy, there's also been plenty going on in the regulatory space for the electricity sector. There are a number of reviews underway into what has now been labeled Black Monday when, unfortunately, the sector failed consumers and the lights went out for some households on one of the coldest nights of the year. The Electricity Authority recently released its preliminary findings on this event last month, which determined that there were shortcomings from system operator Transpower and some other areas for improvement. These events created a very poor outcome for those affected customers, and the industry as a whole is acutely aware of our collective failure to provide a basic need during this relevant time. Alongside the electricity authority's review, the Minister of Energy and Resources has also asked MBIE to conduct a wide ranging review that relates to this outage.
The outcomes of this are due before the end of this year. The Electricity Authority is also undertaking a review, specifically of the wholesale market competition for the period between 2018 to early 2021. And while we believe there are some adjustments that can be made to the market, we also know that New Zealand's electricity market is one of the best performing markets in the world, consistently ranked in the top 10 by the World Energy Council for security, sustainability and affordability, all while delivering to customers. We believe that the electricity market will evolve as it has done for the last 20 or so years in order to meet the challenges that it faces today. And Meridian is committed to engaging in discussions and ensuring that, as a sector, we are able to deliver the best possible market outcomes for consumers and invest in the renewable generation that is needed to help Aotearoa achieve its climate change goals.
We all know the electricity sector is leading some key areas of change, and it will start to look quite different in years to come. One of the changes that will see the sector evolve is the exit of New Zealand aluminium smelters at TY Point. The smelter owners in Meridian agreed a contract extension, which will see the smelter exit New Zealand at the end of 2024. Given that NZAS currently consumes onethree of all energy that Meridian produces, we're focused on ensuring that when they do exit, Meridian is able to create new opportunities that grow value for our shareholders and also for New Zealand. We have a solid strategy in place, and a big part of that strategy is building clean energy systems that help New Zealand decarbonize and achieve our climate goals.
We know that converting to electricity is one of the most significant ways that we can help combat climate change given EATROS' unique abundance of renewable energy, and we're working with a range of companies and partners on projects that will see us accelerate this transition. I will leave our Chief Executive, Neil Barclay, to update you on those actions. This year, we've continued to focus on reducing our own emissions. And as we seek to increase transparency, we look forward to sharing our plan to have our own operational emissions by 2,030. Our Forever Forest program, which continued this year, has seen us plant more than 60,000 stems to offset the remainder of our Scope 3 emissions.
Those are the emissions that we account for in our supply chain that we can't remove ourselves. Our goal is to plant 1,500,000 trees within the next few years. The most material impact we can make is in working to increase the company's renewable energy. We estimate that at least $7,000,000,000 of new renewable generation investment must be built in the next 10 years to keep New Zealand on track to achieve its climate goals. Meridian itself is committed to delivering a significant share of that build program.
Work began on our $395,000,000 Harapaki Wind Farm in the Hawke's Bay this year, which is a tangible step on this path with more to come. This year, we issued our first modern slavery statement and released our 3rd TCFD, that is Task Force on Climate Related Financial Disclosure, report. The first of these reports provides all our stakeholders with more insight into the steps we're taking to ensure ethical business practice is encouraged and observed not only in our business but throughout our entire supply chain. The TCFD report shares further information on how we think about the risks and opportunities relating to climate impacts on our business. Expectations of the entire business community are growing in relation to best in class reporting and transparency, and you will continue to see us challenge ourselves to lead and improve our performance in this space.
We continue to work closely with the communities in which we operate. Our community fund, PowerUp, has been running for more than 14 years now and in that time has invested more than $8,500,000 into local communities through over 1100 projects. Recently, we announced that Meridian has extended its partnership with KidsCan, committed to being the charity's principal funder for another 3 years. Meridian has supported KidsCan since 2013, and it is a privilege to work with Julie Chapman and her team. I know I speak for every member of this company in recognizing the important role Kids Can plays in giving children access to the basics they need so they can succeed in learning at school.
The Board and executive are proud to have achieved a sound business result this year despite the challenging hydrological period, I. E, a drive spell for a number of months. While group EBITDAF, a measure of our underlying operating performance, was down 15% to $729,000,000 it was still a sound result. And whilst you might have noticed that net profit after tax lifted on last year, this was primarily due to noncash movements in the value of derivative instruments, and any cash benefits from these will play out in future years. So EBITDAF provides you a better measure of performance across the year in our view.
The board declared a final dividend of $0.112 a share, which was unchanged from the previous year. This brings the total dividends declared in financial year 2021 to $0.169 a share, which is also unchanged from last year. This year, Meridian announced the introduction of a dividend reinvestment plan that will apply from this year's final ordinary dividend. The board has resolved to apply a 2% discount to this dividend under the DRP. Meridian continues to deliver strong returns for shareholders.
In the 2021 financial year, our total shareholder return was of 11% was again stronger than the benchmark NZX 50 Index. There has never been a more exciting time to be a part of the electricity sector. The role that Meridian plays in transitioning our country to a low carbon economy presents many opportunities to get meaningfully close to our company's purpose: clean energy for a fairer and healthier world. As a purpose led company, we know our actions can grow value and impact for those we serve, our customers, our communities and our shareholders. And in doing this work, we will not lose sight of the responsibility we have to transition the energy sector to a 0 carbon future that is good for everyone.
Finally, I would like to take a moment to acknowledge and thank board members Peter Wilson, our Deputy Chairman, and Arneke Goodall, who are retiring at this meeting, Nga Mihi. Both Peter and Arnake have served on the board since 2011, and both have steered Meridian through its listing on the NZX, several wind farm developments and significant customer growth. Above all, Peter and Anike have been strong supporters of our aims to lead in the sustainability space. We thank them for their significant contributions, leadership and guidance and indeed their friendship over the last decade. Before we move on, I would like to take this opportunity to thank you, our shareholders.
Your board appreciates your continued support and investment in clean energy for a fairer and healthier world. I will now ask Chief Executive, Neil Barclay, to address the meeting.
Kia ora Mark and tena koutou katoa. I'd like to start by quickly introducing you to the Meridian executive team who are online in all of their photoshop glory with us today. They are Tanya Palmer, Chief People Officer Mike Roan, Chief Financial Officer Lisa Hannafin, Chief Customer Officer Guy Wypera, General Manager of Development Jason Willey, General Counsel and Company Secretary Claire Shaw, GM of Corporate Affairs and Sustainability Jason Steen, Chief Executive of Meridian Energy Australia and Power Shop Australia Nick Kennedy, Chief Executive of Flux Federation Chris Avers, GM of Wholesale and also present is Richard Griffiths, acting GM of Generation. During the year, we announced that Jason Steen would be stepping away from the role of Chief Executive of Meridian Energy Australia and Power Shop Australia in December 2021. Jason has recently agreed to stay on as Chief Executive until March 2022 or until the ownership review of Meridian Energy Australia is completed.
Jason has done an exceptional job of steering our Melbourne based team through a prolonged lockdown and difficult trading conditions. So I thank Jason for his hard work and look forward to working with him through to the end of his time with us. Now at Meridian, we pride ourselves on our employee engagement and our health and safety culture. This year, our team's overall engagement scores have remained high, and we know we have a committed, resilient team who are up for seizing opportunities, looking after our customers and doing right by each other. This year, we also appointed a future work lead who helped us develop strategies that will continue to support our people to learn, grow and adapt to new technology and even more agile ways of working.
However, disappointingly, our health and safety statistics slipped with an increase in reportable injuries, more injuries overall and more time off work due to injuries. Now while none of these injuries suffered by our people were serious or long lasting in nature, the Board and management are not accepting our level of performance, and we continue to have an absolute on keeping our people safe from harm. FY 'nineteen and FY 'twenty saw successive record results, powered by strong generation and growth in retail sales. This year, we maintained our customer growth momentum. However, we ran into tough drought conditions that reduced our generation levels and increased our financial hedge costs.
That's just the nature of the business as we are very dependent on variable New Zealand weather for our generation fuel. Also in January, we completed negotiations with the owners of TY Point Aluminium Smelter to extend our electricity supply contract until the end of 2024. And that extension was done at a significant discount to the existing contract. Both of these events impacted financial performance with EBITDAF and underlying NPAT down on prior year by 15% 27%, respectively. But we do believe the underlying drivers of future business value are strong.
Now it's worth noting that since 2018, Meridian has grown the size of our combined New Zealand Meridian and PowerShot brands by 40%, and our sales momentum has not wavered this year. We believe there's still plenty of scope for further growth and enough liquidity in hedge markets to allow us to manage the wholesale price risk associated with that growth. Our focus on delivering great value for our customers continued to pay off in FY 'twenty one, and we saw strong growth in our customer numbers on both sides of the Tasman. In New Zealand, Power Shop led the industry in engaging with customers, as was evidenced in its winning the Canstar and Consumer New Zealand Awards for customer satisfaction and trust. In Australia, we continue to set the benchmark for a great customer proposition.
PowerShop Australia was once again recognized by Canstar Blue, Finder and Roy Morgan for customer satisfaction and market leading products and services. We made very good progress on our digitization journey with around 95% of our customer accounts successfully migrated to our Flux customer care and billing platform. And we believe Flux provides a world class integrated platform that will enhance our ability to delight our customers with best in class products and services. And we remain committed and focused to helping our customers decarbonize and reduce their emissions. This year, we kicked off our process heat electrification program, and it has received a great response from companies wanting to decarbonize their industrial processes.
We already have 292 gigawatt hours of new annual electricity consumption under MoU. Now these projects will start to take shape over the next 12 to 24 months. And when commissioned, they will remove around 106,000 tonnes of CO2 from the environment each year. That's the equivalent to the annual emissions from 40,000 cars, and we've only just begun. Reading can bring to the table sharp long term pricing, but an emerging barrier to getting more of these projects up, particularly as it relates to the financials, is the cost of transmission and distribution upgrades to customer sites.
Businesses are clearly trying hard to decarbonize, and this transmission infrastructure is critical to support a timely transition to cleaner process heat for New Zealand. Our contract with our largest customer, the aluminum smelter, will end in December 2024. As a business, we have always planned for the smelter closure, and we are making the most of the time we have to mitigate the impact of that closure. The most important parts of the mitigation plan concern the improvement of transmission capability so that when the smelter closes, all the energy produced by the Manipuri and Clutha hydro schemes can be transmitted north and not just spilled down the rivers. To that end, the Clutha to Upper Waitake lines project continues to track well, and Transpower will deliver that upgrade a couple of years before the smelter closes.
We've also now secured a North Island site for a grid scale battery that can provide North Island reserve and greater effective capacity on the HVDC link between the South and North Islands. An asset like this would have also made a big difference during the event like 9th August. So we've upped the priority on this project and are looking at ways to bring forward deployment to early 2023. We're also working with many potential new and existing customers to grow the demand for electricity in the South Island, which will more efficiently utilize hydro generation made available when the smelter closes. These opportunities include the electrification of process heat used in existing manufacturing, as I mentioned earlier, a large scale green mega data center and the potential to create the world's first large scale green hydrogen manufacturing facility.
New Zealand has something that the world wants, renewable energy and the opportunity to grow the New Zealand economy through new green industries for both export and domestic use are truly exciting. Now this year, we experienced the 3rd worst drought that we have seen in the Waitake catchment. The amount of water that didn't turn up in FY 'twenty one compared to FY 'twenty was the equivalent of the entire Lake Pukaki operating range twice over. Our catchments are generally fed by a small number of significant rainfall events each year, and there was clearly a lack of those between November June. As a result, generation in FY 'twenty one was 11% lower than the year before.
Now the good news is we've seen record inflows over the winter, which now has which has now alleviated our fuel squeeze, and we've started the new financial year in pretty good shape. The low inflows earlier this year, combined with some yet to be resolved supply constraints in the gas market that first emerged during 2018, did result in a period of very high wholesale prices. I believe our wholesale team managed our hydro storage exceptionally well during the period of drought and showed we were able to conserve water while still meeting our customer needs. We are expecting the gas deliverability issues to take another year or 2 to resolve, so relatively high wholesale prices could be a feature of the market for some time to come. Fortunately, the vertically integrated business model Meridian has adopted means that we've been able to shield most of our retail customers from those high wholesale prices.
But we do acknowledge that some of our commercial customers have been doing it tough. We've been working with these customers to assist with extended contract solutions that help to smooth their costs over time. Over the Ditch, while our Australian retail sales volumes increased, wholesale prices fell to unsustainably low levels, and this impacted the performance of our generation assets. Overall, the Meridian Energy Australia result was down on the prior year, even though we had more hydro generation available as the drought conditions that had been a feature of the last few years began to ease. Recently, Australian wholesale prices have lifted from the low levels during FY 'twenty one.
Also, the strategic rationale for investing in renewable energy in Australia is still sound, given that only around 30% of Australia's electricity is generated from renewable sources and the potential for growth in renewables is large as Australia looks to decarbonize its economy. But the energy market in Australia is highly politicized, and government and regulatory intervention at both state and federal levels are creating significant uncertainty for our business. So just before the end of the financial year, Meridian announced a strategic review of the ownership of our Australian business. This review is still ongoing and is considering all options, including partial or full divestment of the business or continued ownership. We have engaged advisory firm Lazards to help manage this review process, and we expect to be able to make a decision about the future of Meridian Energy Australia before the end of the calendar year.
Now ultimately, I think the outlook for growth in the electricity sector is huge as Aotearoa embarks on a path to net 0 emissions by 2,050. Our country's electricity industry, whilst not perfect, does deliver world leading outcomes for New Zealanders across the trilemma of reliability, sustainability and cost. In real terms, the cost of electricity has not increased in New Zealand for residential customers for more than a decade, and the long term trend is for the cost to consumers to reduce further. Now I know that may not seem obvious when we look at recent high wholesale prices, but it is hard to argue against given the forecast future costs of both wind and solar, which will continue to plummet. Most importantly, the market is delivering clear investment signals, and the industry is responding with a strong new renewable build program.
I don't think anyone doubts the importance of achieving a zero emission economy, and the science is telling us we must do it much sooner than 2,050. Rapid growth in renewable energy is inevitable as costs fall, and I believe a 100% renewable electricity grid by 2,030 is on the cards. But the opportunity for the electricity sector is far greater than a renewable electricity grid, and we need to support the electrification of much of the rest of the energy sector in New Zealand. Now there will undoubtedly be challenges. Particularly, we need to manage dry years when the lakes run low and hydro generation is reduced.
I think we are likely to need a small amount of reserve gas generation for particularly dry years, but other innovative hydro firming solutions are emerging. Most importantly, the electricity market does deliver clear incentives to participants to manage security of supply and to do that efficiently. We believe by staying true to our sustainability values and company purpose and by continuing to strengthen our brands, our people and our renewable asset base, MRIdian can deliver on our customer and renewable generation growth strategies and continue to provide value for all of our stakeholders. Now just before I hand back to Mark, we'll play a short clip of some of the highlights from the last financial year. Thank you.
I can advise that we've received 2 written questions by the deadline. The first question comes from Mr. Loveridge, and he asks, at successful companies, the directors and senior executives have all purchased shares in the company. So my question is, why is it not mandatory for directors to have purchased within 1 month of being appointed the equivalent of 1 year directors' fees? And why is it not mandatory that senior executives purchase the equivalent of 6 months' salary within 1 month of appointment.
The board does strongly encourage directors to hold shares in MRIdian. But whilst this is not a strict requirement and the board considers that share ownership should not be a barrier to joining the board. It can be an issue, particularly for younger members joining the board, so we want to make sure that we take all members' age and stage into account. Note that the New Zealand Shareholders Association position is that it is not mandatory for a director to hold company shares and that individual directors should be free to decide on how many to hold according to their personal financial position. Mr.
Loveridge has also asked, for total transparency and fairness, senior executives and directors purchase or sell shares after initial appointment, and this can be in a period starting 7 days after the release of the annual report and finishing 37 days after the release of the annual report. Can the board please explain this course of action? I think what you're getting at is a better explanation of our trading and securities policy, and this sets out our restrictions in dealing with MRIdian Shares. Under that policy, it is prohibited for a director or senior manager to trade in MRIdian Shares with inside information, and we also have 2 blackout periods that present prevent, sorry, our directors and senior managers from trading in MRIdian shares. These blackout periods are from 31 May until the day following the release of our full year financial statements and 30 November until the day following the release of our half year financial statements.
This means our directors and senior managers can only buy and sell MRIdian shares between the end of March to the 31st May and from the end of August to the 30th November in any year. I hope that helps answer the question. We certainly comply with our disclosure obligations under the Financial Markets Conduct Act and disclose details of any purchase or shares by directors on the NZX. The second question comes from Mr. Walbrun, and he asks, does Meridian have any views on the role of retailers in facilitating demand response at the consumer level?
Mr. Walbrun refers to some background information as part of his question. The electricity authorities see consumer level demand response as a key to assisting our climate change transition in New Zealand. In the U. K, retailers have played a pivotal role in facilitating consumer level demand response.
Meridian would appear to be well placed to be an innovator in this space, and the main barrier to it seems to be concerns raised by the Electricity Authority regarding regulatory barriers. Meridian is very supportive of the development of demand response, Mr. Walbrand, at a consumer level in New Zealand. There are examples of this type of development in overseas countries, including Australia, where our own Power Shop brand offers a product called Curb Your Power. Victorian Power Shop customers help reduce demand on the grid by curbing their power usage at certain peak demand times, and they earn rewards in exchange.
In the background you provided with your question, you raised the point about regulatory barriers as a challenge to demand response development in New Zealand. From our point of view, I think it's not so much a regulatory barrier but rather the lack of regulation in the space that might be a barrier to development of competitive markets for the flexibility and demand response type solutions. We know that the Electricity Authority has done work in identifying the problem, and we look forward to policy development addressing it. Online questions are now open. We will accept questions from shareholders or anyone who has been appointed as a corporate representative or proxy.
I will then either answer your question or direct it redirect it to a member of the Board, the Chief Executive, the Chief Financial Officer or as may be appropriate. Please only raise questions relating to the management and operations of the company at this stage and hold questions relating to the formal resolutions until that part of the agenda. Are there any questions or comments, please?
Okay. The
first question comes from a Mr. Hopkins. Hydrogen fuel cell cars are said to be more environmentally robust than electric vehicles. Where does Meridian Energy stand? Or what progress has the company made to venture into creating hydrogen production facilities that could support this form of transportation?
Mr. Hopkins, as you'll probably be aware, we have undertaken an exercise asking for expressions of interest in a hydrogen facility project down in Southland. We've received the initial responses to that, and the teams between ourselves and contact are now analyzing those briefs and intend to engage with relevant parties. There's been a lot of positive response, and we would expect to have some updates in the coming months. Neil, do you want to add anything to that?
I think that pretty well covers it, Mark. I mean, certainly, electricity looks at this stage to be a far more efficient way of powering our light vehicle fleet in this country, but hydrogen is likely to play a part in the heavy transport sector. So that's part of what we're looking at down in Southland is creating an opportunity for hydrogen exports and domestic use, probably most likely in heavy transport or something along those lines.
Okay. The next question, if you could scroll it up please a bit. Questions disappeared.
I can see it
now. Well, there's one question I can answer in the meantime from Mr. Hopkins. Does Meridian Energy have plans to acquire the facilities at TY Point when their contract expires at the conclusion of 2024? No.
But there's a question above that that we must what yes, again, from Mr. Hopkins. What barriers does MRIdian face when considering expanding within the energy sector into hydrogen gas production? Well, again, Mr. Hopkins, the simple answer is our whole expression of interest process is actually to make sure that we've identified all of those barriers and understand what various industry participants in that sector have and answers they may have in terms of addressing those.
So we will have a better idea of where we sit in several months' time when we're further through this process. Next question from the Shareholders Association, which has disappeared again. Excuse me. Here we go. You've commenced a DRP scheme in order to reduce debt levels.
Will the DRP be a long term initiative? And what is your preferred level of debt gearing? Well, yes, it is a program that we expect to continue for some time. We want to maintain a prudent level of debt gearing, and we remain committed to effectively staying within our current bounds, which are a BBB rating with a 1 notch upgrade given majority crown ownership. And I think we currently sit at about 2 to between 2 and 3.
I think it's 2.3x in terms of our debt gearing, So reasonably conservative. It looks like this one I might pass to you, Neil. Are you going to participate as a generator retailer in the MTR that has multiple trading relationships pilot by Araake?
Look, we're very interested in participating in that sort of innovative idea, so we're totally open to it. The conversations with RRP are just in the infancy at this stage. But I'd say, yes, there's certainly a desire and an intention for Meridian to be part of that.
The next question comes from McCallum family. Sorry, yes. What view does MRIdian have on the merits and impact of Lake Onslow Pump Storage Scheme? Well, at this stage, I would say our analysis and independent views such as Concept Consulting, who are widely regarded in the sector, have said. We see it as quite an expensive option that could be considered to support variable renewable generation.
And one of the initiatives that we have underway around a hydrogen operation would include potential demand response that could actually solve a lot of the problem in a different and a much cheaper way. But that said, there's a lot of water to flow in terms of considering all of these options, and we're just genuinely looking forward to participating in that debate. Another question from the MacCallum family. What is the future dividend policy? And what proportion of earnings will be paid out?
Is the policy sustainable? We think the policy is sustainable. We are we, at this stage, have no intent to change our dividend policy away from what it currently is, which is 70% to 90% of free cash flow averaged over time. And I mean, obviously, we will assess things continually. But certainly, at this stage, there's no intent to change our current policy.
The next question from Keane Family. As at 30 June, Meridian's current liability payables and accruals increased by £213,000,000 compared to 30 June 2020. What accounts for this significant increase? That's quite a detailed question. I might get our Chief Financial Officer, Mike Rowan, to answer that.
If you could, Mike?
Thanks, Mark. Appreciate it. Good question. As noted, our payables and accruals lifted by 213,000,000 between financial years. You also look on the same page of our integrated report, you'll see that our trade receivables lifted by 168,000,000 dollars between the same periods, and they're both driven by the same outcome, which is we had significant lifts in wholesale prices during the year compared to the previous year.
And of course, they affect both the payments we receive from wholesale electricity market as well as the payments that we make on behalf of our customers. So that explains the entirety of the difference.
Thank you. Question from Mr. Watkin. What does the board have to say about the findings of the Electricity Authority that the company deliberately spills hydro water for purely commercial reasons but obviously contrary to sustainability principles. Well, actually, the authorities' final findings were that there were a number of market factors that occurred during the period, And we've always disagreed with the accusation that we deliberately spilled water.
That's not what we've ever been about. But notwithstanding that, we've accepted the authority's decision, and the important thing is we move on. Then a question from the TY sorry, the Saxton family. When TY closes, you speak of energy being transmitted north, a costly option. How seriously has consideration been given to establishing data centers in the South?
Well, a couple of things there. Firstly, TransPower is busy upgrading its lines in order to make it more easy once the smelter is shut to transport electricity further north. That had been a bit of a barrier up until this point, but that project is well underway. In terms of serious consideration to establishing a data center in the South, we have a party who is well underway with its process in terms of potentially establishing a data center in the South. So at this point, we're pretty confident about it.
Neil, is there anything else you wanted to say about that specific element? No, I
think that's progressing well. I mean, you are right. Even when the transmission improvements are put in place, the energy losses between Southland and Auckland where most customers are is between 15% 20%. So there's certainly a case for the country and the energy sector to find better uses for the energy in the Southland region. The conversation we've got going with the data center is promising.
As I mentioned earlier, we're working with customers who are looking to electrify their process heat. So that's a really strong opportunity, and we'll take emissions out of the environment based on existing manufacturing. And that also is the opportunity that we're looking at around a green scale hydrogen production facility. So I think all of those factors are coming into how we're looking to more efficiently use the renewable energy from the particularly the Munno Pori and the Clutha hydro schemes.
Thank you. And a question now from Mr. Gottschalk. The board was aware more than 3 years ago that the aluminium smelter was going close the New Zealand operation? Why was mitigation not started earlier?
And what assurances do we have that we will not again be held to ransom? Well, what I can say, Mr. Gottschalk, is certainly, and as you can imagine with our biggest customer, we weren't sitting on our hands for more than 3 years during that period. There were a multitude of discussions that occurred during that time. But as with any negotiation, they tend to culminate at a point.
But you should not assume, and in fact, it wasn't the case, that in fact nothing was going on during that 3 years prior. Another question from Mr. Gottschalk. Directors appear to hold multiple directorships. How can you adequately manage the workload?
And what systems are in place to ensure directors are paying sufficient attention to Meridian? I can absolutely say and assure you that all directors take their responsibilities very seriously and make sure that they have adequate time to manage the workload. And indeed, there's a bit of fluidity because in a few cases, there are retirements from other boards that are going on or that are imminent. And so what someone might hold today isn't necessarily going to be the case tomorrow. But it is something that we take very seriously and indeed are only too happy to engage with shareholders and make sure that you are satisfied that we are spending adequate time.
Another question from the Keane family. As at 30 June 2021, meridian's total liabilities of 1,110,000 dollars exceeded current assets of 917,000,000. How will MRIdian meet and cover this shortfall in the current financial year through to 30 June 2022? Well, a good part of the answer is that our current portion of term borrowings is going to be renewed with longer term debt in the next 12 months, and this will reduce the balance of current liabilities. I think that's the simplest answer.
Okay. Next question from Mr. Watkin. Does the board think it is appropriate to have swaption arrangements with any competitor? And in particular, is it appropriate to have such an arrangement with Genesis, which involves non sustainable and nonrenewable energy sources?
Neil, do you want to answer that one?
Yes. Look, I think we're very fortunate in this country. We've got a highly flexible hydro backbone that is really that's the basis of the electricity sector. And that will enable us to introduce a lot more renewables, intermittent renewables, like wind and solar. And as I mentioned in my speech, the cost of new wind and solar is coming down dramatically.
So we're on a path to a far more renewable grid, irrespective. It's just the economics are driving us there. But the slight weakness in our hydro backbone is we have relatively small amount of hydro storage. So we still need to find ways to firm up hydro when we have those dry winters. And whilst I think thermal or gas fired generation plant will become a much smaller part of the overall equation, we will still need some aspects of that to cover to firm up the hydro position when we have a very dry drought period and hydro inflows are low.
So we are working with a number of parties around replacing our swaption arrangement. We are open to working with parties that will facilitate gas assets for the next 10 years. We think that's a sensible and reasonable approach for us as an industry to adopt. It's not perfect, but I think, as I said, with the advent of new renewables, the percentage on average of gas fired plant being used to generate electricity will reduce. And I think by 2,030, we're probably looking at about 98%, 90%, 99% renewable in most years with some reliance on gas and those particularly strong drought periods.
So that's a pragmatic way to get us to a far more sustainable position in the future and also to support other businesses to convert their fossil fuel use to electric, which as I say, will be mostly renewable within the next decade.
The next question, does Meridian support and agree with the government removal of the low user power plan, which 59% of households are on? And Central Otago removal will reduce further uptake in renewable energy in the way that increased electricity use and decreased dependence on gas and wood for heating. Neil, I might pass this one on to you again.
Yes. Look, the short answer is yes. We do support the removal of the low user plan. Like the government, we've been aware for quite some time, as the whole industry has been aware of the unintended consequences of the tariff, which can put more of a financial burden on those who don't qualify for the low fixed charge, particularly large families living in poorly insulated homes who have high electricity needs and have to pay for the higher standard higher than the standard fixed charges. Now the key thing here is we need to manage the transition.
And most industry participants have put money into a fund that we're going to actively use to manage the transition from the low fixed user charge to a more standard charging regime over time. So I think providing we manage it sensibly and look after those customers that are most vulnerable, we can manage the transition okay.
Next question, if you could scroll it up, please. There we go. Can you please explain the reasons for the dropping of earnings in 2021? Well, I think actually we've already addressed that point. Key reason was we've just been through one of the worst droughts that in the period between November May, culminating in May of this year.
And that's basically that as Neil also explained in his address, we are very much affected by the way that hydrology occurs in New Zealand, and we can't control the weather. Next question. What factors caused a 7% decrease in employment engagement from 2020 to 2021? Well, actually, through the first COVID level 4 lockdown, we saw a lift in engagement again. And in fact, engagement have returned to our pre lockdown levels.
There's always going to be a bit of fluctuation. And I can say from my experience involved in other companies that the engagement rates at Meridian are actually pretty high and are often not only well regarded, but it's a source of why our employment brand is so strong because incoming employees look at aspects like that. So certainly, at this stage, it was something we keep a close eye on. But as I say, things have actually pretty much returned to what we would expect, similar level to it was as it was in 2020. Next question from Mr.
Quinlan. Does the does Meridian have any comment on recent social media about the lack of recyclability of wind turbine blades? And how accurate are these reports, especially in relation to our own operations? Neil?
Actually, I'm not up to play with the load with that social media. What I can tell you is the all the blades that we've largely had in place now for the last ten, going on 15 years with the Te Upare Wind Farm, are mostly still operating and spinning. Now we will have to work through a recycling process, but we're still 10 years away from any thoughts of decommissioning or repowering Te Aperi wind farm, which is our oldest wind farm. So we've got time to work through those sort of recyclability type issues. I'm not aware of anything particularly critical at the moment, to be honest.
Okay. Question from Mr. Bradford. Please outline the impact the Lake Onslow project would have on Meridian if the government decides to proceed with it. Well, there are a lot of questions to be answered around that, Mr.
Bradford. It's not entirely clear who might own the project or the asset, if it was proceeded with, how it would play in the market, its pricing and so on. But obviously, a key from our point of view in terms of New Zealand meeting its decarbonization goals is ensuring that we don't upset the other rest of the sector's investment incentives in terms of building new generation. And so that is something that I think needs to be considered with some care. Next question from the Altman's family.
With increasing movement by households to solar panels and associated battery technology, what can Meridian do to more tightly integrate this source of energy? Neil, do you want to answer that? I think it's partly answered by the sort of initiative that Mr. Walbrun, shareholder, put up in terms of the sorts of novel ideas and plans that retailers can put to consumers as part of their offering?
Yes. Look, there's no doubt we're going to see a lot more solar penetration in residential households over the next 20, 30 years we need to. The energy transition can't be just solved through grid scale generation options. We're also likely to see batteries in most homes, and the first battery that turns up will probably be in a person's electric vehicle. So there's a lot of work to do, I think, to develop technology solutions that allow customers to more interactively work with the electricity sector by, in some instances, giving back into the grid and, in some instances, taking energy from the grid at low capacity times, for example.
What we're working on at the moment is our options around EV charging. We're also working with large industrial customers around solar and how that can more carefully integrate into their premises. So we're working on it actively. There's a lot more work, I think, across the whole industry. We won't have all the solutions, but there's a lot more innovation required to ensure that the grid overall operates in its most efficient and effective way.
But that investment is going in, and that innovation will start to turn up in the next few years, probably over the next decade.
Next question, which actually looks pretty similar to the last. Does the board see a place for residential generation? If not now, when? Currently, the buyback rates seem to be significantly lower than wholesale fees. Well, yes, we do see a role for residential distributed generation, and our solar buyback rate takes a medium view medium term view of wholesale prices and not just the current prices.
Is there anything you want to add to that, Neil?
No, I think that pretty well covers it, Mark.
Okay. Installing solar panels on roofs of our customers, do we have thoughts on that? Will it alleviate drought conditions as you've been mentioning? I think, again, that's probably covered in the last set of questions we've already answered. Okay.
Thank you. I'm told that those are all the questions. We certainly appreciate your feedback and your involvement in setting those for us. Before we move to the formal resolutions set out in the notice of meeting, I will just briefly outline today's voting procedures. Having opening the voting earlier, you will note a new icon has appeared.
Selecting this icon will bring up a list of resolutions and present you with a list of voting options. To cast your vote, simply select one of the options. There's no need to hit a Submit or Enter button as the vote will automatically be recorded. Persons attending the meeting who are not shareholders, proxy holders, corporate representatives of the shareholders, including bondholders, may not vote. Many shareholders who are not attending this meeting have already voted.
And at the request of the New Zealand Shareholders Association, the announcement of the proxy count will be deferred until after the formal resolutions have been considered by the meeting. It is my pleasure to introduce and move the resolution to reelect Mark Cairns as the Director of the company. Mark was appointed to the board in 2012, and he is currently Chair of Meridian Safety and Sustainability Committee. Mark the board considers Mark to be an independent director and unanimously recommends that shareholders vote in favor of his reelection. Mark, I will invite you to address the meeting, please.
Thank you, Chairman. Nau mai, haiti mai, tina koutou kato. Good morning, ladies and gentlemen. I've been privileged to serve you as a Board member for around 9 years now, joined the Board just prior to listening back in 2012. The company's performance has been strong over this time, both in exceeding prospectus projections and then continuing to generate strong returns against many headwinds along the way.
I'm also a very happy shareholder. You have brief details on my background in the notes meeting. I'm a civil engineer by profession and a fellow of Engineering New Zealand. Earlier this year, I retired after 16 years as Chief Executive of NZX Listed Port of Tauranga to pursue a full time governance career. From the Port and previous roles at Fulton Hogan and Tom's, I bring extensive experience in the management roles and business operations at scale, including significant exposure to capital markets.
I have been around large scale infrastructure most of my working life and have a track record of delivering large projects within time, cost and quality expectations. I can say this will be a useful skill to sit around the board table as we move into a major infrastructure build phase with our new wind farm at Hatapaki currently under construction. I'm passionate about sustainability and currently chair the Safety and Sustainability Committee. We only have one planet and I'm proud that Meridian only generates electricity from 100% renewable sources, wind, water and sun. I consider that Meridian is a great company with an director for another 2 years.
Namihi, thank you, ladies and gentlemen.
Thank you, Mark. I move that Mark Cairns, who retires by Cairns, who retires by rotation and is eligible for reelection, be reelected as a director of the company. Is there any discussion? No? I'm told there isn't.
I have moved the resolution and I therefore put the resolution now. Shareholders should complete their voting for the resolution. I will now pause to allow you time to finalize your votes. To introduce and move the resolution to elect Tanya Simpson as a Director of the company. Tanya joined the board in August 2021.
She is currently a Director at Tainui Group Holdings and Auckland International Airport, is the Chair of the Sustainable Seas National Science Challenge and a member of the Deep South National Science Challenge. Tania is also a member of the Waitangi Tribunal and Deputy Chair of the Waitangi National Trust. The Board considers Tania to be an independent director and unanimously recommends that shareholders vote in favor of her election. Tania, I now invite you to address the meeting.
Greetings to you all. My name is Tania Simpson. And through my mother's lineage, I'm a descendant of Ngai Tahu, Ngapohi and Paimui ancestry. On my father's side, I descend largely from Scottish families. I have a background in governance, including on a couple of NZX listed companies, and I currently serve on the boards, including Auckland Airport, Tainui Group Holdings, and I'm Deputy Chair at the Reserve Bank.
But I think you have access to an overview of my general involvement. I was humbled and honored to be considered for the Board of Meridian Energy, and it would be my sincere privilege to serve Meridian's shareholders. I have a background with the energy sector as a previous director of Mighty River Power from 2,001 to 2015, working through a period of establishing new geothermal and wind generation capacity, much of which was in partnership with Maori Landowners. I was also a director during the partial sell down of the government's electricity companies. And when I left the energy sector in 2015, there was a hiatus on new generation builds due to the reasonably flat demand.
And now on returning to the energy sector 7 years later, the sector is at a point where we're seeing an increase in demand, and we are searching for options for developing new capacity. In addition to experience in the energy sector, I have a strong interest in environmental management and sustainable use of natural resources. This, along with my ties to Ngai Pahu and other Iwi, supports my interest in ensuring that we work collaboratively to guarantee that the waterways and resources that Meridian uses will endure well into the future for the many generations of families who will live alongside and use these resources for years to come and that these will continue to generate positive returns for the current and future generations of investors. Meridian demonstrates a model of commercial activity with strong environmental and social values, something that's increasingly important to all New Zealanders. In fact, worldwide, many other companies aspire to achieve this mix.
I'm very committed to ensuring that creating and growing shareholder wealth can be maintained along with a leading sustainable environmental and social framework. Meridian enjoys a strong reputation and is well positioned to develop new growth opportunities. With your support, I will do my best to assist the company to move forward in a way that continues to lead in the sector. It demonstrates strong value and creates good value and returns for its shareholders. I'll be retiring as Deputy Chair of the Reserve Bank in June 2022, and I'm reducing a number of other commitments over the next few months.
I'm committed to maintaining a high priority focus on Meridian Energy, including supporting the company as it works through its reconsensing processes and its discussions with Tangata Penua. I would also like to acknowledge outgoing direct Ghana Equirol for the work that he has done in this regard over many years. I recognize that Meridian has a long history and a long future. It's part of the bedrock of New Zealand's energy sector, and it's uniquely placed to continue to grow and develop sustainable options for New Zealand's energy future. I thank you all for your ongoing support of Meridian Energy, and I ask for your support to serve you as a Director of your company.
Thank you, Tanya. I now move that Tanya Simpson be elected as the Director of the company. Is there any discussion? I have moved the resolution. I now, therefore, put the resolution.
Shareholders should complete their voting on the resolution. I will now pause to allow you time to finalize your vote. Okay. Moving on to the last resolution. I now move that the total annual director fee pool be increased by $99,000 or 9% from $1,100,000 to $1,990,000 with the first annual increase to be backdated to take effect from 1 July 2021.
Is there any discussion? I have moved the resolution. I therefore now put the resolution. You should now complete your vote. Ladies and gentlemen, that concludes our discussion on the items of business.
I will pause briefly just before I will close the voting for the final time. Please ensure that you have cast your vote on all resolutions. I will now pause you to pause in order to give you that time to finalize your vote. Ladies and gentlemen, voting is now closed. Thank you for your attendance to the resolutions and to the meeting.
As advised earlier in the meeting, many shareholders have voted by proxy before the meeting. And at request of the New Zealand Shareholders Association, we delayed the announcement of those results until after the consideration of the resolutions. As you can now see on your screen, I can advise that 1,950,000,000 votes, representing 76% of the shares on ISU, were lodged with the share registrar, Computershare, 2 days prior to the commencement of the meeting as required. Thank you for voting. Once all votes have been cast, they will be counted by Computershare and scrutinized by our auditor, Deloitte.
The results will be advised to the New Zealand and Australian Stock Exchanges later today. As the policy of the board is to rotate the annual shareholders' meetings around the main centers of Christchurch, Wellington and Auckland, the current intention is to hold next year's meeting in Auckland. Thank you for attending our Annual Shareholders' Meeting. I now declare the meeting