Welcome to Meridian's 2021 Annual Results Briefing. I'm Neil Barclay, Meridian's Chief Executive, and I have sitting here on my virtual left Mike Graham, our CFO. At least I think he's there. I'll make a few opening remarks before we get into the guts of the presentation. Most obviously, we saw quite a shift in financial performance in FY 'twenty one compared to the previous 2 years.
FY 'nineteen and FY 'twenty saw successive record results, powered by strong generation and growing retail sales volumes. This year, we maintained that customer growth momentum. However, we ran into tough drought conditions that reduced our generation capability and increased our hedge costs. That's just the nature of the business and the variable New Zealand weather. In January, we also completed negotiations with the owners of the TY Point Aluminium started to extend our electricity supply contract at the end of 2024.
That extension was done at a significant discount to the existing contract. Now both of these events impacted financial performance with EBITDAF and underlying impact down on prior years by 15% 27%, respectively. But we do believe the underlying drivers of future business value are strong. Now in particular, since 2018, it's worth noting that we've grown the size of the combined New Zealand, Meridian and PowerShot customer bases by 20% and the total volume of energy sold to our retail channels by 40%. And our sales momentum has not wavered this year.
We believe there's still plenty of scope of further growth and enough liquidity in hedge markets to allow us to manage the risk. Our Haripakki wind farm construction is underway in Hawke's Bay and our development pipeline is rejuvenating. We're also buoyed by future opportunities that have started to take shape beyond the smelters exit in 2024. I think ultimately the outlook for growth in the sector is huge as Aotearoa embarks on a path to a net zero emissions by 2,050. But there are some challenges our industry must manage on the decarbonization journey.
I think the own goal that electricity sector managed to score on the 9th August by causing widespread customer outages was just a symptom of a broader contextual issue that the industry must address. The industry is emerging from a period around 13 years where we've seen no discernible growth in demand. Accordingly, the system has not been put under any real pressure to accommodate new levels of peak demand as occurred on the 9th August. It's also become crystal clear that over the last 3 years that the flexibility and reliability of the gas supply chain from gas field through to generation has eroded considerably. And whilst there is investment going into the upstream gas assets, the situation may be exacerbated by the inevitable growth of renewables that are displacing baseload thermal generation at a rate of NOx.
Waikiki, Teuritia, Tohara and Harapaki combined equate to 8% of current demand despite muted demand growth. Now I don't think there's I don't think anyone doubts the importance of reaching 0 emissions economy ideally sooner than 2,050. But the introduction of the 100 percent renewable electricity target by 2,030 has rapidly upended the wider industry's long standing plans to use gas and in particular fast start gas peakers to provide renewable Permian capacity and to efficiently transition away from coal. Now I doubt there will be one silver bullet solution to enable a seamless transition and some of the renewable firming initiatives being muted presently are still well over a decade away. So we do need government policy that is more sympathetic to an accepting of some gas generation.
Also what happens to the load currently contracted by ANSYS through 2024 is a relevant consideration to any package of options to enable a seamless transition as our efforts to enable large scale demand response from existing and new industrial users. I think the future is bright, but we do need to be smart in tackling the transition to renewable grid to ensure the continued affordability and reliability of electricity to New Zealand consumers. And I'll talk more on this presentation about some of the actions Virgin has been taking to invest in the decarbonization challenge. The New Zealand customer growth momentum was mirrored in our Australian Power Shop business and we're super proud of these results. Succeeding in retail is down to the proverbial battle of interest and there's no single ingredient that I would point out to our secret sauce.
It is really about getting every aspect of the customer offer and service experience just right. And to do that, you need great people and a culture that cares. The really good news is we know where we are now and we know we've got plenty of potential to improve. While our cash earnings reflected the impacts of the drought in Ensis renegotiations, the Board was comfortable maintaining the ordinary dividend at FY 2020 level, albeit at a higher payout ratio. To help accelerate decarbonization, we kicked off our process heat electrification program in February.
And it's super encouraging to see a growing commitment from businesses wanting to decarbonize their industrial processes. We already have 171 gigawatt hours of annual load under MOU or contracted and we're close to having a fewer than 100 gigawatt hours signed up. Now Meridian can bring to the table sharp long term pricing, but the emerging barrier to getting more of these projects up, particularly as it relates to the financials, is the cost of transmission and distribution upgrades. Businesses are clearly trying hard to decarbonize and this infrastructure is critical to support a timely transition to cleaner process heat for New Zealand. Accordingly, many conversations sorry, many conversion opportunities are dependent on the timing of funding awarded from the government's $69,000,000 decarbonization fund.
Process heat electrification opportunities typically deliver a low cents per tonne of carbon abated equation and if appropriately supported will deliver great outcomes for customers and our country. As an example, the cold water replacement at Woolworths and Timuray will reduce emissions by 11,000 tonnes a year. This is equivalent of taking around 3,000 cars in their emissions off the road. Now with very small operational missions, the bulk of Meridian's footprint is in our supply chain and it's really pleasing to see our partners making improvements in the quality of the measurements, reporting and quality of their emissions. We continue to make positive progress in our gender equity measures, but as you can see from the chart, we clearly have more work to do.
Last year's COVID lockdown coincided with our staff engagement surveys, so we saw a natural lift at that time. I guess our people were thankful to have our support and the job security we promised. This year's survey results have returned to pre COVID levels, but they are still well, we did expect that and they are still results that are set the leading. I'd like to call out the great work our people continue to do in this COVID effective world. They have been positive and flexible and it's a business we haven't missed a beat.
I'd particularly like to acknowledge our team based in Victoria. They've endured more than a year of COVID related restrictions and their commitment and resilience is absolutely amazing. I've talked before about my concerns around our annual rate of injuries. Now, while none of the 18 LTIs resulted in serious harm this year, But people do operate in challenging work environments and we have a lot more work to do to ensure they can continue to do that safely. Safety leadership and safety culture are the focus of a new program of working led by Tanya Palmer, our Chief People Officer.
We showed investors our fresh strategy at our May Investor Day. We also indicated at the start of an ownership review of Meridian Energy Australia. Mike will update you on that process a bit later on. We have evolved some of the targets since May. For example, Mercury's acquisition of Trustpower's Nest market book gives us the opportunity to focus on a more appropriate medium term target for our retail business around fixed price growth.
And as we deepen our development pipeline to accelerate decarbonization of this country, we're now aiming to have 3 options ready built by the end of ready to build by the end of 2024. I've talked previously about the roadblocks industry faces getting potential sites through consenting. So this will be a real challenge and does require support through the government's RMA reform process. We'll touch on progress on most of these targets through the course of this presentation. Work with shareholders or stakeholders has helped us distill our sustainability focus down to the 10 material topics presented here.
Those topics inform our activities and I'll call out a few successes over the last year. Now it is easy to forget Meridian is already net 0 carbon and we are now planting forests to create our own carbon offsets. By the end of 2021, we have doubled we had doubled the number of trees currently in the ground, but we do need to seriously pick up the pace. And pleasingly, we've recently acquired 2 additional parcels of land to accelerate our planting program. Meridian's own EV charging network was launched earlier this year.
We're deploying mostly AC charges to integrate well into existing electricity networks. They are ideally suited to shopping malls, retail and business parks and community facilities. International experience shows AC charging offers an efficient complement to fast DC charges. We published our first modern slavery statement. The statement sets out our actions to assess and address modern slavery risks in our operations and our supply chains.
And we've now just presented our 3rd TCFD report. We've already put social focus as well established. We have long term commitments to our generation communities supporting local projects that are important to them. Kids Can, Kakapo Recovery and Project Recovery are amazing causes. I'm personally honored to be part of them.
We specifically acknowledge Erie rights under the Treaty of Waitangi. It is important for us as a large user of natural resources to partner with Ewe and find ways to deliver improved environmental, commercial and cultural outcomes. And this isn't just corporate speak. We are working actively with many ewebrics to make a real difference. We've been talking about the green shoots of demand growth for a few years now.
The impacts of COVID and TY's 4th top line, consumption skews things a bit from prior to couriers. But if we normalize for those, we see demand uplift in the last 2 years and that is despite near record temperatures taking off the top of winter demand. Also, the impact of a nationwide lockdown must have an economic impact when we've not seen anywhere near the same level of negative impact on demand that was evident last March, but it's early days. As I mentioned earlier, the customers we have the customer growth we have achieved in retail and customer numbers sorry, volumes and numbers has been a standout in the last few years, and we've achieved this without big movements in headline prices. The project to move Meridian's customers across the Flux platform is in its final stages and focus is now on the remaining complex corporate and industrial customers.
I'd like to acknowledge the Meridian Retail and Flux teams for doing an absolutely amazing job. They have reimagined and rebuilt our customer service operating model and migrated 95% of our customers to the new platform. But the really truly amazing bit is they've done all of that whilst losing no momentum in sales and creating close to 0 disruption for our customers. There's no doubt, electricity pricing is an emotive topic full stop and higher wholesale prices have been exercising many in the market and in the media over recent times. But there's still plenty of evidence to show the sector overall is delivering great outcomes New Zealand across the energy trilemma.
The price graph here, which is MB published data tells quite a story. Now historically, there has been a significant rebalancing in our electricity prices across sectors. I think that's well understood. It also shows though that in real terms, overall market prices have not really increased since 1980s. During the last 10 years, other than the industrial sector, most customers have experienced real price decreases.
And lastly, the hedging strategies adopt by most retailers have meant the vast majority of customers have been insulated from these high wholesale prices that we've seen of late. Also, the price for electricity in New Zealand compares favorably with other OECD countries in particular. And as of last year, large C and I customers paid the 7th lowest price in the OECD. That's a little comfort if you're a large business trying to rig contract supply in this market and the high wholesale prices we've seen are certainly a cause for concern. Meridian has not stepped away from any customer.
We've provided pricing solutions including terms of 5 10 years to help moderate the impact of the current pricing on those customers. We've clearly seen prices moderate as hydro storage has recovered. They still remain relatively high, however, but that doesn't mean to say we're seeing inefficient price signals for a broken market. We'll touch on the drought shortly, but it is worth noting that both Meridian's Waitake storage and the National Hydro Storage only just got above average for the first time this year in the 3rd week of July. The droughts cause high prices and we've seen that many times before.
But underlying the variable weather is the well documented degradation in the gas deliverability that merged in 2018. The outlook may be only improved as investment programs of major producing gas fields are underway or a bit of time. But simply put, right now, the system has less fuel storage and capacity available for it to meet demand than we have enjoyed over most of the last decade. We're seeing the industry respond with several new renewable projects and that will deliver around 8% of electricity demand at a cost of about $2,000,000,000 These projects are in construction and they're in full commissioning right now and new and more new developments also being signaled. But these stabilizing initiatives take time to turn up and given hydro water values reflect scarcity, we believe supply risk is still being priced into the spot and electricity futures markets.
In my view, long term trend in prices is likely to be down as renewables becomes cheaper to build, but we're also likely to continue to see considerable short and medium term price volatility, both up and down, as the percentage of renewable energy increases. The risk management strategies adopted by businesses will need to account for that volatility. Now I mentioned earlier that there is sufficient liquidity in wholesale hedge markets to enable us to manage the portfolio risk of further retail growth. This chart shows just how successful the reforms of the electricity hedge market in 2009 have been. The volume of exchange traded ASX Futures has trended up to be similar in size to the physical market.
In FY 2021, volumes far exceeded the physical energy traded. As you can see, Meridian has put significant capital at risk and continues to do the heavy lifting in terms of supporting ASX growth. And ASX is only part of the story. There's also a strong over the counter market in New Zealand and a growing market for long term power purchasing agreements as new developments are being kicked off. So I think there's plenty of liquidity and opportunity for parties to manage risk and their exposure to wholesale prices should they choose to do so.
But of course, there's no point in waiting until your house catch fires before attempting to buy insurance. Now, the Electricity Authority has an extensive market improvement program in play. Of late, we've seen the implementation of many of the electricity price review recommendations and we've had an overhaul of the trading conduct provisions and that was needed. The final decision on corrective actions for the December 2019 UTS have been published and as expected the cost of meridian was within the $5,000,000 before tax amount that we provided for last year's accounts. More recently, the events on the evening of 9th August created a very poor outcome for affected customers.
Now I can assure you that the industry's collective failure is felt most acutely by those of us who have responsibility towards our customers. I'm certain all parties will want to ensure learnings are taken on board and we avoid similar outcome occurring again. As I mentioned at the start, the industry is moving quickly into a decarbonization phase and we'll have bumps along the way. So there is a broader contextual conversation that also needs to take place. 2021 saw the landmark final advice from the Climate Change Commission to government on its first three carbon budgets.
The government now has until the end of the year to set these budgets and release the country's 1st emissions reduction plan. Already there is movement on government policy. The Clean Card discount has been launched and government have implemented further reforms of the emissions trading scheme. From my point of view, this sets New Zealand on the path to its low carbon future and the electricity sector is the biggest enabler of this future. Notably, the Climate Change Commission have recommended consideration of a 95% to 98% renewable electricity target, which could allow for a longer runway for gas to support system flexibility.
And this month, TransPower published its new transmission pricing methodology. This offers an updated estimate of what Meridian could pay in transmission costs once reforms are implemented. However, we understand the electricity authority has asked Transpower to rethink some aspects of the proposed methodology and further consultation will take place later this year. So the TPM saga continues. Now back in January, we reached agreement with Rio to extend our contract with the smelter to the end of 'twenty four.
And it's fair to say that since then, we've enjoyed plenty of constructive feedback about the extent to which we were taken to the cleaners. Now looking at where LME prices have gone since, it certainly would appear Rio got the best of that deal, but at the same time they've lost any option of a guaranteed electricity supply agreement beyond 2024. I think most people understand the revised NIS agreement is a sense in the dollar type arrangement designed to buy time, time for the South American electricity sector and Meridian to transition away from a significant employer and user of energy and to do that in an orderly fashion. And I guess it will be a far more interesting results briefing for all concerned if we were contemplating the smelter turning off all their costs next week as could have been the case. Now the key thing is we are making the most of that time to mitigate the impacts of the smelter closure.
You'll be familiar with the plan as described in this page and I'll just quickly go through the latest on some of the options. The swaps and replacement discussion continues with various parties. We think a portfolio of options is emerging and as part of that smelter demand response within the existing agreement with Ensis will likely take on a greater degree of importance. The Klufib to the Arpa Waitaki Lines project continues to track well and Transpower do not envision any significant time delays. We aim to secure a North Island battery site by the end of September.
And while the battery concept grew out of a desire to create greater effective capacity on the HVDC, an asset like this would have also made a big difference during the event like the 9th August. So we've upped the priority on this project and are looking at ways to bring it forward for deployment to late 'twenty two or early 'twenty three. Earlier this month, Hawaii Submarine Cable Limited, owned by the founders of DataGrid, was sold to a large Singaporean private company BW Group Limited. We view this as a positive development, both for getting the subsea cables required for the DataGrid installed into the Southland and more broadly for data grid itself. We expect to see significant focus on data grid on the data grid opportunity in the coming months.
The hydrogen registration of interest jointly prepared by contact Meridian was issued to the market on the 22nd July, which coincided with the public release of the McKinsey report and the launch of the Southern Green Hydrogen website. Counterparties have until the 10th September to submit their responses. We'll evaluate those responses by early October and then enter into more detailed commercial and technical discussions with shortlisted counterparties. In parallel, we are progressing engineering pre feasibility work that will support future counterparty discussions. So I think we're making really, really good progress across a range of options there.
Now I'll finish with just some comments on the severity of this year's drought. Our analysis shows it was the 3rd worst drought that we have seen in the Waitake catchment. The amount of water that didn't turn up in FY 2021 compared to FY 2020 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. That's part and parcel of what we deal with And I think we managed our portfolio well through the long drive period.
Now Mike will add a bit more color on that shortly. The good news is inflows in the last 2 months have now alleviated our fuel squeeze and we've started the new financial year in reasonably good shape. I'll now hand over to Mike, who's leading our EMEA ownership review and he'll also drill into the numbers in a bit more detail. Over to you,
Mike. Hi, thanks, Neil, and thanks everyone for joining the call this morning. Hey, I'm going to talk very quickly to the review of our Australian business before cracking into those financials. And as always, I'll try and provide a little more insight than you might see on the slides directly, so showing up is worth your time. Right.
We announced that we're considering an ownership review of the Aussie business during our Investor Day back in May. We followed this up with an NZX announcement early June and following our Board endorsement. We released a flyer during July and last week followed this up with an information memorandum to parties who had entered into a non disclosure agreement with us. This created a bit of media and speculation on both bidders and proceeds. All I'd say is don't count your chickens yet as it won't be until later this year all going well that we decide whether we go whether ongoing ownership offers the most value to shareholders or alternately a partial or full sale.
And to get ahead of any questions, the reason we're looking closely at our business in Australia is twofold. First, we noted that investors have been particularly interested in entities like Meridian Australia. And second, the increasingly fragmented and interventionist electricity policy at state and federal levels in Australia concerns us. That said, we do like Australia's long run prospects as it must also transition to renewables and the challenge there is larger than it is in New Zealand. So time will tell, but retaining an organic proposition in Australia remains an option for us.
But back to the year 2021 financial results. It was an interesting and challenging year for us. In terms of the year itself, I think my comments at interims are a good place to start. If you recall, we had a decent first half with EBITDAS of $422,000,000 which was down by about $43,000,000 on for new 2020, but still represented the best first half performance ever for Meridian or second best first half performance ever for Meridian. However, my key point from February was that we'd run into a dry patch by November and started using hydro storage to deliver revenue while we waited for summer inflows to arrive.
I didn't know it at the time, but those inflows wouldn't arrive until mid May. And the lack of rain would put a material dent in both storage and other opportunities. By late April, Lake Hukaki was approximately 700 gigawatt hours or 53% below average for that time of year. So the drought, alongside the renegotiated TY agreement that kicked in on the 14th January, meant the second half EBITDAF was well down on the prior year, dollars 81,000,000 to be precise. As a result, full year EBITDAF fell by 15% from $853,000,000 last year to $729,000,000 this year.
At the same time, underlying net profit after tax fell by 27 percent from $316,000,000 last year to $232,000,000 in fin year 2021. Now both EBITDAF and underlying net profit after tax are non GAAP measures. And if you look at our net profit after tax, you could be fooled into thinking we had a bumpy year. The reality is the majority of the difference between underlying net profit after tax and net profit after tax itself was driven by unrealized gains on electricity and treasury instruments, which do not translate into cash. So don't be fooled.
And the best way to measure how the year went, at least from my perspective, is by tracking operating cash flows. They fell by 29 percent to $604,000,000 from $604,000,000 last year to $431,000,000 in fin year 2021. Now don't get me wrong, our performance remains sound during the challenges we faced. We just didn't do as well as we did last financial year. So let's move on to dividend before diving into a bit of detail.
As Neil has already mentioned, there are no surprises in the dividend space either. We're rolling the fin year 2020 ordinary dividend through to fin year 2021. That means that an ordinary a fine ordinary dividend of $0.112 per share will be paid on 15th October. And in turn, the full year ordinary dividend will remain at $0.169 per share imputed to 86%. One thing I do want to pick up on here is that the Board has approved implementation of a dividend reinvestment plan.
We signaled this a couple of times this year and as a result, shareholders will have the option to participate in that plan. Those that do will be able to buy shares in Meridian with their final ordinary dividend proceeds at a 2% discount for the market value of those shares. Documentation that describes how the dividend reinvestment plan works is being sent out as we speak. Simply put, performance in New Zealand was sound in some areas and outstanding in others. And there are a few things to reference in this slide.
First, energy margin was $128,000,000 lower in FY 'twenty one than it was last year. As mentioned above, there's good reason for this as while wholesale prices soared, we faced pretty sizable drought in the second half. And while some uninformed commentators think we do well in these circumstances, the more nuanced know that it tends to create challenges for us. And those challenges are pretty simple. Without Matterport supply of fuel, we could end up short to those wholesale prices.
Now we're fortunate that our wholesale team puts a lot of thought and effort into managing our portfolio in these circumstances. And as a result, we didn't end up with spot price exposure, but the hedges we bought and the lack of fuel weighed on energy margin delivery.
For a
drought as substantial as it was, the wholesale team did a superb job. And as I've said before, we also have a pretty decent retail team. In my view, they are the best that are out there. And they did a stellar job lifting contracted revenue by $149,000,000 as shown on the waterfall. Now I know that some of you will be thinking that if we hadn't been focused on developing customer relationships that we would have had stronger energy margin.
That's possibly true, but it's short term thinking. And what really matters is long term success. If you pick up any business textbook, it will tell you that's the only possible if you've got strong relationships with those who use your product. And whether you're an electricity business, a lustful teenager or Amazon, relationships take time to develop. You might be wondering how teenagers fit into that category.
Well, they don't. My current lockdown experience cooped up with a couple of them suggests that they're too focused on short term goals to think about longer term relationships. Anyways, I'm off message in getting into dangerous territory, particularly as one of them might bound down the stairs if they're listening to this. What I'm trying to say is that they've been is that we've been really clear over the past few years that our focus has been centered around customers first. While that might cost us a little in the short run, we're confident that in the long run it will serve our investors well.
And I know there are folks out there that will also think that we're simply looking to extract more coin from them, but that's a cynical view. The reality is that if someone values what you do, they'll gladly pay you for your services and possibly stick with you through the tough times. And that is what we're trying to build. So far, the data shows we're doing a reasonable job on it. Since I managed cynicism, this also feels like the right place to focus a little commentary on the wholesale market, particularly commentary that suggests it's broken.
My only request to you is that you ask yourself why folk might be saying this. And yesterday provides a useful example. As yesterday, a group of large New Zealand business attacked another, us, for making too much money with the sole motivation of lifting their own profitability. So go figure. This was both surprising and disappointing.
But given the underlying motivation, you have to be skeptical of the claim, particularly as the government looked into excess profit as part of its electricity price review in 2018 and found nothing. And our own independent analysis completed by PwC aligns with the government findings. We've released those PwC conclusions, but I want to come back to my key point. Consider the motivation for claims before deciding whether they're credible as opposed to buying into the rhetoric directly. We see business attacking business.
It will be an economic motivation. We know that some new members were exposed to the higher wholesale prices in 2021 and that they want those prices to fall. We get that. But I point out that in this case, the electricity industry has responded ahead of them by committing to approximately $2,000,000,000 worth of new generation development in response to those prices. And those investing are not just incumbents.
We're seeing new entrants step into the electricity market and invest as well. And this is the exact response you'd expect from an effective market. This is a complex industry and silver bullet fixes do not exist. While kicking off in the media can make you feel better, it tends to distract from managing the challenges we face. The good news is that over the past 20 years that the market's been in effect, there's been substantial progress in terms of market design and levels of competition, even if over the same period we've had a few moments that we wish we could have back.
We're always striving to get it right, but perfect does not exist unfortunately. But the progress has been substantial enough for residential customers to see pricing, security of supply, sustainability and product choice benefits. That might seem like a strange thing to say following the events of 9 August, but I said this is a complex industry and when things are complex, they don't go right all the time. The industry actually has a pretty decent track record at least compared to the period before the market existed and we need to give folks time to work through how such situations might be avoided in future. In the meantime, the data that I see and Neil referenced suggests that residential customer cost per unit are lower today in real terms than they were in 2013.
I should point out that industrial customer per unit costs are rising, but they're still approximately half the cost that residential customers pay. That's pretty decent empirical evidence as it means that for residential customers, electricity is a smaller part of people's cost base than it was back in 2013 at least in inflation returns. And to top it off, the International Energy Agency last ranked New Zealand's electricity market as the 10th best in the OECD and New Zealand is the only non European country in that top ten. We also get the International Energy Agency's highest rating of AAA and a pretty solid sound bite in that New Zealand is a world leading example of a well functioning electricity market, which continues to work effectively. We know that the International Energy Agency will update its rankings in October, so we'll get to see if that view changes.
But that is where my security of supply comment came from. Anyways, the fact suggests that residential customers are benefiting from what has played out within the electricity sector and our team will continue to work out how we attract more of those customers to Meridian. Right. Let's talk about Australia. The key feature on this slide is the fall in generation spot revenue.
As I've noted in the second and third bullets, generation volumes sound, but wholesale prices fell materially. And this drove the $39,000,000 reduction in energy margin. In turn, this flowed through to EBITDAF, which fell from $66,000,000 in fin year 2020 to $38,000,000 in fin year 2021. The good news is that wholesale prices lifted towards the end of the financial year. And if you've seen our operating stats for July, financial performance has improved materially.
That said, the customer story in Australia is similar to how I presented it at Ingerms. Since lockdown, the growth in customer numbers has slowed even though customer revenue has grown on the back of a 20% lift in household consumption due to lockdowns in the Lucky Country. So growth in customer numbers slowed, but the team in Australia remained committed and they once again lifted the Roy Morgan Electricity Provider of the Year and Canstar's Most Trusted Energy Provider Award. So the opportunity for growth remains. Now, I always like to say something about large generation certificates or LGCs, largely as we do not have or need such certificates in New Zealand.
But the team in Australia both create and then sell LGCs from our renewable generation assets. Unlike previous years, we hedging of LGCs added value to the business. This year, mark to market losses from them were $3,300,000 and hedge derivative sales and purchases are well off for near 2020 levels. I'll finish with my other favorite when talking about Australia hydro storage, well good news. Storage at both Burrinjak and Keepit hydro power stations is full And Hume, storage is higher than at any time Meridian has owned that asset.
I suggest you look at the Hume graph on the Goulburn Murray website. You can see what I mean. So it looks like we're going to get decent generation volumes from those facilities this year. Now this is a new slide, but we added it as we think it provides some useful insight. First, it sets out that we like all retailers pay the spot price for electricity consumed by our customers.
It doesn't matter whether a company is vertically integrated or not, the New Zealand electricity market ensures a level playing field for retailers. This slide also builds on the New Zealand Energy Margins slide that showed that the cost to supply customers has grown massively. And here we show that at $184 a megawatt hour, the price paid to support our customer base in FY 'twenty one was about $89 a megawatt hour higher than in FY 'twenty. And finally, it highlights the internal transfer price that our retail team buys electricity from our wholesale team, Matt. As stated on the slide, it was $81 a megawatt hour in FIN year 2020 and it lifted to $88 a megawatt hour in FIN year 2021.
What isn't as clear from this slide is how we calculate that price, but it isn't that complex either. So I'll summarize it here. We simply assume that a retail business would hedge its risk progressively over a 3 year period and the fin year 2020 and fin year 2021 internal transfer prices reflect that. The average of the previous 3 years ASX prices for the relevant financial year shaped on a volume wider basis based on our consumption profile. Of course, there are more important issues than internal transfer price, but we thought it was useful to capture this information.
So on to operating costs. There's always a bit more on this one than I think is necessary. So long story short, we showed discipline again in Fin year 2021 in relation to costs. At this time last year, I stated that we expected to spend between $261,000,000 $266,000,000 and we spent $265,000,000 And while that's a lift of $6,000,000 on last year, by the time you strip out the accounting adjustments for Software as a Service and the Holidays Act provision, an underlying operating cost lifted by $3,000,000 during fin year 2021. And that increase was directed towards our development activities where we continue to ramp up efforts to ensure we have sites available to meet expected decarbonization growth.
For those not versed in the Software as a Service adjustment referenced here, in April, IFRIC, the International Financial Reporting Interpretations Committee revised its policy in relation to costs incurred implementing software as a service arrangements. Long story short and following that policy revision, all costs related to software as a service should flow through the P and L as operating costs as opposed to recognizing those costs as intangible assets on the balance sheet and amortizing them over time. Given this decision, we've presented a small restatement for Fin year 2020 and in Fin year 2021 software as a service costs amounted to $2,000,000 as you'll see on this graph. For those that would like more detail, you can see Page 122 of our annual report. 2nd to last comment.
While it isn't captured as a cost item here, we've retained an elevated provision for doubtful debts from Fin year in Fin year 2021. At $9,000,000 it's lower than the $15,700,000 provision held in Fin year 2020, but it's approximately $4,000,000 higher than the levels held before COVID showed up. How it moves in time will depend on how the economy navigates the virus. And with that in mind, during the 1st week of lockdown, electricity consumption looks like it's down by about 7%, which isn't substantial compared to lockdowns in 2020 where consumption fell by between 16% 19%. That could change, of course, so we'll see how things progress.
And finally, we estimate that operating costs will fall in the $275,000,000 to $280,000,000 range this financial year, largely driven by $6,000,000 of software as a service costs flowing through the P and L, with the remainder driven by ongoing focus on development and lifts in insurance and employee costs. I talked about net profit after tax and underlying net profit after tax at the start, so I won't dive into it in too much detail here. As the two graphs show, our preferred measure of performance underlying net profit after tax fell by 27% from full year 2020. I'm sure that makes sense to most of you given explanations provided earlier in this presentation. And it shows that year on year our cash performance was impacted by the drought.
And while net profit after tax lifted by 145%, the key difference between the two measures is fair value movements in both electricity and interest rate derivatives. These are non cash items that can move materially year on year. For example, in FIN year 2020, electricity derivatives reduced NPAT by $113,000,000 but this year lifted it by $169,000,000 So they can move around considerably. My simple message is that Finn year 2021 was not the record year that Finn year 2020 was. Other than for that, in Australia, we saw a gain from changes to the Australian generation asset remediation costs.
And while it isn't shown here, the value of Mount Moosa wind farms was stable and the Green State hydro asset valuation lifted by $55,000,000 I don't have too much to add to the statements captured on this slide. Our State and Business CapEx remained stable at $50,000,000 but the decision to move forward with Harapaki and the ongoing work to cut over our customer platform to FLUX means that investment CapEx was $72,000,000 which is well up on prior years. Harapaki consumed about $41,000,000 of the cash and the cut over to FLUX much of the remainder. And while I'm on the custom platform cutover, the customer team delivered the impressive results I mentioned earlier, while this was in progress and there hasn't been any material issue for our customers or our business in completing this 3 year project. We're pretty sure that customers are going to love what they see in the coming months as we finish the migration of C and I customers onto the Flux platform and then start optimizing it.
I'll leave you with our forecast CapEx range for Fin year 2022, which is $205,000,000 to $215,000,000 We expect our business CapEx to be similar to Finu 2021 with the residual largely attributed to Harapaki and Australian development activities. Obviously, we'll revisit this when we've determined the outcome of the ownership review. And our balance sheet remains a pretty straightforward read. Net debt lifted by 9% over the year to $1648,000,000 and while net debt to EBITDAS lifted from 1.8 times to 2.3 times, S and P removed the negative outlook from our BBB plus credit rating following completion of the Enzys transaction. So I'm finished where I started.
It's been an interesting and a challenging year for investors in Meridian. Our team is focused on working through the transition away from aluminum as directly as it is focused on the economy wide transition away from fossil fuels. We need to put our best feet forward if we are to make that transition successful one for both our shareholders and for New Zealand. Neil, back to you.
Just get off mute. Thanks, Mike. I think you summed things up quite nicely, Neil. I'll just make a couple of concluding comments myself. I think what you see in Meridian is a high performing business and a culture that is values based, and our customers do understand that about us.
You can expect us to be very focused on mitigating the loss of the aluminum smelter, but in doing so, we will not lose sight of the big picture. And we will continue to focus on our customers and supporting New Zealand's decarbonization goals. What you see in the electricity sector is an industry that, whilst not perfect, does deliver world leading outcomes for New Zealanders across the trilemma of reliability, sustainability and cost. And most importantly, that market is delivering clear investment signals and the industry is responding. So I think we'll wrap it up there and move to questions.
Obviously, there's none on the floor today, so we'll be going online.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Your first question is from the line of Andrew Harvey from Forsyth Bar. Please go ahead. Thank you.
Good morning, guys. A couple of questions for me. First of all, just around sort of understanding some of the OpEx and the increase there. I guess, from my perspective, I'd expect to get a little bit of a decrease potentially coming through from the flux and some sort of benefits coming through from that. Is that still a big part of our guidance?
Has there been some change here?
Mike, it's sort of talking about the benefits from Project Momentum. Do you want to cover that?
Yes. Hi, Andrew. So I can't remember whether it's in that slide or not, but what you've seen is customer servicing costs have held flat and flat decreased slightly over time. We'd expect that to continue in the coming years. Where we're really focused on making sure we've got the right cost base is in that development space, which is why I pointed it out as part of the fin year 2022 forecast.
And that's a net and down the line cost base of the stronger parts and probably wasn't much to deliver on the other side.
Sorry, Andrew, I missed that. I think I got the gist of it, but missed some of it. I said it last year announcement results as well as the delivery of that program is delivering real cost benefit. But what you see is the growth in customers, the growth associated with growing customers, just growing that customer base. So every time you pick up a customer, there are metering and field service costs alongside internal costs.
The Flux platform, what it's allowed the customer team to do is manage and gain efficiencies in our internal cost base even while we've added material volume of customers to our business. And we expect that to continue over time. So it's well and truly delivered business case benefits and the efficiency outcomes that we expected from it. And we're actually pretty proud of the fact that we're holding those customer costs flat to falling slightly while we're growing our customer bases materially as we have.
Okay.
The second question is just on the CapEx and clarifying a couple of things. On the slide, it was like 45 Is that the kind of situation in long term going forward?
Andrew, I think You're really breaking up, but I think you're talking about stay in business CapEx. So I might just give a bit of flavor of how that looks going forward, I think.
Yes. And Andrew, I think if I picked it up, I said that I expect stay in business CapEx to stay reasonably at FIN year 'twenty one levels. As you say, I've mentioned approximately $50,000,000 in the slide, it's got $45,000,000 and you can see the trajectory over the past few years. I think that's a reasonable frame for Stain Business CapEx moving forward. We're always really trying to get people to pay attention as the growth CapEx that plays out as it relates to Harapaki and then possibly development in Australia if we can continue the owners of that business.
Does that give you enough? Yes. No, that's okay.
Thanks. The large question given that you're pretty hard to get again. Just around the swaps in the contract you're speaking about, you talked about the smelter perhaps getting involved in some of the base impacts. Am I right in saying that it's sort of the first time that they would be reporting about some details And can you give us some more color about how much Mike is looking at?
I didn't. I'm sorry, Andrew. I didn't get the gist of that at all. It was something about smelter, Mike, did you?
Look, I think it was, Andrew, I'll try and paraphrase it. It was you were talking about swaption replacement and Neil's comment in relation to the SDR, the smelter demand response. And I think you're wondering whether we had had any sort of conversation with Rio in relation to demand response following the conversations last year. And the answer to that is no. No, we haven't had any engagement with Rio Tinto on their activities since conversations we had within last year.
What Neil was really referencing is we're looking more wholly at a package of both supply and demand side options to manage that underlying hydro volatility or hydro inflow risk. And what we can see is that that smelter demand response component of the RIIO agreement in FY2023 2024 could form part of that package. So it's an existing arrangement that we have with them rather than anything new.
I'll just add to that. It's an existing arrangement. We can envision better arrangements that would actually work for both parties. And whilst we haven't had any conversations with them about those since the extended exit deal was put in place. We've made it very, very clear to Rio leadership that if they ever wanted to entertain any sort of remaining in this country beyond 2024, they'd have to bring something to the table that made them operate in a far more sympathetic way with the overall industry as opposed to just being the taker of energy.
Thanks so much for taking the questions offline.
Your next question is from the line of Steven Adjacenta, Quarry Securities.
Good morning, guys. Can you hear me okay?
Yes, we're good.
Okay. I just have 4 questions that I could. You've had a PPE fair value change. I just wondered if you could give us some idea of the assumptions around the NVAS volume and pricing post 2024 and fair value change in PPE? Secondly, maybe one for Neil.
Is the gas fuel swaption option acceptable to you post 2022? And then maybe back to Mike, could you give us an idea of the book value of the Australian assets under review? And then just lastly, Haripati, could you confirm that you're fully at risk on your tables? And if so, what are you seeing in these early days on the civil works?
Thanks, Steve. I'll cover off 2 and 4. Mike, you cover off 1 and 3.
Yes. So, Stephen, you picked up the PPE fair value movement. PPE lifted by a couple of $100,000,000 So the assumption that we're using for Ensis is that it is not connected to the system as part of that valuation. So that's the simple assumption is there is no consumption from Rio Tinto. So therefore, no price, no contract.
And I'll pick up number 3 while we're on it, which was I think book value of the Australian assets, which doesn't come out through our accounts. I'll be wrong on it because I've got last year's value in mind, but the book value is about $470,000,000 net assets.
Stephen, on your second question, would we entertain a gas fuel swaption? Absolutely. We are in conversations with parties around such a sort of transaction. I would say though that the economics of a gas picker have got a lot tougher of late and they need some sort of confidence they can get a return on that investment within a relatively short space of time. So that's sort of the issue that I'm alluding to.
But we're certainly looking to work with parties in the industry to support those sorts of investments because we're going to need them. There's no doubt about it. In Harapaki, yes, we are at risk at Civils. So we manage the project ourselves. And the project has gone into abeyance with the lockdown.
There will be some cost of that. But at this stage, because we're in the early stages of gearing up for the actual into the actual project, those costs are not that significant. Obviously, if we go through further COVID delays through the construction period, then those costs will build. But we have built in a reasonable amount of contingency for that eventuality into into the economic projections before we signed up for the deal.
That's
really useful. Thanks guys.
Thanks, Steve. Hi, Neil. I just had a text from Andrew, who said our call quality isn't the greatest either. So he wondered if while the questions are wrong, whether we both go on mute so that we can hear him a bit better. That's Andrew, I'd agree.
It's a good suggestion.
You go on mute and I'll throw it to you.
Okay. Thank you, sir. Your next question is from the line of Grant Swannable from Jordon. Please go ahead. Thank you.
Good morning. Personally, my voice isn't doubling up. No, it is. Just on from End of Harvey Green. The maintenance CapEx, Mike said $50,000,000 but the presentation said $55,000,000 to $60,000,000 Which is it, Mike?
Right, I think if you use $50,000,000 you'll be fine. The forecast that we've got for Fin year 2022 is captured in the presentation, says STAN business CapEx of about $55,000,000 to $60,000,000 What we've tended to find is our forecasts have exceeded actual capacity to deliver stand business CapEx. So the numbers that you're seeing, the actual numbers in the preso, I think, would be a reasonable forecast where.
Thanks. Next, data opportunities, exclusivity. Has he bought land yield and when does that exclusivity fall away if he doesn't buy soon?
Sorry, Grant, which opportunity are you referring to?
The data center?
The data grid. Look, I understand that they've got conditional offers on a range of properties, but they haven't lent they haven't gone on conditional yet.
Does his exclusivity expire if he doesn't?
Yes. Our exclusively expired about well, on the original terms about a month ago. We pushed it out based on the progress that we saw Datagroup making. So we gave them another couple of months to land something ground.
Thanks. Final question. The 171 gigawatt speed contracts, with just a 250 target, does that seem a bit lacks opportunistic intent?
You're talking about the process heat electrification target? Yes, look, we've already got MOUs of companies that are actively moving to electrify their fossil fuel use that's equating. Like I say, I think got a couple of MOUs that I hope to have sort of floating around on my desk in the next day or 2. So we'll be pushing 250 to 300 as we sit here today. We've actually increased that target internally.
We think there's the opportunity to go for about €600,000,000 And if we can get support from government, particularly around this transmission and distribution cost, which is the main hurdle for getting the economics over the line, then I think that sort of level of growth is achievable. And obviously, it will be a great outcome for the country in terms of reduction in emissions.
That's great news. Thanks.
Thank you very much, sir. Your next question is from the line of Jeremy Kinkade from UBS. Please go ahead. Thank you.
Hi, team. Hopefully, this is clear. First question just around the 3 buildable options by 2024. Can you give us some color on what they are and the potential size?
We're still fine tuning the portfolio, but there'll certainly be one wind farm in there and we'll be pushing through to consent on one of our wind farm opportunities in the not too distant future. We've got a couple of really promising grid scale solar sites coming up that we think we should be able to get to a consented stage in the not too distant future. And we've also got the battery in play and we've got a conditional offering on the parcel of land on that at the moment. And we think with the progress we've made on the design, we can probably get that deployed, like I say, sometime late next year or early the following year. But I'd say it'll be a portfolio of probably battery, solar opportunity and at least 1 wind farm, possibly 2.
Okay. And the potential size of the solar and the wind farms?
The next best option for us is our Mount Munro option, which is in the Wairarapa. I think it's circa 50 megawatts. Is that right, Mike?
Yes.
So we're trying to do I mean, we'll look at big options as well, But we think medium sized chunks are one that are easier to deploy. We can do them more rapidly, more flexibly and the economics are looking pretty compelling for them.
Sean, second question. Just on the process seek MOUs, you've made good progress there, but I suppose you're looking to you're guiding to greater than 50 gigawatt hours
over the
next 3 years. That just seems a bit conservative. Can you talk
to that relative to the success you've had?
Yes, yes. As I was just saying to Grant, we've internally lifted our sites to at least 600 gigawatt hours. I mean, the opportunity is greater than that, but some of these parties are competing we're competing with biomass as well. But one of the really exciting things with this opportunity too is we're starting to work through options for to enable these customers to provide demand response back into the system so they can keep some element of their existing infrastructure in place and can either run it on biofuel or even net fuel, if need be, coal. But you're making a step by moving the bulk of their usage off those fuel types onto electric in the first place.
So we think we can do it in a way that provides quite a lot of flexibility back into the system. But you're right, 250,000 is soft and we're revising our internal view as to what's possible.
Jeremy, I might just add touch to that. There is a massive opportunity out there for fuel conversion. As you know, if you've seen any reports are floating around, biggest constraint we've got is actually network transmission pricing. We're going to need some form of breakthrough if we just see numbers bigger than what Neil has mentioned as the way that transmission distribution charges allocated to new customers coming across is an area that will challenge not only what we're trying to do, but it will form part of the plank that the government's got to decarbonize the economy. So that's what will limit the opportunity.
The economics are lining up probably better than we expected, but that one is a bit of a challenge.
There are no further questions at this point. I would like to hand the floor back to the speakers for any closing. Please go ahead. Thank you. Okay.
Well, there's no further questions. So we'll call an end to it there. Thank you all for attending. Sorry, the call quality was obviously a bit average there when we were doing the questions, but there'll be plenty of opportunity in coming days to talk to most of you and fill in the other questions you have. Anyway, have a good rest of your lockdown.
Enjoy the rest of the day. Thank you.