Earnings Call: H2 2021

Aug 23, 2021

Good morning to you all, and welcome to this event, Vector's briefing for the full year ended 30 June 2021. My name is Jonathan Mason, and I am Vector's Chair. Joining me on the call today is Group Chief Executive, Simon Mackenzie and Chief Financial Officer, Jason Hollingsworth. A reminder that as in recent briefings, we are not intending to go through a detailed page by page recital of the investor material, but instead, we'll give you insights on what we see as the key aspect of our results and then allow more time for questions and answers with you all. I will begin today's presentation with an overview of the key group financial results and the dividend for the full year, then hand over to Simon to talk about insights and highlights from FY 'twenty one. Jason will then comment in a bit more detail on the overall financial performance before Simon takes us through the performance of each business unit, prior to closing with a short statement on Vector's outlook. We will then be happy to take your questions, so save those up. Now to the financial performance. Vector has delivered a strong result for FY 'twenty one recording adjusted EBITDA of 500 and $13,500,000 This was up $23,500,000 or 4.8 percent on last year's results and is in line with guidance provided at the half year result. Gross capital expenditure was $529,500,000 $40,800,000 or 8.3 percent higher than last year. This increase reflects what we've seen over multiple years, ongoing investment in infrastructure to support Auckland's continued growth, as well as increasing deployments of advanced meters as market demand continues to accelerate in Australia. Note that this increase in capital expenditure was partly funded by a $36,100,000 increase in capital contributions recognized as income under IFRS. Turning to group net profit after tax. This was up 190 $4,600,000 or $97,300,000 higher than the prior year's results due to a number of factors that Jason will go into more detail, but let me give you a brief overview, higher earnings, lower interest cost, the impact of a non cash impairment in last year's result, and as noted previously, an increase in capital contributions. Operating cash flow was 25.6 percent higher at $499,100,000 This increase was largely due to the increase in capital contributions and lower tax paid as a result of the reduction in the level of dividend imputation. Now turning to dividends. The Board has determined that the final dividend is $0.850 per share, taking the full year dividend to $0.165 per share, which is $0.25 per share up from last year. The dividend is partially imputed at 10 point 5% and will be paid to shareholders on the 16th September. Just before I hand over to Simon, I wanted to note one governance issue and that is that the Vector Board has announced the appointment of Anne Earlowin as Director of Vector Limited with effect from the 1st September 2021. We are delighted with Anne's appointment as she brings a broad range of complementary experience. We always look to have different skills on the Board and including Anne brings specifically governance roles in renewable energy, infrastructure, telecommunications and other sectors. So, has had a long rich governance career. We look forward to welcoming her to the Vector Board when she starts with us in September. Now, I'll hand over to Simon to talk about insights and highlights from FY 'twenty one. Simon? Thank you, Jonathan. Peoria to everyone. We're pleased to report strong financial results this year. And I'd like to commend teams who have continued to respond to customer needs with urgency, commitment and adaptiveness, particularly as we continue to deal with the effects of COVID-nineteen, not only here in New Zealand, but also Australia. Vector's results reflect the progress we've seen across our portfolio of businesses as we put the customer at the center of the energy system. The past 12 months have seen a dramatic sharpening of focus around the world and in New Zealand on climate change and the efforts that will be required to transition to a low emissions future. In New Zealand, the recommendations put forward by the Climate Change Commission illustrate that our energy system must rapidly shift to a more localized customer centric model. Not only is our energy infrastructure critical to our daily lives, but also to our collective future through its role in enabling the decarbonization of transport and industry. Legacy energy systems across the whole sector are increasingly unable to meet these new challenges and must become vastly more sophisticated and adaptable. Vecta is well advanced globally in developing and operating digital platforms and new solutions to managing these challenging requirements with partnerships with a number of global leaders. This is a crucial time in our history and Vector is well positioned to respond to the challenges and opportunities to carbonization will bring. Over the past 12 months, we've seen continued progress against their Symphony strategy across our portfolio of businesses as they deliver for our customers and at a group level as we continue to reimagine what energy systems are capable of. So turning to our operating units. Firstly, our electricity and gas networks. In FY 2021, we saw the impact of the full year of the default price path 3 reset, which saw prices reduced by 6.9% from 1 April 2020, this being a $28,000,000 impact in revenues. New electricity and gas connections increased 18,839 or up 22.1 percent on the prior full year period, reflecting the significant growth that we continue to see particularly in Auckland. The level of gross investment continues to be at high levels with capital expenditure for financial year 2021 at $314,700,000 And pleasingly, we saw a 22.3% improvement in SADI or a measure of reliability of the network. Electricity volumes were up 0.1% at 8,325 gigawatt hours. To metering, our metering business has had a strong year. In financial year 'twenty one, we deployed 117,000 advanced meters in Australia and 34,000 in New Zealand, a great outcome given the COVID-nineteen challenges particularly in Australia. Our advanced meter fleet now totals 1,860,000 meters across New Zealand and Australia with nearly 400,000 meters now in Australia. We invested CapEx of $165,300,000 or 24% more than the prior year. Importantly, our strategic alliance with Amazon Web Services has delivered its first output. This being an advanced metering platform for gas advanced meters. With respect to gas trading, these results include a full year impact of the sale of Kupuni on segment earnings. But this is largely offset by interest consideration, dollars 6,300,000 reported as part of net interest cost reflecting the structure of the arrangement post the sale of Kupuni. We saw improved natural gas and LPG on gas margins. LPG volumes were up 3.9% to 45,043 tons with bulk and silicon volumes higher compared to the prior year. We saw a 3.1% decrease in 9 kilograms LPG bottle swaps to 680,099. This decline is partly attributable to the impact of COVID-nineteen as the prior year saw an increased unseasonal increase, I should say, in the number of swaps during March 2020 and the number of swaps during March 2020 in the lead up to the 1st lockdown in New Zealand. Other businesses, HRV has delivered a solid result despite the challenges of COVID-nineteen and continues to show positive improvement in what is a highly competitive environment, also making a positive financial contribution. Victor PowerSmart had a challenging year that has seen a number of its projects in the Pacific Islands impacted by COVID-nineteen simply not being able to access those islands to deploy the solutions. However, there are ever increasing opportunities arising in New Zealand as solar farms and developments expand. And as such, Victor PowerSmart has expand. And as such, Vector PowerSmart is well positioned to advise and construct these solutions in New Zealand, whilst also continuing with the projects in the Pacific when travel permits. There is a lot of activity that PowerSmart is currently engaged in. Vector Fiber has also delivered a steady performance over the year and is also well positioned with the growth and demand for high speed fiber services. During the year, Vector Technology Services has been established to take to market solutions developed as part of our own digital transformation journey. We are exploring global opportunities for key priority solutions, including the new energy platform created through our strategic alliance with Amazon Web Services, distributed energy resource management systems, otherwise known as DIRMs, cybersecurity and others. As an example, the Vector Technology Services is now providing cybersecurity services for another New Zealand electricity distribution business leveraging Victor's 20 fourseven secondurity operations center. Victor Property Services has also been sector property services has also been established to explore the commercial potential of our property and facilities. In the context of opportunities to partner with third parties to better utilize some of our passive land, building and tunnel assets such as co location of other infrastructure and broad development in line with Symphony strategy. In terms of other highlights through the year, we expanded our EV smart charging trial in Auckland to close to 200 participants. This trial has already shown that smart dynamic charging using new digital platforms enables us to add more EVs into the system while managing the load on the network. Softens demand peaks as more and more people come home at the end of the day and plug their cars into charge. This helps us lower the need for capital investment to meet increasing peak demand, also ensuring we can keep as possible. This year, we also reset our carbon emissions baseline for financial year 2020 with a more comprehensive understanding of emissions created across our entire value chain, including Scope 3 emissions. Against this more robust baseline, in financial year 2021, we achieved a 12% reduction in our carbon footprint. We have implemented a number of programs aimed at providing extra support and information to help our people navigate the continued disruption from COVID-nineteen, including supporting information around the vaccine rollout in New Zealand Australia, and we acknowledge and commend the resilience of our teams in the face of this disruption, in particular, our Australian team. In recognition that mental well-being is a continuum and we must be vigilant about how concerns may manifest across our large workforce. We have begun to roll out the mental health first responder program. And so far, we have had more than 100 trained mental health first responders who can provide another avenue of support for any of our Victor team. I'd like to now hand over to Jason, our CFO to go through our financials in more detail. Thank you, Solomon. Avicta's financial performance for the year reflects a strong result with adjusted EBITDA of $513,500,000 This is up $23,500,000 or 4.8 percent on last year's results. Adjusted EBITDA for our regulated networks was $350,700,000 up $13,100,000 or 3.9% against the prior year. This includes the full year impact of the Commerzb Commission's DPP-three rep price reset, which came into effect on 1 April 2020, and saw prices reduced by 6.9%. This includes the retention of loss This includes the retention of loss rental rebates, which were retained in order to partially mitigate future electricity distribution price increases and to offset the impact of electricity volume reductions on revenue under the new revenue cap regulatory regime. Gas trading adjusted EBITDA was $27,400,000 down $6,500,000 against the prior year total of $33,900,000 As you can see, the reduction in earnings in gas trading was mainly due to the sale of the Kapuni gas processing plant and associated assets, which took place in March 2020. We continue to retain an economic interest in the performance of the Kapuni plant, with the net present value of future income recognized as a receivable on the balance sheet and $6,300,000 of interest income included in FY 'twenty one profit, as Simon has already mentioned. Adjusted EBITDA for Vector's metering segment grew $16,800,000 or 10.9 percent to $171,600,000 as a result of continued growth in media deployments in both New Zealand and Australia. Group profit after tax was $194,600,000 which was $97,300,000 higher than the prior year. This result was largely due to increased earnings, higher capital contributions and lower interest cost being partially offset by higher depreciation and amortization. The prior year also included a non cash impairment of $32,000,000 While the impact figure is stronger, the better indication of underlying result is the adjusted EBITDA because some of the factors contributing to the impact growth. I'll now hand back to Saum to look at segment performance in more detail. Thanks. Thanks, Jason. I'll now talk through the segments in more detail, starting with regulated networks. Despite the adverse impact of the DPP 3 reset, and in particular inflation forecast assumptions used to see DPP 3, the regulated networks delivered a solid result in the period. We see a continued high level of CapEx with gross regulated CapEx decreased by 0 0.8% to $314,700,000 compared to $317,100,000 a year earlier. CapEx net of capital contributions was 16 point 3% lower than the prior year at $193,600,000 Overall, CapEx continues to be at high levels due to the higher growth CapEx reflecting the continued growth and connections and infrastructure projects as well as investment to improve the reliability and resilience of our networks as evidenced by our SADI results. We note the government's response to the Climate Change Commission's report is due by 31 December this year. Although any definitive decisions could be deferred if the government requests further information or analysis. Commerce Commission is also scheduled to undertake the BPP3 reset of revenues for gas distribution businesses with this come into effect from 1 October 2022. We are working closely with other industry players, regulators and government officials to ensure that regulatory compacts are upheld, especially at a time when confidence needs to be maintained to justify the significant ongoing investment required to maintain the integrity of existing gas network infrastructure and impact on consumers. Turning to gas trading, LPG bulk and cylinder sales were higher compared to the prior year. Over LPG sales were up 3.9% at 45,043 tons. Bottle swap 9 kilograms volumes were down 3.1% to 680,099 bottles from 701,923 bottles a year earlier. This decline is partly attributable to the impact of COVID-nineteen as the prior year saw an unseasonal increase as mentioned earlier for swaps in March 2020. Liquor Gas LPG tolling volumes were down 11.8% to 102,351,000 tonnes from 116,024 tonnes a year earlier. Natural gas volumes were down 3.8 PJs to 8.6 PJs from 12.4 PJs in the prior year period due to a tight gas market and the loss of a major customer from January 2020. Metering, in the past year, we have installed 33,578 advanced meters in New Zealand and 117,472 additional meters in Australia. Our advanced meter base grew by 8.8 percent to 1.86 $1,000,000 from $1,710,000 in the year before. As mentioned, we've now deployed 400,000 advanced meters in Australia and are averaging over 10,000 meter installations per month are subject to COVID constraints. Total metering CapEx increased by 24% to $165,300,000 with the high level of spend reflecting the continued deployment of advanced meters in motor replacement program in New Zealand, rollout of advanced gas meters, investment in their digital platforms and increase in stock levels to help mitigate COVID-nineteen related supply chain concerns. Before we get to the outlook, I'd like to once again particularly acknowledge our essential workers, including our field service partners that continue to display great resilience and commitment as we deliver essential services to customers throughout ongoing disruption from COVID-nineteen. In the coming year, while ensuring we deliver essential services efficiently and safely to our customers remains paramount. We are also focusing on delivering growth in our Australian metering business, developing and growing vector technology services, successfully responding to the challenges we see around resources, enabling growth and ensuring a sensible gas transition. We intend to provide guidance at the half year result. I'll now hand back to Jonathan to close the call. Thank you, Simon. In closing, as Simon noted earlier, I'd like to thank everyone at Vector and our partners for their continued effort as we take further steps toward our vision of a new energy future. And it's not easy to be providing essential services amid abrupt lockdowns in New Zealand. Thank you for being able to pivot and continue to efficiently provide essential services. But now, we're into the Q and A. And Simon, Jason and I are now happy to take any questions that you might have. Our first question comes from the line of Grant Swannipoel from Jardan. Good morning, Vector team. Thanks for taking my questions there. First one, just on lost rental rebates. I know the first half, you mentioned that about $5,000,000 of that number was accrued in the fiscal 2021 first half. How much of the 2022 is actually accrued in FY 2021? And then second question, you pulled guidance, normally you do give guidance for the full year at this stage. Can you give some color on each of the segments? So for example, for electricity distribution, it gets a bit of price increase, there's no real negative impact, impact, little bit of volume. Potentially, you've got continued growth in your meters business. Does that add another €8,000,000 to €10,000,000 Your gas business should be plateaued now that the screening thing is through the numbers, etcetera. Can you talk to each segment in terms of where we should be expecting FY 'twenty two? Thank you. I'm just going to turn this over to both Simon and Jason. There was a finance question in there that I think Jason will want to answer, the first part of your question and then the outlook. I think you're asking for a steer qualitatively by segment on what our outlook might be. Yes, please. Jason and Simon. I'm happy to talk to the loss rental question, your first question. I think you asked how much was accrued. So by that, I assume you mean much we've got on our balance sheet at 30 June. So we have I made an announcement that we've distributed $20 per ICP in September, which will clear out that accrual at 30 June. So the loss range rebates we had on our balance at year end will be distributed to customers in September, which is about $1,000,000 I think. Can you hear me still? Yes, I can, sir. Yes, we can hear you. I can, Grant, sorry. Sorry. That's not what I'm talking about. The 2022 is about what's occurred this year and in the past as well as expectation for future. So I want to know what is of it 2022 is over capture in this year that's held on for recoup next year and the following year? So what do we adjust this year to normalize it by? You want to know what you adjusted for 'twenty two? I guess What are the 22 is still flat for next year and the following year if volumes don't hit the regulated volumes, etcetera? Of that 22, the volume impact was about 7 €1,000,000 So if that's what you're asking then, that's volume impact that we won't be recovering from customers that we've retained loss into rebates for. So does that mean there's still €15,000,000 left for next year if volumes don't quite catch up to where they expect it to be for the regulator? Jason, I think this is and maybe just go back to the point is that the $22,000,000 is up to $30,000,000, right? So what if I'm understanding correctly what you're saying, Grant, is that we don't currently have a forecast on any loss rental rebates that occur through the year. Our policy is that we will utilize those if there's going to be a volume shortfall, otherwise they get distributed to customers. So the 'twenty two just pertains to the prior financial year. Okay. So it's just a bit misleading that in your release, you do say that it pertains to this year and future years? Under the revenue cap, we can recover those volume shortfalls in future years. We've taken them in this year rather than putting our prices up in the future. Okay. But we've taken the offline The volume shortfall. Yes. Brian, is that okay on the loss rental? Yes. Then I'll come back to Jason. Okay. Hey, on the qualitative guidance, we're not going to be able to give you too much there. But over to Jason and Simon, what do you want to say on the outlook qualitatively? We don't I mean, we're going to talk about it at the half year and chose not to give quantitative guidance now. So we're going to be sort of limited on qualitative. But over to Simon and Jason, do you want to talk at all by segment about that? Yes. Look, I can touch on quickly with regards to electricity. Maybe Jason can speak to metering and gas. Essentially, with electricity, obviously, we will see we predict to see CapEx around the same kind of levels, higher capital contributions. We would expect that the growth will be probably roughly in line with regards to the type of level of connections that we're seeing. We haven't seen any downward trajectory on new connections either in electric, fuel, gas to date. And with regards to the price reset, obviously, that's a CPI adjustment and that would take a peak from 1 April next year. So really only see about a quarter of the year influenced by any CPI adjustment from the electricity business. And then lastly, as noted, the gas distribution business, we go through a price reset from 1 October next year. So that would be outside the current period for next financial year, Grant. Maybe, Jason, you might just touch on metering and key points there being Australia subject to COVID deployment and then maybe just talk to the CapEx increase there largely driven by 4 gs rollout. Yes. So I guess we're expecting the leasing deployment rate to continue at a similar rate that it's done in this year, both in New Zealand and Australia. So there should be yes, subject to COVID, but we've traded through COVID over this year. So we are able to continue to deploy meters subject to lockdown rules. And in New Zealand, we do have the 4 gs rollout program where over the next 3 years, we're upgrading the modem connections to our meters, but that's a CapEx item, not an OpEx item. So that will just continue to ensure our meters can operate beyond 2025. Guest trading, I mean, we've had a tight gas market this year, which has helped our gas trading business in terms of margins. So the outlook for gas is a little bit uncertain going forward. We're a beneficiary of wholesale prices increase as they did sort of in the second half of this year, but again, that will depend on market conditions and expecting continued performance from HRV. Yes. Traffic. Our next question comes from the line of Andrew Harvey Green from Foresight Good morning, everybody. Just a couple of questions from me. First question just around the dividends and I guess some of that growth just resumed probably a little bit earlier than I expected. I'm assuming we can think of the assume that the plan does continue to or have that dividend growth ongoing for the future foreseeable future. I can speak to the dividend. Look, we had a good year this year, in some respects, one of our best years in the last 5 years, and as a result, decided to bump up the dividend. But we moved away a couple of years ago from the just the mechanical progressive dividend rate and the Board is really looking now at forward earnings and we have to fund CapEx, we have to fund metering growth and then we also have to have funds sufficient to meet the current dividend and then increase the dividend. So I wouldn't read anything into this dividend that's automatically continuing the future. Look at the cash flow of the business, on metering on other parts of the business and make a decision based on our balance sheet and cash flows. Does that answer your question on that? And this dividend should be seen as we're giving a little bit of more money back to the shareholders as a result of a strong year. Yes. Second question was just, I guess, around the metering business. And I guess in New Zealand, we've got a largely mature market here apart from, I guess, they've got the gas growth going on. On Australia, can you give us a sense of what the level of smart meter penetration is and how many more years I guess of growth at these sorts of levels you expect to see? Excellent. Thank you. Simon, you want to start or Jason? Sure. Yes. Folks know a lot about that issue. Yes. Hi, Andrew. I think it's obviously, the growth we're seeing in Australia, we currently believe will just be getting stronger as Australia also starts really dealing with a number of functions. One of those functions being a move to a 5 minute market, which is obviously going to be in place later next year. And as a result of that, it's super critical that the platforms that are in place to enable the 5 minute market data as sophisticated as possible. And also one of the key ingredients with that is the processing capability of the platforms to be able to enable that 5 minute market meter data provided to customers being obviously the retailers. So we think that that's one feature that will drive more metering growth as well as just the ongoing replacement of old legacy meters in Australia and the growth from new meters. As it stands at the moment, the penetration of meters primarily in what we call the Eastern States, you have to remove Victoria because that was rolled out by future of a regulated framework in Victoria. So the distribution companies put the meters in, whereas New South Wales, Queensland, South Australia, ACT, TESI largely was a market determined outcome as per the New Zealand market. And the penetration and that really started with what we saw occurring in solar installations where solar was the first kind of layer of smart meters and then what's the new and replacement. And we believe that that's just going to continue to grow very strong. And this in the order of about 5,500,000 to 6,000,000 meters in that kind of quantum other than that's discounting Victoria, of which there's still we're probably only at around about 10% total smart meter penetration, 15%, maybe an upper level of 20%. So still a significant amount of smart meters to be deployed into those states in Australia. And with the climate change, decarbonization initiatives, we think that lots of commentaries in Australian context around smart meters being a key enabler and platform for all the data and information that not only retailers require, but also third parties and distribution companies. Andrew, did that give you the color that you needed on Australia? Yes. That's the same. And last question for me was just if you could talk to, I guess, inflation pressures going on within the business and what we can perhaps expect to see on the cost side over the coming 12 to 24 months? Yes. Simon, take that. Yes. Supply chain, flash inflation. Sure. Yes. Clearly, we're obviously very aware of the inflation challenges. I think also particularly supply chain challenges. I guess we could characterize those, Andrew, into assets and obviously being resources such as the labor market. And so with regards to the resources, then we have as noted in the presentation, we've taken the step a good 6 to 9 months ago to increase stock levels. And as a result of that, we sit in a reasonably comfortable position with most of our critical stock, not only in electricity, but also into our metering business. But we definitely can't be complacent. We are seeing those cost pressures, particularly in Auckland infrastructure builds increasing with regards to costs. And you also note that we've changed our capital contribution policy, which means that for all those growth of the electricity business and gas business in particular, we have largely managed that cost CapEx pressure in that space through changing our capital contributions. With also the metering business, the key costs really arising in that space of deployment costs, it's pleasing to say that we have actually had reducing cost focus on that business as well as reducing deployment cost per meter. But importantly, also with the new platforms, the new platforms that we're deploying will be at a lower capital replacement cost than legacy platforms that are basically the other options in the market. So the strategic alliance with AWS, for example, is really important in building these multi fuel platforms at a much better capital cost. In the resources, particularly our people, we're seeing high cost pressure in areas such as field services resources and also into drivers and so forth in the LPG business. And the reality of that is that's a cost that we have to manage, but it is definitely at a higher rate than inflation, as I'm sure many people are seeing. All in all, I think our focus for next year just remains about how else we can drive cost efficiencies from a cost perspective across the business, recognize that we just have to relentlessly focus on ensuring that we are only deploying capital into areas that are efficient, get an acceptable return. But by and large, it would be fair to say, Jason, you might want to add anything, but we believe that we have good cost control management. And then on the positive side through the electricity and the likes of the resets with inflation increasing there, we should see a better upturn with regards to electricity resets because of higher inflations and indexing flow through into our regulated asset base adjustments. I think you add, Simon, I agree that's the key thing is we obviously we move with inflation on our regulated business, so that's helpful. Yes. And also, I should say with our field services contracts that primarily are indexed to CPI. So that's how those costs materialize through our field services contracts. That's great. Thank you. That's all for me. Thank you, Andrew. Other questions? Our next question comes from the line of Stephen Hudson from Macquarie. Please ask your question. Good morning, Jonathan, Simon and Jason. Just a couple of quick ones from me. Just firstly, your comment on the property partnering and co location strategy. Can you just flush out a few examples of what you're thinking of there? Secondly, the 4 gs modem CapEx envelope, could you give us an idea of what that is and whether or not those modems will be 5 gs compatible? And then just thirdly, on the gas reset, can you give us an idea of the likely price reset there and the probability of a price rollover? Thank you. Okay. Thank you, Stephen. Simon? Look, I could pass property over to Jason, but I guess, in essence, our focus is on recognizing that we have a lot of assets, particularly in Auckland in the property space, where we do not see we're realizing as much value as we would otherwise expect from those property assets sitting in Auckland. And examples of that would be substation assets where we have the ability to develop those with, for example, building above the substations, which is done commonly in a lot of other entities globally, co location of services, whether it's things such as cellular towers or 5 gs kind of rollout solutions. So that's the types of examples of property benefits that we see that we can actually be to focus on than just being one of the better word static electricity use only. Jason, you might want to add anything to that? I don't think so, Simon. But there are a lot of those assets. And obviously, Auckland Property Process is doing what they've done. There's a lot of opportunity there to extract some value from those assets. So we're looking at it carefully at the moment. A case in point would be one of the Auckland City substations that was already that was always developed with the air rights preserved to be able to build something like 8 to 10 levels above it of either apartment or business facilities. So those are examples of a lot of the assets that we have right across the Auckland footprint. Jason, you might want to touch on the question Stephen had with regards to I'm sure the CapEx. To modems, 5 gs modems. Just from the first question was, they are 5 gs compatible and they're basically LTE 5 gs capable. So they definitely have a very long life capability on in line with the cellular upgrade pathways. Sort of indicative ballpark CapEx is around $150,000,000 over for 3 years. So it's spread out and needs to be completed by 2025. So it gives you a rough idea of the size of the spend and extends the life of all the meters that are deployed in New Zealand. That's also fair to say, Jason, that we have the plans to deploy most of those modems in the next couple of years as opposed to leaving it over the 3 years. So the CapEx will probably be best, but probably over 2.5 years of which we've already employed around $30,000,000 I think roughly of CapEx for the program. Yes, that's right. We trying to get it out of the way, sit around the line. Yes. Good. And the last question comes from Yes, I'm afraid we said we have some uncertainty there, right? But Simon, what can we say? Yes. Look, I think a good question. Obviously, you would have read the Commerce Commission's issues paper. Our perspective is that 1st and foremost, we have the decision that the government has to make with regards to the gas transition, particularly how that relates to gas distribution and customers and particularly the impact on customers of any transition. I think it's important to say that we have as mentioned in the presentation that we've been working closely with PAO and First Gas and also regulators, Commerce Commission, Envy and others is identifying exactly the challenges with the gas transmission, how do we actually ensure that the there's the clear information around what are some of the issues with the gas transition? How does it impact on customers? How can we find a three way arrangement that works with not only customers, but also for the government from initiatives. Clearly, one of those initiatives is to ensure that the optionality remains for more different biofuels, whether it's biogas or hydrogen blending. So that optionality is obviously very critical for the government. And equally from the network owners perspective is that, I guess, the key point there is that we see that there has been a regulatory compact in place, which was essentially derived from a perpetual business model perspective, now is actually something that has to be reviewed by the Commerce Commission. And we are working closely with those parties as mentioned to identify how this transition could be managed. The Commerce Commission through the legislation that it has to operate to is kind of got its hand tied slightly because of the framework it operates to. So they are kind going through their process around what they expecting to think about with regards to the DPP-three reset. And as you will have seen in their paper, they do kind of look at issues such as whether they should just roll over because of the uncertainty around what is going on with regards to a gas transmission and how they transition and how it implies to gas distribution companies. They also raised topics such as removing indexation, accelerated depreciation and the likes. We'll be obviously engaged significantly on those points. And I guess from our perspective, we believe that there's a different construct that needs to be put in place to recognize the situation we find ourselves in now where the existing regulatory framework was not even contemplated to deal with this kind of transition. And therefore, that's something that we're in conversations about with the other the distribution debt with colleagues as well as seeking that further engagement with the regulators and other government agencies. Yes. And ultimately, Simon, to provide the commercial incentives to continue to invest in the gas network for the 30 years that we're going to need it. Yes. This transition will be very challenging, but it's great that Vectrus engaging with all the right players to try to find a transition path and watch the space. Stephen, did you have any other questions? That's it. Thanks for those responses, gentlemen. Very useful. There's no more further question at this time. Excellent. Well, oh, go on. Yes. Thank you. Go ahead. I will now hand Excellent. Thank you. Look, if there's since we don't see any further questions, we'll end now the teleconference and webcast. But if analysts and investors have any further questions, please contact Jason. And for the media, first port of call is Matt Britton or call our usual media phone number. Thank you everyone for joining the full year 'twenty one Vector Briefing. Have a good day. This concludes today's conference call. Thank you for participating. You may now disconnect.