Hello, everybody. Can I just offer my apologies for that delay. Very fortunately, we're back, and we can carry on with the meeting, and we will do that. I did say to my team this morning as we all arrived, "Now, guys, we've really got to be on fire today." I don't know whether I jinxed it or we are. We'll commence proceedings, and I'll ask John to come up and get us underway. Thank you.
[Non-English content] . Good afternoon, everyone, and welcome to our 2026 Annual Meeting for Shareholders. My name's John Rodger, and I'm Vector's Chief Legal and Assurance Officer and Company Secretary. I'd like to acknowledge [Non-English content] as mana whenua for Central Auckland, where we're meeting here today. I'm going to run through some housekeeping before we get underway. The toilets, some of you may know, are located just outside there the way you came in. The next section in my speech is called, If There's an Emergency. I'm going to short-circuit that one. I think you know the drill. We'll move straight into cell phones. We'd ask you, if you can, to please switch off your cell phones or put them on silent for the duration of the meeting.
At the end of the meeting, there's going to be time for something to eat, which is going to be well earned, and a chance to have a chat to Vector directors and to staff, if you've got any questions or any feedback on the discussions today. Now I'll turn to the agenda for today's meeting. First, I'm going to go through the instructions for voting and for asking questions. We'll then move on to ordinary business in the meeting, where we're going to hear addresses from our Chair, Doug McKay, and from our Group Chief Executive, Chris Blenkiron. We'll then go to the formal resolution to appoint our new auditors, PwC. After that, we'll move into general business, and there'll be time for shareholder questions. There'll then be an opportunity to vote, and voting will then be closed, and we will formally close the meeting.
Today's meeting is a hybrid meeting, so that's being held here in person and online. This is a meeting of shareholders, so we'd ask you to keep your questions focused on matters that are relevant to shareholders. Our customer team is at the back as usual and is happy to help you if you've got any queries around operational or customer service matters. You can ask questions at the specified times during the meeting. To help give everyone an opportunity, we'd ask you to limit yourself to two questions. If you have more questions than that, then Chris, Doug, other members of the Vector team, and I will be available at the end of the meeting. If you're participating today online, you can submit your questions at any time using the online voting platform. We'll then answer those at the appropriate time in the meeting.
If you need technical assistance, you can type in your query on the web portal, and a member of the Computershare team will assist you. We welcome media today as observers. Can you please hold your questions until after the meeting and make yourself known to a member of our communications team and our management team? The voting today on our resolution will be conducted by way of a poll. If you are in the room, you can mark your paper anytime on your voting paper, and a member of the Computershare team is going to gather these up at the end of the time for voting at the end of the meeting. If you are online, you can vote anytime through the online platform after Doug has declared the meeting open. Doug will indicate the final opportunity for voting before the papers are collected and the online voting closes.
Thank you. I will now hand over to Doug to open the meeting.
Thank you, John. Welcome, everybody. As we have a quorum, and it is now well past 2:00 P.M., it is my pleasure to declare the Vector Limited 2026 Annual Meeting of Shareholders open. With the meeting open, you may now cast your vote at any time. The number of shareholders who have appointed proxies and the shares represented by those proxies are shown on the screen. The screen also shows the proxies held by me in my capacity as Chair and in my own name, including the shares held by Entrust, our majority shareholder. It is my intention to vote the discretionary proxies I hold in favor of the resolution. I would now like to acknowledge my fellow directors, Alastair Bell, Vaughan Busby, Dr. Paul Hutchison, Dame Paula Rebstock, Bruce Turner, and Anne Urlwin.
Also at the table are our Group Chief Executive, Chris Blenkiron, and our Chief Legal and Assurance Officer and Company Secretary, John Rodger, who has just taken you through the meeting procedures. In the front row in front of me here are our Chief Financial Officer, Jason Hollingworth, our external auditor, Matt Diprose from KPMG, and other members of the Vector executive team. Overview of Vector's financial performance. I am pleased to report a strong financial performance for the year ended 30 June 2026. Adjusted EBITDA increased from NZD 401 million in FY 2025 to NZD 482 million in FY 2026. As the chart shows, the increase was driven principally by the electricity business. Gas distribution was broadly stable, while the other category was down NZD 8 million compared to the prior year.
The main driver of the increase in electricity adjusted EBITDA was the higher DPP4 revenue allowance for electricity distribution businesses. It applied for the full FY 2026 year, compared with only one quarter in FY 2025. Net profit after tax increased from NZD 155 million in FY 2025 to NZD 240 million in FY 2026. The movement reflects higher adjusted EBITDA, partly offset by lower capital contributions and higher net interest. A key difference year-on-year is that FY 2025 included a NZD 37 million impairment of the gas distribution business. There was no impairment in FY 2026. Overall, the increase in NPAT reflects the stronger earnings performance together with the absence of the gas impairment. Gross capital expenditure increased by NZD 74 million or 16% from NZD 470 million in FY 2025 to NZD 544 million in FY 2026.
Electricity CapEx accounted for the majority of the movement, increasing from NZD 432 million to NZD 512 million. This is the largest annual investment ever made in our electricity network. It supports reliability and resilience today while preparing for rising demand across Auckland. Within electricity CapEx, growth expenditure increased by NZD 18 million and replacement expenditure increased by NZD 62 million. Gas distribution CapEx was down NZD 5 million and other was down NZD 1 million. Vector continues to maintain a strong balance sheet. At 30 June 2026, economic net debt was NZD 2.28 billion and gearing was 39%. We continue to manage funding prudently with a focus on maintaining financial flexibility as we invest in the network and pursue disciplined growth opportunities.
The Board declared a final dividend of NZD 0.135 per share, taking the full year FY 2026 dividend to NZD 0.26 per share. The dividend reflects the strength of the year's performance and the Board's consideration of Vector's investment program, balance sheet, and future funding requirements. I will now turn to the outlook for FY 2027. As with FY 2026, we are providing guidance on adjusted EBITDA, gross CapEx, and capital contributions. For FY 2027, adjusted EBITDA is expected to be between NZD 540 million and NZD 560 million. Gross capital expenditure is expected to be between NZD 605 million and NZD 635 million. Capital contributions are expected to be between NZD 160 million and NZD 190 million. The guidance reflects continued investment in Auckland's electricity network while maintaining our disciplined approach to costs, capital, and funding. Customer-driven activity is expected to be broadly in line with FY 2026.
The guidance range for capital contributions is lower, reflecting that contributions can vary substantially depending on the timing of major customer project connections. We will now move to the next part of our presentation, where I will set out the context for the next chapter of Vector's growth, and Chris will talk about a refreshed strategy to deliver that growth. After that, I will open the floor for shareholder questions. Throughout Vector's history, the business has created value by anticipating major shifts in the energy sector and positioning itself accordingly. We have never stood still. We built our foundations through major acquisitions, then expanded into metering and other energy services. Through our Symphony strategy, we were early to recognize the value of a more integrated approach to energy.
More recently, we have simplified our portfolio, exited a number of investments, and sharpened our focus on the opportunities we believe can create the greatest long-term value. Each phase has built on the one before. While our core business has remained strong and has consistently underpinned the group's performance, those decisions have reinforced the areas where Vector has a genuine advantage. Together with the discipline, leave the company ready for its next phase of growth. Our forecasts show demand for electricity rising, and all the trends point to accelerating electrification as Auckland's population grows. More large loads are added, and more data centers are built. The next major shift for New Zealand is not simply generating more renewable electricity. It is electrifying more of the economy, with electricity meeting a greater share of the country's energy needs.
This year, more than 90% of New Zealand's electricity has come from renewable sources. But electricity currently meets only about 1/3 of our energy needs. As transport, heating, and industry electrify, that share could rise to around 60%. That would represent one of the most significant transitions the country has undertaken, with benefits for customers, the economy, and the environment alike. Vector intends to take a leading role in that transition, and if we get it right, we will create attractive long-term growth opportunities for the business while supporting outcomes that matter for New Zealand. That is why we have refreshed our strategy. It is not a radical change in direction, but an evolution that reflects where the sector is heading and the scale of the opportunity ahead. The Board believes Vector is ready to capture it.
I will now hand over to Chris to explain what that looks like in practice.
Thank you, Doug. Before I talk about where we are going, I want to acknowledge the strength of the business today. I am incredibly fortunate to have joined a company that is in great shape. That is not something that happens by accident. It is the result of disciplined decisions, long-term thinking, and a commitment to doing the right thing for customers and shareholders. We have invested for the future without losing sight of affordability. We have continued to strengthen and grow the network with record investment exceeding NZD 500,000,000 in FY 2026. Meanwhile, Vector's share of the average monthly household bill has barely changed in real terms over the past decade. For absolute clarity, our pricing on your electricity bill is, on average, NZD 4 more a month in today's money than it was in 2013. That is particularly important when you consider what is ahead.
We are in the middle of a 20-year program to invest around NZD 10 billion in the network that will enable Auckland's growth and electrification for decades to come, including NZD 5.4 billion over the next 10 years alone. Our progress to date is no small achievement, and it is a credit to the people who have guided this company over many years. The electricity network is at the center of everything we do, and we also have a set of complementary businesses in our portfolio. Gas distribution, fiber, our technology solutions business, and Bluecurrent. Each contributes in a different way to strengthening our core electricity distribution business. Together, they help make us better, and the investment and the pricing track shown on the graph give you confidence that we run a very efficient EDB. So my job is not to reinvent Vector.
It's to build on what's already been created and make sure we're in the best position to succeed. That means being clear-eyed about where the energy sector is heading and where Vector can make the greatest contribution. As Doug said, the future is electrification. This will be one of the largest and longest-running infrastructure transitions Auckland has undertaken. We believe Vector has the assets, capabilities, and experience to help lead the change towards an electric future over the next 30 years. Delivering that future will require a collective effort. One of the strengths of Symphony was recognizing that customers do not experience the energy sector one organization at a time. They experience it as a single interconnected system with one overall bill, and it's encouraging to see the industry increasingly working together on that basis. Electrification will deliver real benefits for customers.
A fully electric home with solar and an EV can be cheaper to run than a typical home today. Preparing for a more electric future requires investment, but it must remain affordable. Our success will not be measured by how much we spend, but by how effectively we invest and how productively we use the assets we already have. Every dollar we save through better planning, technology, and smarter network is a dollar customers do not need to fund. But we will never pursue those savings at the expense of safety, reliability, or service. Our strategy has a simple objective, connecting Aucklanders to the energy transition and helping lower their overall energy bills. How will we get there? We will transform our distribution business so it is ready for a more electric Auckland. We will continue to lift our productivity so we get greater value from the network.
We will set up two new enterprises, one called Nexos, to build on our connections experience and deliver the grid exit and injection points that New Zealand will need as electricity demand grows. The other, called Catalyst, will help Auckland's businesses and, over time, households overcome the cost and complexity of electrification. Together, these priorities reinforce one another. A modern, efficient distribution system provides the foundation, while our broader capabilities help customers electrify and create new avenues for growth. For me, the most important part of our strategy is what we call transform distribution. Behind the label is a simple idea that builds on what we started with Symphony. The distribution business of the future will need to operate very differently from the one that we have today. Transforming distribution is about preparing Auckland's network for a more electric future while getting more from our infrastructure.
As more customers generate, store, and manage their own energy, the network will need to become smarter, more flexible, and more responsive. An example of how we will transform our distribution system is with better data that will give us a more detailed view of network performance and available capacity. We now receive smart meter data in five-minute intervals for around 50% of customers, and we aim to reach 95% by 2031. This will allow us to understand demand in greater detail so we can use existing capacity more effectively, target expenditure more precisely, and avoid building infrastructure before it's needed. AI will play an increasingly important role in helping us make sense of that data. We're already seeing benefits through tools such as Grid Aware, which help us identify issues sooner and target investment more effectively.
On Kawau Island, a network survey that previously required eight people working for five days can now be completed in a matter of hours. AI-assisted pole inspections have reduced assessment times by more than 80%, from up to 45 minutes per pole to less than seven minutes using drone imagery. We will deploy AI responsibly with strong governance, appropriate safeguards, and careful management of cyber and technology risks. We also need our network to become more flexible. We will make more use of options like batteries and demand response while aligning more closely with how the wider electricity system operates. We have identified to help defer or reduce traditional network investment, creating opportunities for new providers to deliver those services. Transforming our distribution business is about making electrification work better for customers.
That means affordable, responsive, and reliable services alongside more opportunities for customers to benefit financially through cost-reflective pricing and incentives for using energy more flexibly. We are already seeing this in practice. More than 2,500 homes are participating in flexible pricing arrangements. These reward customers for shifting demand away from peak periods. We were the first electricity distributor to remove peak pricing from mornings in May and September because increased visibility in our network showed us that it was possible. It also means continuing to challenge our assumptions. Historically, nearly all growth has come from new connections, and our position is that growth should pay for growth. As more demand comes from existing customers electrifying their homes, vehicles, and businesses, we will work with regulators and the sector to make sure costs are allocated fairly and support an equitable transition for all customers.
When growth changes, we need to change, too. While we are doing all of that, our focus on safety and resilience remains unchanged. As the network evolves, customers should continue to have confidence in the service they receive, supported by clear information and a faster response when disruptions occur. We know households and businesses are under cost pressure. As we have made clear, the answer is not simply to spend more. It is to lift productivity and avoid unnecessary expenditure. Every project we can avoid through smarter use of the network helps keep costs down for customers. When investment is required, however, we need to make sure that it is the right investment, delivered in the right place at the right time, and as efficiently as possible.
We will still need to invest in physical assets like power poles and wires, and increasingly, that investment may include batteries and other flexible solutions. Getting those decisions right matters because we are operating in an environment of rising costs, which ultimately flow through to our customers. Take those power poles I have just mentioned. We have 126,000 on our network to maintain and replace, and the cost of erecting a standard double concrete pole has increased by over 40% above inflation in just five years. That includes around NZD 2,000 more per pole just for traffic management. This shows that keeping costs down is not only about buying materials at the best price. It is about planning and delivering work efficiently, building strong partnerships with councils, with regulators, and the wider sector, so the rules are practical, and the projects can be delivered effectively.
This is what Transform Distribution is ultimately about, combining better data and technology with the judgment of our people to make every dollar count for Aucklanders. If we get it right, customers benefit from a more reliable network and lower energy costs over time, while shareholders benefit from a more efficient future-ready business. Alongside transforming our core distribution business and lifting productivity, we have thought carefully about where else we are uniquely placed to make the biggest difference. The opportunities we are pursuing build directly on our existing strengths and Auckland's emerging needs. That is why we are creating two new businesses, Nexos and Catalyst. As New Zealand electrifies, demand is growing for large connections that enable major electricity users and generators to connect to the national grid.
These projects are becoming increasingly important to the country's growth and traditionally have been delivered largely by Transpower. We are establishing a new business, Nexos, to bring additional capability to this market. It will build on the expertise we have developed delivering complex connections on our network and apply it to opportunities across New Zealand. We already have a strong pipeline of our own projects and are in discussions with customers today planning future high voltage connections, giving us a solid foundation from which to grow. The level of demand is clear. There were five transmission connection inquiries in 2019. This year, that number has risen to 131. Individual projects can range in value from NZD 50 million- NZD 150 million.
Not all will proceed, but the pipeline points to a substantial long-term need. By applying expertise built over many years, we can help more customers connect sooner and support the infrastructure New Zealand will need. Electrification makes economic sense for many businesses, but the upfront cost and complexity of making the switch can be significant. That is why we are establishing our second new business called Catalyst. It will help businesses and, over time, households overcome the practical, technical, and financial barriers that can stand in the way of electrification. This links directly to our strategy. We have talked about preparing Auckland's network for a more electric future, and we also see an opportunity to help turn customers' electrification ambitions into projects. We have seen the value of this kind of thinking before.
Our early investments in smart metering and our technology solutions business helped lay the foundations for the five-minute data capabilities now being rolled out across New Zealand and Australia. Catalyst applies the same principle, anticipating where the sector is heading and building capability ahead of demand. For customers, the opportunity is also significant. The house on the slide shows a typical Auckland home and the savings that can be achieved by electrifying things like transport, heating, and hot water. The same principle applies to many commercial and industrial customers. In simple terms, the more energy users that can be electrified efficiently, the greater the ability to reduce the overall energy costs over time.
Looking more closely at the potential market for Catalyst, we estimate Auckland's 90 largest gas users could represent around a billion dollars of investment as they transition to electricity, acknowledging that some are limited for now by current technology. Industrial heat pump conversions can cost between NZD 1 million and NZD 3 million per megawatt to install, highlighting the size of the emerging market. That is why we will initially focus on large energy users, helping commercial and industrial customers make the transition to electricity. For some, that may involve replacing gas-fired equipment. For others, it could involve solar generation, battery storage, or other technologies. Nationally, around 500 industrial sites have been identified as suitable for process heat conversion, representing an estimated NZD 5 billion investment opportunity.
While the economics are increasingly attractive, many of these for some to find the upfront investment required to get started. Catalyst will help customers overcome those barriers. Depending on the project, that could include technical design, implementation support, partnerships, or solutions that address the upfront capital requirement. The goal is to help viable projects proceed sooner. By doing this, Vector can support business growth, help counter de-industrialization and job losses in Auckland, and accelerate the shift to lower cost, lower emissions energy solutions. Nexos and Catalyst will operate independently of our regulated network business and will be subject to the same investment discipline that has served Vector well over many years.
We will also continue to grow the value of our existing interests in fiber, gas, our technology solutions business, and our investment in Bluecurrent. The energy transition is a once in a generation opportunity. Vector brings technical expertise, a strong balance sheet, and a willingness to partner where that creates better outcomes. We expect Nexos and Catalyst to make a meaningful contribution to group earnings over the medium term. Our strategy is straightforward. Transform our distribution business, lift productivity, help Auckland electrify at the lowest possible cost, and pursue growth where we can create value for customers and shareholders. Auckland is changing and so is Vector. Our role is to connect Aucklanders to the energy transition and make sure they share in its benefits. Doug McKay has more to say about the strategy, but first, we have got a short video that captures some of the exciting opportunities before us.
If you listen to the conversations happening around Auckland today, you will hear people talking about electric vehicles, solar panels, batteries, and the future of energy. These are not niche topics anymore. They have become part of everyday life. That is because Auckland is changing. The way people use energy is changing. We have an opportunity and a responsibility to help customers navigate the transition. That is why our purpose is connecting Aucklanders to the energy transition. We have an opportunity to help Auckland become a city that is more resilient, more productive, and better prepared for the future. Auckland's NZD 160 billion economy is increasingly driven by industries like food manufacturing, digital services, and software that depend on affordable and reliable electricity.
As New Zealand's gateway to the world, Auckland needs a network that can support their growth. In the past, when demand grew, the answer was usually simple: build more stuff. But it is expensive to keep doing that, and we have got a smarter approach. Transform Distribution is about turning Auckland's electricity network from a one-size-fits-all system into a smart, responsive network that can adapt in real time. Tools like Grid Aware and Grid Planning Tool are giving us a clearer view of the network. They help us spot issues earlier, understand where Auckland is growing, and invest where it matters most. Transform Distribution is about giving Auckland the network it needs for the future, one that is smarter, more resilient, and ready to grow.
For our customers, it means a network that can support the choices they are making today and the energy future they will rely on tomorrow. When we say expand connections, it is about enabling major infrastructure, supporting industry, connecting new sources of generation, and essentially powering the next wave of New Zealand's growth. It is about taking Vector's expertise beyond traditional customer connections and applying it to larger, more complex connections such as major infrastructure, industrial sites, and generation projects. Every new connection creates the foundation for what is next, for Auckland today and New Zealand tomorrow.
Electrification is far more complex than simply switching energy sources. For example, network upgrades, retail contracts, rooftop solar, battery storage, flexible demand management, heavy vehicle charging, and ensuring a resilient electricity supply. While the transition will deliver long-term cost savings, the high upfront capital, combined with complex design, remains a barrier for many of our large customers. This is where Vector can make a real difference. We will help customers design, own, build, finance, and maintain the assets they need to electrify with confidence. Electrification isn't something that simply happens to Auckland. It is something that Vector can help make happen.
One of the things that appeals to the board about this strategy is the balance it strikes between ambition and discipline. We are building on the strengths that have served us well, while responding to a rapidly changing energy landscape and evolving customer expectations. That puts Vector in a strong position to benefit from the opportunities ahead and to help power Auckland's transition to a more electric future. Just as importantly, it does so in a way that remains focused on affordability, prudent investment, and long-term value creation. Taken together, we believe these are the right priorities for the next phase of Vector's development and for delivering sustainable growth in the years ahead. Vector has served Auckland for more than a century, and the decisions we make today must equip it to serve the city for generations to come.
I will now open the floor for shareholder questions on Vector's FY 2026 financial performance or the refreshed strategy. Questions may also be put to our external auditor, but please keep those questions relevant to the auditor's role. Are there any questions from shareholders in the room on the addresses you have heard from Chris and myself, the annual report, financial statements, or the audit report? If you could please raise your hand and wait for a microphone to come to you. If you could introduce yourself at the beginning.
[John Clearwater], shareholder.
Thank you, John.
I would like to thank our new Chief Executive, Chris Blenkiron, for a most encouraging report. I was left with the feeling that there was very little room for an LPG investment. I wonder if you could put a light under the government and say you are barking up the wrong tree?
I know where you're going, but we'll leave the LPG arena for the government, the next government as it seems now, to decide. But we're confident that we can meet most of, if not all, of Auckland's electricity energy needs with the strategy we've been talking about today. Sir?
Hi, my name is [Jagat Dev]. I'm reading through annual report, and I see that there is a NZD 1 billion intangible assets, which is a gas distribution asset, and I see on the slide that there was a prediction that in the future gas energy would be replaced by solar. So how would you make sure that that NZD 1 billion assets, which is sitting under intangibles, would not have a genuine goodwill impairment? Or if you think that the future is going towards solars and there is not much need of gas distribution and having a NZD 1 billion gas distribution asset, is it not a risk on the asset side?
Well, thank you for that, Jagat. That's a good question. I'm going to ask Jason, who's sitting down in front of me, to help respond to the specific balance sheet situation of those gas assets. But we are not in control of the situation we find ourselves in with gas. It is a depleting resource. It's dropping dramatically. Our strategy is determined particularly with the large customers Chris has talked about 90 or so in Auckland. Most of those who do use gas for their energy needs, we need to help them get off gas and onto electricity as part of their risk management strategy for the state of the gas supply market.
Now, we've taken an impairment in gas last year, and we have adjusted our investment strategy for those gas assets to be more operational in focus and not so capital-focused for the future, because the future of gas definitely is finite, and we need to be very responsible and prudent about how we manage those assets to their end-of-life situation. Part of the help we need for that is to get the Commerce Commission on board to understand that we've made investments in gas that we might need to recoup faster than the original anticipated life of those assets. So it's very much in our frame, I can assure you of that, but Jason might want to just comment on the state of the balance sheet, goodwill vs asset value and so on.
Thanks, Doug. Just a couple of comments. The carrying value of our gas distribution business is more like NZD 500 million, I think. There is no goodwill attaching to those assets. We have written all of that off. So we are carrying those assets at their regulated asset value, and we have just had a reset with the regulator, the Commerce Commission, and they have enabled us to depreciate those assets at a more accelerated rate, which will help us get our investment back into the early 2040s. I guess we are confident that there is certainly gas for residential distribution into that time period, and our strategy is about getting our large customers off gas and onto electricity, which will help preserve those gas reserves for our residential or retail customers. So it is all part of a linked-up strategy, I think.
Any other questions? There is one over here. Oh, the one here, sorry. We will go here first. We will catch you in a minute.
My name is [Neil Anderson], and I am a New Zealand Shareholders' Association representative, and a shareholder in my own right. There was a lot of philosophical discussion about how you are going to electrify the industrial customers, but not a lot of information about CapEx and how much it is going to cost, and some comment on that would be useful. A second question is, you showed two houses up there, but you made no comment really on how or what you are going to do to put cash or money or whatever into electrifying those houses?
I get the thrust of your question. All of this sounds pretty capital-intensive, which it is. We may well find ourselves financing some of it. Chris mentioned there are a number of infrastructure funding partners out there who are very interested in this type of investment, and if we can structure the equity component with the help of some partners. We have a partner like that in our Bluecurrent business at the moment, Queensland Investment Corporation. We have got inbound inquiries as to how others might join us in how we have set up financing and funding arrangements here, and their expectation is a relatively modest but solid infrastructure return rate. So we are not, at this stage, into the detail of financing individual projects. We have just started and commenced conversations with prospective customers, and very encouraged by the interest that we are getting.
We haven't turned our minds to the two-house situation we highlighted yet because we think the priority should be the 90 industrial customers because their energy use is so significant, and they would be at risk of de-industrializing if they don't get assistance to move to another form of energy through electricity, which would put employment at risk in Auckland and so on. That is our priority, and we're confident that when we work with those 90 customers, there'll be a combination of their balance sheets, our funding support, and potentially funding partners and debt which will suffice and give us the capacity to do what we want to do. I hope that's sufficient at this stage. We don't have detailed financial plans by customer yet, but we've understood at a high level how we will structure a lot of these investments.
Just an additional comment then. Residential customers are going to want to know soon how are you going to do the two-house solution. Many, many residential customers are looking to the two-house solution, so I urge you to get onto that quickly.
Okay. Thank you. There was a question over this side as well.
[Coralie Van Camp], shareholder. Some of us in the suburbs, as you're aware, are facing the ghastly prospect of Plan Change 120 and intensification where it really shouldn't be. Some of us are already undergrounded with power, and all you've talked about is power poles and the extra cost, and you've shown wires up on top of the ground. So where is the undergrounding program at, and how would the intensification be affected with extra power poles and undergrounding, et c.?
Well, your street is in a very privileged position if you are undergrounded. It is a very small percentage of our whole network. What we showed on the video is more realistic as to what Auckland looks like, which would be different from your street and different from my street actually as well, Coralie.
Are you expanding undergrounding? Or has that just stopped?
No, it has not stopped. It continues on as it always has done. We allocate a certain amount of investment every year for undergrounding. We prioritize the projects. Part of that is what are the existing above ground assets? What condition are they in? Are they at risk of not performing? We do not want to underground assets that still have good life in them, so we tend to focus where those opportunities are. We also focus on opportunities where residents of the street are prepared to part fund the investment in undergrounding, because undergrounding and agree with our shareholder interest on what those undergrounding priorities would be and what budget we commit to spend on undergrounding every year.
If we are already undergrounded in a street, and along comes permission for a great big tower to be stuck in the middle of our street, which is inappropriate, and they have never paid for the undergrounding. What is the situation there?
Well, if they come along and want to build something big and new, and it requires more investment in network assets, then we will be asking them through development contributions to pay for that step up in investment that's required. Because all the other people in the neighborhood have already paid for what's there, and as we believe in the growth pays for growth philosophy, we would be asking for a contribution from that new development.
Thank you.
There was another question. Gentleman behind Coralie there. No, you're all right? You're done? Okay. There's one down here, please.
Thank you. [David Devereux], shareholder, I guess.
Sorry, David, I missed who?
Oh, [David Devereux]. Yeah, shareholder, I guess.
Okay. Thank you, David.
40 years ago, we were living in a street in St Heliers, and everyone just chipped in and got underground power, and I guess we were very fortunate to have the money to do that. But it worked really well, and the street's still got underground power. Anyway, just to comment and a question is, the traffic costs I noticed have gone up quite considerably, and I work sort of in that space, and in the last two years, I know personally companies in the traffic space that have gone under, have shed staff, and they've got multiple trucks sitting there doing nothing. But I'm guessing Vector do their own traffic management or they get in third parties, but I don't think, what do you call it, wages have gone up that much, and cones probably haven't gone up that much.
But for whatever reason, and I know there's been a shakeup in the traffic management space with the training, I'm guessing in the next couple of financial years, that cost should level out or come down, unless you're doing more poles, because you should be able to put the squeeze on those traffic companies, I reckon. Anyway, that was just a comment. And of course-
Respond to that?
Yeah.
We're not saying or implying that traffic companies are overcharging or gouging. The whole cost of traffic management as a system, which is also a function of Auckland Transport's regulatory requirements, imposes these costs upon both of us really, the suppliers and ourselves. So it's a whole of system, and we need to give people It's happened at the park here, which I know very well. The traffic management requirements for a game day here at the park just made it untenable. You couldn't afford it. But as we, the initiator of projects, come to Auckland Transport with new ways of doing things, we need them to be more flexible with their regulatory environment.
Yeah, instead of having five trucks at a grand a day. It's ridiculous, isn't it? Yeah.
Yeah. I agree with you. I am not implying the traffic companies-
No, 100%.
are in any way.
100%.
Yeah.
I know your strategy has got to move ahead no matter what happens at the election. The Greens have said that if they get in, they are going to put a stop on data centers and all that sort of stuff. I do not know if that affects your strategy because data centers will probably only be a small part of the business. I am not sure. I do not know if you have got any comments. I guess you have got to wait till November. Have you put any thought into what might happen if that happens, and then they get put on hold for three years and suddenly no more data centers or something like that?
Look, the whole data center environment globally is very dynamic at the moment. New Zealand's penetration by data centers, inquiries for data centers, is still very, very low relative to the rest of the world, even Australia. Australia's way ahead on their building and planning for data centers. We'll just have to let the political situation play itself out. As Chris highlighted, there's more than enough opportunity, which includes data centers. But if data centers were to go on a go slow for various reasons, we are not short of opportunities to redeploy our activity and our investment. Okay, there doesn't appear to be any more questions in the room. Oh, there is one over here.
The name's [James Johnson]. You had a slide up earlier to do with capital assets, and there was capital contributions. I wonder where they're going to come from?
Well, from recalling the slide, last year we had around NZD 160 million, NZD 180 million of capital contributions. They come from customers who are looking to undertake new connections or developments, and their contribution to the network and the asset upgrades that might be required, given how much demand they'll be putting on the system, what I spoke about in response to Coralie's question earlier. All right, could I just check with my colleagues at the back, any questions online?
Yeah, there's one here from Steven.
Can't hear you. You need to turn your mic on, I think.
Yeah, there's one here from Steven John Lowe and Pauline Glenda Lowe. It's about the residential gas supply. Can you give some timeframe estimate of how long residential gas will be available in New Zealand?
Not as long as what we all thought it was going to be a while back. It's a moving target, so no, I can't give you a set timeframe. I'll ask Chris to help me with the impact of these 90 big industrial customers, that if we can help them, over time, convert to electricity off gas, that will free up more gas for supply into the retail market. The percentage of gas that that works for is how much?
Yeah, so if we're able to help get the top 30 C&I, commercial and industrial, customers off gas, it'll free up about 36% of the volume of gas that's run through our network. To give context, we have 4,000 commercial and industrial customers on our network, which has 120,000 total connections. The top 30, if we can get them onto electricity, will save us 36% of the volume of gas in the network.
Which will mean a 50% higher availability of gas for the retail network. That will extend the current life, whatever that is, of the retail network by another half. Any other questions? Nothing more? Well, thank you. That concludes questions on the Chair and the Group Chief Executive reports and the financial statements. The next item of business is the Board's recommendation that shareholders appoint PwC as external auditor of Vector Limited for the financial year ending 30 June 2027. I would like to take this opportunity to thank KPMG for more than 20 years of service to Vector. Their support has been exemplary. The decision to recommend the change has been made as a matter of good governance in light of the current auditor's tenure.
The Board seeks your approval to formalize the appointment of PwC, as is conventional, to authorize the Board to fix the auditor's remuneration. I now move to the resolution and invite any discussion. Are there any questions on this resolution from shareholders in the room?
[Michael Bowden], shareholder. Just how often do you put the auditor's contract up for tender?
Well, we haven't done that for 20 years, Michael. This is the first time in 20 years. There are some rules around partner rotation, auditor partners rotation. So every five years, we get a new partner on the audit from the appointed auditor. But there's less prescription around how frequently or how long any tenure should be for the auditor to the role.
But in the future, how often are you going to consider that, putting the contract out for tender?
I can't answer that question at the moment. The last time was 20 years, so I've got a little bit of time to think about that maybe.
Yeah. That's good.
Okay. Are there any questions online? Okay, none. Thank you. That concludes questions on this resolution. The proxy voting position for this resolution is shown on screen. I'll give you a bit of time just to read that. We have now completed the ordinary business of the meeting. Are there any items of general business or further shareholder questions from the room? As a reminder, please keep these questions confined to shareholder matters, but our customer team is happy to help after the meeting with individual operational or customer service matters. Any questions from within the room of a general nature? Okay, thank you. Are there any questions online? Well, thank you. That concludes general business and shareholder questions. I will shortly close the voting. Please ensure that you have cast your vote.
While final votes are being cast, I would like to thank our shareholders for your continued support of Vector. I would also like to thank my fellow board members, Chris and the executive team, and everyone across Vector and our field service providers for their work during the year. The voting results will be released to the NZX following the meeting. I will just give a couple of minutes for final voting before I close voting. Voting is now closed, and I declare the Vector Limited 2026 Annual Meeting of Shareholders closed. Thank you for joining us. Chris and I, together with members of the Vector team, will remain available in the room after the meeting to answer any further questions during refreshments. Thank you