Vector Aktie

Yes. 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 really got to be on fire today. So I don't know whether I jinxed it or we are. So we'll commence proceedings, and I'll ask John to come up and get us underway. Thank you.

[Foreign Language]

Good evening, everyone. Good afternoon, everyone, and welcome to our 2026 Annual Meeting for Shareholders. My name is John Rodger, and I'm Vector's Chief Legal and Assurance Officer and Company Secretary. I'd like to acknowledge Ngati Whatua Orakei 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 the way you came in. The next section in my speech is called if there's an emergency. So I'm going to short circuit that one. I think you know the drill, and we'll move straight into cell phones. I would ask you if you can to please switch off your cell phones or put them on silent for the duration of the meeting. And 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 the Vector Directors and to staff if you've got any questions or any feedback on 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 will be time for shareholder questions. There will 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 2 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. And 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 every resolution will be conducted by way of a poll. If you're in the room, you can mark your paper at any time 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're online, you can vote any time 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'll now hand over to Doug to open the meeting.

Thank you, John, and welcome, everybody. As we have a quorum, and it's 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.

And 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.

I'll now move on to an overview of Vector's financial performance. I'm pleased to report a strong financial performance for the year ended June 30, 2026. Adjusted EBITDA increased from $401 million in FY '25 to $482 million in FY '26. As the chart shows, the increase was driven principally by the electricity business. Gas distribution was broadly stable, while the other category was down $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 '26 year compared with only 1 quarter in FY '25.

Net profit after tax increased from $155 million in FY '25 to $240 million in FY '26. 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 '25 included a $37 million impairment of the gas distribution business. There was no impairment in FY '26. Overall, the increase in NPAT reflects the stronger earnings performance together with the absence of the gas impairment.

Gross capital expenditure increased by $74 million or 16% from $470 million in FY '25 to $544 million in FY '26. Electricity CapEx accounted for the majority of the movement, increasing from $432 million to $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 $18 million and replacement expenditure increased by $62 million. Gas distribution CapEx was down $5 million and other was down $1 million.

Vector continues to maintain a strong balance sheet. At 30 June 2026, economic net debt was $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 $0.135 per share, taking the full year FY '26 dividend to $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'll now turn to the outlook for FY '27. As with FY '26, we are providing guidance on adjusted EBITDA, gross CapEx and capital contributions. For FY '27, adjusted EBITDA is expected to be between $540 million and $560 million. Gross capital expenditure is expected to be between $605 million and $635 million. Capital contributions are expected to be between $160 million and $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 '26. The guidance range for capital contributions is lower, reflecting that contributions can vary substantially depending on the timing of major customer project connections.

We'll 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've 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 disciplined execution reflected in this year's financial result, they 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 loads -- 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'll now hand over to Chris to explain what that looks like in practice.

Thank you, Doug. Before I talk about where we're going, I want to acknowledge the strength of the business today. I'm incredibly fortunate to have joined a company that's in great shape. It's not something that happens by accident. It's the result of disciplined decisions, long-term thinking and a commitment to doing the right thing for customers and shareholders.

We've invested for the future without losing sight of affordability. We've continued to strengthen and grow the network with record investment exceeding $0.5 billion in FY '26. 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, $4 more a month in today's money than it was in 2013. That's particularly important when you consider what is ahead. We're in the middle of a 20-year program to invest around $10 billion in the network that will enable Auckland's growth and electrification for decades to come, including $5.4 billion over the next 10 years alone.

Our progress to date is no small achievement, and it's 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 isn't 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. So 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 2 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 5-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 GridAware, which help us identify issues sooner and target investment more effectively.

On Kawau Island, a network survey that previously required 8 people working for 5 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 7 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'll make more use of options like batteries and demand response while aligning more closely with how the wider electricity system operates. We've identified more than 30 locations where batteries or other flexible solutions could 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're 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. And 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'll 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're 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've made clear, the answer isn't 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're operating in an environment of rising costs, which ultimately flow through to our customers.

Take those power poles I've 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 5 years. That includes around $2,000 more per pole just for traffic management. This shows that keeping costs down isn't 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've 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's why we're creating 2 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're 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 5 transmission connection inquiries in 2019. This year, that number has risen to 131. Individual projects can range in value from $50 million to $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's why we're 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've 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've seen the value of this kind of thinking before. Our early investments in smart metering and our Technology Solutions business help lay the foundations for the 5-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 this 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 $1 billion of investment as they transition to electricity, acknowledging that some are limited for now by current technology.

Industrial heat pump conversions can cost between $1 million and $3 million per megawatt to install, highlighting the size of the emerging market. That's why we'll 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 $5 billion investment opportunity. While the economics are increasingly attractive, many of these businesses face competing demands on their capital, making it difficult 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'll 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 has more to say about the strategy. But first, we've got a short video that captures some of the exciting opportunities before us.

[Presentation]

One of the things that appeals to the Board about this strategy is the balance it strikes between ambition and discipline. We're 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 '26 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, a shareholder. I would like to thank our new Chief Executive, Chris Blenkiron, for a most encouraging report. And I was left with the feeling that there was very little room for an LPG investment. So I wonder if you could put a light under the government and say you're 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.

My name is [ Jagan Dev ]. I'm reading through annual report, and I see that there is a $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 $1 billion assets, which is sitting under intangibles would not have a genuine goodwill impairment? Or like if you think that the future is going towards solar and there is not much need of gas distribution and having a $1 billion gas distribution asset, is it not a risk on the asset side?

Well, thank you for that, Jagan. 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, about 90 or so in Auckland. Most of those who do use gas for their electricity -- for their energy needs, we need to help them get off gas and on to 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 versus asset value and so on.

Thanks, Doug. Just a couple of comments. The carrying value of our gas distribution business is more like $500 million, I think, and there is no goodwill attaching to those assets. We've written all of that off. So we're carrying those assets at their regulated asset value. And we just had a reset with the regulator, the Commerce Commission, and they've enabled us to depreciate those assets at a more accelerated rate, which will help us get our investment back into the early 2040s. So I guess we are confident that there's gas -- certainly gas for residential distribution into that time period, and our strategy is about getting our large customers off gas and on to electricity, which will help preserve those gas reserves for our residential or retail customers. So it's all part of a linked up strategy, I think.

Any other questions? There's one over here. One here, sorry. We'll go here first. We'll catch you in a minute.

My name is Neil Anderson, and I'm a New Zealand Shareholders' Association representative and a shareholder in my own right. There was a lot of philosophical discussion about how you're going to electrify the industrial customers, but not a lot of information about CapEx and how much it's going to cost. And some comments on that would be useful.

Second question is, you showed 2 houses up there but you made no comment really on how or what you're going to do to put cash or money or whatever into electrifying those houses. So that's...

I get the thrust of your question. All of this sounds pretty capital intensive, which it is. And we may well find ourselves financing some of it. But also, 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've got inbound inquiries as to how others might join us in how we've set up financing and funding arrangements here. And their expectation is a relatively modest but solid infrastructure return rate. So we're not, at this stage, into the detail of financing individual projects. We've just started and commenced conversations with prospective customers and very encouraged by the interest that we're getting.

We haven't turned our minds to the 2 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 deindustrializing 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. So that is our priority, and we're confident that we work -- when we work with those 90 customers, there will 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. Residential customers are going to want to know soon how you're going to do a 2-house solution. Many, many residential customers are looking to the 2-house solution. So I urge you to get on to that quickly.

Okay. Thank you. There was a question over this side as well.

[ Carolyn Wanken ], 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 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 cetera?

Well, your street is in a very privileged position if you are undergrounded. It's a very small percentage of our whole network. So 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, Carolyn. So...

Are you expanding undergrounding? Or has that just stopped?

No, it hasn't 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 aboveground assets, what condition are they in? Are they at risk of not performing? And we don't 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 electricity is a very expensive exercise. And each year, we sign off and agree with our shareholder, Entrust, on what those undergrounding priorities would be and what budget we commit to spend on undergrounding every year.

So if we are already undergrounded in the street and along comes permission for a great big tower to be stuck in the middle of our street, which is inappropriate, and they've never paid for the undergrounding. What's 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.

There was another question, gentleman behind Carolyn there. No, you're right. You're done. Okay. There's one down here, please.

[ David Dubrow ], shareholder. 40 years ago, we were living in the 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 still got underground power. But anyway, just to comment and a question is the traffic costs, I noticed have gone up quite considerably. And I've got -- I work sort of in that space. And in the last 2 years, I know companies -- 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. So 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. We're not saying we're 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 Park (sic) [ Eden 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 would like -- we need them to be more flexible with their regulatory environment.

Having 5 trucks at grand a day, it's ridiculous, isn't it?

Yes. So I agree with you. And I'm not implying the traffic company in any way...

100%. But I know your strategy is going to move ahead no matter what happens at the election. And the Greens have said that if they get in, they're going to put a stop on data centers and all that sort of stuff. I don't know if that affects your strategy because data centers will probably only be a small part of the business. I'm not sure. I don't know if you've got any comments. I guess you've got to wait until November. But have you put any thought into what might happen if that happens and then they get put on hold for 3 years and suddenly no more data centers or something like that or...

Look, the whole data center environment globally is very dynamic at the moment. But New Zealand's penetration of data centers, inquiries for data centers is still very, very low relative to the rest of the world, even Australia. Australia is way ahead on the building and planning for data centers. So 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. There is one over here.

My name is James Johnson. You had a slide up earlier to do with capital assets, and it was capital contributions. I wonder where they're going to come from.

Well, we -- if I'm recalling this slide, last year, we had around $160 million, $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 Carolyn's question earlier.

All right. Could I just check with my colleagues at the back, any questions online? I can't hear you. You need to turn your mic on, I think.

Yes. There's one here from Stephen John Lowe and Pauline Glenda Lowe. It's about the residential gas supply. Can you give some time frame 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. But it's a moving target. So no, I can't give you a set time frame. But 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 create more gas -- free up more gas for supply into the retail market. And the percentage of gas that works for is how much?

Yes. So if we're able to help get the top 30 C&I, commercial and industrial customers off gas, it will free up about 36% of the volume of gas that's run through our network. So to give context, we have 4,000 commercial and industrial customers on our network, which has 120,000 total connections. So the top 30, if we can get them on to 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. So that will extend the current life, whatever that is, of the retail network by another half.

Any other questions? Nothing more. Okay.

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 June 30, 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 Bever ], shareholder. Just how often do you put the auditor's contract up for tender?

Well, we haven't done that for 20 years, Michael. So this is the first time in 20 years. There are some rules around partner rotation, auditor partners rotation. So every 5 years, we get a new partner on the audit from the appointed auditor. But there's less prescription around how much -- how frequently or how long any tenure should be for the auditor to the role.

In the future, I mean, 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.

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]

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.

Good morning, everybody. Welcome to Vector Limited's conference call and webcast to discuss the company's financial and operational results for the full year ended 30 June 2026. [Operator Instructions] I must advise you that this conference call is being recorded today.

I would now like to hand you over to Vector's Chair, Doug McKay, who will take you through the call. Please go ahead, Doug.

[Foreign Language] Good morning, everyone. I'm Doug McKay, Vector's Chair. Today, we'll be going through Vector's financial and operational results for the full year ending 30 June 2026. Joining me on the call are Group Chief Executive, Chris Blenkiron; and Chief Financial Officer, Jason Hollingworth.

We'll begin with an overview of the year, then cover the detailed financial and reportable segment results, our investment in Bluecurrent, the outlook for fiscal '27 and then the final dividend. After that, we'll open up the call for questions. But for now, I'll hand over to Chris to start the presentation.

Thank you, Doug, and good morning, everyone. FY '26 has been a year of strong financial performance. We've maintained a disciplined approach to capital allocation. We're sharply focused on delivering the services and experiences our customers expect and deserve and we're delivering for our shareholders. We've had a record year of capital investment in the electricity network. We've done this while continuing to be very deliberate about when and where we invest so that we can build a safe, reliable and future-ready network while minimizing the cost impact to our customers. Overall, the picture ahead is that Auckland has an opportunity to power more of its economy with affordable, reliable electricity, and Vector's network is essential to making that future possible.

I'll now move on to an overview of our group level financial results for the year. To set the scene for these results, a higher revenue allowance for electricity distribution businesses applied for the full 12 months of these results compared with only 3 months in the previous financial year. This higher revenue was set by the Commerce Commission from the first of April 2025 as part of the DPP4 reset. This led to revenue from continuing operations increasing by $111 million or 12% to just over $1 billion. The higher revenue flowed through to adjusted EBITDA of $482 million, up $81 million or 20%. Net profit after tax increased by $86 million or 55% to $240 million.

During the year, our investment into Auckland's electricity network was our highest ever reported in the financial year and exceeded $0.5 billion. Gross capital expenditure for the group increased by $74 million or 16% to $544 million. And finally, our operating cash flow increased by $117 million or 23% to $633 million, and this was driven by the higher adjusted EBITDA.

I'll now hand you over to Jason.

Thanks, Chris. I'll begin with the drivers of adjusted EBITDA, net profit, capital investment and the balance sheet. I'll then take you through the performance of our Electricity and Gas Distribution segments, followed by our investment in Bluecurrent. This slide shows adjusted EBITDA for continuing operations increased by $81 million to $482 million in FY '26. The increase was driven by the Electricity segment, which contributed an $88 million uplift. Gas Distribution was flat year-on-year, and the Other adjusted EBITDA was $8 million lower due to a $9.3 million loss on the sale of HRV.

The main driver of earnings growth, as Chris has said, was a higher DPP4 revenue allowance for the electricity distribution business applying for the full period of these results, whereas the higher allowance was in place for only a quarter in the prior year. Other remains a non-reportable segment, and that includes VTS, HRV, Vector Fibre, Equalise and also some group eliminations.

I'll now move to net profit after tax. NPAT from continuing operations increased to $240 million, up $82 million on the prior year. The largest positive driver was the increase in adjusted EBITDA, and this was partially offset by lower capital contributions and higher net interest. A key difference year-on-year is that FY '25 included a $37 million impairment of the Gas Distribution business, and there was no impairment in FY '26. Overall, the increase in NPAT reflects the stronger earnings performance, together with the absence of the Gas impairment recognized in the prior year.

And I'll now move to capital investment. Gross capital investment increased by $74 million or 16% to $470 million -- from $475 million in FY '25 to $544 million in FY '26. Electricity CapEx accounted for the majority of the movement, increasing from $432 million to $512 million, which is a record amount of capital invested under the electricity network in a single year. Within that, the electricity growth CapEx increased by $16 million, while electricity replacement CapEx increased by $62 million. Gas Distribution CapEx was down $5 million, and other CapEx was down $1 million. Net CapEx increased from $260 million in FY '25 to $353 million in FY '26 due to the higher gross CapEx and also lower capital contributions at $191 million in FY '26, down from $211 million in FY '25.

I'll now move to the balance sheet. Vector continues to maintain a strong balance sheet. Our Standard & Poor's credit rating remains at BBB+ with a positive outlook. Our economic net debt at June '26 was up $120 million to $2.28 billion, with gearing at 39%.

I'll now move to the segment performance. We start with Electricity. Electricity adjusted EBITDA increased by $88 million or 25% from $352 million in FY '25 to $440 million in FY '26. Revenue increased by $141 million, driven by the impact of the DPP4 reset, which included $38 million of the -- from the net impact of the DPP3 inflation washups and IRIS penalties. Pass-through costs increased by $31 million, with the increase linked to the new reset period for Transpower. And these costs are recovered through revenue. Other OpEx increased by $22 million, linked to the increased maintenance activity and also higher digital costs. Total electricity connections continue to grow, increasing 1.6% to 642,134.

And then to Gas Distribution. Gas Distribution adjusted EBITDA was flat at $47 million. Revenue was slightly higher, but this was partially offset by higher costs. Gas volumes were down 1.7% on the prior year, with lower demand across all sectors. And total gas connections decreased by 0.5% on the prior year to 119,991. The gas market remains an area of ongoing uncertainty and we continue to manage the business prudently, having moved from investing CapEx to spending more on maintenance where we can to maintain safety, reliability and long-term customer outcomes.

I'll now move to Bluecurrent. Our investment in Bluecurrent continues to perform well. Our revenue, EBITDA and cash available for distribution were all up on FY '25. [ And get ] equity accounts is 50% investment in Bluecurrent. So while Bluecurrent earned $222 million of EBITDA in FY '26, the company reported an accounting loss of $43 million due to depreciation costs, interest costs and also the amortization of intangible assets.

Vector recognizes 50% of this loss in its P&L. Bluecurrent is currently debt funding the rollout of its new meters, which means surplus operating cash flow is available to be distributed to shareholders each year. Bluecurrent's net debt increased from $1.391 billion to $1.59 billion over the year, and that was due to the rollout of new meters, mainly in Australia.

In FY '26, Vector received $55 million in distributions from Bluecurrent, and that was up by $3 million on FY '25. These distributions comprise $10.2 million of interest on a shareholder loan provided to Bluecurrent Australia; $12.1 million of principal that was repaid on this loan; and we received $32.6 million of dividends. The net book value of our Bluecurrent investment was $580 million at year-end. This net book value was reduced over the year due to the recognition of our share of the joint venture's loss, the dividends we received and an increase from the net movement in the shareholder loan balance due to an FX gain.

I'll now hand back to Chris to cover the outlook.

Thank you, Jason. As with FY '26, we are providing guidance on adjusted EBITDA, gross CapEx and capital contributions for H' 27. Adjusted EBITDA is forecast to increase on FY '26. The DPP4 decision set out a path of increasing revenue in each year of the 5-year period. Our forecast for FY '27 is consistent with this and includes recovery of an additional net $54 million of revenue wash-up and IRIS adjustments. We're also forecasting an increase in gross capital expenditure, and we'll likely see another record year of investment into the electricity network.

The primary driver of the increase is higher levels of replacement CapEx. This is important because it reflects how we're investing more to ensure the network remains reliable and resilient as Auckland continues to grow and electrify. Importantly, we're focused on balancing these investments with affordability. We're very disciplined on when and where we invest to deliver the network our customers need while minimizing the cost impact.

Customer-driven activity is expected to be broadly in line with FY '26, although the guidance range for capital contributions is lower, noting contributions can vary substantially depending on the timing of major customer project connections. For FY '27, the guidance range is adjusted EBITDA of $540 million to $560 million, gross CapEx of $605 million to $635 million, capital contributions of $160 million to $190 million.

Before I hand back to Doug, I'd like to thank all our people, including our field service providers and call center teams, for their enormous work throughout the year. I would also like to acknowledge our customers, our partners and stakeholders as we continue to invest in the network and support Auckland's growth and electrification.

I'll now hand back to Doug.

Thank you, Chris. I'll now cover the dividend. The Board has determined a final dividend of $0.135 per share with no imputation. This brings the full year dividend to $0.26 per share. The dividend record date is 9 September 2026, and the payment date is 21 September 2026.

Chris, Jason and I are now happy to take any of your questions.

[Operator Instructions] Your first question comes from [ Joshua Dale ] and Craigs Investment Partners.

[ Lillian ], thank you for the presentation, and well done on a solid result. I have a handful of questions. So it was helpful to see the split out of Bluecurrent distributions. One thing I noticed was the weighting to dividends was quite high in FY '26. And the loan repayments were much lower. So 2 questions on that. What does the pace of that shareholder loan paydown look like in the future? And is this now a permanent shift into dividend receipts for you from Bluecurrent?

Joshua, there were originally 2 loans for Bluecurrent, 1 into New Zealand and 1 into Australia. And the New Zealand loan has been repaid, so we will now be receiving dividends out of New Zealand. The loan in Australia is probably going to take over 5 years to repay, based on current forecast. So we'll continue to receive interest and principal repayments out of the Australian business.

That's helpful. And distributions from Bluecurrent obviously increased by $3 million, $255 million for FY '26. Is that about the right increase to assume in FY'27?

It reflects the deployment of meters. So I think if they continue to deploy meters at the current rates, you would expect that to broadly follow that trend.

And that it might be a bit of a hard question to answer, but the metering market in Australia and New Zealand is obviously somewhat finite, and there's probably an upper limit as to what Bluecurrent's revenue in EBITDA could be at some point in the future. Is there any sense, I guess, as to when you might start to approach that limit of full market penetration and the time frame over which that might play out? I appreciate your competitors are obviously in the mix as well.

So the Australian market is moving to a 100% rollout of smart meters by 2030. So that's the sort of time frame there. The New Zealand market though, that's been highly penetrated for quite a while now is still growing because people are still connecting to the electricity network. So there's always that underlying growth of new connections that will continue. So not at the rate that you see when you're rolling out smart meters, but we continue to have growth.

We've also deployed smart gas meters into the New Zealand market successfully. And Bluecurrent are looking at trying to push smart gas meters into the Australian market, so there's an opportunity there. And there's also opportunities in smart water metering, which is not a whole segment that is available potentially to Bluecurrent. So there are still growth opportunities for that business going forward outside the current sort of smart electricity metering rollout in Australia.

Okay. And just last 2 questions, hopefully, easy ones. First, imputation. Obviously, there's none at the moment. I think you signaled we might expect to see some from FY '28 onwards. Is that still the case? And I guess, any sense of level would be helpful and perhaps timing around when you may get to full imputation?

You'll see that in our balance sheet, that our tax asset is now our current tax asset. So that's tells you that we're going to use it up in the next 12 months. So that's -- that will be the end of that, and then we'll start paying cash tax towards the end of FY '27. Not a huge amount, I don't think. So we'll really be starting to become a taxpayer in FY '28.

We'll never get to -- based on our forecast, we'll never be fully imputing our dividends, but we'll be imputing a portion of them as we pay tax. So not a lot happening in this financial year, but we should expect to start seeing a level of imputation in FY '28.

Okay. Last one. You've obviously tested the market with your fiber business. What happens to it now? Are you just sitting on that for now?

Yes, Josh, it's Chris. Yes. We've decided we're the best owner for the fiber business. Obviously, it's got an exciting growth curve ahead of it. Actually, if you look at data centers, if you look at 5G. So we weren't short of people interested in that business, but we decided that we're the best owner. And so now going forward, they've got a lot of opportunity in front of them in the market, which I know the team is pretty pumped about actually, and they're getting after it.

Your next question comes from Andrew Harvey-Green and Forsyth Barr.

A couple of questions from me. First of all, I think you've been running a bit of a strategic review over the last few months. Chris and Doug, just a question, I guess, in terms of progress on that and timing and sort of what we might expect to see from that in due course?

Yes, Andrew, that's something we're just in the sort of final throes of working through. I think to give a flavor, I mean, the focus very much on the efficiency and sort of the disciplined execution. And I guess you saw a bit of that through the capital program that we talked about through the results just now. So there's a big focus on making sure that, that part has transformed and operating as well as it can be into the future. There's a large program of work ahead.

But we're also having a look at the energy transition, what role that we should be playing in that Auckland needs to electrify the country needs to electrify. So we're looking at that. But we'll probably have a little bit more to say at that probably towards the shareholder meeting in September. So we're just working through the final parts of it now.

It's Doug here, Andrew, I'll just add to that. We've got a lot of growth opportunity in front of us. So it's all very positive in terms of what our future strategy will be. I'd also say it's going to be much closer to our core business operations than the previous step-outs into other activities, which we've been cleaning up from for the last 3 years. So we've now bottomed the cleanup pretty much, made the strategic decision to keep going for growth in fiber as part of that review. But now we're clean slate where we've got a complete strategy that we've been working our way through testing various hypotheses. And we're almost there, almost there, and we will speak more to that around the AGM. But there is no shortage of growth opportunities in our part of the sector or the industry.

Yes. And the only other question I really had, I guess it's probably more for Jason, just around the S&P rating and noting you're on that positive watch. I mean, is it something that you're wanting to pursue as a credit rating upgrade? Or is it more gracious, if it happens, it happens?

I think it would be good, Andrew, because obviously, it would make our debt costs lower. We do have some refinancing to happen over the sort of next 12 to 18 months. So again, it's really an S&P call, I think. So we will -- we have an annual cycle with them. We'll be presenting them with some updated information in the next month. And release up to them, will they maintain that positive outlook or move on that.

Your next question comes from Phil Campbell and UBS.

Just a couple for me as well. I suppose just the first 1 was just, I think, recently, there was a ComCom letter under Section 36 of the Commerce act on connections. Just wondering if you had any kind of views on potential impact of that?

We're engaging with ComCom actively on many fronts. The EA is currently also speaking about connections and balance point and the like. There's various angles that Commerce Commission looking at the moment and the EA that we're actively engaging with. And I think it's a positive thing. One of those angles is around distributed generation. It's another thing that we're actively looking to work with our customers on and open up to. So nothing really in terms of material impact for us. We'll keep working through them. And if we need to, we can update later on.

Awesome. Second one was just on the CapEx guidance. Obviously, it looks though it's a bit higher than what was in the [ AMP ]. And is that mainly due to replacement? I'll just be interested in kind of reconciling that guidance with the AMP.

Yes, it is slightly higher than the AMP for this year, Phil. So -- and there is a lot of replacement CapEx, as I think we mentioned in that slide. So again, there are some larger projects, some of it just the timing of things. So we will try and deliver the AMP over the 5-year period, but yes, this year is slightly higher.

Right. And then I haven't had time to calculate. I just wondered what the dividend payout ratio was under your formula on the $0.26?

At the bottom of that payout range of 70%. Which I think we signaled at last year.

Yes, that's right. I suppose will we get a bit more of a color in terms of what potential kind of guidance on the payout ratio when you've done your strategic review at the AGM? Or will that be included within that? Or is it just going to be more about the growth opportunities?

Yes. We haven't turned our mind to the payout ratio at this stage, Phil, for next year. We've been focused on what this year should be. But as you can see from the tenor of our conversation this morning and some of our written commentary, we have a lot of growth opportunities and we need a lot of CapEx. So we're being very conservative at the moment in the way we're thinking about where we fall in that range.

And it could well be that we continue to be very conservative. I certainly wouldn't be encouraging anyone to push up into the upper half of that range, nothing like that because we need a lot of access -- we need access to the capital for our growth in replacement.

[Operator Instructions] Your next question comes from Stephen Hudson and Macquarie Securities.

Just a couple from me. Just firstly on capital contributions. I just wondered if you can give us a bit of flavor for what you're seeing out there? You were obviously forecasting a reasonable dip this year.

Yes, it's pretty steady. But obviously, we won't go into the specific projects and the commercial nature of them. But I mean, we're seeing a pretty steady flow. But as you can imagine, some of the big projects can really swing that around as I sort of signaled in terms of the guidance. But in terms of activity, it's pretty steady.

Okay. And just coming back to the payout ratio, you've sort of got quite a specific definition of cash flow available for distribution. And it's different, I think, to what you used to use as a free cash flow payout definition. If we were to assume sort of the dividend climbs by cents per share in line with the dividend trend slide that you've got on Slide 17 here, what would the traditional free cash flow payout ratio look like at the end of DPP? For Jason. So leaving aside your company-specific definitions and just using the old traditional stay in business CapEx.

Look, I don't know, Stephen, off the top of my head. What would you -- I don't know, Stephen, off the top of my yen, maybe to look at it that yes, I can't do that calc sitting here, I'm afraid.

I suppose it's sort of quite important account because you've got a -- on the traditional government, your free cash flow payout, you're actually paying out more than your traditional free cash flow. That's over 100%. And so -- but we understand that you're growing into that through the DPP for smoothing in? Do you think it would be under 100%, I suppose, is the question? By the time 2030 rolls around?

Yes. Look, I just don't know. I guess we've got a policy that we've been -- that we forecast against and that takes account of the reset and takes account of our current balance sheet. So I guess I'm used to thinking of it in net terms rather than sort of going back to how we used to measure things. And I think our old policy was more of a progressive policy, right, where the dividends went up at a certain rate each year rather than a specific sort of payout percentage or anything, so it's quite different.

The 2 components -- Doug McKay here, Stephen. The 2 components of a percentage of cash flow, 70% to 100% of cash flow and 75% of CapEx is debt funded. There are the guide posts at the moment. It's -- I'm not saying that will be the guidepost forever. In fact, there could well be a need to revise our dividend policy at some point in the next few years, particularly as we land our strategy and we start to understand the capital -- the CapEx implications of that. But we'll be more transparent about that when we finished that work by the time we get around to our AGM.

Yes. Okay. That's useful. Just 1 final one. Doug, you talked about -- you've got a lot of prospective growth and projects in front of you. Can you give us a bit of a flavor for where and what they are?

I can broadly do that. But if -- I won't go into too much detail because it is part of our strategy work and we need to land it. But the whole electrification -- the [ quartile ], the stats I like to you, Stephen, on this 1 is people bandy around that we're at 92% or 97% renewable on our electricity generation, whatever that number is, but you know what I'm saying. But we're only 34% renewable in total energy in New Zealand.

And when you look at the impact of lifting, say, from 34%, which broadens the definition to vehicles and transport and a whole lot of other things. But when you lift that number from 34% to say, 60% to 65%, the opportunities for savings for our consumers and our customers are very significant. Plus we've got the ongoing uncertainty around gas supply in New Zealand. So there's a dramatic uptick in inbounds for us on electrification and how can we help our customers with that.

And both retail and industrial customers are finding that quite a complex process to navigate. You've got to have a lot of technical knowledge. So yes, you think about the implications for electrification. That in itself is a major growth opportunity for a business like ours.

There are no further questions at this time. I'll now hand back to Mr. McKay For closing remarks.

Thank you. So if there are no further questions, we'll end the teleconference and the webcast. If analysts and investors have further questions, then please contact Jason. If media have any follow-ups, please contact Matt Britton or call our usual media phone number. Thank you, everybody, for your interest and for joining us.

Good morning everybody. Welcome to Vector Limited Conference Call and Webcast to discuss the company's financial and operational results for the half year ended 31st December 2025. [Operator Instructions] I must advise you that this conference call is being recorded. I would now like to turn -- hand over to you Vector's Chair Douglas McKay who will take you through the call.

[Foreign Language] Hello everyone, and welcome to this presentation. I'm Doug McKay, Vector's Chair. Today, we're going through Vector's results briefing for the half year ended 31 December 2025. Joining me on the call for the first time as our group Chief Executive is Chris Blenkiron. Pleased to have you here, Chris. And we have Chief Financial Officer, Jason Hollingworth.

We'll start the presentation with comments from Chris on overall financial performance. Then Jason will look at the detail. Chris will then talk about the outlook for the next 6 months, and then I will come back to talk about the dividend. After that, we'll be happy to take your questions. And I'll now hand over to Chris to start the presentation.

Thank you, Doug. Hello, everyone, and thank you for joining the call. It's great to be speaking with you for my first market update since joining Vector in December. I'll start off by setting the context for these results. The new regulatory period, known as DPP4, began on the 1st of April 2025. At this time, the Commerce Commission increased allowable revenue for all electricity distribution businesses in New Zealand. The changes support the investment that's needed for the country's energy transition.

Also, keep in mind that the gray bars on the slides show the impact of businesses that have now been sold and continuing operations are shown in blue. This is to allow for easy year-on-year comparison. With that background in mind, I'll talk through some of the top line results.

Vector's group financial performance for this half year has been strong and in line with our expectations. Revenue for Vector Group is up 14%, driven by higher electricity revenue. Higher revenue has flowed through to an increase in adjusted EBITDA to $240 million. This is up 19% over the same period in 2024. Adjusted EBITDA excludes capital contributions, which are paid by new customers for their connections to the network and is how we currently ensure that growth pays for growth rather than cost of growth being spread across all Auckland electricity consumers.

Net profit after tax was $113 million, down 4% with the higher adjusted EBITDA offset by lower capital contributions. Gross capital expenditure was $223 million, down 15% on the prior period. However, we do expect capital expenditure to be higher in the second half of the year than it was in the first.

In terms of regulatory quality measures, we include SAIDI minutes in our quarterly operating statistics, which were released last month. SAIDI is how electricity distribution businesses are measured by the Commerce Commission for the duration of power outages on their networks over a year. At this stage in the regulatory year, which finishes at the end of March, we are within the regulatory limit. Our focus is on making sure every dollar we spend produces the best value possible and keeping our charges, which are around 1/4 of the total power bill as affordable as we can. I'll now hand over to Jason to go over the detail behind these top line results.

Thank you, Chris. This slide shows the segment contributions towards the adjusted EBITDA figure. Adjusted EBITDA from the Electricity segment was up $48 million, reflecting that HY '26 was under DPP4 and HY '25 was under DPP3. Earnings for Gas were flat on the prior period. Other includes VTS, Vector Fibre, Equalise, which offers cyber services to other lines companies and our group eliminations. It also includes a $9.3 million loss on sale from HRV effective on 1st of August '25.

Next slide. Net profit after tax was down $5 million or 4%. This is down on the prior period with the higher adjusted EBITDA being offset by the factors shown on the slide, including lower capital contributions, fair value movements on financial instruments and tax. Gross capital expenditure has decreased from a comparable 2024 period to $223 million, and you can see here some of the detail. Net CapEx after deducting capital contributions was down at $126 million. Capital contributions were down at $97 million.

The slide on group debt shows that our debt levels have remained flat with gearing at 37%. The next slide, we'll now look at the segment performance, starting with electricity. Adjusted EBITDA for electricity was higher, as previously mentioned. The higher impact from pass-through costs is the transmission charges we collect on behalf of Transpower. These have increased because of Transpower's own revenue reset that reprice transmission at the same time as distribution.

We passed transmission costs on and recover them via our revenues. There are also higher OpEx costs in the period linked to increased maintenance activity and also higher digital costs. Total electricity connection numbers grew by 1.3%.

Looking at gas. Adjusted EBITDA for gas distribution was flat at $24 million, with slightly higher revenue in the period, offset by slightly higher costs. Gas distribution volume was down 4.5% compared to the prior period due to lower demand from the residential, industrial and commercial sectors. There has been a 0.4% in total gas connections over the period.

These results are consistent with our most recent forecast for the Gas network, which were published last year in our gas asset management plan. We have recently submitted on the Commerce Commission's DPP4 draft Gas decision. This is the 5-year reset for gas distribution networks with the commission's final decision due in May 2026.

We welcome the commission's intention to continue to accelerate depreciation given the heightened uncertainty over the long-term nature of gas in New Zealand. And given the difficulty in accurately forecasting gas volumes for the next 5 years, which is fundamental -- which is a fundamental input into setting a price cap, our submission advocates for a move away from a price cap for approach that would share volume forecast risk between both the network owners and consumers.

The Commerce Commission is still considering its final decision, so we don't yet know what this will mean for consumer prices. Pipeline costs are just one component of the gas bill; however, most forecasts show that over the long term, these will rise. That's why we're advocating for a managed transition and making sure we recover costs fairly now. This also means keeping the gas network safe and reliable while it's still in use and planning for decommissioning when these pipes reach the end of their life.

Next slide looks at Bluecurrent. Our investment in Bluecurrent continues to perform in line with our expectations. Year-on-year, Bluecurrent has increased its revenue, resulting in higher EBITDA, and this is flowing through to higher distributions. In this period, we received $26.6 million of distributions in relation to our 50% shareholding. And I'll now hand back to Chris.

Thanks, Jason. For the 2026 full year results, we are forecasting adjusted EBITDA to be within our guidance range of $470 million to $490 million. We are now forecasting gross capital expenditure within the range of $500 million to $540 million. This forecast represents an increase over our full year 2025 capital investment and at around $0.5 billion shows our commitment to significant investment in Auckland's critical energy infrastructure.

We're forecasting capital contributions within the range of $180 million to $215 million for the full year. We've tightened the ranges for gross capital expenditure and capital contributions because we now have greater visibility of project time lines through to the end of the reporting period. Thank you to all of the Vector people, our field partners and suppliers who work incredibly hard for our customers and who delivered these results.

We know that for our energy system to be at its best and most affordable, the whole sector needs to coordinate well and work in concert with each other. We're committed to doing this to support the region's role in our national economy and to help our country meet our energy aspirations. I'll now hand back to Doug.

Thank you, Chris and Jason. The board has determined an interim dividend of $0.125 per share with no imputation. Now that brings us to the end of our presentation. But just before we move to questions, I'd like to thank Chris and his executive team and everyone else at Vector, plus our field service providers and call center for their hard work over the period to deliver for Vector customers and shareholders. Chris, Jason and I are now happy to take any questions.

[Operator Instructions]

Your first question comes from Grant Lowe with Jarden.

Tim, can you hear me okay?

We can. Grant, Yes.

Thanks for the presentation. And welcome, Chris. Just around a few for me. The electricity business was a beat on my numbers at both revenue and EBITDA. So I think the revenue was up circa 28%, which is a touch higher than my uplift that I was expecting. Were there any sort of one-offs in that result in terms of inflation catch-up and the like that we've seen in the past?

Yes, Grant, there is still a wash-up balance that we were able to recover in this period. So that is in there as well. That's coming to an end because it has a 2-year lag.

Yes. Okay. And do you have that number to hand as to roughly how much that was?

I don't have it to hand that I can look it up and get it to you, yes.

Okay. Yes, great. Thank you. Okay. No, that's good. And then just the -- so the guidance has been held, and we've also got that $9.3 million loss in there. With guidance being held, was that guidance already factoring in the $9.3 million loss and the washup balance that going into that number when you set the guidance at the full year?

I think, to be honest, probably not Grant. So I think we're at the probably higher end of that number. That loss turned up after we set that guidance. So yes.

Yes. So the washup balance was probably $9 million, that's calculable. But -- so effectively, is this effectively a $9.3 million upgrade to the guidance range.

I think it puts us at the top end of that guidance. We're now saying it would have been at the top end of the guidance. We've held the range. But I think if we haven't had the HRV situation, we would have probably been guiding to the top end of the range rather than sort of leaving the range as it is.

Yes. Okay. I guess, that's useful. And then just around the dividend payout, it was a touch lower than I had in my forecast, I was forecasting 13% versus your 12.5%. I appreciate it's a free cash flow measure. But obviously, the -- if we just think about the EBITDA for a second, that's up quite materially. How did the Board go about -- think about setting the 1H dividend? And then what are the sort of swing factors around for the full year dividend, what we might expect to see there?

Yes, it's a good question. To be honest, we didn't pay any attention to -- and we haven't with the interim in terms of its percentage relative to the 70% of the policy. And I understand from Jason this morning, it's lower than that.

For the half result.

For the half year results. Yes. We don't look at the half in that respect. It's the full year that we will pay consideration to the 70% minimum. So we don't have any reason to think we won't be well within the range at the year-end. Look, part of the decision-making was what was it last year in the interim and what should it be this year, given EBITDA is strong, as you say. And so we uplifted it by 0.5%, and we sort of thought, well, that's a good indication of how confident we feel about the way things are tracking. But if you looked at it strictly versus the policy, but we don't think about the half year in that respect, we could have gone a bit higher. But no, we haven't.

Okay. So I guess -- I mean, my full year is $27 million versus the $25 million last year based on the free cash flow calculation. I guess what I'm hearing is that there was a touch low on the free cash flow side of things. If everything sort of plays out with respect to guidance and everything else, would it be reasonable to assume that there is a slightly stronger uplift in the second half if everything plays out according to plan?

If everything plays out, yes, it will, Yes. I wouldn't necessarily agree with the $27 million, but you're at the top end of what I'm thinking of as Chairman anyway. I'm not speaking for the Board at the moment, but we'll see.

Okay. Yes, indeed. And then last one for me. Just I think last year, you provided guidance on Bluecurrent distributions. Do you have any thoughts on that? I see we've got the half year figure of $26.6 million. Do you have a full year figure in mind?

We do have a number. I don't have it to hand, but you can see the year-on-year sort of increase for Bluecurrent period-on-period. So I think that we expect that to continue into the second half. So I think last period, we got $23.4 million. This period, we're getting $26.6 million, so an uplift. So I expect that to continue as they continue to deploy meters.

Your next question comes from Andrew Harvey-Green with Forsyth Barr.

Doug, Chris and Jason. Just a couple of questions from me. First one, just looking at the electricity OpEx line, there was a reasonable increase, I guess, relative to first half last year, but even relative to the second half last year. Is that -- should we be thinking as that the sort of the normal half year run rate for OpEx on electricity going forward? Or are there some sort of one-offs in there that might pull it back for the second half and other periods?

I think there are some one-offs in that, Andrew. I don't think it's actually coming down, but I don't think it's going to keep lifting at that rate. There has been, I guess, an increase in our maintenance spend in this half that's probably going to continue with some change in standards and just some extra activity that we've been doing. We also have a couple of large projects underway that are -- have to be under these new accounting rules now have to actually be expensed rather than capitalized. So our digital costs are sort of running at a higher rate, which I think is probably going to continue while these projects are occurring.

So yes, it's mainly those 2 areas that are causing that increase, maintenance spend, which is going to continue and this lumpy digital spend around a couple of key projects that are cloud-based and therefore, have to be expensed.

Just a follow-on question around the metering. I noticed, I think that it's been refinanced. So you've got -- expecting lower interest costs going forward. All other things being equal, we should expect that to help increase distributions back to Vector from the metering?

They've refinanced at lower interest rates. Their NPAT number is lower because they've had to write off their arrangement fees from the original facility, but sort of that's noncash, if you like. So the actual underlying cash flow is better because they've got lower interest rates, I think, by circa 30 basis points from memory. So it's a reasonable reduction.

Yes. Okay. Cool. And last question for me was just whether we've got a little bit of an update on the strategic review of the fiber business.

Yes, Andrew. No real update, that process continues. And just a reminder that there's no guarantee that the outcome of that strategic review would result in a sale, but the process does continue.

Your next question comes from Phil Campbell with UBS.

Just a couple from me as well. I just noticed in the half year cash flow statement, it looked as though there was some kind of positive working capital movement. So that was one of the reasons why if you did do a dividend payout ratio calculation, it was a little bit lower. I'm assuming there's just timing issues around that, Jason, and that will probably reverse in the second half?

Yes, that's right. There's nothing there that I'm aware of -- yes that's structural. I think it's timing, yes.

And then just on the dividend coming back to this kind of $0.27, I think we've got that in our model as well, and we're assuming that the payout ratio declines from last year. I think from last year, from memory, it was 85%. So we've got that coming down. I just wanted to see if that was still the thinking. I think the rationale at the last result was just some uncertainty around what EA is doing in terms of those capital contributions. I just wanted to check if that was still the thinking from the Board?

0Yes, it will be lower than 85% this time around.

I think last year,, don't lock that in because that was a sort of one-off to do with sort of transitioning from DPP3 to DPP4 and the fact we only had a quarter in our results. So I think we said, look, we're paying up at this level, but it's not a -- don't bake that into your future numbers.

And maybe just a question on CapEx. Obviously, like it was a bit weaker in the first half. And obviously, you've tightened the range up in the full year, still a large number. What's the kind of reason for the CapEx number kind of coming down?

Yes, Phil, there's a couple of reasons. I mean 1 is some customer projects were sort of pushed out. It's always difficult with these lumpy capital projects, as you know, to get the timing right. So a few of those have been pushed further out. And that's probably the primary reason. So we do have some confidence going in the second half that, that run rate will certainly pick up.

Is that data centers or you can't really comment?

We can't comment on the specific projects, but there's a number of them.

And then maybe just last question for me on metering. I noticed that Neil Williams has left a CEO. I'm just wondering if there's any reason for that and whether you've recruited a new CEO for Bluecurrent?

Not yet. We haven't recruited yet. The Bluecurrent Board is managing that process, and we have 2 representatives on that Board, looking after our interests, Dame Paula Rebstock and Simon MacKenzie. And they're in the process of working with the headhunter now to find the right replacement.

Great. Awesome. And I just noticed you may not know the answer to this question, but I just noticed in the AFR, there was, obviously, one of the Bluecurrent competitors, I think, potentially a transaction happening there. Just wondering if there's any valuation read-through that you might want to comment on?

Are you talking plus ES?

Yes. Yes.

Well, look, I can't quote the numbers, but I did remember thinking the expectations on value looked very, very high. But I didn't do an earnings multiple or anything. It just -- I think it was $3 billion or something. It was a massive number. So obviously, we're trying to be involved in that process. We are interested strategically in increasing our participation in that market, increasing our number of meters but we'll just have to see how that plays out. If people are at that sort of number, that's a very big number.

Right. And then maybe just very last one, just on the fiber process. Is there any kind of timetable there? When you say we're no guarantee of sales. Is there any time when bids are due or where about are we in that process?

There is a timetable, Phil. And yes, I think we'll know by year-end, whether we've got a transaction or not. And I guess we won't quite know when it completes. It will depend on what the terms and conditions are. But we'll certainly, I think, have landed a decision by 30 June, one way or the other.

Your next question comes from Stephen Hudson with Macquarie Equities.

Morning, everybody, and welcome, Chris. All of my questions have actually been posed, but perhaps just a general one for you, Chris. I know it's early days, but I guess I just -- and I know we'll be meeting with you, I believe, the 1st of March as a community. But any sort of initial observations on the state of Vector in terms of assets, people and strategic direction and where you may, I suppose, differ from sort of the prior thinking, I guess?

Yes, sure. I mean, Simon's left a very strong and good business operating here, Stephen. We've got some very strong people in the right roles, doing some really good work. In fact, I think some of the credit that we will get to keeping the lights on and the infrastructure going in Auckland is probably something that we should get. It's in a strong state.

In terms of the strategic direction, I've not contemplated any change in strategic direction. The Symphony strategy remains as focused as it has. I think what we'll continue to do is an ongoing test against the external environment, whether that's the customer side, the regulatory settings, decarbonization pace, technical, we'll continue to test those settings. But my focus at the moment is absolutely on sort of disciplined execution on the work that we're doing as we go into the second half. But it's great to join a great business in really strong shape.

Very good. Thanks, Chris. And I look forward to catching up.

Yes, Looking forward to it. Thanks Stephen.

Your next question comes from the line of Grant Lowe with Jarden.

Another one from me. Just around the meters rollout in Australia. Obviously, the regulatory bodies over there have -- I'm not sure exactly what the terminology is, but effectively mandated 100% penetration by 2030. Is there any sort of commentary you can give around Bluecurrent in terms of either contracts signed or thoughts around the level of participation in that rollout at this stage?

I don't have any updates, Grant, other than we had a Board meeting here yesterday, and Paul was telling me that things are tracking as they had indicated they would be the Bluecurrent Board. So there's no surprises there. There's incremental increases in our metering network. We don't -- we haven't had any acquisitions of packages of meters or anything like that in this period. So it's all organic at this point in time, and it's steady.

Yes. Okay. How do you -- just generally, like for the market as a whole, how do you see that rollout playing out? Like obviously, there was a big contract signed here for the rollout in New Zealand. Is it a similar sort of a process? Is that what you're expecting over the next well and you're sort of actively participating in those discussions?

Those contracts tend to be quite long term. So once you settle into them, you've got a good tenure there mostly. You're not sort of every year or 2 into another process on those same contracts. They require a lot of capital investment. They require a lot of systems and process changes and interactions. So it doesn't move around a lot. Once you land them, it's a reasonably settled market.

Yes. I guess the question I'm sort of asking is, I think rough guess there were sort of 5 million meters to go or something, you might tell me that's wrong. But are we -- do you expect to see sort of like 1 million meters contract or a rollout of 1 million meters signed in big chunks like that? Is that kind of how you expect this to play out?

The retailers typically bundle them up into reasonably large blocks, Grant, and then sort of tender them out. And we have contracts in place with the existing retailers, and there are still some contracts being let, but we have a number already under contract. It's competitive though, as you imagine, [ Telehub, Plus ES ] are the other 2 big players. And these retailers are sort of good at getting the sharp price out of the market.

And yes, so that's it. So we've got a number of already under contract that we're executing on. New Zealand is deployed, so there's not so much going on here. It's really an Australian growth sort of situation. And once you've won those contracts, you still have to execute on them, right? So there's always a risk that if you don't deliver because there's a lot of competition for field service people to install all these meters.

So it's not -- one thing to win the contract, you actually got to execute on it. And we're very sort of mindful of that because the opportunity potentially to pick up some extra work if you're the party that's executing well. And we're seeing a bit of that going on at the moment as well over there where some others potentially aren't quite performing.

And these contract package sizes are often in the order of 200,000 to 300,000 meters.

Yes. That is useful.

There are no further questions. I would now like to hand it over back to Doug for closing remarks.

Okay. Thank you. If there aren't any further questions, we'll end the teleconference and the webcast. If analysts and investors have further questions, please feel free to contact Jason. For the media, please contact Matt Britton or call our usual media phone number. Thank you, everyone, for joining us.