Infrastructure report: Power up the next stage

Alison Andrew. Photo / Peter Meecham

Alison Andrew has taken over as Transpower chief executive as it finishes a $2 billion upgrade. She tells Grant Bradley why the national grid operator has entered a new phase with its focus on customers.

Alison Andrew studied chemical engineering at Auckland University. After graduating, she worked at the gas to petrol plant in Motonui when it was being built in the early 1980s. She went to Britain for four years and worked in Europe for a US chemical company.

'I then decided that I didn't want to be a nuts and bolts engineer all my life -- I was more interested in the commercial things."

She did an MBA at Warwick University, joined Petrocorp and had roles in energy, gas reticulation, oil and gas exploration, petrochemicals, and power generation.

As part of the wider Fletcher group she had senior roles in the forest and paper divisions before joining Fonterra in a range of roles including its e-commerce business, called Fencepost.com, just before the dotcom bubble burst. In another case of unfortunate timing, Andrew moved to head a (private equity owned and highly indebted) signage business, Lexicon, just before the global financial crisis hit and credit dried up. "It ended up being too difficult to carry that debt so that business went and I learned really interesting lessons around cash flow management."

Her most recent role was global head of Chemicals for Orica and she was a director of Genesis Energy for a year before her Transpower appointment. She lives in Remuera, and is married with two sons, 17 and 20.

Q: What interested you most about taking on the Transpower job?

It's an essential service for New Zealand and I'm a Kiwi at heart, everyone uses power, so to be part of something that has such a proud legacy and such an important role is a unique opportunity. Transpower has a lot of diverse and unique stakeholders -- land-owners, farmers, distribution companies, major customers -- we interface with it and it's interesting to manage such a diverse mix. The board painted a picture of taking Transpower to the next stage -- the challenge is how to reposition the organisation for the next stage of the journey. It's in good shape but we need to do some different things. I really like leading smart people and driving change.

Q: Describe your own management style.

I like to build good teams of people. I'm only as good as the people I've got working with me. Part of my role is to get the best people you can on your bus and going in the right direction with you. We have smart people, being clever is helpful but how do you inspire people and get them to follow you? As an engineer I'm very much trained in logic but I've done a lot since then and a lot of the soft stuff is about people.

Q: Achievements you're particularly proud of:

I've signed up for lots of tough challenges which is where you learn the most. I love winning -- the Fonterra days we had lots of great results. You can build good diverse teams, in Orica we built a management team of 50 per cent men and 50 per cent women. Orica also won supplier of the year for Fonterra and its operation here was the top globally based on revenue.

Q: What now for Transpower?

Demand has been predictable. It's gone up steadily for a couple of decades, but we're looking at quite a lot of uncertainty around major users Tiwai and Norske Skog -- there are some big things that can come off that would put us in excess. We're going to be spending between $300 million and $400 million a year maintaining and refurbishing assets.

Now we've got this robust system in place with a lot of investment, how do we keep prices down for consumers? Rather than build new things how do we find smart solutions to make sure consumers get what they want -- the power on? How do we sweat our assets harder and make sure we direct our maintenance dollars in the right place. Consumers demand reliable power but with pressure on pricing how do you balance that reliability -- if you want 100 per cent reliability it's unaffordable.

Q: How confident are you that Transpower outages can be avoided?

I would never tell you there will not be a power outage because of the nature of our business. We have built a lot more resilience into the system. The customer only cares about reliability, but resilience for us is acknowledging that from time to time you will have incidents and the key is how fast you can get them back up and running. We build assets for 70 years -- you don't want to make those investments too soon because of the costs but if you make them too late the power's off and you're never forgiven.

Q: What proportion of a power bill is the Transpower component?

We do recognise the fact that we contribute and residential prices is where the controversy is. Over the past years there has been an increase in the Transpower component as we commission assets and pay for them. From next April there will be a 1.5 per cent increase -- below inflation. The Transpower price is about 9 per cent of an average residential bill. Our focus is to be as efficient as possible and working smarter, it's not about ripping costs out.

Q: Do New Zealanders pay too much for power?

Every power system is unique, New Zealand's is a long, thin system. New Zealand domestic consumers pay about 25c a unit which is in the middle of the pack. Domestic power prices are up because the cross subsidy for domestic customers has been removed. It's a controversial issue but if you benchmark it internationally, we're not wildly out. It's important for the New Zealand economy that we don't make industrial consumers pay too much. We need power in the future and don't want to end up in a situation where there's no incentive to invest.

Q: Power company executive pay has been under the microscope; any views?

I'm not qualified to talk about chief executives' pay, I'm not an expert. People go out to boards who approve salaries against comparable roles and salaries. There's a whole industry of people who are experts in that area. We make sure the job is properly sized and in a market you don't want to underpay because you're giving them an incentive to leave.

(Andrews' own pay will be disclosed in Transpower's annual report, later this year).