It’s not every year you can negotiate and sign a deal that is the culmination of a decade of talking.
But Meridian chief financial officer Mike Roan can count that as one of his biggest achievements in 2024 after signing a 20-year power supply agreement with New Zealand Aluminium Smelters (NZAS) to keep the Tiwai Point plant operating.
Roan, who has been at Meridian since 2006 and chief financial officer since 2019, says that deal and the company’s strong financial performance are some of his proudest moments in what has been a tough year for the energy sector.
The partially state-owned company’s net profit went from $95 million to $429m in FY2024 and while much of the increase was influenced by net gains on hedge instruments of $249m — Meridian’s earnings before interest, tax, depreciation, amortisation and financial instruments (Ebitdaf) were up 16% to $905m.
Roan said it had been incredibly tough to reach the deal with NZAS but it now set a blueprint for how the company could work with big power users in the future.
“Everyone knows the relationship with the smelter has been tenuous and difficult for as long as I’ve been at Meridian so it’s really nice to put a line under the tension and challenge and uncertainty.
“I think it also creates a bit of a blueprint for existing and other industrial customers to expand their own operations by using electricity or possibly a longer bow, but attracting others.
“To do what we can to grow the economy off the back of confidence that any international investor can see we have put our money into and been able and willing to support a big industrial user of electricity in New Zealand.
“It feels good.”
He said that negotiation had gone on for the best part of 10 years with a material focus for the past three years after NZAS owner Rio Tinto terminated the agreement in 2021.
It proved tough to get the deal over the line.
“As we all know international companies are very very good at looking at their business and thinking about whether to do business in New Zealand or anywhere else. They are very sophisticated and have massive resources to support their interest.”
But in this case Meridian had a number of things on its side as well.
“The fact that New Zealand had got to the point where we were sick of them. We really had had enough of the ‘will we stay or will we go’ talk.
“We had had enough time to think through the negotiation strategy and approach that was as much about making sure they were good corporate citizens of the country — their environmental performance is poor — a lot of it was you need to tidy up your act environmentally.”
On top of that was the demand response provision which means the smelter will wind down its operations to reduce the load on the power system if needed.
“Go to any business that’s had a proud history of making aluminium and say well actually we are going to reward you for not making aluminium — they would look at you and go ‘huh’?”
“If anyone had told me that we would be exercising the biggest one of those demand response provisions only three months later — I would have said not a chance.
“When you deliver something you have been working on for 10 years and it brings certainty which now people can use to invest — which we all know we need to invest in renewable energy to decarbonise — it felt very good.”
To cap things off for the year the company also completed the Harapaki wind farm in Hawke’s Bay and started construction of the first grid-scale battery.
Roan said there were three key attributes in a good chief financial officer.
“One is the capacity to listen and think.
“Most of what a CFO does is focus on the future — most of the decisions you are making are in the face — no one knows what is going to unfold and so your ability to listen to what others views of the future look like and think about them in relation to your own. It’s crucial that you are not too rigid in your own thinking.”
Secondly, it was vital to be able to challenge executive peers.
“You must be able to challenge peers in relation to what they are doing and how much they are spending — and no one likes that. You have got to be comfortable doing that and over time you build respect.”
And then on top of that a chief financial officer had to be able to present a credible view of the business and its strategy to current and future investors.
Judge Jonathan Mason said under Roan’s leadership Meridian had not only achieved substantial operational growth but also reinforced its commitment to renewable energy innovation, positioning itself as a leader in sustainable energy solutions.
“Mike Roan has been recognised by his board and the market as one of NZ’s leading CFO’s over multiple years and he is an absolutely integral member in Neal’s [chief executive Neal Barclay’s] team that has posted market-leading returns.”
CFO OF THE YEAR FINALISTS
Lyndal York, CFO at Fisher & Paykel Healthcare
Australian Lyndal York became chief financial officer at Fisher & Paykel Healthcare in 2019 and is based in Australia but comes to New Zealand about one week a month.
She has been a key part of the team over the past five years that has produced a 64% shareholder return for Fisher Paykel for the 12 months ending September 2024. As leader of the finance team, York has supported key product investments and managed a complex set of financing and tax issues, with manufacturing and processing in Mexico, China and New Zealand backed by a significant sales effort in the US.
York says recovering from the Covid years when revenue was running hot in some parts of the business and returning to business as usual has been one of the biggest challenges in the last year.
“It’s definitely that coming out of Covid. Covid was definitely a positive in terms of revenue for some parts of our business but also had challenges and detriments to other parts of our business.
“The challenge really for the last year and a half or so has been coming out of Covid and reassessing where are all of the different parts of our business at today and then pulling that all together and getting that sense check of here we are today and setting the scene for ok here’s we want to be.”
She said that focus was now firmly on returning to its target margin while continuing sustainable profitable growth.
York said the company did incredible work during the Covid years making sure that any patient that needed its products got them.
“That was our single focus over those few years.”
She said it wasn’t focused on cost increases or trying to mitigate those or keeping inventory at reasonable levels.
“Over the last year or so we’ve had more stable ordering patterns and not seeing that volatile demand that we were through Covid.”
Now it is back to its goals of doubling its revenue every five to six years, getting to a gross margin target of 65 and operating margin of 30.
“What my whole team has been working on is really making that clear to the whole business... so that everyone can see what role they can play in getting us back there.”
York said she considered her nomination as recognition not only for her whole team but also the business as a whole.
“We very much operate as a team within F&P, there’s no silos or distinct roles and responsibilities — the performance of the business is everybody’s responsibility. We feel in the exec team that we are all in it together.”
York said she was proud of being able to set the scene for where the business was and where it wanted to be and felt the energy of everyone working together.
She said finance was seen as an integral part of the business not just the policeman or the bean counters running around with a stick.
York said a good chief financial officer was someone who understood the business and that the business was a priority and that everything worked around that.
“Having that deep understanding of what are we trying to achieve as a business and so then being able to say what do we need to do to ensure we can do that.”
She said it was also about the business being able to carry on and do what it needed to do without having to worry about the financials.
“We make sure everything is in place as and when we need it. The fact that in finance you see and touch everything, everything has a financial impact so you have that really broad view across the business of interconnection and any cracks or flow-on effects...being able to see that and making sure that all the right connections are made... I think is a key part of the role of the CFO.”
David Mackrell, CFO at NZME
David Mackrell says this year has been more challenging than most years for the business with the media industry under pressure in the tough economic environment.
“If you think back to Covid which was about crisis management — there was a real burning platform of change to survive through that — and we used it to create what we thought was the right sized company going forward.
“Then you look at this year and we have made some good progress towards our strategic goals as we headed into the back end of 23 and the first check-in point and then we started this year with acknowledging the economic environment is pretty tough and it made it really hard — you could point to indicators that you were making good progress on but that wasn’t showing up in the financials which made it a tough sell out into the market.”
Mackrell said while it was easy to point to competitors and say the company was performing better than them ultimately there was a requirement to have a sustainable future and to make sure that the company was in the right place.
“Advertising in particular is one of those things that people chop off, that’s the first thing to go. It makes it very difficult to pinpoint exactly what the future might look like. What’s the new normal that might exist? Is it as it was or has it changed dramatically?”
He said that the economic environment made it really tough to plan for the future.
“We know it’s going to get better but at the same time in a disrupted market like media there are underlying changes that are going on all the time — and we saw that in what happened to TV and Discovery in particular and we know the implications that’s had on TVNZ as well.
“None of us are immune to what is going on from that industry perspective.”
Despite the tough environment Mackrell says he’s proud of the strong balance sheet the company has built up which was critical to NZME’s future.
“That is back a few years now but maintaining that strength in balance sheet means we can make choices about our future — we are not having to make choices for someone else, we’ve got lots of options in front of us.”
Mackrell said the company had kept its eye on hitting strategic targets, although not necessarily the financial ones given the economic environment - but things like continuing to develop OneRoof and the digital transformation across both audio and publishing.
“That strength of the balance sheet means we can make those choices about how we invest in the future.”
He said the role of the chief financial officer was to talk about what had happened but also what the future could look like and what are the risks and opportunities.
“It’s about coaching and collaborating with the other executives to make sure they are thinking about what are the things that are in front of them specifically in their business and how do we prepare ourselves for those...determine a strategy that will map that pathway through.”
Mackrell said being chief financial officer or leader was pretty lonely at the top and often a chief executive’s best confidant was the chief financial officer — a role that involved challenging a chief executive’s view but also a certain amount of safety.
“I believe the CEO/CFO role is as important as it has ever been and then line that up with the board and their engagement with the CEO and often the CFO is the other role they have a lot of engagement with.”
He said the chief financial officer was often the other channel into a company for the board. “I think it’s become more important as boards have become increasingly focused on what the risks are and what’s going on.”
Mackrell said the chief financial officer was also the external voice of the company and had to articulate the strategy in a way that was understandable to investors.
Mackrell has led the sector delivering a 30% total shareholder return for the 12 months ending September 2024 and on an annual basis over the past five years of his tenure.
Under his financial leadership, NZME has addressed challenges such as declining print revenues, inflationary pressures, and shifting consumer behaviours by accelerating its digital transformation.
Mackrell’s experience from Heartland Bank and Air New Zealand allows him to balance NZME’s traditional media with a forward-looking digital strategy. His work has driven growth in digital audio, news, and real estate, positioning NZME as a media leader.
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