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Warm winter troubles Contact

By Phil Boeyen, ShareChat Business News Editor

Thursday 23rd November 2000

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Contact Energy (NZSE: CEN) has delivered a $97 million profit for the year to the end of September, nearly $20 million greater than its prospectus forecast although revenue is down due to a mild winter.

The company says a wet, warm winter depressed wholesale electricity prices and retail demand, and its net surplus was $61 million when adjusted for non-recurring items. Last year's adjusted net surplus was $88 million

The non-recurring items include proceeds from the sale of plant at the decommissioned Stratford power station and damages payments from the contractor in relation to the new Otahuhu B power station plant, which has been out of action since July due to a mechanical fault in the transformer.

Acting Contact boss, Stephen Barrett, says the company performs best when the weather is cold and dry, and heavy rainfall during winter meant storage levels in South Island lakes were 58% above average at the end of September.

"This has put downward pressure on wholesale electricity prices. The average wholesale price per megawatt hour earned by Contact was $31.33 in the year under review, compared with $35.41 in 1999."

Revenue for the year was flat, up just 1.4% to $868 million, while operating expenses increased 16% to $696 million.

Mr Barrett says the increase reflects a full year of costs associated with the retail business and the Empower acquisition. Empower is an independent retailer which Contact bought during the year, and the company says it has been outperforming expectations, adding around 1,000 new customers each week.

CEN has also become New Zealand's biggest gas trader with the acquisition of Orion Gas Trading, and increased its shareholding in Queensland's Oakey Power Project from 16.7% to 25%.

Further Australian investment looks likely, with the company also commencing a feasibility study for a new co-generation plant in Queensland during the year, and Mr Barrett confirming that Contact is looking to broaden and strengthen its revenue base in the future.

Mr Barrett says the company's business fundamentals are strong, and this was reflected in the decision to increase the total dividend payable to shareholders by 10% on the previous year. A final dividend of 12.36 cents per share has been declared to make a total dividend for the year of 17.36 cents per share.

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