By Phil Boeyen, ShareChat Business News Editor
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Friday 26th October 2001 |
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The company's strong rise in net profit to $130.7 million compares with $96.98 million last year and will put further pressure on Edison Mission Energy to increase its takeover offer for the business.
Earlier this month majority shareholder EME said it would pay $3.85 per share but as soon as it put the offer on the table shareholders and analysts suggested it undervalued the company.
Contact Energy chairman, Phil Pryke, says the improved profit reflects a cold, dry winter this year, compared with a warm, wet winter in 2000.
"The result carries a simple message that Contact Energy has consistently stated. With its portfolio of hydro, thermal, and geo-thermal assets, Contact can expect to do well in cold, dry years.
"Contact's mix of generating assets and a retail customer base left the company well-placed to protect its customers from fluctuating wholesale prices."
Mr Pryke says the directors have not yet made a decision as to whether to declare and pay a final dividend but noted that the takeover offer from EME provided for an adjustment to the offer price for any final dividend paid.
Contact had not been due to reports its full year earnings until the end of November but the date was brought forward to help shareholders evaluate EME's takeover bid.
The company's adjusted net surplus is $126 million, more than double last year's figure of $61.1 million.
Chief executive Stephen Barrett, says during a year when average spot prices rose, around 40% of the company's generation capacity benefited from the relatively higher prices.
"This had a significant influence on total operating revenue, which rose to $1,097 million for the period ended 30 September 2001, compared with $868 million for the same period last year.
Mr Barrett says at the same time as a very dry winter there was a significant demand growth, signalling an emerging gap between New Zealand's generation capacity and the nation's future electricity needs.
"The relatively low inflows into the lakes prompted conservation of existing storage. Wholesale prices then rose to reflect the scarcity value of the water as well as the cost of thermal generation brought in to replace the hydro capacity.
"This stands in stark contrast to last year's situation, when a wet warm winter depressed demand and resulted in an abundant supply of electricity at relatively low wholesale prices."
Mr Barrett says Contact's decision to be a net generator capable of covering retail customers' demand and contracts to third parties underpinned the company's financial performance during 2001.
Contact's electricity customer base has risen by 13,000 since March to 387,000 and the company now has a total customer base, including gas users, of almost 495,000.
The company says growth was stimulated by Empower's activities and the company's DualEnergy programme, which enables customers to receive a single invoice for electricity and gas.
Contact's profit rise is in strong contrast to other electricity retailers such as TrustPower and Natural Gas whose earnings were pounded by the cold, dry winter conditions.
NGC finally decided paying the high spot prices was too much to bear and it is now out of the retail power market having sold its customers to the state-owner power companies, Genesis and Meridian.
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