Thursday 23rd October 2008
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"As a result of the extended drought and transmission constraints experienced, Contact's performance in the first quarter of the financial year was well below expectations," chairman Grant King told shareholders at their annual meeting in Auckland today.
Profit probably won't beat the NZ$237 million Contact earned in the 12 months ended June 30. The company's shares fell 3.6% to NZ$7.05 and have declined 10% this year, outperforming the NZX 50 Index, which fell 28%.
The utility blames restrictions on the HVDC link between the North and South islands for exacerbating the impact of drought. Transpower decommissioned pole one of the HVDC sooner than Contact had expected. That reduced the company's ability to send power from the North Island to supply customers in the south, forcing it to buy electricity on the spot market.
The spot price of electricity soared to almost NZ$450 a megawatt hour in May based on prices at Haywards, compared to an average in more usual times of NZ$60 to NZ$70. South Island prices stayed "significantly above" those in the North Island for most of the winter, chief executive David Baldwin said at the meeting.
The utility is half owned by Australia's Origin Energy, which fended off a hostile takeover attempt from the UK's BG Group earlier this year.
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