Sharechat Logo

Contact Energy says profit growth may stall in 2009

Thursday 23rd October 2008

Text too small?
Contact Energy, which generates about 28% of New Zealand's electricity, said profit growth will probably stall this year because of drought in the South Island and capacity constraints on the Cook Strait cable.

"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.

By Jonathan Underhill

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

UPDATE Contact increases dividend as FY earnings rise; quits wind projects
Contact increases dividend as FY earnings rise in competitive market
Contact shares drop to 2-month low, says 'hard to see' investment under Labour-Greens plan
Contact Energy, parent Origin mull redemption of $2.03 bln of notes after S and P change
Solid first half for Contact, despite retail margins squeeze
Contact sells mothballed New Plymouth power station for $24 mln
Contact Energy's King hints at greater returns as cash mounts
Contact energy beats FY profit forecast as revenue surges
Elliott leaving Contact for Origin role
Contact sees 2014 cash-flow boost as projects put on ice