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Contact Energy investors hit paydirt ­ at last

Friday 28th March 2003

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After a rough start, investors who bought into the Contact Energy float four years ago have cause to celebrate.

Those who paid the government $3.10 a share in 1999 have seen the shares climb to $4.46 this week. Adding in dividends worth 73c the average annual return has been around 14%.

Even Edison Mission Energy, the US energy conglomerate that paid $5 a share for a 40% cornerstone holding and now has 51%, must be starting to feel a bit chirpier.

It's had a rollercoaster exchange rate ride but the kiwi is back around where it when Contact was privatised. Even so Edison is nowhere near recouping the cost of the truckload of debt backing its investment.

Too bad for Edison that minority shareholders didn't take to its cleanup offers at $3.85 and then $4.14 back in 2001.

Rating agency Standard & Poor's in February affirmed Contact's investment-grade rating after new governance measures aimed at allaying market fears Edison would cash-strip the company.

The latest share price surge is in response to strong profit results, increased generation capacity following the $500 million purchase of NGC Holdings' Taranaki Combined Cycle station and climbing wholesale market power prices.

The price spike brings the possibility of a repeat of the bumper earnings Contact made during the 2001 dry winter but it's a little early yet to count the profits.

It also brings the possibility of government meddling in the market. Chief executive Steve Barratt this week warned state intervention would only delay the building of new plant.

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