Natural Gas tallies losses

By Phil Boeyen, ShareChat Business News Editor

Friday 22nd June 2001

Energy company Natural Gas is picking it will record an after-tax loss of up to $310 million for the year ended June, mostly from non-cash items such as revaluing its electricity business.

The company has also announced plans to sell its retail electricity customers in Christchurch to state-owned provider, Meridian as a way of reducing its exposure to the wholesale electricity market.

The sale does not include the company's 100%-owned Cobb hydro power station, gas sales operation or customer service centre in Christchurch

MD John Barton says selling the Christchurch customer-base is part of a range of measures being taken to address the impact of the unforeseen, and unprecedented, increase in wholesale electricity prices.

"All of the measures being taken by NGC are necessary because all three electricity markets - hedge, spot and retail - had not performed recently in accordance with any reasonable expectation.

"NGC remains firm in its belief, however, that the extent of the wholesale price rise was not justified by the circumstances."

NGC first warned the market of its power squeeze just two weeks ago, when it said that it was unlikely to produce a profit for the six months to the end of June because of the wholesale price jump.

Last week the company was forced to raise retail prices in response, but the increase sent thousands of On Energy customers looking elsewhere for a power supplier.

NGC has been working to staunch its exposure to the wholesale market and says a combination of arrangements already concluded, and others currently under discussion with various parties, will reduce its exposure to less than 20% of its forecast demand.

Price arrangements with other power generators have not been disclosed.

In the meantime the company is maximising output from its own generation plants, promoting energy efficiency measures to reduce electricity consumption and assisting customers to save energy costs and maintain water levels in the hydro lakes.

John Barton is also attempting to reassure the market over the amount of red ink that will feature in the company's end-of-year books.

He says the company is engaged in a range of businesses and its infrastructure, electricity generation, gas processing and trading businesses were robust and continuing to trade satisfactorily.

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