Contact vs the whiz kids

By Deborah Hill Cone

Friday 5th March 2004

Three months after being stung by a mystery $8 million arbitration settlement, Contact Energy has filed proceedings in the High Court in Auckland against the whiz kid entrepreneurs who sold them retailer Empower.

The High Court register shows Contact Energy and Empower are suing 29 defendants including Remco Management, a company owned by Empower founders Grant Baker, Shane McKillen and Paul Smithies.

Other defendants include companies linked to Dave Spicer and Andrew Hawken and other key Empower management as well as trustees who represent other investors.

In July 2000 Contact bought Empower, which at that time had 10% of the national retail power market, for $55 million.

The deal included an earn out-clause and five of the owners Mr Baker, Mr McKillen, Mr Spicer, Mr Smithies and Stephen Sinclair, stayed on in management positions for some time afterwards.

The group has now moved on to various new projects with Mr Baker and Mr McKillen backing listed spirit company 42 Below, and Mr Hawken investing in the Rialto television channel.

Mr Baker, Mr McKillen and Mr Spicer are former executives of Eric Watson's Blue Star Group and Mr Hawken is a former commercial lawyer.

Contact's case was filed last week, three months after the listed energy company was ordered by an arbitrator to pay $8 million in a mystery settlement. The other party or parties could not be identified because of the confidentiality restrictions of the arbitration process.

At the time, Contact chief executive Stephen Barrett said he was considering whether to appeal the arbitrator's ruling to the High Court.

The dispute was said to relate to "conflicting interpretations over agreements with the parties." In last year's annual report the company said it faced a contingent liability from Remco Management, which had started proceedings against Contact.

"The directors are of the opinion the claim can be successfully defended," the annual report said, before the arbitrator ruled.

Contact said at the time of the ruling it had set aside $5 million as a provision for the dispute in its accounts to the end of September 2003.

At the time of the purchase Contact said Empower had proved itself to be the most successful start-up retailer in the New Zealand electricity market, with 25,000 high-value residential and business customers.

But not long after buying the company Contact phased out the Empower brand and merged it with its own operations.

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