Tuesday 20th August 2013
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Contact Energy, the power company controlled by Origin Energy, has increased its annual profit and final dividend and is pulling back from two big wind-powered projects.
Earnings before interest, tax, depreciation, amortisation and changes in fair value instruments were $541 million in the year ended June 30, up 6 percent on the previous year, the Wellington-based company said in a statement.
Net profit of $199 million was slightly above First NZ Capital's expectation of $191.7 million.
It is exiting the Hauauru ma raki wind generation project on the Waikato coast, which would power up to 170,000 houses, and will not proceed in the foreseeable future with the Waitahora wind project near Dannevirke, which could power 70,000 houses, citing market conditions and the cost of large projects as issues.
"Contact's performance for the year has been characterised by the continued reduction in energy procurement costs and focus on retail operating performance in what remains an oversupplied and highly competitive market," chief executive Dennis Barnes said.
The company increased its final dividend by two cents a share to 14 cents a share to be paid on Sept. 16. It is paying out 92 percent of underlying earnings after tax. The total dividend for the year is 25 cents a share.
The company has been saying for some time that it expects little growth in demand for electricity and that the retail market will remain highly competitive.
It has also cited the government's partial privatisation of the state-owned electricity companies as a challenge, but one that it can met.
The government is detailing its plans for the partial privatisation of Meridian today.
The company said investment in a flexible generation portfolio has reduced its reliance on large volumes of contracted gas.
It is driving on with a strategy of reducing energy procurement costs and says the completion of the Te Mihi power station helps.
"The investments in gas storage and flexible generation, coupled with the reduction in gas purchase obligations, have enabled Contact to better manage and respond to the inherent volatility of hydro generation output in New Zealand," Barnes said.
Commenting on the outlook, Barnes said the company will continue to progress in its transition from a focus on asset delivery to increasing value to customers.
Contact's revenue fell to $2.5 billion from $2.68 billion.
The shares gained 0.9 percent yesterday to $5.35, and have gained 1.9 percent in the past 12 months, lagging behind the NZX 50 Index's 11 percent gain. The stock is rated a 'buy' based on a Reuters survey.
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