Contact posts $107m full year profit

By NZPA

Thursday 21st November 2002

Contact Energy today posted a $107 million profit for the full year to September 30.

The result was down on the $131 million super profit of the September 2001 year -- when Contact was a big winner from soaring winter wholesale electricity prices -- but was at the top end of analysts' forecasts, ranging between $93 million and $109 million.

The company will pay a final dividend of 15.4 cents per share.

The dividend has a record date of December 13, and is payable on December 20.

Chief executive Steve Barrett said lower wholesale electricity prices during the year were offset by strong growth in Contact's retail customer base.

Wholesale electricity prices averaged $41.60 per MWh in the September 2002 year, just over half the $82.70 per MWh average for the previous year, when a cold, dry winter threatened power shortages.

Contact's retail base grew by 12 percent, or 60,000 new customers, in the year under review. The company now has 50 percent more retail customers than three years ago.

Electricity customers were up 16 percent during the year, making Contact the country's largest energy retailer with a total of 554,000 electricity and gas customers (449,000 electricity and 105,000 gas customers respectively).

"This has significantly increased Contact's level of retail hedge to approximately 71 percent, compared with 56 percent by volume in 2000/01," Mr Barrett said.

Today's result was based on total operating revenues of $1.05 billion, down slightly on last year's $1.1 billion figure.

Total operating costs of $838.2 million were static, reflecting lower gas purchase and transmission costs, offset by higher electricity transmission and distribution costs associated with the growth in retail customers.

Contact warned, however, that after a strong growth phase in which the company has gone from generator to integrated generator-retailer, the rate of retail customer growth must now slow, because of constraints on its capacity to add substantial new generating capacity.

"We have plans for incremental increases in generating capacity over the next one or two years, but there is still insufficient certainty about the source and price of new energy supplies -- whether gas or an alternative -- to allow us to commit to the construction of substantial new generating plant at this time," Mr Barrett said.

"This remains a key issue for the country, as we approach the rundown of the Maui field, which has provided a whole generation of New Zealanders with relatively cheap and easily accessed energy."

Mr Barrett said it was vital that the Kupe and Pohokura fields be developed quickly to help ease this period of relative uncertainty.

"Kupe and Pohokura are the only two known undeveloped gas resources of commercial size. Their timely development will help to close the gap created by the rundown of Maui, but further discoveries will be necessary to meet expected demands as we reach the end of this decade."

Contact said it is continuing to explore opportunities for new growth, with New Zealand as the primary focus, but with an eye to growth across the Tasman.

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