By NZPA
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Friday 23rd February 2007 |
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Chief executive David Baldwin said, given appropriate policy settings, the company's investment plans in renewable generation could play a significant role in helping to advance a more sustainable and climate-friendly energy generation sector.
The announcement was made as the company reported a $122.9 million December half year net profit, down from $146.6m a year ago.
The company will pay an unchanged dividend of 10 cents a share on March 23.
Baldwin said the next stage of the company's generation growth would come primarily through investment in up to 260 MW of new geothermal generation, with two new power stations planned for the Taupo region.
Baldwin said recent results from test production wells in the Tauhara steamfield strengthened the company's view that the geothermal resource was potentially very strong and able to support a new geothermal power station.
Following further confirmation tests it would apply for resource consents for a new 200 MW power station from the Tauhara steamfield that could be in production by 2012.
In addition, Contact has been considering upgrading or replacing the Wairakei geothermal power station, and will be developing and advancing these plans with a view to having a new plant commissioned by 2011.
Upgrading Wairakei would add 60MW capacity.
Baldwin said Contact would need a streamlined consenting process for its geothermal investment programme if it were to be implemented within the timeframe anticipated by Contact to help meet the country's growing demand for electricity.
"Contact's 2001 Wairakei resource consent application currently still remain unresolved, preventing us from generating substantial additional renewable energy."
Contact has recommended the Government call in applications for renewable projects directly to a board of inquiry or the Environment Court for swift consideration.
"We have been encouraged by the draft New Zealand Energy Strategy and have held positive preliminary discussions with the Energy Minister (David Parker) over possible call-in options.
Contact is also considering four wind farms, two of which, with a capacity of 400MW were under development.
The company had agreed commercial terms for the purchase of two further wind farm sites, with promising signs for capacity to generate up to 300 MW, although further feasibility work is required, Baldwin said.
He said the development of any two of these wind farm sites would cost up to $1 billion.
Otahuhu C and the future of thermal generation Baldwin said that new generation would be needed by around 2012, and new renewables needed to be developed by then.
He said that with government support for the consenting of geothermal and wind development, he believed the Government's goal of meeting New Zealand's energy growth from renewable forms of energy could be realised.
Baldwin said if the Government came to the party over aiding the resource process for renewable projects, Contact may be able to delay the development of new thermal generation for up to 18 months.
"During this time, we would be looking to the Government to finalise a market-based pricing system for carbon emissions."
Contact's proposed Otahuhu C combined-cycle gas turbine power station was "clearly New Zealand's best thermal option" because Contact had the consents but it could be delayed "if the consenting climate, and grid transmission capacity, support timely investment in new renewable generation".
Baldwin said there would still be a need for thermal generation.
Older, inefficient thermal plants needed to be replaced by plants such Otahuhu C to held NZ reduce greenhouse gas emissions.
The two billion investment programme over five years has scotched plans to return capital to shareholders.
"Accordingly, the board has decided against making a capital return at this time," he said.
The year-ago profit was boosted by a $33.4m one-off gain from the sale of an Australian power plant.
Contact's earnings before interest, taxation, depreciation, amortisation and financial instruments (ebitdaf) were $275.4m, down slightly from $280.4m from a year ago.
Baldwin said the result was particularly pleasing despite some challenging trading conditions, but noted that a delay in full production from the Pohokura gas field had seen the company use lower-cost sourced gas, which had favourably affected the result.
That would not be repeated in the second half and Contact would continue to face significant challenges over the coming year, as the business adjusts to higher priced gas and reduced fuel flexibility, Baldwin said.
He reiterated earlier guidance that net profit after tax was likely to be materially lower than for the previous financial year.
Contact shares closed on closed yesterday on $8.48. They have risen from $7.40 a year ago.
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