No guidance from Contact after shocker year
Future too uncertain for earnings guidance from Contact Energy
Oct 22 (BusinessWire) - Contact Energy is giving shareholders no guidance about earnings in the year ahead, with chairman Grant King warning that dividends will only be retained at current levels if profitability returns to "more normal levels".
In speech notes for the company's Annual Meeting in Wellington, King said the board was "realistic about the market conditions Contact faces".
"The economic conditions currently impacting
New Zealand are expected to continue to dampen demand
growth, and a range of market and operating uncertainties
remain," he said, referring to ongoing constraints in the
national grid which last year undid Contact's long term
strategy of balancing its retail customer load with its
generation capacity to hedge wholesale and retail
earnings.
Instead, in the 2008/09 financial year,
hydrological conditions swung wildly from severe drought to
a deluge in Contact's southern hydro catchments, sinking
wholesale market prices, while transmission constraints made
it impossible to send as much hydro power to the North
Island as usual.
The result was a 31 per cent
decrease in underlying earnings to $160.6 million,
exacerbated by the loss of almost 10% of the company's
customer base when competitors exploited public anger at the
company's doubling of the directors' fee pool at last year's
Annual Meeting, and raising its tariffs just ahead of the
last election as the world economy plunged in the credit
crunch.
Managing director David Baldwin dwelt
briefly on last year's public relations nightmare, saying
Contact had "worked hard over the year to rebuild our
relationships with customers and other stakeholders".
"While in recent years we had been successfully building
our retail customer base, following last year’s AGM,
customers made it clear that we were out of step with
them."
Customer losses peaked in February, and
Contact was now experiencing net customer growth, said
Baldwin, although its monthly operational statistics
released last week show total customers flat-lining in
recent months at 479,000, still the lowest total since 2002,
and down from a peak in September 2008 of 529,106.
King emphasised that the increased directors' fee pool
had not been used to increase fees, but to pay the expanded
board, and to allow the appointment of new directors.
The company would shortly announce the appointment of a
further new independent director to complement
Christchurch-based professional director Sue Sheldon, who
replaced Tim Saunders on the Contact board during the year.
The other two independent directors are the deputy chairman,
Phil Pryke, and John Milne.
Contact shares had slipped 1.1% to $6.20 as the annual meeting started.
(BusinessWire)