Baldwin leaving Contact Energy for Origin role

Baldwin leaving Contact Energy for Origin role

By Pattrick Smellie

Jan. 11 (BusinessDesk) – New Zealand’s largest listed energy company, Contact Energy Ltd., will be led by a long-standing Origin Energy senior manager, Dennis Barnes, who will replace current managing director David Baldwin in a transition to occur over the next three months, Contact announced today.

Nelson-born Baldwin came to Contact four-and-a-half years ago in May 2006, during Origin’s failed attempt to create a merged, dual-listed entity, dubbed ContactOrigin. His appointment followed the surprise resignation of David Hunt, a New Zealander who replaced the previous chief executive, Steve Barrett.

Baldwin will take up a role as Origin’s Chief Development Officer, while Barnes, currently Origin’s general manager for energy risk management, will relocate to Wellington.

Baldwin’s time at Contact was marked by a prolonged period of stagnant profitability, caused by factors both within and beyond the company’s control.

Contact seriously misjudged the public mood by raising both electricity tariffs and its directors’ fee pool just weeks ahead of the 2008 general election, and around the same time as the Lehman Brothers collapse and subsequent global financial crisis.

Those actions both coincided with and exacerbated an unprecedented burst of retail competition, which saw customers peel away in large numbers from Contact, despite substantial investment in rebranding in 2007, from which it has yet to recover, with customer numbers still consistently dropping.

Less controllable were weaknesses in the national grid which undid Contact’s previously successful strategy of hedging earnings in the wholesale and retail sides of its business to balance earnings, irrespective of whether wholesale electricity prices were high or low, on average.

With the Cook Strait cable unable to transfer energy at previous rates between the country’s two main islands, Contact was unable to balance its portfolio the way it had previously.

Baldwin oversaw two key projects to re-inject portfolio flexibility by improving its ability to store and better use natural gas at its Taranaki gas storage facility, Ahuroa – a project initiated under Barrett and now almost fully commissioned – and the construction of a 200 Megawatt fast-start, gas-fired power station near Stratford.

He also saw resource consent processes for two key Contact generation projects – a 520MW wind farm near Raglan and the 250MW Tauhara 2 geothermal power station – become two of the first to be fast-tracked under Resource Management Act reforms enacted by Environment Minister Nick Smith.

Barnes comes to Contact after joining Origin’s predecessor, Boral, in 1998 as a senior energy marketing manager. Other roles held with the increasingly powerful Australian energy business include general manager of generation operations, national gas trading manager, and a retail contestability project manager.

Origin chairman Grant King said it was “delighted” with Baldwin’s performance at Contact, although the company had begun to draw comment from institutional investors because of the high rate of senior management turnover under Baldwin’s watch.

Contact shares rose 0.7% to $6.23 in today’s trading, before the company’s announcement. Since Baldwin took over the reins, the shares fell 20.3% in what’s proved to be a volatile period where they climbed as high as $9.56 in May 2008 and dropped as low as $5.55 in March 2009.

Disclosure: Pattrick Smellie worked as corporate communications manager and then brand strategy manager at Contact Energy between 2003 and 2008.

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