Contact Energy profit slumps 79% on grid constraints
Feb. 24 – Contact Energy Ltd., which generates about 28% of New Zealand’s electricity, posted a 79% slump in first-half
profit, saying constraints on the national grid stymied its efforts to respond to climatic challenges.
Net income fell to NZ$25.1 million, or 4.35 cents a share, from NZ$117.4 million, or 20.14 cents, a year earlier, the
company said in a statement. Sales rose 11% to NZ$1.2 billion.
Contact says much of the blame for the profit slump rests with the reduced capacity on the Cook Strait cable since the
loss of pole one of the HVDC. That hampered its ability to send power south when hydro lake levels were low, forcing the
utility to buy power at market rates to supply customers. Subsequent rains coincided with a cut in output at the Tiwai
Point aluminium smelter, forcing power companies to spill water from their dams.
“What the six month period reinforces is how dependent New Zealand is on a robust and reliable transmission grid. It’s
the backbone to move electricity from power stations across the country to customers,” said chief executive David
Baldwin.
““Over the past year it has become manifestly clear that many parts of New Zealand’s transmission system have been
unable to cope with requirements,” he said.
The company will pay a first-half dividend of 11 cents a share.
Contact is pressing ahead with plans to increase North Island capacity, including the first phase of the Tauhara
geothermal project near Taupo and a 200 megawatt gas-fired power station at Stratford. The company is also developing an
underground natural gas storage facility near Stratford. The three projects represent investment of more than NZ$500
million, Baldwin said.
Contact is making good progress on consenting two North Island wind farm sites, though power prices would need to rise
to make the projects viable.
The company also today announced plans to raise funds selling bonds next month and has registered a prospectus, it
said.
Contact will offer shareholder distributions in the form of non-taxable bonus share, with the option to have them
bought back by Contact.
Chairman Grant King announced the retirement of director Tim Saunders and said Baldwin and Sue Sheldon have been
appointed to the board.
The utility is half owned by Australia’s Origin Energy Ltd., which fended off a hostile takeover attempt from the
U.K.’s BG Group last year.
(Businesswire)