Contact says 'hard to see' investment under Labour-Green plan

By Pattrick Smellie

Contact Energy says it is ' hard to see' how it would have justified its recent $2.5b investment in power stations if the Labour - Greens power reforms had been in place.  Photo / NZ Herald
Contact Energy says it is ' hard to see' how it would have justified its recent $2.5b investment in power stations if the Labour - Greens power reforms had been in place. Photo / NZ Herald

Contact Energy shares dropped almost 6 per cent in early NZX trading, with the company saying it was "hard to see" how it would have justified investing $2.5 billion in new power plants if the Labour-Greens electricity policy had been in place.

In a statement not issued to the NZX but received by BusinessDesk, Contact chief executive Dennis Barnes says "under the proposed model, it is hard to see whether such investment would be made viable and who would pay."

"Competitive and efficient electricity markets attract investment and talent from companies like Contact," said Barnes. "Over the past five years Contact alone has invested over $2.5 billion in building generation capacity to ensure the reliable, safe and secure supply of power to New Zealanders now and in the future."

This morning's share price drop to $5.15 follows a decline of 4.6 per cent yesterday, wiping out gains over the last week but still well above the low for this year of $5.06 on Feb 10.

That bears out a prediction yesterday that the policy announcement would have a greater impact on the issue price of MightyRiverPower shares than the recent scare over whether Rio Tinto subsidiary Pacific Aluminium will walk away from the Tiwai Point aluminium smelter

Contact's Barnes said the company had "not yet had the opportunity or invitation to discuss the proposal" with the Labour and Green parties.

"We believe the best way for New Zealand to operate its electricity industry is through markets and competition, something we believe already exists, which is supported by the regular and robust analysis of the Electricity Authority," said Barnes.

Disclosure: Pattrick Smellie worked in corporate communications for Contact Energy from 2001 to 2008.

- BusinessDesk

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