Contact Energy reported a 5 per cent improvement in underlying earnings for the six months to Dec. 31, with improved sales to industrial and commercial customers and lower wholesale electricity prices offsetting lower mass market sales and weak overall demand.
Statutory net profit, which includes the non-cash impact of items such as unrealised changes in the value of financial instruments, rose 27 per cent to $112 million, while earnings before interest, tax, depreciation, amortisatisation and fair value movements (ebitdaf) was up 4 per cent on the same period the previous year, at $264 million.
The company's preferred measure for comparative performance, underlying earnings excluding one-off factors, showed a 5 per cent rise to $97 million. It offered no guidance for the full year.
An unchanged 11 cents per share fully imputed dividend was declared, payable March 27. The company also announced it will be offering up to $250 million in retail bonds with a coupon interest rate of between 5.8 per cent 6 per cent, based on demand. Contact is close to completing a wider debt refinancing package, with future capital expenditure needs dropping dramatically after spending some $2 billion on new generation and upgrades over the last six years.
However, the company continues to experience significant delays in commissioning its new geothermal plant, at Te Mihi, with its hot well pumps not performing to specification. That will delay full commissioning until the end of this financial year, chief executive Dennis Barnes said in statements to the NZX.
"In the event that further modifications to the hot well pumps are required, the production impacts will be reduced by diverting steam to the existing Wairakei units," he said. "The associated commercial matters are in the process of being resolved with the contractor."
Geothermal generation of 1,087 Gigawatt hours was down 58GWh, largely due to Te Mihi commissioning outages. The new plant ran for a month at 159 Megawatts, close to rated capacity, in December.
Today's announcements do not appear to make any provisions relating to the issues at Te Mihi.
Contact also continues not to contract for additional natural gas, although it booked a $33 million cost in the half year under review relating to the injection of gas into its Ahuroa storage facility, taking stored gas to 11.6 Petajoules. The company is building a nine kilometre pipeline from Ahuroa to its Stratford combined cycle gas turbine plant to reduce reliance on production facilities at Waihapa, recently sold to New Zealand Energy Corp. Reduced reliance on take-or-pay gas and greater use of hydro and spot market electricity purchases instead of its own gas-fired plant also helped contain costs.
The average wholesale price received for generation during the half was $47 per MWh, down $9 per MWh in the corresponding period.
Total revenue for the six months was $1.148 billion, down 5 per cent on the corresponding period, while operating expenses were 8 per cent lower at $884 million.
Mass market electricity sales fell 4 per cent to total $496 million in the six months to Dec. 31, while commercial and industrial electricity sales rose 8 per cent to $279 million. Competition for retail customers using both gas and electricity remained intense, and retail gas sales fell 4 per cent to $35 million, although retail gas customer numbers rose by 1,500 in the half.
On the retail customer front, Contact described New Zealand's electricity market "one of the most active ... in the world", with average monthly customer switches between retailers rising to 33,500, compared with 29,000 in the previous six months. Total retail electricity customers fell 4,000 between December 2012 and December 2013, although the rate slowed in the six months under review to 1,000.
Just over half the company's customers are now on a discounted price deal, either its market-leading 22 per cent prompt payment discount, or a fixed price, fixed term deal.
A "retail transformation" project, in planning since 2007, was delayed further "to ensure the business is fully prepared to provide customers with a seamless experience."
"Contact welcomes the more stable competitive environment that should result from the partial privatisation of previously state-owned enterprises," said Barnes. "While this will mean that the industry, including Contact, will be in the full glare of scrutiny from investors, customers and the community to maintain a reliable and competitive supply of energy, it is also expected this will ultimately be for the benefit of the customer with a lower cost industry driven by efficiency and innovation."
The company continues to argue against the Labour and Green parties' NZ Power proposal to create a single buyer and reduce wholesale electricity prices, saying there is "no evidence" that Contact earns "super-profits."
"Savings of $500 million to $700 million are targeted, but (it's) not clear they exist," according to presentation slides with the result. "Over 50 per cent of savings will be borne by the government from lower taxes and dividends."