Contact Energy earnings drop 6pc

Contact Energy managing director David Baldwin. Photo / Greg Bowker

Contact Energy today announced underlying earnings after tax for the year ended June 30 of $150 million, down 6 per cent from the previous year.

Earnings before net interest expense, tax, depreciation, amortisation, change in fair value of financial instruments and other significant items (Ebitdaf) were $427m, down 4 per cent from the previous year.

Managing director David Baldwin said performance was hindered by wet conditions during the 2010 financial year - with Contact contractually obligated to pay for gas that it was unable to use in its gas-fired power stations, because of the amount of hydro generation available.

He said the company had made significant progress in the projects it initiated in 2007 to restore portfolio flexibility, which were expected to be complete later this year.

"I'm immensely proud of how the Contact team responded to the gas challenges during the year. Their efforts to accelerate the development of the Ahuroa gas storage project resulted in the injection of about 10 per cent of Contact's gas requirements during the year, saving the company tens of millions of dollars," he said.

"It shows how important the Ahuroa gas storage project is to Contact in re-establishing gas supply flexibility - and the gains that are possible by the company being able to turn off its gas-fired power stations and store the gas for use when it is most required."

Retail competition continued to intensify during the year with the number of customers switching retailers increasing from an average of 20,000 per month in July 2009 to around 25,000 per month in July 2010.

Baldwin said that Contact had largely maintained its customer numbers over the year.

Its 23 megawatt Te Huka geothermal power plant had opened in May under budget and ahead of schedule.

Another achievement Baldwin cited for the year was Taheke 8C and the Adjoining Blocks Incorporation selecting Contact to be its joint development partner for the Taheke geothermal project.

"This is very exciting for Contact as it's the first step in establishing partnerships with iwi to develop new geothermal resources.

"We're thrilled to be partnering with Taheke 8C and are looking forward to commencing exploration drilling within the next few weeks," he said.

Construction of Contact's $250m gas-fired peaking project also made good progress and was expected to be fully operational in late 2010.

When completed, the new power station would provide a source of flexible generation for times when weather-dependent renewables were unable to meet demand, or when other power stations were undergoing maintenance.

Contact's strategy for growth remained focussed on pursuing a range of options across the major fuel types - thermal, geothermal, wind and hydro - that the company could execute at the right time to suit the changing operating environment, said Baldwin.

He forecast that the 2011 financial year would be "a year of two halves". Continuing high levels of take-or-pay gas and high hydro inflows would likely result in the first half being similar to the first half of last financial year.

Ebitdaf in the second half was expected to benefit from increased operational flexibility as the Ahuroa gas storage and Stratford peaker plant were brought into commercial operation, and as take-or-pay gas levels reduce from January 2011.

Directors declared a final dividend of 14 cents per share, resulting in a total distribution of 25cps - 3c down from the previous year.

- NZPA