Contact Energy's earnings rise 12 per cent

Te Mihi, Contact Energy's geothermal power station in Wairakei. Photo/Supplied.

Contact Energy said full-year operating earnings from continuing operations rose 12 per cent, boosted by a strong performance from the firm's generation and wholesale business.

New Zealand's second-largest electricity and gas retailer said earnings before interest, tax, depreciation, amortisation and changes in financial instruments from continuing operations rose to $505 million in the year ended June 30, from $449 million a year earlier.

That excludes the RockGas LPG business and the Ahuroa gas storage facility, which the firm sold to First Gas in the first half for $390m. Including those non-continuing operations, ebitdaf rose 8 per cent to $518m.

Including the gain on those sales, full-year net profit more than doubled to $345m from $132m. Excluding such one-time gains, underlying net profit was $176m, up from $112m a year earlier, the company said.

Chief executive Dennis Barnes noted the firm achieved a 6 per cent reduction in cash operating costs and capital spending, with stay-in-business capex down $18m and other operating costs down $11m.

About $4m of that was from savings on IT procurement, with another $6m from leaner wholesale operations and bad-debt reduction.

Generation earnings rose by $67m to $464m, boosted by higher power prices and a 22 per cent increase in hydro generation from its South Island dams, which helped offset a shortage of gas in late 2018 and earlier this year.

Despite a 21 per cent reduction in its gas-fired generation volumes, thermal generation costs were $8m higher than the year before. Risk management costs were $19m higher and power purchases from other generators increased by 22 per cent, Contact said.

Earnings from the customer business fell $9m to $67m, reflecting competition, lower volumes, and higher pass-through costs from lines and meters.

While retail margins remain "under pressure," Contact said it has gained 4,200 customers during the six months ended June and its net promotor score in the June quarter climbed to plus-26 from plus-20 a year earlier.

Bad debt write-offs were more than halved to $2.3m, while its broadband offer contributed an extra $1m to earnings and attracted 10,000 new users.

Contact will pay a 23 cent final dividend on September 17 to investors registered at August 29. That is up from 19 cents a year earlier, and takes the full-year payout to Contact's 39 cents a share target. It paid out 32 cents a year earlier.

The company's shares last traded at $8.30 and have gained about 41 per cent so far this year.