Contact hangs on to the cash

Contact chairman Grant King is dwarfed by his big-screen image as he takes questions from shareholders at yesterday's annual meeting. Picture / Mark Mitchell

Contact shareholders hoping for a big cash handout have had their hopes dashed.

The energy company has decided to keep the money in the bank for big investment in generation.

Contact's share price fell 14c from a record high yesterday, ending the day at $6.96.

The shares had risen amid talk of a cash return worth as much as $1.15 billion or nearly $2 a share.

But Contact's new chairman, Grant King, said the board had no intention of making such a move.

The company also said yesterday after-tax profits had leapt 50 per cent for the quarter from $27.5 million to $41.3 million, despite high river flows depressing wholesale power prices.

But the year ahead will be one of challenge and change for the stock market's second biggest company.

Yesterday's annual shareholder meeting was the first since former cornerstone shareholder Edison Mission sold its stake to Australian energy company Origin last year.

It was also the last for chief executive Steve Barrett, a former Edison man, who will return to the United States in September.

The new chief executive will be taking over a company with a narrower geographical focus than the last: further expansion into the Australian energy market is now a low priority since that is now the home turf of its major shareholder.

He or she will be taking over with a lot more certainty about crucial natural gas supplies.

"A year ago, we could not say with certainty how we would run our existing gas-fired power stations through to the end of this decade," said Barrett.

New contracts, including one to get gas from the new Pohokura field, meant Contact knew it had the gas to run its stations for the next five years at least.

Outlining new, small-scale generation improvements coming in the next year, Barrett also sounded a confident note about a possible start on a new gas-fired power station at one of two sites.

"Indeed, our most significant future generation options are the new, large-scale combined cycle gas turbine plants that we could build on our sites at Otahuhu and Stratford, and for which Contact already holds resource consents," he said.

"All we lack is the gas to run such new plants, each of which would be equivalent to between two and three years' electricity demand growth."

Plans for a liquefied natural gas system are proceeding as a backstop should no local gas be found.

Contact and its state-owned rival Genesis are seeking a possible terminal to handle the imported gas.

Marsden Point and Port Taranaki are the front runners.

* Contact is changing its balance date because of its new major shareholder. It will report a nine-month financial year to June 30 and hold its next general meeting in October.