KEY POINTS:
Contact Energy said today it was battling high gas prices and low wholesale power prices.
Chairman Grant King told shareholders at the annual meeting in Christchurch rising gas prices were an ongoing challenge for the company.
A 20 per cent increase in natural gas costs over the 2007
financial year was likely to be repeated in the 2008 year, with per unit gas prices continuing to rise as Contact's Maui 367 gas entitlements were fully used by June 2009.
"Significant increases in the per unit cost of natural gas will continue to be a factor for Contact until the company has fully transitioned to current market gas supply arrangements," he said.
Mr King said in speech notes that softer wholesale power trading conditions over the 2007 financial year had continued into the 2008 financial year.
The company did not expect underlying earnings to be materially different from last year's result.
However, Mr King said Contact's depreciation and interest expenses would increase as previously signalled, primarily as a result of increased investment in geothermal and the revaluation of Contact's assets in June 2007.
The company was expected to face a revolt from institutional shareholders about the appointment of some directors, particular Tim Saunders, who was a director of failed Feltex Carpets.
However, Mr Saunders was expected to be supported by Contact's 51 per cent owner Origin Energy.
Mr King said the company had a sound strategy that positioned it well both in retail, through its acquisition of Rockgas, and in generation, through its $2 billion renewable investment programme in wind and geothermal.
Chief executive David Baldwin said Contact had an opportunity as the only energy company that could deliver electricity and gas products across the whole country.
He said the company was making very good progress towards developing the new 225MW Te Mihi geothermal power station north of Taupo which, alongside a similar power station proposed at nearby Tauhara, would provide New Zealand with valuable renewable, baseload energy.
"Geothermal energy has a vital role to play in helping New Zealand towards the target of a 90 per cent renewable energy sector by 2025.
"If renewable projects can be quickly consented and constructed, then we believe that target can be met."
Contact this month announced plans to build a 650MW windfarm in western Waikato, which he said would play a critical role in helping meet the renewables target.
He reiterated Contact's plea that consenting for such projects be "called in" under the Resource Management Act to avoid undue delay.
"If this does not happen, the target of 90 per cent of the country's electricity coming from renewable sources will not be realised."
Contact shares fell 9 cents to $9.10 today. They have traded between $7.06 and $9.70 in the last year.
- NZPA