KEY POINTS:
Contact Energy has posted a 1 per cent fall in full year net profit to $237.1 million, after having to supply its South Island demand by purchasing electricity from the spot market at a "significant" loss during some periods.
Contact chief executive David Baldwin said the result for
the year to the end of June had been delivered under "challenging and somewhat unique conditions".
Drought conditions during the second half of the financial year had resulted in an average wholesale price for the year for Contact's generation of $107 per megawatt hour (MWh), almost double the average wholesale price for the prior corresponding period.
However, along with the low hydro conditions, transmission constraints in the lower North Island and across the interisland HVDC link resulted in periods where Contact was unable to supply its South Island demand, and had to buy electricity from the spot market at a significant loss.
Wholesale electricity revenue increased by $518m, or 82 per cent, to $1.148 billion, but electricity purchase costs were up 110 per cent to $954.9m.
Underlying earnings after tax for the year were up 0.7 per cent on the previous year to $232.8m.
Earnings before net interest expense, income tax, depreciation, amortisation, financial instruments and other significant items (ebitdaf) was up 4 per cent to $567.2m.
A fully imputed final dividend of 17 cents per share will be paid, taking the total fully imputed dividends to 28cps for the full year.
Contact is 51.2 per cent-owned by Australia's Origin Energy which is the subject of a hostile takeover bid Britain's BG Group.
Mr Baldwin said Contact's performance for the first two months of the current financial year were "well below" expectations.
That was due to a continuing need to meet the company's South Island load, which was about 50 per cent of Contact's total, from time to time through electricity purchases from the spot market at a loss.
Most of Contact's generation was in the North Island and a significant portion of that was unable to flow to the lower North Island and on to the South Island, Mr Baldwin said.
While conditions were having a significant impact on Contact's current performance, it was too early to accurately assess the impacts of those conditions on the 2009 financial year results.
But the company's current mid-point of expected outcomes for the year did not see it significantly outperforming the 2008 financial year result.
Mr Baldwin said Contact was making progress on a plan to invest up to $3 billion in about 1400 megawatts of new generation projects across key fuel types.
Among Contact's projects is the 220MW Te Mihi geothermal station near Taupo, which has been called in by the Environment Minister.
Other include the 540MW Hauauru ma raki wind farm in the Waikato for which consent applications have been filed, and the 240MW Tauhara geothermal project near Taupo for which preparations are under way to file a consent application.
During the year, Contact increased its retail electricity customer base by 6500 new customers, taking total electricity customer numbers to 520,000.
LPG customers increased by 3500, taking the total to 52,500, while retail reticulated natural gas customer numbers were flat at 75,000.
Upward pressure on electricity prices was likely to continue as prices continued to trend towards an entry price for wind generation, Mr Baldwin said.
The underlying per unit price for natural gas increased by 20 per cent during the year and gas transmission costs associated with generation increasing by 18 per cent.
Shares in Contact Energy closed at $8.31 yesterday, having ranged between $10.15 and $6.91 in the past year.
- NZPA
