Edison will stay in Contact

By ELLEN READ

Edison Mission Energy says it will not sell its 40 per cent stake in Contact Energy - and would like to increase its holding at some stage.

Bob Edgell, an executive vice-president of Edison and a Contact director, told shareholders at Contact's annual meeting in Auckland that Edison was committed to its investment despite dissatisfaction with the share price.

"I can only tell you that we continue to be very bullish on New Zealand and will continue to be a long-term investor. We have to be patient; this is a fine company," he said.

Mr Edgell later told the Business Herald that he did not rule out Edison's increasing its stake at some stage.

"We rule out selling but we're not ruling out investing more. We are constantly evaluating ... whether it makes sense to invest more in Contact or other places in the world."

Asked whether it made sense at the moment, Mr Edgell said: "We're constantly looking at it. We are very keen on this investment and we would like to make more investment."

The company was well managed and was in a good position in the market to expand.

Contact's directors dismissed speculation that Edison would be forced to sell its shares to prop up Edison's troubled sister company, Southern California Edison.



The annual meeting was not as fiery as could have been expected given the criticisms by some shareholders in recent weeks.

Contact's weak share price, large payments to former chief executive Paul Anthony and a withdrawn attempt to increase directors' fees meant chairman Phil Pryke was always going to come under pressure at the meeting.



He rejected calls for him to step aside, saying the share price was not the only measure of the company. He continued to back the payments to Mr Anthony and the proposed fees increase.

Shareholder David Zwartz, who was behind the campaign against the higher fees, was unimpressed. "I'll feel better about it if they actually take some notice of those things and that we see a change in the way Contact behaves itself," he said.

He doubted Mr Pryke would take on board comments made about the recruitment of a chief executive.

Mr Pryke had said that the yet-to-be-found new chief executive would have a similar baseline salary to Mr Anthony, who left the company in September for a position with British Gas. Contact's annual report showed he was paid $6.5 million in his last two years of service.



"I know that some of you think this kind of sum is way over the top," said Mr Pryke. "It's an opinion I and the board can understand. But it's not one with which I can agree."

He said more than half the sum related to special circumstances which were unlikely to be encountered again and that the remainder, $3.2 million, was appropriate given Mr Anthony's skills.

Mr Zwartz said he would consider a motion of no confidence at the next annual meeting if no improvement in the company's performance was evident, but said it would be better to wait six months and see what happened.



Questions were also asked at the meeting about Mr Anthony's purchase of shares in August and whether this timing contravened company regulations.

Contact later released a statement saying the purchase was in line with its employee share-trading policy.

Mr Pryke said Contact's policy prohibited specified employees from buying shares in the two months before the preliminary announcement of the company's results to the stock exchange.

Contact's annual result for 2000 was announced on November 23. Mr Anthony bought the shares on August 28.

Commenting on the company's performance, acting chief executive Stephen Barrett said its first-quarter results were on target to meet expectations.

Mr Barrett also said Contact's Otahuhu B station was expected back in operation from the day of the meeting.

Breakdowns had kept it out of action since July.

The company would soon announce an increase in retail gas prices because of higher wholesale and distribution costs, he said.

Contact shares closed down 5c at $2.75 yesterday.