Power surge at Contact AGM

By CHRIS DANIELS

It seems no matter how much money the company makes, or what the share price is, Contact shareholders will make an annual trip to give the board a roasting.

Yesterday's annual meeting at Auckland's Aotea Centre was no different. Shareholders were in good voice, especially after being told a joint-venture deal announced in October had been constructed to avoid consulting them first.

A cold, dry 2001, when hydro lakes were low, provided perfect business conditions for Contact, earning a net profit of $131 million, up from $97 million the year before.

The total number of retail customers grew to more than 500,000 - 409,000 buying electricity, the rest gas.

Despite chief executive Steve Barrett telling the hundreds of shareholders about a financially successful year, the crowds were more interested in exploring the role on the board of US energy giant Edison Mission, which owns 51 per cent of Contact shares.

Before resolutions were discussed at yesterday's meeting, Edison board appointee Bob Edgell told shareholders that Edison would exercise its right to vote on all resolutions, and would support the board's recommendations.

A board resolution to raise directors' fees by $47,000, from $223,000 to $270,000, attracted little shareholder opposition and, with the support of Edison, is expected to pass. Final voting figures are expected to be announced this morning.

Putting the determination of directors' retirement benefits into the hands of shareholders was proposed by Shareholders Association representative Graeme Bulling.

Bulling appealed to Edison Mission not to use its voting power to sink his resolution, which required a 75 per cent vote in favour to succeed, saying it would show the US company appreciated the desire of New Zealand shareholders for "fairness and justice".

Without the help of Edison's votes, however, Bulling's resolution is expected to fail.

The extent of Edison's power and influence over Contact was also at the heart of yesterday's most interesting exchange between shareholders and directors, springing from a resolution moved by Simon Botherway, head of equities at Arcus Investment Management.

If passed and adopted by directors, the resolution would mean any transaction with a related party, primarily Edison Mission, would need shareholder approval in a special meeting.

Concern about the role of Edison Mission in joint ventures with Contact has been growing since a recent deal to build a new power station in Australia was structured to avoid the need for shareholder approval.

Contact's share of the financing was $81 million, giving it 40 per cent of the project. The deal represented 4.9 per cent of Contact's shareholder funds - 5 per cent being the threshold that would require the shareholders to approve such a transaction with a "related party".

Chairman Phil Pryke said the deal to buy into the Australian power station was designed so Contact could act quickly to be part of what was "a bloody good deal".

Botherway said Edison, which failed in its recent attempt to buy out 100 per cent of Contact, was now trying to get access to the company's good revenue streams through joint ventures.

"The message to Edison is to stop acting in an oppressive, tyrannical and condescending manner."

But Pryke said the relationship between Edison Mission and Contact was extremely beneficial for both sides and independent directors did not take instructions from Edison.

A company needed to be agile to operate in the market and to get into good deals when the opportunity arose.

Botherway told the directors they "were an absolute disgrace and should be ashamed of yourselves" for "bending the rules" when investing in the power station.

Pryke objected to the term "bending the rules", saying the company had done no such thing. Like Bulling's, the Arcus resolution is doomed to fail once Edison's majority of votes are taken into account.