Pressure builds for change at Contact

Phil Pryke chaired Contact from its 1995 establishment until Origin's 2004 buy-in. Photo / NZME.

Investors call for action on company’s governance structure and resignation of interim chairman Phil Pryke.

Contact Energy is facing growing pressure from institutional investors over its governance structure, including calls for the resignation of long-serving director and interim chairman Phil Pryke. The electricity company has a much wider investor base following the exit of its former majority shareholder, Origin Energy, last month.

ASX-listed Origin divested its 53.1 per cent stake through a $1.8 billion block sale to a range of New Zealand and Australian institutions and Kiwi retail investors. Three Origin-appointed directors - including former chairman Grant King, Origin's managing director - resigned from Contact's board after the sale.

Pryke, who chaired Contact from its 1995 establishment until Origin's 2004 buy-in, has taken over as interim chairman alongside remaining directors Bruce Beeren, Sue Sheldon and Whaimutu Dewes.

Contact is searching for a new chairman and additional directors to fill the seats vacated by the Origin directors.

But several sources, who requested anonymity, said further board refreshment was required through the departure of Pryke, who has had a sometimes contentious relationship with shareholders over issues such as his support of takeover and merger bids for the company, including Origin's.

Market players have also questioned whether it is possible to be a truly independent director after a long association with a company.

Pryke is up for re-election at Contact's annual meeting, which has been deferred until December to allow more time for the board recruitment process to be completed. Beeren will retire at the meeting.

One investor said Pryke needed to step aside. "It's a great opportunity now Origin is gone," he said. "It would be fair to say that Phil has only survived there because of votes from Origin." In 2008 Pryke received 327.9 million votes for his re-election, versus 68.9 million against. But excluding Origin's votes only 31.4 million were cast in his favour.

The investor said it would be "ideal" if Pryke stepped aside before the annual meeting.

"If Phil tries to stay in the role then I think we're likely to see some boilover and more action taken."

Nikko Asset Management senior portfolio manager James Lindsay wouldn't comment on individuals but said there was a "unique opportunity" to refresh the board. "The management team has asked us to bring forward ideas and discuss that with them."

Contact chief executive Dennis Barnes said he, Pryke and chief financial officer Graham Cockroft had been holding meetings with a range of investors and seeking feedback on governance "amongst other things".

"We understand the significance of the board appointment process and are pleased by the high degree of engagement by and feedback from shareholders on this matter," he said.

Asked whether Pryke wanted to respond to investors' calls for his resignation, a Contact spokesman said the firm had no further comment.

The company last month reported a 43 per cent drop in full-year profit to $133 million - a result it partly blamed on margin pressures in its retail electricity business.

Contact shares, which have shed roughly 23 per cent this year, closed unchanged at $5.17 on Friday.

Contact Energy
•Last month reported a 43% drop in full-year profit to $133 million.
•It partly blamed margin pressures in its retail electricity business for the result.
•Company's shares have shed roughly 23% this year.