Contact Energy shares have fallen nearly 9 per cent today after reporting a plunge in half-year profits.
Problems with its billing system and strong competition have contributed to a 54 per cent drop in half-year profit to $51 million.
The electricity generator and retailer's earnings also fell, down 3 per cent to 257 million for the six months ended December 31 last year but the company says its dividend will remain steady at 11c a share.
"The first half of the 2015 financial year (1H15) was a transitional period for Contact as the Te Mihi geothermal power station and the new retail system were integrated into the business," said chief executive Dennis Barnes.
"Following the go-live of our new retail customer billing and service system we have made considerable progress in stabilising the system and the processes that support it. A system change of this size always creates challenges," he said.
Retail margins were hit by intense retail competition.
Barnes said it had integrated the Te Mihi geothermal power station into its generation portfolio increasing renewable generation from 68 per cent to 76 per cent of total output.
Underlying earnings after tax was $76 million, $21 million (22 per cent) lower than the first half of the 2014 financial year reflecting lower retail margins and the impact of plant outages reducing earnings before interest, tax, depreciation, amortisation and financial instruments ( EBITDAF) by more than the increased depreciation and interest costs following the completion of the significant capital programme.
Following the go-live of our new retail customer billing and service system we have made considerable progress in stabilising the system and the processes that support it. A system change of this size always creates challenges
Operating cash flow after tax was $227 million, up $54 million or 31 per cent.
"The retail electricity market remains highly competitive with discounting dominating the market. Maintaining sales volumes has been important to us as we grew our share of the small business market and cooler temperatures drove a 1 per cent increase in residential usage per customer."
This was partially offset by residential customer losses as the company implemented a new retail system.
"As our systems and processes have stabilised we have been able to resume customer acquisitions which saw us reverse customer losses and add 450 customers in January."
Contact said it would not raise energy charges but from April 2015 will be passing through to customers changes in the costs charged by network companies, increases and decrease.
In the generation and trading business cost of energy improved by $2 per megawatt hour as Contact's percentage of generation from renewable fuel increased but this was partially offset by lower plant availability and reliability, with extended outages at Te Mihi and Poihipi reducing geothermal generation, and increased unit gas and carbon costs.
"Following a transitional period the second half of the 2015 financial year is expected to see improvement. Te Mihi power station is now performing better than business case expectations which, combined with changes to the existing Wairakei resource consent, are expected to increase overall geothermal generation," said Barnes.
The limited growth opportunities in New Zealand meant Contact was looking overseas to expand.
We believe that in the current environment, material growth opportunities in New Zealand that leverage Contact's long history in geothermal and hydro development and operation are unlikely. Therefore, we are investigating options to leverage our skills and experience to grow in international markets."