Contact Energy chief executive Dennis Barnes says the firm now has the chance to steer its own course.
Free of its Australian majority shareholder, Origin Energy, Contact is having a boardroom shakeup and could, says one analyst, start considering merger opportunities.
Barnes has headed Contact for the past four years on secondment from Australian company Origin. He is now an employee of Contact, which yesterday announced what it said was a disappointing full-year result but added it was at a turning point.
"You don't get too many opportunities like this to change the culture of a business so this is a great opportunity," said Barnes.
Origin is selling its 53 per cent stake in Contact, its board appointees have gone and the company is hunting for a new chairman.
"From now on we can plough our own furrow and be a bit more agile, creative and inspired on who we can have on the board," Barnes said.
If the ownership had not changed, his next step would have been to look for board roles rather than remain in charge of a division of Origin which he said had determined strategy and had limited amounts of attention for its New Zealand offshoot.
Barnes said he did not have a set contract, adding, "Let's see whether the new chairman likes me or not."
Contact reported a 43 per cent fall in net profit to $133 million and a 29 per cent drop in underlying earnings to $161 million for the year to June 30, against the previous 12 months.
He said his biggest challenge was to transcend the decline of a mature business and find a new way to deal with assets and customers so Contact could increase earnings in time.
One analyst, Grant Swanepoel of Craigs Investment Partners, said Barnes could look at expansion through a merger, possibly with TrustPower. "I don't see why they don't consider TrustPower as a merger opportunity. Before they were restricted by Origin, which had different objectives," Swanepoel said.
'Great opportunity' for company
Barnes was regarded as a fixer who also wanted to move on to bigger and greater things.
"If he's not going to build anything new it could be to merge. Changes for Contact are more than just operational, they're strategic as well," Swanepoel said.
Contact announced the closure of its Otahuhu 400MW gas-fired power plant. It had not been used in tandem with its power stations in Taranaki for well over a year as a glut of power, mainly from expanded renewable supplies, had led to weak prices.
Mighty River Power is closing its Auckland gas-fired unit at Southdown and Genesis Energy plans to take out its 500MW capacity coal units at Huntly in 2018.
While Barnes said he expected competition to keep a lid on prices in the near term, Swanepoel said that when Huntly closed supply would tighten and prices would go up.
The move away from baseload gas and coal-fired generation sent a strong signal to electricity companies to build a quickstart peaker plant, said Swanepoel.
Contact Energy shares rose 1.6 per cent to close at $5.24.
Results at a glance
• Underlying earnings: $161 million - down 29 per cent.
• Net profit: $133 million - down 43 per cent.
• Dividend: 76c - up from 26c (but includes a 50c special payment).
• Share buyback: Will start soon, details being finalised.
• Shutting down inefficient gas power station at Otahuhu.
• Searching for new directors and chairman.
• Says competition to keep a lid on retail prices.