Forum Archive Index - March 2000

["Graeme Greenan" <graeme.greenan@xtra.co.nz>]

Hi Kevin,

Extract from New Zealanmd Investment Journal,



NZSIA Presentation by Contact Energy CEO & MD
Wednesday 8th March 2000
Mr. Paul Anthony made a presentation to analysts today. The focus of the
presentation was that Contact is under-valued by the market in comparison to
their competitors.
Contact Energy is not a utility company, as the companies markets are all
highly competitive.

Contact have concentrated on building a electricity customer base outside of
the major cities, as UK experience has shown that customers in rural or
smaller cities are significantly less likely to switch suppliers than those
in major cities.

This customer base has been complimented by the gas retail operations of
Enerco in the major North Island cities.

Contact has over the last year concentrated on consolidating the acquired
systems, from 9 seperate metering, billing, call-centre, and other systems
to a single energy sales system.

Now that this process is almost complete Contact will put further effort on
cross-marketing to their existing customers who purchase either gas or
electricity from them.

The initial cross-marketing push to 100,000 of their own shareholders wasn't
terribly successful, with only 1% taking the opportunity to switch
electricity retailer and get a free pre-paid mobile phone from Vodafone.

The value of this customer relationship is a large part of the value of the
company. Contact acquired most of those customers at about $400 cost each,
in comparison ISP customers have been valued recently at up to $1200 each.

Cross-selling of other services to this customer base is obviously a large
opportunity for Contact if done successfully.

The other large opportunity for Contact is that the Energy sector world-wide
is currently out of favour.

Large UK and US companies are purchasing each other, and as their shares are
currently out of favour they are unable to easily raise loans, and selling
more shares will unfairly dilute existing shareholders value. To buy new
assets it is likely that they will sell non-core assets in this part of the
world, and Contact is one of the few companies with a strong enough balance
sheet to consider purchasing these assets (at the right price).

He was asked, that if Contact Energy shares are so cheap, and they have
funds available to invest why aren't they buying their own shares?

Paul Antony's response was that there were likely to be better opportunities
for Contact elsewhere. That share buybacks can often artificially inflate a
shareprice temporarily before it slips back to the previous level,
destroying shareholder value.

On why Edison aren't purchasing the balance of the company, Edison is a big
company that invests for the long-term.
They aren't as nimble or flexible as Contact, and any decision would not be
taken quickly.
Contact in the scheme of things is not a significant investment for Edison,
so while a move may come it probably won't come quickly, in the meantime
Contact will continue to generate significant cashflows for shareholders.




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