Daily ShareChat: Contact Energy

By Jenny Ruth

Tuesday 3rd November 2009

Contact Energy's annual shareholders' meeting this year was "an altogether more sedate affair" to last year's fiery meeting, says McDouall Stuart.

"We would summarise the tone of the meeting as humble and conciliatory. Addresses to shareholders made liberal usage of phrases such as ‘rebuilding consumer trust and confidence' and being ‘out of step' with customers," the broker says.

Contact lost a net 35,000 customers in the nine months following last year's annual meeting.

But on the operating performance front, the over-riding theme was Contact's loss of operational flexibility and the impact of outside factors, particularly the weather, it says.

"Contact is currently in a period of extreme exposure to hydrology and, therefore, transmission constraints, both of which are beyond the company's direct control to manage," it says.

The company didn't offer any earnings guidance, saying it wouldn't be prudent, given the range of marketing and operating uncertainties, but said current consensus estimates, about a $179 million net profit, up 12% on the previous year, are in line with company expectations.

"We remain concerned with the lack of operational flexibility that Contact faces over the next few years, making future results reliant on it seeing favourable (ie normal) weather conditions," McDouall Stuart says.

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