Lower power prices reduce Contact Energy profit by 7 percent

By NZPA

Thursday 1st August 2002

Listed power company Contact Energy posted a 7 percent decrease in nine-month net profit of $70.41 million, as a wet winter prevented last year's soaring electricity prices.

The unaudited tax-paid surplus for the nine months to June 30 was down on the $76.0 million net surplus achieved in the same period last year, during a period when wholesale "spot" market prices were rising to reflect dry hydro conditions.

Contact's earnings before interest, tax, depreciation and amortisation (ebitda) for the nine months was static at $219.5 million, compared with $219.9 million for the equivalent period the previous year.

Contact is a net generator of electricity with around 1900 MW of capacity from its nine power stations.

Contact said in a statement today that its customer base grew by 17,000 new customers during the third quarter of the 2001/02 financial year.

Retail sales volumes also recorded rapid growth, reaching 3852 gigawatt hours (GWh) for the nine months, a 20 percent increase.

"The sales growth has also helped Contact to balance the impact of lower wholesale electricity revenue on the results for the first nine months of the financial year."

Wholesale electricity prices averaged $45.93 per megawatt hour for the first nine months, compared with $61.90/MWh last year.

"This difference reflects the extremely dry, cold winter experienced in 2001," Contact chief executive and managing director Stephen Barrett said.

"For the 2002 winter, storage levels are close to or above mean.

"The resulting softer wholesale electricity prices are expected to persist through to the end of the financial year," Mr Barrett said.

Wholesale electricity revenue was $293.7 million for the period, down 24 percent on the $386.0 million achieved the previous year.

However, total electricity revenue grew by 11 percent to $541.1 million thanks to growth in retail customer numbers and sales volumes.

Total electricity customers now top 430,000, with growth in small and medium-sized enterprises.

Contact's total gas and electricity customer base stood at a new record high of 536,000 in June 2002.

"We owe much of our recent growth to the competitive activity of our acquisition division, Empower, which has moved into several new markets, including Christchurch and Wanganui, targeting business customers as well as households," Mr Barrett said.

Contact's average level of hedge cover from rose from around 60 percent in the nine months to 30 June 2001, to about 77 percent in the latest period.

Mr Barrett said the average level of hedging through to the end of the financial year was likely to be approximately 80 percent, depending on actual generation volumes as well as future growth in retail.

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