Contact to sell $300m of five-year bonds

Monday 2nd March 2009

Contact Energy, which generates about 28% of New Zealand's electricity, offered to sell at least $300 million of bonds to repay debt and fund new power plants.

The bonds, which mature in May 2014 and have a credit rating of BBB with Standard & Poor's, are being offered to retail investors, the Wellington-based company said in a statement.

Contact posted a 79% slump in first-half profit, saying constraints on the national grid stymied its efforts to respond to climatic challenges. The company is pressing ahead with plans to increase North Island capacity, including the first phase of the Tauhara geothermal project near Taupo and a 200 megawatt gas-fired power station at Stratford.

The funds raised will fund developments including the geothermal development and a new gas-fired peaking capacity plant at Stratford in Taranaki, as well as repaying debt, chief executive David Baldwin said.

The offer opens today and will close on March 31. Oversubscriptions may push the sale to as much as $500 million, the Dominion Post reported, citing financial adviser Chris Lee.

Contact is joining companies including Tower, Fonterra Cooperative Group and Auckland International Airport in selling bonds to tap demand from investors faced with dwindling deposit rates.

ANZ Bank's Advantage account pays 3.5% for deposits up to $5,000 while ASB's retail call account offers 2.5%, according to depositrates.co.nz.

Lead managers for Contact's sales are First NZ Capital, ABN Amro, ANZ Bank and Forsyth Barr.

Contact stock fell 2.5% to $5.80 and is down 19% so far this year.

By Jonathan Underhill

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