Natural Gas reviews value of power business

By Phil Boeyen, ShareChat Business News Editor

Wednesday 20th June 2001

Gas and electricity company Natural Gas (NZSE: NCH) is scampering to reduce its exposure to the wholesale electricity market while at the same time reconsidering what its electricity business is worth.

The move comes in the wake of a profit warning from the company, as it struggles to combat reduced generation capacity and increased wholesale prices.

Last week the company's electricity business, On Energy, announced it was increasing retail prices to try to claw back current losses, but the move has prompted thousands of customers to consider buying their power from other suppliers such as state-owned Meridian.

NGC says it is continuing to develop and implement a broad programme to alleviate the effects of the high wholesale prices.

"This programme includes negotiations on a number of proposed agreements which, when finalised, will significantly reduce NGC's exposure to the wholesale electricity spot market," the company says.

"As these negotiations have yet to be finalised and are commercially sensitive, NGC is unable to elaborate on them at this time."

The company says because of the unprecedented level of wholesale prices - and in view of its contention that the wholesale market is not working as intended - it is reviewing the value of its electricity retail and trading business.

Earlier this month NGC said was unlikely to report a profit for the second half of the year because of the jump in wholesale power prices.

In the first half to the end of December the company posted a $31 million profit.

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