Contact calling for power station tenders

Australian-controlled Contact Energy said today it would call for tenders to build a 400 megawatt power station in Otahuhu, Auckland.

Chief executive David Baldwin, in notes for what was expected to be stormy shareholder meeting today, said the station next to Otahuhu B was the best new generation option for the country.

A final decision to build would be made after tenders were received.

Contact already had resource consents for the combined cycle gas-fired plant.

"It would provide a significant amount of base-load electricity directly to Auckland and help improve security of electricity supply not only to Auckland but to the country," Mr Baldwin said.

The final decision would depend, among other things, on the company's ability to secure gas for its natural gas fired power stations in the post-Maui environment.

The company, 50.1 per cent owned by Origin Energy, said the average wholesale price for electricity generated by Contact in the September quarter dropped 12 per cent on a year earlier, as a result of higher than average hydro inflows.

It said its generation for the September quarter was 2954 GWh, 1 per cent less than total generation for the year earlier period.

Chairman Grant King outlined two key challenges that the company faces in the forthcoming year -- considering investment in an uncertain regulatory environment, and securing a competitive gas supply.

He said the failure of the proposal to merge with Origin had been a disappointment for the company.

"Shareholders can be assured that the significant commitment of resources to pursue the merger proposal was made on the basis that it was considered to be in the best interests of Contact shareholders and worthy of your consideration," he said.

He defended the process followed by the independent directors as "entirely appropriate".

The independents, lead by Phil Pryke, have been roundly criticised for recommending the merger before an independent report came out. The report has never been published. They had recommended an earlier takeover proposal by former owner Edison Mission at a much lower price than today's share price.

Mr Baldwin, appointed in May, said he was pursuing a comprehensive review of the business, out of which would come a strategic plan to guide the company's future development.

He signalled potential new investment, depending on resource consents, of more than half a billion dollars over the next decade in renewable geothermal generation options.

The company was currently undertaking due diligence on a number of windfarm sites.

Contact shares were down 3c to $7.32 in early trading on the share market.

- NZPA