Contact coy over profit guidance

Contact Energy managing director David Baldwin. Photo / Simon Baker

Contact Energy avoided providing profit guidance for this financial year at its annual meeting in Wellington today, citing a lack of certainty.

Chairman Grant King said economic conditions were expected to continue to dampen demand growth, and a range of market and operating uncertainties remained.

"In this context, the board considered it would not be prudent to provide quantitative guidance for the 2010 full year financial performance."

King also said that maintaining dividends at the levels of previous years depended on restoring profitability to more normal levels.

He told the meeting Contact had the best generation options of all generators in this country which it could develop as market conditions supported them.

Managing director David Baldwin said three Contact projects, valued at $600 million, in advanced stages of development would restore the company's operational flexibility.

They were the $250m Stratford gas-fired fast-start peaking power station, a $250m underground natural gas storage facility at Ahuroa, and the $100m Tauhara phase one geothermal power station at Taupo.

Contact had been injecting 40 terajoules of gas daily into the reservoir at Ahuroa, and a drilling rig arriving at the site today would drill three new injection wells, Baldwin said.

The commissioning of the three projects in mid-2010 would strengthen Contact's position for future years and deliver long term value to shareholders.

Further into the future, new sources of electricity generation would be needed to meet growing demand. That would be particularly important as coal-fired units able to generate 1000 megawatts at Genesis Energy's Huntly power station looked set to move to a reserve generation role in coming years.

Contact's view was that renewables, particularly geothermal, would be the next source of new generation, and Contact was building on its position as this country's largest supplier of geothermal energy, Baldwin said.

As well as building the $100m Tauhara phase one power station, the company was planning work worth $1.5 billion with the 250MW Tauhara phase two station, and the 220MW Te Mihi geothermal project.

Contact was also looking into wind and hydro options. Based on information about gas reserves, it did not have sufficient confidence there would be domestic sources to meet the requirements of a new gas-fired station.

In the year to June Contact had a 31 per cent fall in underlying earnings to $160.6m.

The company blamed a loss of flexibility and increased costs of its gas supply portfolio, worsened by electricity transmission constraints, and weather extremes.

Contact Energy shares were down 12c to $6.15 around noon.

- NZPA